Avoid These Costly Mistakes When Buying a Business with Ray Dalio’s Advisor

You started with 30,000, but you went on to buy, you know, hundreds of thousands into the millions.

I did a lot of flying by the seat of my pants. When you don't have many options, it's really easy to make decisions. I like to buy a business that's rock solid. I personally do not see a better way to invest your money. Absolutely do not limit your possibilities.

The Dalio family had hired you to help their son acquire businesses.

We made a number of investments and unfortunately, Devin was killed in a car accident. The devastation was unbelievable. That was a massive upset to my life. You can be the byproduct of change and see the direct result of things that you do. To be a successful entrepreneur in it for me, anyways, you have to.

What we're saying to the listeners right now is that you guys are tuning in to two Idiots.

Two Idiots. Congratulations.

In life, I've discovered there's a lot of things I don't know, and that's why I love interviewing guests who have expertise in areas that I know nothing about. So. Today's special guest co authored a book with President Donald Trump. He also was hired by the Dalio family. Ray Dalio hired him to help his son find businesses. Buy them and grow them and sell them. So today's special guest, Richard Parker goes deep on how to find a good business at a great price. And I learned so much about businesses, how he looks at them, how he values them, how to never buy a distressed business. So I learned a lot. I'm sure you will too. I hope you sit back and enjoy the show. This episode of the Lead On Purpose podcast is proudly sponsored by NZ Mortgages. You can check them out at nzmortgages.co nz. Richard, a huge welcome to the Lead On Purpose podcast.

Thank you. I appreciate you having me. It's wonderful to be speaking to someone on the other side of the world. We talk about the other side of the pond. It's a big pond between us, but I guarantee there's a lot, a lot of things in common between how business is done here and there. So I'm really looking forward to it.

Me too. And business is business. No matter where we're doing it, the principles, the foundational aspects of business are the same. And I guess before we hit record, we were talking a little bit about where we live and our connections. And it's so interesting that we might be 6,7000 miles apart, but actually there's some connection there through sport, through location, through interests. So that's the one thing that every Listener, I guess, can really connect on is that there's. When we're buying a business or selling a business, the person that we're buying it from or selling it to, there's a way that we can connect to understand more deeply what it is they do, how they've done it, how they've succeeded at this great business, or how they've failed. So I want to get into it, but I also know that in this market of, hey, this is how you buy a good business and here's how you get it at a good price. I understand there's a lot of con artists out there. There's a lot of people selling the snake oil on Instagram. You get these DMs, people sell stuff. What do we need to look out for before we get into on your story? What's the first thing someone needs to be aware of to avoid when it comes to someone saying, hey, you can buy an amazing business for $0 down?

I bought a lot of products over the years myself, more informational products, because I'm always. My life has been a never ending quest to learn because I'm certainly not the smartest guy in the room. And the barometer that I've always had related to programs, two things. One, if I learn one thing from it, it's perhaps worth the money. But to me, if you're selling an information product online and they generally ask like thousands of dollars, if they don't have a bulletproof refund policy, don't buy it. I mean, if you know, you could be anyone you want to be online and so you could paint and provide all these beautiful, paint this beautiful picture, have all these wonderful promises and have all this, all these statements which may not be true at all. And so if you believe and can prove what it is that you're allegedly teaching people how to do, if you don't back that up with a bulletproof money back guarantee, I tell people, better off to light your money on fire because how else do you validate the information? Yeah, you may not do it, you may not work for you, but I think people are honorable enough to say, hey, I didn't do what they told me to do, and thus I didn't get a good outcome. That aside, if the information doesn't prove to work in the real world.

Whose fault is that? That's the people who are pitching it. I'm glad you used the word con artist because that's prevalent. And so to me, the top of the pyramid is absolutely. If they don't guarantee it the truth of their information by a refund policy, then I would never, ever entertain buying it and would tell anybody else, don't do it.

I'm with you on that 100%. And I read a book probably six, seven years, maybe even more years ago, and there was this whole concept in it that talked about believability, and I've carried that with me. And that is so for me on the show. If I have someone on the show, whether they've reached out or I'm reaching out to them, the first thing I ask is, what's the believability rating? And so I'll go, okay, what's the thing they say they're good at? Okay, have they done it for themselves? Okay, yeah, I can see they've done it. Have they done it more than one time for themselves? Yep, they've done it several times. Okay, great. Next question is, have they successfully helped and equipped other people to do the thing they've done for themselves? That's the whole idea of believability. And what's interesting about this, and there's a strange connection, is that that was Ray Dalio's book Principles.

It is crazy that I try to never think about my answer when someone's asking me a question, because I really trained myself. I wasn't like that when I was younger. And I've gotten really good at it because I want to always hear the whole question. So I apologize. But as you were talking about it, I was going to give you an example recently. Carry on. About Ray, because I quoted him earlier about something that I learned when we were in partnership together.

