How to Acquire A Profitable Business Instead Of Building It With Carl Allen

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All right, welcome back to the show. This is Brad. And after taking a short hiatus here just recently, I'm back with some of my most fun and favorite episodes for you guys today. And today I've got a guy on the show named Carl Allen. And Carl is somebody that I, I think I may have seen some ads or somebody talked about him probably a year ago, and I paid close attention because he's talking about something that's kind of near and dear to the things that I'm interested in, the things that I'm doing right now, and that is acquiring businesses. You see, I've started businesses, I've sold businesses, I've built them, tried from the ground floor, and I've also tried to build them and flopped. And one of the things I really realized way back when was that.

Is.

That startups are really, really hard. I mean, as we all know, most businesses fail in the first year or two. I think something Carl may know the stats, like 90% fail within the first five years, like 96% fail in the first 10 years. I mean, we're all entrepreneurs listening to this show. But the point is, building a business is really, really hard. And through some of the conversations I've had with past guests from mentors of mine from colleagues and other people, it really dawned on me in a very big way that there's probably an easier way to do this. And that easier way sounds really complex, but it doesn't have to be. And that is typically acquiring somebody else's business. Now, that may sound like a really big mountain to climb because you're like, well, I don't have millions of dollars to buy a business and I don't really know all this stuff. But the truth is you don't really need that. And if you've paid attention to late night infomercials for the past 40 years, people talk about buying houses with no money down and with none of your money, and real estate investing, well, there's not that big of a leap between real estate investing like this and buying a business. Now, there are some differences, some are more complex than others, but it starts to make a whole lot of sense and once you have this epiphany and your mental, your mindset switches, I gotta tell you, at least for me, it's kinda hard to look at the world of business the same way. So right now I'm always looking for, you know, who else has a business that I can either acquire, improve or really take on ownership of either all or part. And I gotta tell you, it's not always the easiest thing in the world to do because I don't know everything about this. But that is why I reach out to experts such as today's guest, Carl Allen, and bring him on the show to shed some light because he's been doing this for, I believe he told me about 26 years buying and selling businesses and helping other people do the exact same thing. And he, you are going to meet him right now. Carl, welcome to Bacon Wrap Business.

Thank you, Brad. Great to be here. Thanks for having me.

Yeah, it's really awesome to have you here. And I want to preface this by telling.

My audience that some of the stuff we're going to talk about may seem a little bit over their head and it doesn't have to be. But I don't want to spend the entire time with you here talking about the most basic why should we do this? I kind of want to get into some of the good stuff as if you and I are having a beer or a coffee somewhere and the folks on the other side are getting to eavesdrop. So instead of waiting to the end to let people know where they can follow this rabbit trail and learn more, how can people like you have a 90 minute training or you have something if people want kind of a primer on this stuff. Right. Where can they go to see that right now?

Yeah. So I started doing this because I was getting inundated by, you know, people when I was in the media or some of my deals got announced, people would reach out and email and say, hey, you know, hit me on Facebook, you know, how can I, you know, can you teach me this stuff? And I said, well, you know, I, I'll put together a 90 minute training that's completely free for you to watch it. And that's@ninjaacquisitions.com.

Free. So if you go to that link, put your, your name, your email, pick a time. It's an evergreen webinar. It's not live. And you go through the 90 minute training and you'll get a lot of value from those 90 minutes. And I actually give you my 10 step blueprint, which is my proprietary business buying system that I've built over 26 years now, 25 and a half years. And you take that away, you get copies of the slides and the tools that I give you as part of it. You can go where you can implement that and you can buy a business in 100 days with, without you spending $1 of your own capital. I show you exactly how to do it right.

And guys, I've been through the webinar, it is really, really solid and it's one of those things that you're not gonna see this kind of stuff in a lot of places. So it is really mind expanding on what's possible. So even if the tip of your, you know, like if you're not on the precipice of thinking I wanna go buy a business, it's really good to learn because it will expand your mind and your horizons. That being said, I kinda wanna dive into some of the questions that I've got for Carl and, and I invite you to guys listen in and hopefully you can get some information because I have bought businesses. I bought one a couple years ago, I bought one last year, I'm working on another one right now. And this is very active. So Carl, you've been doing this for about 26 years you said, right?

Yes. So 1992, I started nice.

And what was your very first business that you purchased and what were you doing at the time and then what was that impetus to go from to, from whatever to buying business?

Yeah, so, so I started my, my deal making career in 1992. So I left university, I was in England at the time. I went to work for bank of America. So I worked on Wall street and I was doing, you know, really big deals and I was working for Boeing, IBM, you know, ge, all these big businesses buying and selling subsidiary businesses and so really got my, my chops in this, in this world, you know, doing 100 hour week sleeping at my desk, doing all these deals. And then, you know, I left bank of America, I went to business school in Chicago, got my mba, then I went into private equity. And these are guys that, you know, they invest large amounts of money in private companies and we'd, we'd invested in a business which we ended up selling to hp, the software company. So I ended up going there as part of their mergers and acquisitions team. So I was buying businesses and selling businesses for them all over the world. And this was 2008 and I was in Moscow buying a business and my wife was 36 weeks pregnant I think at the time. And I was cleared to Go and do this deal. And literally I'm in the meeting room negotiating the final terms of this deal. And I got the call, Brad, the call, it was my wife. He said, look, I'm sorry to tell you this, but I've gone into labor. You need to get back to England straight away. So I literally, I had my wallet, my cell phone and my passport on me. I literally ran out of the boardroom. I left all my luggage, my computer, all my work stuff. I ran out, I flagged down the nearest cab. I get to the airport, I jumps on the first plane. And I got off the plane in England, there was a police escort to take me to the hotel. And I literally, I ran into the delivery room in the hospital. About five minutes for my son came out. So I'm sat there like, phew, that was close. And my little, my little guy, Josh is in my arms. He's, he's 10 now. And I thought to myself, yeah, I think I need to find something else to do. You know, I. This corporate life, traveling all over the world doing deals, sounds very glamorous. It is. You know, it's very well paying job. But I thought, I need to spend more time with my, with my family. So a couple of weeks of changing diapers and, you know, pushing my, my son around in his pram, I sat down with my wife and I said, right, you know, what am I going to do? So, so I, you know, I left hp, took some money and I thought, well, I only have one skill. I only know how to buy and sell businesses. But I've learned enough on the skill. Yeah, I'd learned enough in the 16, 17 years. And, you know, when you're doing, you know, billion dollar deals, which I've done, there's no real difference to that than, you know, doing a, you know, doing a 2, 3, 4, $5 million deal. The mechanics are exactly the same, the transaction is the same, the work that you do is actually the same. And it's actually so much easier to buy a small business because you're dealing a lot more with seller psychology. When you're buying a billion dollar business, it's, oh, you're dealing with a whole.

Bunch of, it's very highly sophisticated issues.

And it's all about numbers. When you're buying, when you're buying a business doing a $2 million a year from a baby boomer that wants to retire, he's less interested in the money. He's more interested in you being a safe pair of hands that can honour his legacy. Look after his employees and treat his customers the way that they used to be treated. You know, you sell that story to him or her, he's going to let you buy that business.

And he's going to let you use his own business assets and cash flows to do it. So that's basically my model. So the first time I did this.

When I decided to go and actually do this, my first kind of consulting assignment, because I was doing some consulting at the time, is there was a transport company, it was doing about $7 million in revenues in U.S. money. And they called me and said, hey, we want to sell the company for us. So I went down, I looked at it, it was profitable, it had good assets. And I went out to the market and I figured who would covet this the most? Which bigger transport companies would really cover this company's fleet, its employees, its customer base. So I went out, I found three buyers, got them into a negotiation and ended up with a really great offer. So we'll go through the deal. And it was the night before the closing. So the night before the money was changing hands, the ownership was changing hands and the buyer had come into the business. I wasn't there. And he sat down with the two brothers and he gave them a list of all the employees that he was going to let go the following day. You know, it arranged for the sign people to come and change the name above the door. And he was letting two thirds of the employees go because he already had employees.

And he revealed this before closing on the purchase.

Yeah, so literally I can see where.

This is going, but keep going.

So the older brother, who was 59, 60 at the time, Big guy, 250 pound guy, scary looking guy. He calls me absolutely in floods of tears. He says, carl, we can't do this deal.