Well, that's why I wanted to bring it up, because often when I'm doing research and the team will dig deep to research all of our guests, and we discovered that the Dalio family had hired you to help their son acquire businesses. So I thought, okay, believability rating goes sky high on this one. This is pretty cool. So tell me about Ray. How did you meet Ray? What's the connection? What did you help his family do?

Well, the first thing is.

I don't promote that. That we have a very deep personal relationship. And I'll explain to you in a reason why. Because it goes transcends business. But going back a number of years, I worked with ray twice. In 2007, he hired me to teach his son Devin how to buy businesses. Devin was living in Florida at the time, and Ray found me similar research to what you probably did and wanted to hire me to teach his son how to buy Businesses he was living in Florida time, smaller business. And that was just at the moment when my youngest son was diagnosed with epilepsy. And the reason why I tell you that is when Ray called me and he said, hi, my name is Ray Dalio. I had no idea who he is. I mean, I'm, you know, didn't make any, didn't mean anything to me. And he started telling me what, how he came to me and, and he's always used this believable party agenda, or blueprint, if you will, and wanted to hire me. And I told him that normally I'd be okay with doing it. However, my son had just been diagnosed with epilepsy at that point, five years old. And I said I was going to take the next few months off to learn about the disease, and I really wasn't going to. I'm not taking on any new clients. And Ray's answer to me was, I completely understand, no problem. He said, I. And these are his words. I'll paraphrase slightly. He said, I have some terrific connections in the medical field and if I can do anything for you related to your son's condition, I'm happy to make as many introductions for you as you need. Wow. And I thought that, you know what, right then and there sums up that human being who was on the other end of the line because it could have been easy for him to say, oh, I understand, and best goodbye and good luck to you, or do you know of anybody else who I could potentially call on? And so I said to him, look, you know, at the very least, let me meet your son. I greatly appreciate that because I really thought, this is a terrific guy and let me meet your son. And I met him and I thought he was wonderful, smart, nice, kind, individual. And again, I had no idea who the Dalio family was. And I was so impressed with Devin that I. And having raised comments related to my son behind everything, I said, you know what? I'll make time for this. And so Devin and I began working together and our curriculum was. He was, you know, studying my course. And we'd meet every week for a couple of hours. We'd go through homework. And we started, after a little bit of period of time, started looking at businesses. And it was only like way down the road. I mean, we worked together. I think it was seven months and probably five, six months into it, something Devin said, and it wasn't intentional, it was just like a. An off the cuff remark. And I thought to myself, I said, I think this young man may be from a pretty significant family.

Because I don't operate like that. I don't care who anybody is. It's like I want to deal with the person. I don't care what's behind them. Right. And I ended up looking online of Ray Dalio and said, you know, the thing comes up with like their image and net worth. And I was like, whoa, oh my God. But that was way, way into the relationship. And Devin and I formed a beautiful relationship. And then it was decided they were just starting their family office. They had three people at the time now I think 100 plus. And Rafe and I agreed that it was probably a very good idea for Devin at that point to go work at the family office. He would get some terrific experiences. That was the collective understand and agreement and the path forward that we decided to do. And we always stayed in touch and we were good friends. And then in 2000 and Devin rose through the ranks. And there's no nepotism at Bridgewater or the family office, none whatsoever. As a matter of fact, it's a complete opposite as a, you know, as a offspring to Ray, you probably have to prove yourself three times your worth. And then someone else, I mean, he's very stringent about that and it's very admirable. And Devin ended up rising all the way through the ranks, worked a bunch of different jobs to become co CEO. And in 2017 he decided that he wanted to, as he said, you know, he had an entrepreneurial itch that he wanted to scratch and wanted to get into buying businesses and smaller businesses. And he was considering moving to Florida. And Ray said to him, well, why don't you do this with Richard? Let's see if Richard would be interested in doing something. So we ended up, we spoke. I was just in the midst of moving part of my business to integrate, integrating it with another one. It was like 72 hours before I was going to be doing this. And we spoke and we actually put a deal together in, in minutes on a Sunday. And so I became partner with Ray and Devin in a, in a company called P Squared. I was hired again to mentor Devin to teach him how to buy businesses. And we were going to be like mini PE and we worked together. Ray was our only investor. And when you have someone of that net worth, you don't need other investors. He, but, but by and large, I mean, he stayed out of the equation. He let us do our own thing. I mean, it was only when we were making certain investments that we had to approach mother than that we didn't even have our offices near Bridgewater. We were in Greenwich, Connecticut. They were in Westport. And he let us do our own thing completely. We reported to. We were reported to the family office and the CEO of the family office. And we had a.