We care about our employees, we care about our brand. He said, I want to be driving around in my retirement. I want to see my trucks on the street doing what we do. He said, you've got to go find me a buyer that's not going to trash the company, that's going to look after it, protect it, honor it, and respect what we've built. You know, this was a 35 year old business. So I thought, and it just came out of my head. I said, colin, I'll buy it. I said, I'll buy it, but you have to let me finance your assets to give you a down payment. And then I want to pay you some money over time. I said, but I'll promote your number two to be general manager. I'll give him 10% of the equity. And I said, if I sell the business within five years, I'll give you 2% of the sell proceeds. He said, done. Get yourself down here. Let's do that deal. So we did that deal. That was my first deal. And it gave me the idea that there's going to be hundreds and thousands of people out there just like him that didn't want to sell to trade buyers. And I actually, I did a survey back in 2012 where I interviewed about 2,000 people that recently sold the business, and the results were staggering. 79% of sellers did not consider money their primary motivation for selling. They wanted. They were selling because they had had enough. The business was in good shape, but they just couldn't go in there anymore and keep running it. They wanted to leave, but they didn't want somebody that was going to rip it up, relocate it, fire all the employees. They wanted somebody who's going to look after it. So that became my kind of business model. And so I've been doing deals, and I'm still doing deals. I'm buying three businesses right now, and I'm selling one business as well. So I'm not just coaching people on this stuff. I'm not just talking about this stuff. You know, I'm doing this stuff every single day of my life because it's amazing. The opportunities out there are phenomenal, especially in the US there's two massive, massive things that are happening in the States which just completely put fuel into people buying businesses. So the first thing is there's already more than 2 million businesses for sale in North America today. But there's 10. According to the Wall Street Journal, there's 10,000 baby boomers retiring every single day in the United States. And Forbes, Forbes reported that 19% of them own small businesses. Okay, yeah. According to BizBysell.com who are the largest online business brokerage, about 200,000 businesses per year change hands. So literally, it's like a 1 in 10 to 1 in 12 businesses that try to sell actually do. And what's also happened, which is amazing, is the sba. So the Small Business Administration, you know, your own federal government, they turn around and they said, okay, if you're an entrepreneur and you've got a reasonable credit, we'll give you. We'll lend you 90% of the purchase price of the business.

You know, we'll partner with a bank. We'll give you that money so you can buy a business. So the government are trying to solve the epidemic, which I See in the small business market today in North America, that there's so many people wanting to sell businesses, but there's not enough entrepreneurs that have either got the skillset or the capital to be able to make those deals happen. So that was a massive driver for me creating my coaching program and that was a massive driver to really kind of teach entrepreneurs the whole mindset of deal making. Why would you want to buy a business? What type of business should you buy? Do you want to run the business yourself or do you want to buy a business as an investor and have a general manager, you know, run it for you? And then, you know, how can you scale the business, how can you optimize the business? And then eventually, when you're ready, could be three months, could be 10 years, you know, how do you sell it, how do you take it and put it into, you know, the mindset of your ideal buyer that's going to take it forward. So that's why I do what I do. That's my model.

I love it. And offline, we were talking about some of the types of businesses that you have kind of specialized in, both with you and some of the clients and students that you work with and they tend to be more the brick and mortar offline style businesses versus like an E commerce style business. Is that right? It's a little bit more of the established.

Yeah.

Can you give me some examples of some of those? Like maybe it's the types of businesses you're, you're buying right now or some of the ones that you kind of see there. Because I mean there's a million different business categories out there. So I'd love to just enlighten myself and the audience with some examples.

Sure. So, so I'll buy me, my partners and all the people in my program as well will do deals in any sector apart from the E Comm. So when I, when I say E Com, I mean like an Amazon dropship business that's basically one person with a website, all the inventories in an Amazon store. So there's no assets and you know, they've just built it as a lifestyle business. There are people that do those deals, which is great, but that's not my mantra. I don't teach that because I've never done one of those deals. So I'm buying engineering businesses, manufacturing businesses, technology businesses. So hardware, software, software as a service businesses, IT services businesses, professional services businesses like pr, marketing, advertising, web design, SEO, Facebook, ad agencies, all those types of deals don't tend to do much in the Retail space and then I don't really do like commercial real estate.

Although a lot of the deals that I do, they come with real estate. So you're buying the business and you're buying where the business operates. So those are the types of deals that were know that we're doing. And actually the deal I'm about to close on, it's a radio business in la. So this will be the first time I'll be venturing into the radio market.

So you're buying a radio station?

No, it's not a radio station. It's a content aggregation business. And I know absolutely nothing whatsoever about that industry. But I partner with somebody that knows that space and that's my model. You know, people think, you know, to buy a business you need to be a Nobel prize winning expert. You don't, you know, if you know how to buy a business, which I can teach people, if you don't know that sector, then you just need to partner with somebody you know, that does. They'll help you do the deal and then they'll help you run the business as well. So, so let me ask, let me.

Go down that path because personally in my business I am not looking to buy at least right now, one particular business and then be the CEO and run it. I'm actually not a good CEO. I'll be the first to say I'm a terrible coo. However, you and me both, however, I do like the, and I've done recently the deals where you buy a company, you bring partners in. I've done this where I brought them in afterwards to help take over a lot of the heavy lifting and the management, et cetera. While I still remain a partner and focus on the big, the much bigger pictures and potential deals out there. Like we may buy another company in that niche that we just purchase something in, but that's another story. So I'm very interested in the acquiring a piece of the business but staying off the org chart and staying away from having to run the thing. So I want to dive a little closer into that and how you do this. Now I know that.

You'Ve spoken about how sometimes you have people you've taught to buy businesses and students who really do they want to buy a business and run it and do all that. In those cases they make perfect partners because you help them close the deal and then you've got somebody trained to run it. And I kind of get that. But what are some of the other ways that you can go into some of these totally disparate businesses? Engineering tech, SaaS, agencies, et cetera, where you don't have the perfect partner lined up ready to run it from day one, but you identified a good opportunity. You start to go down that path and starting to build that hit team early on. Like, enlighten me some more there on some of this.

Yeah, so there's four. So there's four answers to that, and I'll just quickly whip through them. So typically a lot of the people that are in my coaching program, and I do this a lot as well in my own deals, is what's real. And most people will find this really, really strange. But what you'll find in some cases about a third of the time is you'll buy a business and the seller, the owner, they're happy to stay on and run that business for you. So they're in a position where they don't want to own the business. They don't want the accountability of owning the business. They don't want to have to deal with all the financing. They don't want to have to deal with.

The HR type stuff which you can outsource. They want to go and they just want to do what the business does. And what's actually interesting, Brad, is most businesses that I actually look at, the owner and the business are typically one and the same. So they haven't separated themselves per se from the daily grind.

The owner, operator.

Yeah, yeah. And some of them are just completely incapable of. It's like severing an arm or a leg. They're tied to the business. They don't want to own it, but they're happy to run it. So some of the deals I do and my coaching members do, they'll buy a business and they'll lead the seller in, you know, maybe for a couple of years just to keep running it. Or what you'll also find is inside of that business where the seller does want to go. Let's say they want to retire or they're sick or they're completely burned out, they just want to leave. Then what you'll find is inside of that business, nine times out of 10, there's always a great number two. So it could be the head of sales, it could be, you know, the head of manufacturing. It could be the financial control. There's also great number two that wants to step up and be the general manager, but they don't want to own the business. They haven't got the mindset of being the business owner and doing the deal. They just want to keep the train running on the tracks. So that's another great method. The third way is if the owner doesn't want to stay and there isn't a great number two to step up, then you can leverage your network to bring somebody in from the outside. So you can use LinkedIn or some of the job boards. And then if you want to do that, you can, you want to get that person.

Kind of in place quite early on. So once you've had the first conversation with the seller, so you found the deal, you've been and had that first conversation, whether it's over the phone or you've done a face to face, one of the first questions you need to ask is, number one, why do you want to sell the business? And if they say to you, look, I'm completely burnt out, I've been doing this for 25 years, I want to retire and spend time with my grandkids, great. Then, you know, you know, the option one's off the table. So your second question is, so you know, is there anyone in the business, if I buy the business as an investor, is there anybody else in your business that can do the day to day and they'll tell you, and they love it when you say, hey, you know what, I'm going to, if I buy the business, I'm going to promote that person to general manager. I may even give them a little bit of profit share or a little bit of equity, you know, for running the business for me, they're going to love that. And it's a great way of kind of building rapport. And it's a great way for you to convince them that you're that safe pair of hands that's gonna take the business to the next level and they're gonna cheer you from the sidelines. And why it's important to ask those questions early on is if there isn't a number two to step up, or there isn't the possibility of the owner staying on and running it for you, then you wanna get that person early. Because you don't just wanna think of that person as the person that you're gonna parachute in to run the business the day after you buy it. You want them part of the journey because they'll help you with some of the due diligence. They'll help you figure out where the business is in the market, what are the opportunities to scale it, what are the potential issues that might stop you buying the business? But what are the potential issues that are going to get fixed pretty early on? Most of the businesses that I look at the Seller themselves think they're underperforming, they think they're undervalued. They've got this limiting belief, this bad quality mindset. But I'm going in and I'm thinking, wow, that's a five minute fix. And I was on a call literally today with the owner of a technology company, reasonably, I say reasonably young, few years younger than me, so early 40s. And I said to him, tell me about your marketing strategy. How do you win business? He said, oh, we don't have to do marketing. It's all repeat customers. It's all word of mouth. You know, I love it when somebody says that because I know the minute I get in some proper marketing fuel into that business, I could double, triple, quadruple that business in 12 to 18 months. You know, I love it when they say that. You know, people think that when they say, hey, we don't have to do any marketing, they think it's an impressive thing. Yeah, I suppose it is.

It's impressive to you because you know, the minute you do it, it's going to be a.

Got it.

Yeah, exactly. And you know, one of the things, you know, you kind of mentioned a few minutes ago is that how money is not really always the big motivation for these people. I mean, a lot of times you're just providing them liquidity. It's like, because a lot, you know, they want, they want to be unshackled from the day to day responsibilities and obligations to make payroll, to do all this other stuff. Because, you know, I've realized that, you know, there's the, we all get into business for one reason or another. Sometimes we're forced into being an entrepreneur or a freelancer or something like that. And then there's the stuff we like to do, providing our service or, you know, selling a product. But there's all the necessary evils that go into running a business, operations, hr, finance, and all this stuff that just bogs us down. And there's a lot of people out there who are just absolutely sick of that. And they're not even looking for the big payday. They're looking for, you know, liquidity and they're looking for freedom. And that kind of leads into one of the next questions. And I know that the answer is probably a combination of the two. But back to the real estate example. When you're buying a house, like when you're buying a real estate investment, 99% of the real estate investors out there are not buying a house in the hopes that it's going to appreciate they're going in and they're buying a house that is disrepair, it's undervalued. But mostly importantly is they're not buying a house. They're buying a situation. They're buying the situation that the seller is in. They could care less about what the house looks like because they know if the situation is correct, they can get the price on the house that works for them. So when you're looking at businesses to buy, you know, there's typically three. Like, I guess if you look at the health of the business, there's three types. There's a business that is doing just flatline. They've plateaued. There's a business that's got an increasing trend of things are going pretty decent. And then there's obviously companies that are a little bit hurting and there's a downward trend in revenue. And there may be the necessity for a bit of a turnaround. And I guess the question is, and it may not be the clearest because it's combination of things, but are you typically looking for a situation versus a type in the health of the business? Like, the more motivated the seller is, the better, obviously. But are there any certain things you're looking closer at than others? And on top of that, are there any things you're gonna steer clear of, such as downward revenue trends for the past year or two where it's like not 100% clear where that's coming from? So what are some criteria there? That's a big question.

That's an excellent question. So typically. So my. My bullseye deal is I want to find a distressed seller of a good business, not the other way around. Yeah. So there's no point buying a business that's massively distressed, in my opinion. So if it's 90 days from insolvency or it's actually in insolvency, there's no real point buying that. So, you know, you could find a business. So I looked at a business last week that it was offered to me for a dollar.

No down payment, no seller financing payments.

What was the general kind of business?

So it was a professional services business. And basically it was 30 days from insolvency. So there was a lot of debt in the business.

The problem with that is it's really quick and easy to do the deal, but you need to really have skills in kind of business turnaround. You've got to be able to go in there and really be able to pick that business up and turn it around really, really quickly. Now there are people out there. If that's your skill set. If you're a business turnaround expert, you can pick up $1 deals all day long and you're not taking any risk. So if you only turn around one in three and sell for a profit, you're still making a decent return on your time, not on your capital, because you're not having to put capital into deals. So really I'm more of a situations guy and I'll give you an analogy. You could look at two identical businesses. Let's say you've got a business doing $2 million in revenue, making $200,000 of free cash flow. You've got two completely identical businesses. They've got the same revenues, they make the same products or services, they're even in the same location, even got the same customers. Two identical businesses. Business A is owned by a 30 year old entrepreneur that's, you know, got a lot of energy, having a lot of fun, you know, really, really enjoying life and enjoying being in the business. Business B, which is identical, is owned by a 63 year old retiring baby boomer that's got some illnesses, is spending far too much time in that business and wants to retire. Business A.

Could be worth five times more than business B in the mind of the seller. And what's really interesting, and I touched on this at the start of the call, is that when you're buying a small business, it's 90% psychology, 10% numbers. You know, business is worth, it's related to what's going on in the mind of the seller. And it's very different to real estate because I know real estate, you can get distressed deals, but real estate in a big way is underpinned by things like location. So you could buy an apartment in Nob Hill in San Francisco and pay 100 times more the same apartment in the middle of Idaho, no disrespect to Idaho or somewhere like that. There's a massive.

Kind of focus on the location of it in a business. In a small business, it's not about location, it's not about size, it's not about what's going on inside of there. It's all about what's going on in the mind of the seller. So I'm looking for that kind of highly motivated seller that's got a good business, it's got at least 12 months of life left in it and is underperforming. So it doesn't do any marketing. So put some marketing into it, it's going to fly. There's a lot of cost built up in that business over the years, it's never been, know, kind of trimmed out. So that's, that's going to put money on the bottom line, you know, instantly. And you know, it's got, you know, great, great employees, you know, a good number two that can step up and help you run that business. So that, that would be the bullseye, you know, type of deal for me. Things that are distressed, you know, it's not. Not really kind of my bag, because I'm not a turnaround guy. I know how to grow businesses, I know how to optimize them, I know how to sell them.

You just don't want to turn around something that's like really, really hurting because yeah, now you have to step in and do sometimes this debt negotiations and contract negotiations, which is great if you're doing like vendor and supplier relationship, like contract negotiations to save money, but not if you have, like, not if the whole business depends upon its survival to do that.

So. Absolutely. And what you tend to find with those deals is you have disenchanted employees, you have disenchanted customers, you have disenchanted partners and suppliers. You know, you basically go in there and everyone's in a really bad mood. Everybody like, hates this business. I'd rather go in and buy a business that's doing good. It's not the best business in the world, but it can be. And it's got enough life and juice in it to really basically take it forward. That's my model.

I like that. So then on the.

Just looking at a handful of my notes here.

So.

Due diligence. So due diligence is one of the most critical pieces of the puzzle. And for somebody who is not.

It'S probably the part that requires the most skill because you have to know where to look. You have to know where the bodies could be buried. And there's a million things that can go wrong if you do it incorrectly. And I know that in your course you probably go through some of the things that you need to do to know to go through due diligence. But I don't care who you are. If you're just starting from absolute scratch, that can be overwhelming. I mean, it's overwhelming for me when I've been doing it because I'm constantly worried, am I missing something? So do you have any strategies to help.

To help, I guess, outsource or hire? The due diligence done in a way that doesn't break the bank? Because if you're looking at enough deals, you could easily go broke paying Attorneys or paying other experts to do due diligence for you or on deals that aren't going to close.

Exactly. So you've answered your own question, which is great. Basically even. I've done 286 deals in 17 countries over 26 years. I do not do my own due diligence. Why? I'm not an attorney. I'm not a cpa. I've read probably more than a million pages of legal contracts in my life. And I, I'm sorry. Yeah, I know I got my CPA qualification way back when, but no, I want to be the deal maker. So what I always do and what I always recommend people to do is build your own little micro deal team. So when you're doing due diligence, there's really three parts to due diligence. You've got financial due diligence. So that's making sure, you know, the numbers are what they say in the accounts they've filed, their taxes on time. They've, you know, the money in the bank is true and accurate, you know, and all the kind of financial stuff that's going through the business, you know, is it true? And proper record, you know, even if you were a cpa, you know, you wouldn't want to do that. You would want a CPA to do that work for you. And I'll tell you how you pay for that person in a minute. The second thing is the legal due diligence. This is probably the most important. So an attorney will check, you know, things like that. The seller's got the legal right to actually sell you the business. You know, I went to meet seller five years ago, loved his business. He didn't actually own it. He was making it up. Somebody else owned it. So just checking little things like that and checking things like pending litigation and material contracts and employee contracts and 1099 and all those types of things. So you definitely want an attorney to do the legal side of due diligence. The only one that you would dip into, especially if you don't know the market, is the commercial due diligence. So this is looking at the customer base, looking at the market opportunity, looking at the trends.

That's the part I like the commercial. Like it's the, it's the financial and legal. And even though with the finance degree, I don't want to look at that stuff, like, I'll go crazy.

Exactly. So, you know, spending some time really, you know, doing, you know, doing a bit of research in the marketplace and, you know, understanding, you know, where the company sits you know, mystery shopping, some of the competitors, you know, talking to some of the customers, you know, so I always do commercial DD in my deals. So, you know, I'll get the customer list.