Terrific relationship, Devin and I, we. An incredibly trusting relationship as partners. And we became cherished friends with one another. And we worked. Although we had offices, multiple offices in the. In the building, him and I always shared an office because we love bouncing ideas off each other. We were sitting face to face, like you and I, and we made a number of investments. And then unfortunately, if you follow Ray, on December 17, 2020, Devin was killed in a car accident. And of course, you know, obviously the devastation was unbelievable. And so we decided to wind down the business because it was stood up for Devon. And we kept our investments, still have them, and there was opportunities for me to work, continue to do some work with the family. And I decided that I really didn't want a business relationship with Ray and his family and Devin's siblings. Not because it wasn't wonderful. It was phenomenal. Like my relationship with him from a business standpoint, on a scale of 1 to 10, was probably a 50. It was unbelievable. But we were now bound for eternity through sorrow. And I never, just personally, I never wanted to have a situation arise where we had a falling out over business. The personal relationship was way too important. And there, you know, I consider them and they consider me. We're extended family to one another. My time there was unreal. The learning was incredible. The support that we had, the whole family office cheering for us to be successful. And we made some terrific strides. And like I said, Devin was, you know, consider him closer, close as a brother. And so it was a very, very unfortunate ending. But the time there was just. It was magnificent. And Ray was just a gem to work with. He was just a terrific business partner, a human being. I mean, just the whole thing was wonderful with a terrible ending. Yeah.

Well, thank you for sharing that, Richard, and everything I've read about Ray and people that I've chatted with that are connected directly with him, they all confirm that he's a good human. You know, he's a good.

He's a good human. That's a good summary. He really is just a good guy. I tell people that, you know, when you meet him, he's just a regular guy that happens to have a lot of money. And you would never know if you just had a casual conversation like you and I were having, very quickly, you would realize he's very quick study. So very quickly you would see that this is a really smart guy. But you know, you wouldn't know if he was the wealthiest guy in Connecticut or the poorest. He's just, he's just, he's just one of the boys. Good, really good. Really wonderful guy. Yeah. Oh yeah, really. He's a really terrific guy.

Well, thank you for sharing it. And Richard, of course, how did this all happen for you? So you're incredible at what you do and you run this incredible course that changes a lot of people's lives and businesses. But where did life begin for you? Who influenced your mindset, you know, who brought you up good? Whether they were good influence or not so much?

I think my parents to a large extent, very hard working people. One life lesson that happened very early on, and I've told this story a number of times, is I always had a job. Even as a kid, like really young, I was shoveling snow. I lived in Montreal shoveling snow. I was cutting lawns, I was working in gas stations. I started my own business when I was 12, delivering papers. Where papers, newspapers weren't delivered. I convinced the publisher to let me solicit home delivery and I built that up to like a thousand papers, papers and then started selling off individual pieces of the route. But one thing that, you know, it's crazy, one thing that happened which I really only thought about years later, was my father. My father was a door to door siding salesman and he actually almost moved to Australia. I know you're in New Zealand because at one point our family was talking about moving to Australia to do exactly that. Door to door salesman. I worked with him every summer. And I remember from really being young, 10, 12 years old, my father would never offer to give me money if I didn't have a job. Whenever I had a job part time, no matter what it was, again working in a gas station or shoveling snow or whatever. My father would always ask me, you need a couple of bucks? But if I wasn't working at the time, he never even offered. And it was one of the lessons that said, you know what, you can't help people if they don't want to help themselves.

And so that plus understanding a connection between.

If you're working and you're least making the attempt.

You'Re already in the game. It's when you go onto cruise control or you start giving up that things really go sideways. And no matter what, I think the larger lesson for me and connecting it was, you know, sometimes you just really need to keep One nostril above the water.

And so when I look back, you know, I've always been entrepreneurial. I always wanted to have a better lifestyle than my parents did. Hard work was always a requirement in my family. And I love the connection between if I go out and do something, I can get an outcome, even that. You know, when I was delivering papers, you know, at that point in time, I was getting 25 cents a week allowance, which was pretty much market rate. Okay. I spent it in like nine seconds running up to the corner store, okay. And. And, and blowing it on candy. But when I started doing my newspaper route, I was making 20 bucks a week.

Big difference.

Big difference. Okay. Big difference. And so I started realizing, like, there's a connection here between hard work, a little bit of creativity, and having some money in your pocket. And so I, you know, it. Sorry for the long winded answer, but I think that really cemented my understanding of not only entrepreneurship, but the direct connection between keep going. And if you're really pounding away, there's usually a good outcome.

And that idea of keep going, I need to hear that. And I'm sure there's a listener right now that just needs to hear that, because we inevitably have roadblocks, obstacles, maybe even ambushes in life. Maybe it's pandemic, maybe it's relationship financial, whatever it might be. So for you, how early in the piece in your life did you hit your first big ambush or failure?

Besides getting cuts from the AAA bantam hockey team that I was sure that I was going to make, that was pretty disappointing. Okay, I bet I still convinced I made a mistake. But.

The biggest issue is I was working for a company. I was doing quite well. I was 29 years old.