I'll call the top 10 customers and I'll say, why do you buy from this business? And they'll tell you. And then, you know, you can translate that into your core USPs of the business, what it stands for, and then that's your marketing message to the rest of the market. So it's really fun to do all that. But even if that's even daunting, you can hire a consultant to do a little bit of that work for you. Now here's the trick. Now, I've talked about hiring a lawyer, I've talked about hiring a cpa, I've talked about hiring a consultant to do commercial due diligence. You're probably thinking, yeah, well, you know, you, 5 to $10,000 a pop on a reasonable deal, that's a lot of money. If I don't have that money, how do I do it? So here's the thing. In the world of deal making, the vast majority of professionals will work on a contingency fee basis, which means that either the business pays their fees if and when you close the deal, or it's all wrapped into the financing. So let's say you're buying a business and you need $500,000 of financing, which comes from the assets. So you might raise 600, take $50,000 of it for yourself as like a deal fee for doing the deal for your time that you've spent. Then the other $50,000 will pay all the fees, and there's a little bit left in the bank for you to spend on marketing or whatever. Now, to get an advisor to do a contingent fee deal, you need to have two things. So the first thing you need to do is you need to have a signed letter of intent. So the process is you'll find a deal, you go meet the seller, you talk about the business, you do a very simple financial exercise. There's actually a model in the webinar that I share where you plug some numbers in from the accounts. It values and structures the deal in about two minutes. You make the offer, gets accepted, or you negotiate a little bit. And then what you do is once you've got the deal agreed, then you need to go and get your proof of financing. So you'd go to a financier or the SBA or an investor or whoever you want to partner with on doing this. Deal, and then they'll have a brief look at the numbers in the deal and they'll give you something called an eoi, an expression of interest. So basically, once you've got a signed letter of intent to do the deal with, say, four weeks exclusivity, and you've got the kind of proof of funding, obviously subject to the finance's own process and due diligence, you give those two documents to a consultant, a CPA and an attorney, two out of three will do the deal on a contingency fee basis because they know you found a business, you've agreed a price, you've agreed a deal structure, you've got the financing. It's all the case of just doing a little bit of due diligence and writing up the legal contract. And I would say.

99 times out of 100, when you get to that place, you will close that deal. You might find things in due diligence where you might want a price chip or, you know, just adjust things in a little bit of a way. But generally, you know that that's how the model works. So you can get people to do those deals and advise you and help you and assist you on a contingency basis, providing you follow those two steps.

I love it. So, and then sometimes, I mean, I guess if you've, if you've enlisted an attorney or a CPA or somebody to do some of that, you've probably paid a little bit of a retainer. But then if the. I'm just kind of recapping the.

If the.

Yeah, you've got the loi, you got the financing, and they can actually tell you're serious and you're not, just like, hey, this is somebody who might want to sell their business and I might want to make an offer, they're not going to do it there. But if you're, You've already kind of moved forward.

Oh, yeah, absolutely. Once you've got a deal locked in and it's ready to close, it just needs the transactional process and the paperwork executed. That's when, that's when you steam in. You know, if you woke up one day and thought, you know what? I'd like to buy a small business. I found a business. Yet I've not met anybody. I've got no financing arranged. I don't know anything about anything. You call a cpa, say, hey, it's me, you know, I'm going to get a business at some point, and once I've got it, I want you to do all the due diligence work for me on a continuous CV basis, they're going to say no. If you go to them and say, hey, I found this business, I, I've met the seller, I've got a signed letter of intent, I've got a full due diligence plan and timetable mapped out. Here's my attorney's details as well. This is what we're doing. Oh, by the way, here's all the financing that we need to make the closing payment and make sure there's enough working capital in the business. Will you do the deal on a contingency fee basis? They might charge you 20, 25% more, but they're looking at that thinking, well, you know, there's practically no risk in me doing that work. So, yeah, you might have to pay 500 to $1,000.

It's not that big of a deal. Especially if you've got. Yeah, if you've already got the loi and everything else, then you're good. Absolutely.

Yeah.

The.

You know, one of the things I forget where I read about this, I think it was from. I don't know if you know Simon Black from Sovereign man, but he had a great.

Yes.

Yeah, he had, he had a great little report he released a while back called.

The Infiltration Method or something like this. But he said a great way that he either gets deals or introductions to some amazing opportunities because he travels a lot internationally. And he said he'll go to a city and you can do this in your own home city, but go find some of the best business law firms, especially if that's kind of what you're looking for, and set up interviews with them. And he actually has a whole way he sets them up. He'll say that he's in town, he'll tell them to pick him up, send a car from me, I'm at the Ritz Carlton or the Four Seasons or something. And he goes, first of all, if they won't send a car for me, I probably won't go. But he's posturing as though he is a big deal. Now, he is a big deal, but he does this on purpose. So then he goes and interviews with the big law firms and he's interviewing them and letting them know that, you know, he is doing a lot of business, he is going to need some representation. He's got multiple opportunities going on. And then he finds out how much he can, you know, what their basic retainer is. He goes, you'd be amazed that you can hire some of the top law firms out there. I Don't need anything right now, but here's like $5,000, sometimes less of a retainer just to put it down. And he goes, what the big benefit is now you become a client of that law firm and they start to invite you to legal functions. They can introduce you to their clients. They keep you top of mind when you tell them what you're looking for. Like, by the way, I am looking for deals like this. And he said he's gotten so many deals from literally just retaining certain law firms or potentially even CPA firms, even if he's not going to do any real business with them because he's buying his access to them. And attorneys and whatnot have some of the best potential opportunities out there because they're talking to people.

Yeah, it's a great method not just for building that relationship and preempting what your deal team's going to look like, but also it's a great way for deal flow and deal origination. You can do it with attorneys, you can do it with CPAs, you can do it with financiers.

I called a financier on Monday. So yesterday called the financier about a deal that I'm doing an engineering business and we were talking through what I was looking for and he said, whoa. He said, you know something? He said, we finance a deal very similar to this. It would make a great kind of bolt on acquisition where you combine the two businesses together. The guys had enough. I think he'd let you just take it over. If you were to assume the liabilities on the balance sheet, I think he'd just walk away and let you do that deal. So they're always got their ears to the ground. And what's great is when you go to, so take your attorney example. You go and sit down with an attorney and you're telling them what is your deal spec, what type of deals are you looking to do? Then they're either going to have clients already that they know looking to sell or they would proactively and they would obviously then advise the seller, not you, or they'll proactively go out through their network and find them. Because what's interesting, really interesting statistic for you, only about 20% of businesses that are for sale in North America today are actually listed with brokers. So it could be some garbage by sale or all the local brokers all over the place, 80% of them, they're what we call off market deals. So they're not, they haven't put a big sign up out there. To say I'm for sale. And there's a reason for that. Because most.

Sellers, particularly the older generation, the retiring baby boomer, they don't want to publicly state that they're selling their business because it makes their employees nervous, it makes the customers nervous. And then they're frightened of a competitor coming in, pretending to buy the business, getting access to all the information, you know, who are they employing, who's the best salesperson, who's the best customer, and then going out and damaging them in the market. And even though you sign something called a non disclosure agreement to get access to all that stuff, those don't mean that much. Doesn't mean that much. You're not going to litigate if the competitors out there killing your business in the market. So if you're looking to sell your business, you tell four people, you tell your spouse, you tell your lawyer, your CPA and your banker. So if you're networking with the latter three, obviously you're not going to network with the spouse. But if you're talking to local banks, you're talking to all the local CPAs, you're talking to all the local attorneys, even financiers, investor clubs, you're talking to all those people, you're networking with them, you're going to get insane levels of high quality deal flow. And those deals are amazing because there's nobody else looking at them per se. So you're not, and you're not dealing with business brokers who some of them are okay. But the majority of them, you know, not that great. And you know, one of the biggest mistakes people make when they decide to want to go out and buy a business is they only look at broker deals. And it's the worst thing that you can do.

I was just going to ask you, that was dovetailing into the question is that the are the best deals not with brokers.

They are. The best deals are not with brokers. I won't even look at a broker deal until it's been on the market for 12 months. Yeah.

Because you want to know that it's not selling for one reason or another. So now that person isn't desperate and high hope, I mean, is more desperate than he would be when he just started.

Yep. One of the common things in the industry is the same in the uk, Australia and also in America. I spent my time third, third, third across those three places. And.

The way most brokers work, you know, and I'm not criticizing the broker model, but the way most brokers work is they'll Charge a big upfront listing fee and then they'll get a percentage of the deal. So if you're selling your business, they might want $25,000 up front and then they'll take 5 to 8% of the selling price. Now what's interesting is to brokers are notorious for inflating valuations. And they're not corporate financiers in most cases. They're not finance people, they're salespeople, the marketing people. I'll give you an example. I was speaking to somebody last week and basically it was a business that did websites. So they built websites, SEO. This business was doing about a million dollars in revenue, making $100,000 in free cash flow. So I'm on the phone with the seller and I said to him, what are your price expectations? He said, well, the broker that signed me up has told me because I'm in the technology sector, I can sell for 23 times multiple like Google. That's why I paid him the fee. I said, well, okay. I said, well, do you know something? This was a business in Milwaukee. And I actually said to him, I said, do you know the average last year of the 200,000 businesses that were sold in North America under $5 million, the average multiple of free cash flow was 1.9x. I said, so how on earth do you think you're going to get a 23 times multiple? My broker said, so he said, you know what? He said, you're right, aren't you? So that's, you know, that's it. A small business will sell between one and four times cash flow, depending on its sector, whether it's growing, the quality of what you're seeing. Yeah, a multi billion dollar company like Google will sell at 23 times because you've got a fast growing liquid market of investors that are buying and selling those shares in real time. So obviously with a small business it's different.