I was somewhat in over my head. The company was growing by leaps and bounds. So I was getting promoted at the speed of light because we were just tripling catch up. So I was really in a job that I wasn't qualified to do, but I was working 100 hours a week, learning like a maniac. And that was enabling me to pretty much keep one nostril above the water. And I was making $72,000 a year, which was pretty substantial. It's 1990. And then I had the brilliant idea that I was going to invest in the stock market and listened to someone who talked to me about margin and where you could buy twice the stock for the same amount of money. And that sounded terrific because they said, well, you know, when the stock goes up and you want to sell it, then you repay back you know, pay back the money. But I was too dumb to realize and ask the question, well, what happens if the stock goes down and the stock absolutely crapped the bed? And I blew $60,000. 29 years old, I was making 72, but I pretty much wiped out all of my savings except for $30,000, which was pretty nice that I had $90,000 saved up at that point in my life. Quite a bit of money at this point, probably today's equivalent to probably close to 300,000, which was, I was very proud of. But I was, oh, my God, I can't believe, like, what I did.

But I couldn't spend much time ruminating about it because I had to do something. And I realized, well, I could keep working at what I'm doing, and maybe in time I'll be able to recapture that money, but it's going to take a long time. I couldn't really change jobs for more money because I was already overpaid. So I was never going to find something else at more money and said, you know what? The only way that I can get out of this mess is I have to put myself in a position where there's no limit to my upside. And said, well, as I thought about that, I said, well, I got to go into business for myself. I mean, I. I mean, I'm not going to do it buying lotto tickets or going to Las Vegas, so I've got to go into business for myself. And when I started thinking about starting something or buying something, and what I ended up doing was I started a business similar to what I was doing at this company, but for a very short period of time, because I realized that, hey, if I want to grow this thing, the quickest way for me to grow this is I got start buying companies that are already doing this, and I'm just going to add them onto my company. So I started buying some small companies. This is within 90 days of me starting the business. And so I bought my first company with the $30,000 that I. That I had left. And I just, you know, and ultimately became very successful. And the life lesson really there was, you know, you know, when you don't have many options, it's really easy to make decisions.

Yeah, the two options were like, go, you know, try to dig myself out of this hole for over the course of the next decade, which was completely unreasonable to me, or go into my. Go into something where I didn't have any limit in my upside. And so that was. It was very easy. And there was times where as you pointed out, it was like you got to just keep going. There was things that came across that was a massive upset to my life and you just have to work through it. You cannot get paralyzed. I mean, there's going to be stuff, as you mentioned, relationships, business, personal. You can't plan for a lot of these things and you have to figure out how to push through. It's very easy to push through when times are easy and it's probably an overused statement. It's when you know when, when every, when you feel like the weight of the world is on your shoulders and it's so easy to just want to crawl into bed. That's the time where you really have to push through because you come out regardless of the outcome, you come out at the other end much stronger in my view.

Oh, 100%. There's no doubt about that's how we build resilience. We've got to face the fire and learn from that. Now obviously you had this massive loss at a young age in terms of finance, but then you responded and I love how you responded. As you were building towards something, did you have a clear vision of what your goal looked like? Whether it was a 12 month outcome, a 10 year outcome, a retirement outcome? Did you have anything you were building towards or was it just let's go?

It's a bit of both. I've always been very goal oriented so I like to list out my goals over the course of, you know, daily, monthly, annually and longer term, five years, etc. In the business. No question, I did a lot of flying by the seat of my pants because I was a young business owner. I didn't know what the hell I was doing. And I mean, when I started out, I mean, I couldn't even read an income statement or a balance sheet. I ended up taking a night course on business accounting. And I mean, all these years later I'm really proficient at that. But I didn't, I really didn't know what the hell I was doing. I focused on what I, what I believed I was good at, which was I was in consumer products. I was selling products to major retailers in Canada. I was always a good salesperson because I understood it from the buyer's eyes and worked tirelessly to satisfy, you know, what their requirements were. But all the other pieces related to the business I like. I was like all over the place. As time went on, I started having a greater appreciation of implementing goals, policies, procedures and measurement. More importantly, I mean, it's great to have goals, but you don't measure them. I mean, they're sort of useless piece of paper. And so measuring.

Measuring initiatives and being able to pivot has been very important in my business life and personal life. But that ability to say, well, we're going to try this and we're going to measure it, it's not just going to be, oh, we tried it, it didn't work. I mean, you see too much. I see that all the time with business owners I deal with, you know, we tried it, it didn't work. Well, what is, I don't even know what that means. Right. Like, like, did it work? 10%, 80%, 40 did. What was the target? So as far as my goals, I, I always attach measurement to them and that really allows for me anyways, and I think it could be applied for most people, is to recognize what is and what is not working and allows you to pivot and pivot quickly as opposed to just sitting back a year later and say, shoot, you know, I thought I was going to do this, I didn't do it. That's too bad, I'll try it again next year versus looking at this, you know, daily, weekly, monthly, and say, this is not working, I got to pivot.

Yeah, it's really good advice and just keeps people with a finger on the pulse. And look, you started with 30,000 and you bought this business, but you went on to buy, you know, hundreds of thousands into the millions and help others do even in that billion dollar range. I was starting to do a bit of research on who you've been helping. It's phenomenal. Now, before we look at some of those examples for the person right now that's going, I want to have more wealth and I've got goals and there's different vehicles I can choose. Property, stocks, crypto. If they're crazy business.

I'm with you.

Yeah.

So why, why go the business route? Why would you say, hey, you know what, this is actually a really viable and smart move to buy a business rather than say, take the property route.

I think there's a couple of reasons. I think on the one side related to strictly financial.

Because businesses are sold at a multiple. And typically let's just, for example, three to five times, we'll call it four times multiple in a smaller business. And I don't want anyone to peg that because multiples could be all over the place. But let's point of conversation four times. Well, you look at that and say, well, for every dollar of value that I add in the business, I'm going to get four back. I mean, there's no other, there's no other return. And if real estate is wonderful, it's solid, it's not going to disappear. However, you can't really influence it. It's the economy, the local economy for the most part, that influences whether that property is going to go up in value or down in value. And you can keep applying all your, you know, rental income or what have you to paying down your debt and you have something at the end of the day. And that, that's true, but you can't influence that. Yeah, you could, you know, put in better landscaping, you know, improve the, you know, put new kitchens into every. If you had a rental property, put a new kitchen, get a little more rent, but you're not going to go from one to four. And so, so that's like, on the financial side, the way I look at it, I'm not discouraging people to buy real estate. I think it's very good. But on the financial side, as far as what you could potentially get, as far as return, nothing compares to a business adding the value. Then there's the whole other personal side, and that is the gratification, leaving aside the money, the gratification that comes with business ownership. Because you have the ability to not only improve your financial position, you have the ability to improve the lives of others. You can make an impact on the lives of others financially. You can build value. There's no limit to your upside. You can change the universe when I mean that it within your business and things that you can implement, you can be the byproduct of change and see the direct result of things that you do. Because you can test, unlike working for someone else, where you can keep filling your bosses with ideas and they do none of them, or they may do some and then they take the credit.

That happens as well. And when you take all those benefits and then you layer on top of it, you can have an unbelievable time doing it. I mean, to me, like there's nothing greater. And so when I think, when you. I believe when you marry, let's call it the science part of it, which is the pure numbers and the value with the art of it of all the benefits just outlined, I personally do not see a better way to invest your money. I don't. And it's not even a case of I've got to make the argument on both sides of the table. To me it's. There is nothing like this, in my opinion and in my experience, when you.

Describe it like that, Richard, I Hear you saying that actually it meets all of our core human needs, the need for certainty, for variety, for connection, for growth, for contribution. Like, it meets all these needs. And that's why it can be almost, I would say, borderline addictive, you know, really thrilling. Yes, I get it 100%. Now, let's say we've got someone who has done well in an industry, whether it's finance, whether it's plumbing, whatever it might be, and they've got a bit of money, their business has done well, or they've come into a bit of money and they think with the wealth mind or the financial market mind, or the plumbing mind, and they stay in that little zone and go, I can only buy a business in that industry. Is that a smart thing? Or do you think we should be opening up our possibilities to looking at other things? Are we qualified to look at other industries that we're not experts in?

It's smart and dumb. And it's a great question. And here's what it comes down to. Prospective business buyers can't confuse experience with expertise. Experience is the industry, the plumbing industry or the finance industry. That's experience. Expertise is what you did in that industry. What skill set that you acquired that makes that that one shining skill set that you have could be sales, could be marketing, could be operational, could be putting plan together, could be logistics, manufacturing, whatever it is, that's a skill set. That's not expertise, that's not experience. And so you need to identify that skill set, because that skill set is what you must apply to a business that needs that skill set to grow. The mantra that I've been using for years is whatever it is that you do best must be the single most important driving factor of any of the revenue and profits of any business you consider purchasing. So that means that particular skill set, some of which are just outlined, that is what you have to marry to a business that needs that skill set to drive the revenue and profits. With that said, yes, if you can buy a business within an industry that you are familiar with, where the requisite, the prime requisite, the key one, the number one requisite, is that skill set. Wonderful, because your learning curve is shortened, but absolutely do not limit your possibilities to think you need to buy a business in an industry that you're familiar with, absolutely categorically not.