Right? Well, and in another totally separate conversation about this is when you do start to understand the intricacies of valuation and valuation is not dependent solely upon the amount of revenue. It's like a lot of people think, oh, it's like 2x3x times EBITDA. And it's like, no, it totally depends on like industry. Do you have continuity? Do you have processes and systems and how strong your people. There are a million ways to break down somebody's valuation in negotiation and let them know that it's not worth what they think it is. And at the same time, if you buy that and you, whether you're trying to sell your own business, or you buy a business and you're trying to resell it, which is one of the things that my partners and I are doing with one of the businesses we just bought is how can we add certain things to this so that the valuation will automatically be higher simply because we've got it. And it could be a set of standard operating procedures that make it really easy for the next guy to take it over. It could be adding continuity to the, you know, recurring revenue to it. And all these things can make a big difference. And that's one of the things I love is going in and finding a company who's doing a lot of things right. Just, but just not even close to everything they could be doing. But they've got all the heavy lifting out of the way. They validated the business. They've got revenues, they've got customers, they've got momentum, they're making money. And you come in with 10 things that you want to do that can not only make more money, but improve the valuation. And you can take something.

In relatively short order and sell it for a lot more than you purchased it for.

Right, absolutely. Valuation's a great kind of discussion topic because I get asked this a lot. How do you value a business? And of course there are accounting and financial methods for valuing a business you can value on a profit multiple. You can look at the value of the balance sheet and then adjust for goodwill. You can do complex, when I worked on Wall street back in the day, discounted cash flow analysis and real options and all that kind of stuff.

When you talk about public companies, right, that's a totally different story between public companies and small businesses.

It is, absolutely. But what's really interesting is the valuation of any business really comes down to what is it worth to somebody, what's somebody prefer to pay for it, what's somebody prepared to sell it for? Going back to my example of the two businesses that are identical, there could be a huge gulf in, you know, every business is for sale. You know, it doesn't matter. What if you had a trillion dollars right now?

Every business is for sale. So you know, those two businesses before the 2 million making 200,000 free cash, you know, the 30 year old entrepreneur, he might want 15 times free cash flow to even consider selling his business. Whereas the, you know, the 63 year old retiring baby boomer, that's, that's really, you know, had enough, you know, he, he might take one and a half times and let you pay him over five years. You Know that that's the difference. So. So valuation is one thing. What's more important, especially with doing small deals, it's not necessarily the valuation, it's the structure of the deal. You know, let's say you had a business that was worth a million dollars and I said to you, you know, I'll give you 2 million, but I want to pay you over 20 years. And you know, I'm only going to pay you per year if we hit above a certain level of profit. You know, you might think that's a great deal because you're potentially going to make a lot more money. But for me, that's the perfect deal because, you know, not only am I not putting any of my own money into that deal, I'm not having to raise any financing or do anything like that whatsoever. So deal structure.

So the first way, the first part of that one was what you said, the, of that example. Only pay me when what?

Yeah, so. So there's lots of different ways that you can structure the deal. So, so typically when you're buying a business, let's say you've got a down payment and you're getting the money from the assets, then let's say there's a balance of payments that you're going to pay over a number of years. That's called seller financing. Sometimes what you can do is you can increase the deal by giving them something called an earn out, which are bonus payments paid quarterly or annually based on the company hitting a certain financial milestone. I don't know if you've ever looked at a deal that's been presented by a business broker, but it's your classic kind of hockey stick, forecasting the businesses. The business done a million dollars in revenues for the last three years and then it's going to do five, ten, and then.

Yeah, I just, I ignore that stuff.

Yeah, I know. And then they try and base the valuation on this kind of crazy hockey stick growth. And you know, you can placate some of that by saying, look, you know, I'm only going to, I'm only going to buy the business off you for what it's worth today, looking back. But if we hit those numbers going forward, then we will give you a little piece of that upside. If that growth is real and it's achievable, then we'll give you a little bit of that upside. If it's someone to say, no, absolutely not, you know, their forecasts are false and in most cases they are.

Yeah, I love it. I love that. I want to make the most of our time. So I just, I want to hit a couple of the questions that I definitely want to go into. And this is probably the first, this is probably one of them that most people are going to ask in the very beginning. But I'm kind of waiting to the end. But because, and I know there's a lot of ways to find deals and get into the. Into deal flow and starting to kiss a bunch of frogs and analyze a bunch of potential deals. Like, because sometimes you just want to get, you know, you just want to get in the flow of looking at potential deals for sale. So what are some of the best ways that you found? And I'm going to preface this with a very selfish scenario, which is mine. I don't want to go out. I don't have a dream business that I want to be in. And that makes it harder to go look for them. Like, if I wanted to be a, if I wanted to own an engineering firm or if I wanted to own a manufacturing company, I can say, all right, go find those. But for somebody who is looking, I'm a deal maker. And for somebody who's looking for a variety of businesses to potentially buy and to start to look at this, what are some of the best ways you, you found to start to generate some of this deal flow and uncover some of these opportunities?

Yeah. So before I give you the strategy to find deals, the first thing you do really need to do though is you need to focus a little bit. You can't really attack the market with a general overarching, I'll buy any business because there's 2.44 million businesses for sale.

So there's far too much. So you want to focus in a little bit. You know, whether it's, whether it's services, tech, engineering, you know, you need to kind of focus the market down a little bit. And then what you also need to think about as well is you can buy a single business or you can do something like a roll up. So for example, there's a lot of people, I love the roll up. Yeah. Like rolling up chiropractors. So you could go, you know, go and buy a chiropractor, then buy another one, another one, another one. Then when you've got five or six, you know, you can take out a lot of the central, you know, a lot of the costs and centralize them, you know, and get economies of scale and all that type of stuff. And then once you get them to a certain size, then, then you can sell them. Because what's interesting about the mergers and acquisitions market. It's like a food chain. You know, you, you've got, you know, you've got the million dollar businesses. You know, they, they're either going to be bought by individuals like us.

Private equity is never going to come in and buy the small fish.

No. Any business north of 10 million, they're not going to buy it because they'd rather buy a business the same size of them or a $5 million business. It takes the same amount of time and effort to buy a $1 million business as it does to buy a $10 million business. So there's nobody, there's only individuals like us buying those kind of bottom feeding businesses, which are great businesses. But if you can buy several of those and you can roll them up into a group, then they're going to become attractive to the next big players up in the food chain. So those are some of the things you've got to think about. You know, where can I focus a little bit? Even if I just want to be general and you know, do I want to buy a standalone, do I want to buy, you know, do roll ups and those sorts of things. Once you figure that out, then really, as I said before, stay away from brokers as much as you can only look at deals that historically they've been listed a while. So for example, if you go to bizbuysell.com and you pay the, I think it's $20 a month for the premium service each of the listings, they'll tell you a, how much of the deal the sellers prepare to sell or finance. It's so funny. And then b, they'll tell you how long the business has been listed for sale. And what's interesting is you can do an analysis. You could pick 100 deals on biz Buy Sell and the longer it's been listed, the higher percentage of the seller financing. So there's a, you know, once they go over a year listed, generally the seller financing is 70 to 90% seller financing. So the guy wants it just a little bit down, but he's prepared to carry the rest over a number of years. So brokers just be wary. And then really it's all about, it's about networking. It's networking with your human network. Talking to all the intermediaries that we.

Discussed before hosting a podcast and letting my listeners know that I'm actually in the market to buy businesses.

Absolutely, yeah. Posting on LinkedIn, posting on Facebook.

In my webinar training, the free webinar training, I have a little process That I teach, it takes about two minutes to kind of implement. You can do it whilst you're actually on the webinar and I give you a little post you could put on your LinkedIn profile and it literally take you 15 seconds to type it in, personalize it to yourself, send it out. If you do that, you'll have deal flow within 24 hours. It's amazing. So, you know, when I started in this business 25, 26 years ago, you know, we didn't have any of this stuff. But now, you know, social media and the Internet is phenomenal. You can go to, there's blog sites and there's forums where for kind of sectors per se or just for doing deals. You can go in there and you can say, hey, I'm Carl, I want to buy an engineering business in Dallas. Do you have any tips or advice? I don't need tips and advice because I've been doing it my entire working life. But that's not the point. The point is, you know, 50% of the messages will be people that are trying to give you advice. But the other 50%, oh, you know, I own an engineering business in Dallas. You know, I'd be interested in talking to you or my buddy that I play golf with, you know, he's looking to exit at some point in the next few months. You know, do you want me to make an intro? So making those connections is great. And then what I also teach as well is what I call the direct approach. So there's nothing to stop you going to a library, getting access to Hoover's or one of those online databases, or they give you a 48 hour trial these days for free. You go in there and you say, right, I want to buy this type of business within this number of miles of where I live, between 1 and $5 million in revenues. You click the button, it prints you off the list. You can find out who owns the business, how old they are, you know, key financials, and then you write to them. You know, you just send them a letter. Not an email, a letter, send them a letter, very, very private, confidential. And you try and tailor the letter a little bit to the business. So, you know, look at the business's website, you know, what do they do that's unique? You know, find the seller on LinkedIn, you know, try and find some links where you can have a conversation, you know, build rapport. And you put that into the letter and you send it out. You know, you send 20 of those out, five or six of them are going to call you and they're going to want to have a conversation. So there's all these different things. You can go to events. So if you're, let's say you're working in sales and you're a frustrated salesman, you're pounding the streets, working for somebody else, you miss your family, you want to buy your own business and you're going to an event, a trade event. If you call the exhibitor, they'll give you the attendee list and you can look down at the list and you think, oh, I like these four or five little business owners that are going to be there. Small businesses, do a little bit of research before you go. Put there, you know, put a couple of bullets on the back of some cards. You go into that meeting and you find that person, you can start to have a conversation with them immediately, build rapport, talk about the sector and you say, oh yeah, I know your business. You do this and yeah, yeah, I've been researching you. I'm, you know, I'm looking to buy a business and I actually thought your business might be a really, really good fit, you know, are you up for having a conversation about it? I've done some incredible deals using that, using that strategy. That's great.