Amazing. That's so exciting to hear. Like, for me personally, that's very exciting because I've been in a specific industry and I've done very specific things. But when I look at one of, I say My key strengths in building the business, it's relationship building and sustaining great relationships, building authentic connection and that organically helps business grow. So I love people, I love working with people, I love conversing, I love figuring out how can I help you and what can we do. So for me, if I was to look at buying a business, I should be looking then at a business where they actually require that skill set and they're maybe lacking that skill set. Is that what you're saying?

100% correct. So for example, you would not want to buy a manufacturing business where what drives the revenue and profits is manufacturing. Know how to. You want to buy a business where getting in front of customers, solving their problems, putting, you know, being able to work with your team of employees, empowering employees, where that is the skill set that's required to drive the business, not something where it's part of what it does. I mean it's a phenomenal skill set and the application of that to the right business. Because there's very often, there's a lot of businesses where especially mature businesses where the owners have just stopped caring about those relationships. That's the same employees, this one's good, this one's bad, you know, that one's a pain in the rut in the rear. You know, the customers they call, we send them the orders, all okay. And they sort of get onto cruise control where the, the new vigor coming into the business saying, hey, we've got these long term relationships with these customers, but they're also buying from five other people or we're not really exploiting all the things we could potentially sell them. I mean that sort of energy is adaptable to so many businesses and it's a great skill set to have. So the way you're thinking about it is absolutely 100% correct.

Well, thank you, that's great, honestly, because I've never really thought about how that would even apply. So I guess next question is for the person that's listening, going, I'm very, very keen. Look, you've built a whole course around how to buy a good business at a great price. So let's jump into that. How do we even identify a good business that's up for sale or might be up for sale?

So it's important for anyone to understand that I'm a buy an existing business guy or an existing franchise for those that looking for franchise, believe in buying a franchise resale versus any type of startup. And I talk about a good business because businesses have their life cycle. They start off as I call them the three GS on the hill. They start off at the bottom, whether a startup. And to me they're all garbage at that point because you have no ide deal what's going to come about in the future and then at the top of the pyramid is when they're great and you don't want to buy it then because the only way to go down typically is, is, is, is, is the only way to go after that point is down. And that's, but in the middle are these good businesses. In other words, they're rock solid. They have a foundation, they have infrastructure, they have customers, they have employees, they have products and they have, and they've gone past the startup stage. And so when you look at these businesses, I like to buy a business that's rock solid. I don't like to buy distressed businesses. I think that's ridiculous. There's a reason why they're distressed. It's an endless money pit. And most people, certainly new newcomers are not, not don't have the competence to turn around the distressed business. So I, you know, and I say, I love, I love the fact that it has the word stress in it because that's what it is. It's just a stress business. It's awful. So you buy these good businesses and by good business I mean some of the things, the attributes that we've just talked about. The most important thing that determines that is, you know, growth is very sexy, but stability is valuable. And so has that business been stable? Has it, you know, perhaps some growth to it, but assuming all things remaining status quo and based upon my skill set, can I go into that business tomorrow barring something unforeseen or beyond my control like a pandemic or a 911 event or something along that line? Along those lines, will the business continue to be status quo with me as the new owner? That's point one related to a good business. Point two is what does the world look like for this business and this industry post purchase? Meaning is the product in demand? Is there going to continue to be a demand? Are there opportunities for growth? Is there opportunities to potentially improve efficiencies and technology within the business? Can I scale the business? Who are my competitors? Is there an 800 pound gorilla in this business that is absolutely going to prevent me from growing this business? Are the fundamentals in place? You know, are the right people there? And if they're not the right people, can I get, can I get, get them, get them out and get the right people in? And so that foundation of rock solid is critically important. And then you layer onto that what the future looks like and you that through research, through gathering information, critical questions to ask the seller, understanding what they do every day and getting realistic growth opportunities through your own research and speaking with other business owners in the exact same field who may be doing better, may be doing worse. So it comes into you, you pay for the past, that's what the price you pay for the business. But you're evaluating it for the present, but you buy it for the future.

And the way you've described that makes total sense to me. And some of those key indicators you're looking for. So if someone was brand new to this and they're going, okay, I want to buy a good business, not a distressed one, what are a couple of the high level key indicators, you know, margin, gross profit, what are the key things that they need to look for that it's a healthy good business?

Well, look at both sides of the equation because some of the things I want people to look for is, is there any customer concentration? Meaning does a disproportionate amount of the revenues come from a too few customers? So is it there any customer concentration or supplier concentration, meaning they have one key supplier that provides all their product and they're reliant on them. What happens if they go out of business? Similarly with the customer concentration, what happens if that customer disappears? What policies and procedures are in place for me already in that business? Okay, so customer concentration is clearly an important one. On the negative side of red flags to look for on the key fundamentals to absolutely look for are when you look at the finance, the beauty of financials is their numbers. It's math. It is. You know, I hate to sound like jargon, it is or it ain't. You know, I mean, it's, it's like one plus one never equals three. And so the financial piece is the, is the easiest part to deal with. So when you're looking at the financials, one point that you brought up is the margins, are they increasing? Are they decreasing? That's really important because if you're buying a business, for example, in a more mature industry or where scaling is going to be difficult, you have to make sure that the margins aren't decreasing.

Right? Because there's a chance that the business, if you don't do some things with the business, could constrict a little bit. And so if you have that revenue constriction plus shrinking margins, you're really in trouble. Are the certain expenses increasing? I have one client right now whose business is being absolutely decimated because of insurance costs. And they're in a type of business where they have a spotless record, but it's a high risk business and their insurance is doubling every year and there's nothing they could do about it. And so, and it's, and it's a big, big number. And so you look at that and say, well, it's certainly not going to start going the other way.

And so being able to tear down the expenses and saying, what is it costing me to generate this revenue on a continuous basis, are those things that are going to continue to impact the business negatively? Similarly, you want to be able to look from the positive side of things and saying, okay, if I put X amount of money into this business for marketing, is there a relative outcome on the other side? So if I put in a dollar into this business and I get $2 in revenue and it's at good margins, well, what happens if I put in $2? What happens if I put in $22? Does that ratio continue? And so being able to look at that, the numbers part, very important. Another piece is to look at the employees. Are there key employees? Anybody with specific licenses that they hold that I don't have that they could walk away tomorrow? And I know this is sort of sounding negative, but when you want to look at positives in a business, very often you have to first look at the negatives to make sure is that possible. Because you could always deal with growth and good times and blue sky that you have to learn about and investigate what can go wrong. You can't solve for everything. And there's always a risk with buying a business, but you want to look at, hey, what can go wrong? And so with the key employees, am I reliant on anybody if I need a constant flow of employees? For example, we're looking at right now a commercial cleaning business. And it's a pretty significant size business. But that business is always, always, always has a problem with recruiting, training and retaining people. Everybody in that business has the same problem. And now you look at a minimum wage is going up exponentially, as it should. Don't get me wrong, people need to be paid a proper living wage, but that really has a massive impact on the margin. So that's great. We want to pay all these people this new proper ways that they should be getting paid more. We want to pay them more than that. But can we get a price increase from our, from our, from our customers? And so looking at some of these things as to you know, growth and at what cost and can it be done? And what problems are potential problems in the business? Oftentimes what are. When you look at the problems, you understand what are the good things that to be looking at as well. So you look at the numbers and you're looking at within the business and certain things that I like to see. You know, I have my five golden rules for businesses that I buy sales and marketing driven. I like ones with high margins because if they have high margins and I know I'm capable at sales marketing, I don't care what the revenues are, because as long as I build the revenues and the margins are good, it's going to be profitable. I like businesses with demand in place. I want business that doesn't compete in price. And I always like an element of exclusivity related to the business. So those are five my golden rules. Everybody should have their own, but those are ones that guide me. And those are really things that I put every business through that litmus test. And so if you have those rules and we also have these 10 commandments that people need to follow and you have those rules and formula, you can put the business through that test. And ultimately in the aggregate, it determines whether or not it's a good business.

That's incredible. And is the idea here to have multiple businesses and keep building and you step out and you get great leaders in there to run the businesses? What has your experience been? Have you always had one and then sell by another one, or have you had multiple.

I'm sorry, I'm laughing. I don't think I've ever had one.

There you go.

I've curtailed my buying activities a little bit because I'm at a certain age and I'm looking to devote, you know, the next period of my life. 62 and grandson now, and looking to vote the last period of my life. More to education than buying more. But I think it's completely up to the individual. You said something earlier in this conversation where you could become addicted to this very easily. Because when you start connecting the dots of I do this and I get that outcome and love the idea of building something, for some people, the nice thing is if that's what you want to do, you can do that. In this, in this universe of buying businesses, running them, and entrepreneurship. And so that's very. I mean, it's, it's absolutely part of it. For other people, they're going to be happy with saying, hey, I just want to. I just want to control my own destiny. I just Want to walk into my own business every day. I'm happy with one business, nice size, I want to be able to grow it, I want to be able to take some time away. So for them that option is available as well. I will to your third part of the question, which is related to putting people into place if you really want to be able to exit. Every business gets sold or closes at one point. So if you want to build a really good business and have the ability to sell it down the road as you start to make more money, you really need to start thinking about putting a second tier of management into place as opposed to just. Most business owners are guilty of just keep. As the business grows, they keep putting more and more money into their pocket. Figure out the amount you could live on and put in a second tier of management in place. Because I believe fundamentally that you should run your business like you have to sell it and you put things in place that is going to ultimately make it more sellable, but in the interim, it's going to make it a better business. Like second tier of management, like having flawless books and records. These are all things that are important to buyers. You know, what keeps you up at night about the business are problems in your business. In the eyes of a buyer who has no clue about your business, those are going to be magnified times 10. Right. So those type of things and the sky's really the limit. I've always gotten my jollies from the process of buying and then the immersion. I have less fun actually running it after a certain period of time. I really like the deal, getting a deal to the finish line in a good way. And I love the immersion of being in a new business where I, you know, a few months ago I knew nothing about. Now I own it and being able to really sink my teeth in, learn that business, get the guts of the business in my belly for six months, then start looking at some initiatives to grow it. And once it gets to a certain point and really has legs and it's starting to do really well. I mean, if I'm really enjoying it, I'll keep doing it, but if not, I want to put something into place, someone in place, and get on to the next, I love it.