I love it.

What's.

What has been one of your, like favorite deals? Cause we've all got favorites. We've all got ones that just made us kind of like giddy. Like this was whether you made the most money at it or not, but it was just one of those that, the way it worked out, it was just so cool and advantageous. Do you have any of those favorite stories?

Gosh, yeah, I've got loads and loads of them. One of them, I'll tell you actually. So this came from a LinkedIn post. So.

I was doing engineering deals at the time, was a small precision engineering business. This was in the UK about, about 50, 60 miles from where I live, you know, when I'm in the uk. So I sent the post out like, you know, hi, you know, I'm looking to buy an engineering business, blah, blah, blah, blah, blah. You know, the script for that's on the webinar. And then I got, you know, 15 to 20 responses. And it's not necessarily for people in my network. They share it and they know people. So I got this email from this guy the following day. I sent it out about 9pm, opened my email. 7 in the morning I got this email from this guy called Jeff and he's like, you know, hi, Carl, got your message. He said, I'd be very interested in talking to you. Unfortunately, yesterday my wife was diagnosed with a very aggressive form of cancer. You know, I need to leave my business as soon as possible and I'd like you to have it. Can you call me? So I called the guy and he said, look, I don't want any money for the business, can you just take it off my hands? And there's a little bit of some liabilities on the balance sheet. He said the business is worth about a million pounds. There's about half a million pounds worth of debt in the business. So net's worth half a million. He said, look, if you can do the deal today, he come down today and buy this business, you can have it. So I went down, we did the deal, I met the team, we went through the numbers and I did the deal now and it was a really great business. It did, it did component parts for kind of really high end automotive. So it was making little components for Porsche and Audi and Volkswagen and all those guys. So we got into the business, you know, there was a, you know, good number two that, you know, didn't want to own the business but was happy to kind of do the day to day for me. So took that business on and then, you know, I kept in touch with Jeff for about three or four months and then about four months later his wife died. Sadly, she didn't make it. And you know, we took care of his daughters and he kind of got everything on an even keel. And then he called me up and he said, look, you know, I'm bored out of my wits. His daughters had grown up. He said, can I come back and work for you in the business? And I just said, I'll tell you what I'll do. You come back, I'll give you 50% of the equity and let's run it together. So we ran that business for about four years and then we sold it for about £2 million. So we both got about a million pounds out of it. And it was amazing. And so I'd say that's my favorite deal. It's not my largest deal. It's certainly the quickest deal I did. On average, it takes about 90 days to do a deal. If you're starting without having done this before, you know, my record is, yeah, 27 hours start to finish. But you know, the great story on that was, you know, that the guy came back into the business and I gave him half the business back and we grew it together. So that, that's certainly my favorite deal.

Oh, that's fantastic. Now, on the, when you're taking over a company, like how I would imagine, because didn't you say you have like, how many businesses you said you had currently have ownership in? Something like 17. Now are you.

Managing this by simply by like high level KPIs and are you looking at this daily, weekly, monthly? Or do you have like even one level of like, do you have one person who works for you who is kind of monitoring that on an ongoing basis? Because I can see that could start to get really time consuming is just kind of keep an eye on everything that you own.

Yeah. So obviously I'm very fortunate that, you know, I have a great team, you know, I have a cfo, you know, and I have great people that can, that can monitor all that stuff. But what I always do, every kind of 10 to 14 days, I'll have an hour on the phone with each of my GMs or my kind of operating partners. So about a third of my businesses, I own 100%. You know, lately, you know, I'd rather do deals with partners just to get this kind of leverage.

So, you know, I'm doing deals with people that, you know the sector. You know, they can either be the general manager or that they can be the kind of overseeing partner that's making sure that the business is, is on track. And what I always do when I buy a business is I'll always spend two to three days in the business, you know, really getting under the hood and basically agreeing a strategic plan to take the business forward. You know, we always have board meetings, even if they're on Skype or on Zoom, you know, once a month, you know, what was the plan? What did we do? Why, why did we miss it? Or if we blew it out the water, why can we leverage that? You know, what's the plan for next month? Or any major things that we need to, you know, we need to address. So, so, so yeah, it's, you know, there are ways to systematize it. You know, as an individual, you know, you, you could, you could easily own five businesses, you know, and you know, have a weekly call.

Overwhelmed.

Yeah, without being overwhelmed.

So one of the things that this leads me to, and it's because we all know that, I mean, we've been painting a pretty cool, fun picture of this and I think. And it gets really easy to do. But I always like to ask people, especially about a business model that I'm not 100% certain of, like, what is the, what's the hardest part? What's the stuff that if you actually had to like, really sit somebody down and explain and prepare them, like, this is the part that's going to be the hardest or the. This is what's going to suck the most. Because a lot of. And a lot of the. And just before you get to that, because I know you understand where I'm going, I think that the whole expert industry of I'll teach you how to do what I do has got one fatal flaw, is that there's not enough of the real damaging admission because if it was super easy, unicorns and fairy dust, everybody would doing it. And we all get into something and we start going full steam ahead and then we hit a brick wall and go, this sucks. I didn't expect this. What is the hardest, worst, suckiest part of this entire business model?

Mindset.

Okay?

It's not about the process, it's about mindset. So unfortunately, a lot of people in the world, you know, they have limiting beliefs. So they'll say, I don't believe you can buy a business without spending your own money. You told me before we came on the call, you've done it yourself, so you know, you can do it. You know, a lot of people think that, you know, I can't buy a business and not run it. You know, that's my limiting belief. So it's all about mindset, you know, it's all about emotion. And, you know, there's a saying, you know, where focus goes, energy flows. So really it's all about having that mindset. And I spent a lot of time with people in my coaching program, you know, really getting them into that peak performance mindset. Because I think it was Tony Robbins that said, you know, if, whether, whether you believe or you don't believe you can do something, you're going to be right, you know, so. So if you start this process and you think, you know, I don't believe that I can do this, then, yeah, you're probably going to fail. If you attack this process, you know, with a daily focus on, you know, I'm going to do this, I'm going to break this process down. I break the whole process down into 10 stages. And each stage has got, you know, like 10 mini stages. So there's 100 things you need to do step by step. It's like flying. Remember the Apollo missions when they flew to the moon? Like 100 things they had to do before out of the Earth's orbit. It's exactly the same. And like anything in life, you know, if you can break A process down into steps. And you can go through that process and you can model it step by step, stick to the rules, do everything that you need to do in order. You know, you can achieve anything. So, you know, it's like baking a cake. You know, I can't bake and I don't ever want to learn how to bake a cake. But if I wanted to learn how to bake a cake, I just model somebody that's done it. I'd find out, you know, what's their process, what are their ingredients, what's the timing, what's the sequence? And I just model that process step by step. And I would get the same result as that person. So for me, it's not about.

It's the mindset.

Yeah.

And you know, I can resonate with that because having gone through this, you know, a few times, the part that always gets me is that moment. Because I have not done this a lot, but I've done it, but not a lot. But it's the, it's getting to that point where this deal is starting to happen and, and sitting there thinking, what am I missing? Like, am I missing something? It's that I don't know what I don't know moment of am I about to make a big screw up because I haven't asked the right question, or that I'm making false assumptions, or that.

As I said, I just don't know what I don't know. And I know that's by the way, one of the reasons that people who are thinking about doing this should get a mentor and should actually enlist somebody. Because the way that I get around that personally is I just remind myself that I don't have to know everything as long as I have connections to people who do. And if I can get access to them, whether it's for free or for paying them, then I can usually mitigate that. And that's kind of how I've kind of gotten over those little mindset humps. But you're 100% right. It is mindset.

Yeah. So I break the whole. So the whole buying a business, you know, the whole deal, making space, it's basically, it's a triad. So for me, it's 70% mindset, it's 10% strategy, and it's 20% execution. So the strategy is, you know, you enroll in someone's program, you follow someone's blueprint. That's the process. That's 10% of it. For me, the 20%, the execution you're only going to get if You've got the right mindset. You know, that's the key. And what's important, you know, when you're buying a business, you know, you've got to have what I call emotional fitness. You've got to have some measure of psychological strength because it's not a get rich quick scheme. You know, it's not like, you know, you've got a 150% probability of it working. You know, you wake up one day, you push three buttons and boom, you know, you bought a business. You know, it takes effort and it takes work and dedication. It's like all things in life. You know, there are no, you know, there were no get rich quick schemes in this world. You know, you see a lot of it all over the Internet.

You know what, you know, that actually makes me think of something and it's like, it's a contrary thought that I loved. So there's a book I read years ago. I don't know if you've read it. It's an amazing book called Millionaire Fast Lane by MJ DeMarco.

No, I've not. No, I've not read.

So I recommend it for a couple reasons, and I recommend it to everybody. But one of the things he talks about, he says, I mean, he does talk about the real way to get. You want to get rich. It's. You kind of need an exit event. So if you're just, if you've got one little product you're selling that's great, you're making a little more money. But the people who've really made super duper money in this world are the people who've like, created a business and they've, you know, it's a sellable asset because you have this exit event where somebody's giving you three, five times, you know, yeah, revenue is like, boom. You just. That's. So a lot of it is designed around build. Build an asset that is sellable so that you can have that exit event. However, in the beginning, he starts off saying this, and I loved this. He goes, everybody says get rich quick doesn't exist. The problem is it does exist. They're confusing it with its evil cousin, get rich Easy, which does not exist. But he goes, let me explain what get rich quick means. He goes, if you were to start a business and over the next five years, for instance, you work on this thing and you've got this thing rocking and rolling and it's doing, you know, whatever, but over, after five years, you sell this business for $5 million, which is rich by anybody's. Standards, right. You get $5 million. He goes, it's taking you five years to do that. He goes, compare that to any other business or a career. Did you get rich quick? He goes, first of all, redefine what you think quick means.

Yep. Right.

Get rich easy. Doesn't like, there's a lot of work that goes into that. But truthfully, if you go out tomorrow and you buy a business.

Whether it's with none of your own money or some of your own money, and you pay a million dollars for that, maybe it's owner financed, and you come in there and you make a handful of changes to the revenue, you improve that, you improve the valuation, and then you go search for a strategic buyer that will pay an even higher valuation for your business because they really want it. And that business that you put nothing into, you sell it for $2 million or even you sell it for $1 million. It doesn't matter that now you have in your pocket. That's get rich quick. Now, it ain't easy, but it's quick.

Right.

So I loved that little counter argument. To get rich quick doesn't exist. I was like, oh, that's a good point. You got to redefine quick.

No, great point. Yeah, great point. Yeah. So I think, you know, just, just to recap on that. Yeah. For me, the vast majority of success in this market is all about your mindset. It's all about the state. If, if you can crack that, and I spent a lot of time focusing people in on that, then, you know, the rest of it is pretty straightforward.

Yep. Well, and you know, the worst part about this whole thing is once you start to go down this, this rabbit hole like I've done, is it actually does shift your thinking. It's hard to go back to just thinking about building a business from scratch.

Yeah. And you're absolutely right because, you know, a big part of it as well is it got to comes down to, you know, for anyone that wants to buy a business, the first question I ask them is why? You know, what, what's your why? You know, I don't know. I can't remember the name of the book. I think it's the start with why book where Simon Sinek where, you know, really it's all about your internal why it's that emotional, you know, kind of driving force that, you know, that controls your decisions, your actions and, you know, what you do. And what's really interesting is most of the people that I work with, they want to buy a business because they are you know, they're trapped in corporate world, so they're working for someone else. You know, nine to five dollars per hour shuffle. They're either sat in a cubicle all day, changed to a computer, or they're traveling all over the country selling stuff. And they want a better work life balance. They want more control over their life, they want more control over their future wealth creation.

And a lot of it is they want that pride and, dare I say, ego. Being able to go to the country club or the pub or the local golf course and say, you know what, I'm a business owner. You know, I've gone from employee to employer. Now the problem is most of them, we talked about this at the start. Most of the people that get into that space, and there were 6 million Americans last year got into that space, what do they do? They go and start a brand new business. So it's like talking about before, you know, if you want to, you know, if you want a house, you know, do you go buy one that someone else has built and finance it or do you go and, you know, build your own? You know, do you buy the concrete, the bricks and the wood and you build it? You know, if you want an iPhone, you know, do you go to the Apple store and buy one that they built for you and you know, they'll even let you finance it or, you know, do you go and buy the silicone, the rubber, the plastic, you get the soldering iron and you, you know, you build it yourself. No, you go and buy one that someone else has built. But so that, that, that's my whole mantle with this. Really.

Sorry.

No, no, I was gonna accentuate what you were saying.

Yeah, just, just my, you know, my, my, my big mantra in life is it's, it's easier, quicker, and far less risky to go and buy an established business than to start one on your own. Yeah. That someone else has built for you and just doesn't want anymore for a whole variety of reasons.

I couldn't agree more.

And you know, the wheel. And even if you wanted to do something really unique and there isn't really a business out there just like that, there'll be a business out there a bit like that. So go buy that business that's a bit like that and innovate from within. And guess what? Innovating. You've got customers, you've got suppliers, you've got employees that will help you. The customers will probably buy what you build in the future anyway. You've got cash flow from the existing operations.

I Just don't get why.

There were 6 million Americans started a brand new business in 2017. And 50% of them will fail this year. 96% of them will fail within 10 years. Those are Michael Gerber's numbers, the author of E Myth. It fascinates me when there's 2.44 million businesses for sale and only 1 in 12 will actually sell. There's a big paradigm shift. There needs to be a big matchmaking opportunity putting entrepreneurs that want to start a business into deals that no one else is going to buy. Wow.

Yeah, you're 100% right. And this just last point kind of goes on to something that I tell a lot of people when I meet them at marketing conferences and my friends, because I've got a lot of friends who are consultants and run marketing agencies. Sometimes they do Facebook agencies, sometimes they do website design, but they're serving the business community. And I think this is some of the lowest hanging fruit, which is when you're doing discovery with a client to, let's just say you're managing their Facebook ads. Ask them one question that is nothing to do with your Facebook ads, which is, so, you know, what are your overall goals with this business? Like, do you want to run it forever? Are you open to sell? Have you thought about selling it? Like, just start planning, planning those questions, because people don't get that question very often. But find out if the owner of the business actually is hiring you to help them grow their business because.

They'Re out of options or whatever, and find out if they'd even be open to that conversation. You don't have to buy their business, but if, you know, people who do, it could be lucrative for you and you've already got the ears of that business owner. Ask that question like, you know, have you ever thought about selling your business? Because you're doing discovery as a business consultant in one way or another anyway. And I know when I've talked to people just individually about that, they said, yeah, I would love to. I don't, I don't. I have no idea how to go about selling it. Right. So they just kind of plod on and, you know, stay in their little business and, and think that they have to die with that business or let it fold.

Yeah. And we're in a really interesting time because, you know, 20 years ago, you know, most, you know, most small business owners, they would hand the business down to a son or daughter that will take it on, you know, and then it would be a multi generational family business. But now if you look at the college intake stats, you know, they've gone through the roof. You know, kids want to go to college, they want to be lawyers and doctors and bankers and consultants and all that stuff. You know, they don't want to take over, you know, dads engineering business in punks at all Pennsylvania. You know, they want to go and work on Wall street and do all that stuff. So, you know, a lot of these business owners that are, that are approaching retirement age and if they don't have an exit strategy, they don't know how to do it.

So, you know, that's one of the major reasons why, you know, I built my coaching program because, you know, I really feel for people that want to sell the business and they can't. And I really feel for employees that are stuck in a corporate job and want to own their own thing. And what's also really interesting is if you can't sell your business.

If your only exit strategy is to turn off the lights and close the door and shut it down, in most cases, as the owner, that is going to cost you money. You'll have says you've got to satisfy, you'll have supplies, you've got to pay. Yeah, you could put the business through a, an insolvency process and walk away from all that. But most people don't want to do that. You know, a lot of their customers, a lot of their suppliers, other employees, you know, their family, their friends, you know, they don't want to, you know, they don't want to take liberties with those types of people. So if that sellers save money up for the retirement and they can't sell their business, they have to use some of that saved up money to get out of the business. So in some cases it's far cheaper for them just to give you that business for a dollar and walk away.

It's fascinating. It's all about psychology.

Yeah, it 100% is. It's one of the reasons I like it the most. So Carl, what is a nut you're trying to crack in your business right now? And by that I really mean, like it can be anything. It can be somebody you're trying to meet, a skill you're trying to develop, a partner you're trying to find traffic, you're trying to find money, you're trying to raise just absolutely anything. This is where myself, my listeners get to kind of think about our resources, our Rolodex and our skill sets and think, oh wow, I might be able to help this guy crack a nut in his Business or his life. Is there anything that comes to mind?

Yeah. So I would say my biggest goal right now, the thing that excites me the most is, you know, we have over 1,000 people inside of our coaching program today. I launched it just over two years ago. So that's great numbers. I think, you know, the potential out there, as I said before, you know, 6, 7 million Americans every year trying to start a brand new business and failing. You know, I want to serve those people. I want to help those people, you know, scoop up and buy all the millions of unsold businesses in the U.S. so you know, my, my goal is to, you know, is to really spread my reach and get, get my content and get my skills and get my coaching into as many hands as possible. So it's that, that's going to happen through partners. So it's scaling through, you know, like minded partners that have got, you know, networks of people that, you know, they can feel that pain, they're looking for that value, they're looking for that, you know, to learn that skill and learn that process. So what my, my biggest goal for this year is to really take that forward. And it's interesting because I don't have like an affiliate marketing or a partner marketing strategy, but it's interesting that, you know, people, you know, some famous people as well, I won't name names are seeing my stuff. They're reaching out and saying, you know, Carl, this would be a great, great, great fit for our audience. You know, could, would you, would you come and do a, you know, a 90 minute, you know, live training for these people and you know, really share with them your expertise and your process so they can go away and they can do this stuff, they can model it and do it for themselves.