And when we go back to talking about core human needs kind of psychology that we talked about earlier, it sounds to me like variety or almost uncertainty is a big driver for you. You love learning, you love growing.

Absolutely. The learning part is huge. I mean, I find it fascinating. I never want to be the smartest person in the room. Because if I'm in the wrong room, that's very different. Now when I started out in 29 years old, I was a young business owner and I was got my ego and insecurity got in the way and I probably, I did feel then that I wanted to be the smartest person in the room and that hindered my growth substantially, business wise, personally, etc. And when I made that evolution to hiring people that were bigger, better, faster than me, my businesses started to explode. And so, but that was a learning process. But yes, the, I love the uncertainty. I love the, you know, to be a successful entrepreneur and I'm sure there's other people that have been on your show have different versions of it, you know, for me anyways, you have to embrace the uncertainty. As long as you don't do something stupid that's going to put yourself out of business. You know, I mean, you've got to embrace the uncertainty because it's like there's no straight line in entrepreneurship.

It's.

You're zigzagging and things come up that you didn't expect and you've got to learn to deal with them. I've always, I've, I've always been someone, you know, they had that book, don't sweat the small stuff. Yeah, I know it sounds crazy but like I sometimes like, you know what? I've been more worried about some of the small stuff. The big stuff never phases me because I got to deal with it. So to me it's always been a case. Like I want to know what I'm dealing with and then I'm going to deal with it. Like no matter how massive it is, I don't ruminate by it. I compartmentalize very, very well. I deal with it in an effective way and I'm by no means superhuman. I'm like by no means. So please, I don't know if I'm not giving off the impression that thinking of a know it all or anything, but as far as, you know, being able to embracing the uncertainty of entrepreneurship, to me that's where the beauty of entrepreneurship lies because you find solutions to problems, problems and you come out at the other end. Even if you didn't solve the problem perfectly, you come out smarter to, to deal with the next problem. So yeah, I love, I love the changing landscape. I love the uncertainty. It's not for everyone. Some people want more stability and that's fine too. You can, you can accomplish that in business ownership. But I think you're in a very brief Period of time. You're probably like a paid psychologist. Like, you figured it out pretty quickly. I like that stuff. Yeah, I do.

I love it.

I like that stuff. Yeah.

I have to be honest, this has felt to me like a bit of a masterclass. And I know that the listeners will probably be feeling the same way. So if this is anything like a taster of what your program, your course is about, man, oh man, it's going to be mind blowing. So I'm going to ask my team to put a link in all of the show notes. On YouTube, on Spotify, on Apple. Wherever the listener, you're listening right now, there's going to be a link for you to go and check it out. It's called how to Buy a Good Business at a Great Price. And honestly, Richard, how you share the information and distill it makes it understandable for me. And I always say, if you can make it understandable for an Irishman, you're doing great.

You and me both. Yeah, that's right.

If you want to make it idiot proof, just imagine that you just now met a better idiot.

Okay?

So really distill this for me because I don't get it.

What we're saying to the listeners right now is that you guys are tuning into 2 Idiots.

Congratulations, everybody.

I've loved it. Amazing. Can I ask you one last question?

You could ask as many as you'd like.

I love it. So I'd like you to fast forward many, many years into the future and you're highly aware that it's your very last day here on Earth and someone very young, maybe a grandson or great grandson, someone you love dearly, walks into the room and they say, richard, how do I lead my life? On purpose? What would you say to them?

Never worry about being right. Just worry about getting it right or doing right, even if it's to your own detriment.

I love it. That's incredible. A listener that's listening right now. There'll be a listener somewhere on the planet that needed to hear that. Richard and I thank you so much for creating this space. I'm excited to see what you do in helping others because I know that that's a big part of this next plan is to continue growing other business owners and equipping them. So thanks for what you do for this world.

Thank you. I appreciate you having me. I love the conversational nature of our time together. Sometimes I'm on these and they give me scripted questions beforehand, which is a little crazy. But I really enjoyed our time. You asked terrific questions and I really enjoyed my time with you.

Pleasure. And next time I go to buy a business, I'll be going through the course first.

I'll take care of you. Don't worry about it. I promise you.

You're a legend. This episode of the Lead On Purpose podcast is proudly sponsored by NZ Mortgages. You can check them out at nzmortgages Co nz.