Right. Has there. And I've like the stuff I've seen, I know like you're obviously you're on this podcast and I've seen some of your Facebook ads. Have there been any other things that you've kind of done like I imagine, because I've seen the Facebook ads, you know, over time, so I imagine they're working to a degree. Is there anything that you're trying to get working that hasn't or that you haven't tried that you really kind of want to push forward besides just doing more JV and affiliate deals?

Yeah. So, you know, I'm not the kind of guy that blogs all the time, you know, so, you know, I always believe that, you know, if you want, you know, if you want great traffic, you have to Pay for it. And I love buying traffic. I guess one of my.

One of my concerns in terms of my traffic is I'm 100% paid Facebook ads. And I think a lot of the recent controversy over Facebook.

Is not going to spook me, but concerns me a little bit. I'd love to develop alternative paid traffic strategies. Things I don't know. So I'd need to partner with people or hire people to do that. So whether that's solo ads or, you know, YouTube ads, I'm fascinated by LinkedIn because I think.

I would think that personally, that that would be the best place for you, personally.

Yeah. So I totally agree. You know, my. My audience, I, you know, it's amazing that they're all on Facebook, but, you know, that, you know, LinkedIn's where they live. But. And I know Facebook has, you know, you can do paid advertising on Facebook. You know, I've never done it. You know, I, you know Josh. Josh Turner, who owns Link Selling, you know, I know, you know, he and I talked about that a little bit as something to potentially do. So, yeah, I think, you know, I think maybe LinkedIn advertising and, you know, kind of JV affiliate deals, they, you know, that's where I really want to scale this. You know, get my message out to the millions of people out there, get my content into the hands of as many people that can really get the value from it. That's my kind of. That's my business and my spiritual goal for the next few years.

I love it. You know, just off the top of my head, one of the strategies that I think would probably serve you really well in just at least in the content stuff. When you think about the mindset, like, of the people out there, this probably kind of fall into one of two primary categories, one of them being people who are already, like, they've thought about buying a business, and.

You come across at the right time, like, oh, wow, this is exactly what I've been looking for. And then there's the majority of people who are either entrepreneurs or want to be, and they come across. You're like, oh, this is kind of interesting. I think the negative side or the downside of what you're teaching is, is it almost sounds in the beginning to somebody who's just kind of like coming across it, like, wow, that sounds so big and complex. And it's like simplifying it to let people believe. Like, if you can get that belief that actually, okay, this is possible.

I don't know what I'm trying to think what might Be kind of an easy win or.

Sometimes it's been called, I know Frank Kern has called this results in advance or getting somebody that early momentum such as early parts of your course may talk and I haven't been through it yet but talk about just how to start to maybe even stoke the fire and get, and start to get into conversations about this stuff. Like I would imagine if you were to set the tone early on and say, listen, a lot of you might not believe that this is possible, that there's not as many deals out there and I want you to go maybe even creating a challenge for folks such as like I don't know, like a 30 day challenge to go talk to people and ask them if they'd be willing to sell their business. Like with, with absolutely no expectation that you're gonna buy it. Just try to get into the conversation with people and I would bet that if you started because people and this is working really well especially with cold traffic is issuing these challenges because everybody likes a challenge.

I have a 10 day, I have a 10 day challenge that cool.

So what's in the 10 day challenge?

Yeah, so I have a 10 day challenge in my funnel where what I do, 10 emails, 10 days, 30 minutes a day. There's a 15, 20 minute video, then a bit of implementation. So video one, I.

Talk them through creating a deal specification. So what types of businesses should or shouldn't you buy based on your background, your skills, your location and whether you want to run a business or just be an investor. Day two, some quick topics on deal origination. So I start with LinkedIn. So I say look, take this post, model it for yourself, get it out there, you'll have deal flow tomorrow and they have deal flow. And then day three is okay, how to talk to a seller. Get on the phone, 30 minutes, go through this process, ask these questions, answer these questions that he's going to ask you because I've done tens of thousands of them. And then at the end of the call ask for the financials under NDA. So day four, you've got the numbers.

Pick these seven numbers out of the of the account and plug them into this simple model that I built for you that spits out a deal structure and an offer. Take those numbers. Day five, put them into the letter, send it out. Day six, seven, eight is negotiating and looking at the financial options. So I kind of take them through that in kind of a short burst, 30 minutes a day and it's really, it's dumbing it down. But again it's Giving them that confidence, it's giving them that mindset. So they go through those 10 days, they think, well, you know, look at my journey in 10 days. I figured out my why, what type of business I want to buy. I found some deals, I had some calls, I've got some numbers, I've structured some deals, I've made some offers and I've started looking at financing. I've done that in 10 days. Think about if I do it properly and rigorously over, say 90 days, I'm going to 10x my success. So that's why I did that. I'm running one at the moment, actually.

I'm running one at the moment. We're at day eight.

And yeah, there's, I'm seeing at least 50 offers being accepted after eight days. It's insane. Never seen before. Yeah, never seen these kind of results before. This is the third time I've done it and I've sharpened it up. I've made it a lot more dynamic over the year that I've been doing it. But no, it's phenomenal.

Oh, that's fantastic. Well, Carl, I got a. I gotta tell you, this has been one of my favorite episodes.

And it's a longer one that we normally cut them off at about an hour or so. We're at an hour and a half because this was just so good. And I, and I really enjoyed getting inside your brain and hearing about some of the strategies that you use and kind of the way you think about this. And I can, I mean, I can tell there's a lot of people out there who talk a big game, but can't. You know, I used to live in Texas. We called that big hat, no cattle.

Oh, big hat, no cattle. Yeah, yeah, yeah.

But so, and I can definitely tell that you're, you're one of the, you're not one of those people who, I mean, you walk the talk. And I think that's, that's fantastic. And I, and I once more, for my listeners, this is a path I'm going down. Personally, I am like Carl, like his students, I am actively looking to acquire businesses. I have created, created some criteria which I think would be really beneficial to me. And if you send me an email to ask bradakenraftbusiness.com I'm happy to let you know some of that criteria is.

And in the meantime, I encourage you very much to go to the 90 minute training that Carl has. It'll link in the show notes here. I believe it's ninjaacquisitions.com free. But I'll put a little clickable link in the show notes as well and check it out and go a little bit further down this rabbit hole and find if this is something that really resonates with you. I mean, my biggest suggestion is it's better to know the basics of how to do a deal like this. Just in case you come across an opportunity of a lifetime and you're not going, I have no idea what to do. If you even have the most basic knowledge of this and the right opportunity presents itself, the right conversation happens, maybe over a coffee or dinner or something, you hear somebody might be willing to sell their company instead of letting that just kind of go over your shoulders and just go, okay, well I can't help him with that. If you even have this 90 minute training and you're like, oh cool, I actually not only know how to have a conversation about this and at least, and worst case, I know a couple people I can call. I can call Carl, I can call Brad. I can figure this out. I've done many, many cool deals and opportunities simply because I took the time to pay attention to what's out there so that I can have the conversation when the conversation arises. And that's been one of the secrets to my success is to know just enough to keep the conversation going. And you can do that@ninjaacquisitions.com free. And once more send me an email to ask bradakenratbusiness.com if you a have a business that you would be either open to selling or just exploring your options or you know, somebody who would. And I'm happy to kind of field that. And if it, you know, if you even want a personal introduction to Carl, I'm happy to do that. I don't know Carl, if you want to give out any contact information, if people have something hot and they want to contact you right away, yeah, sure.

So it's Carlinja acquisitions.com that will go directly to my, my inbox, my phone, my iPad and my watch. So yes, Carl, Carl with a Cinja acquisitions dot com.

That's fantastic. And to everybody else, if you really do enjoy these, these conversations about thinking about the bigger picture, about deal flow and structure and you know, whether it's consulting for equity, etc. I'm putting together. I've done a lot of these episodes. One of the most recent ones was, was with Roland Frazier, which I, you know, I love Roland and that was just.

Oh, love Roland, yeah.

Recently on the show and I'm going to be putting together kind of a a deal maker series of some of the some of the best deal making episodes that I've done over the past three and a half years where we've talked about whether it's acquisitions, consulting for equity licensing, just putting together creative deals. So send me an email if you want access to that too, because I'm thinking about putting together something really cool. Until next time, guys. Thank you very much. Carl, stick around for another minute or so. I want to talk to you privately offline, where none of these people get to listen and hear what we say. But thanks for subscribing, guys. Share this on social media. Let me know what you think at askbrad@baconratbusiness.com See you next time.