Untold Truths of Business Acquisition

Speaker 1 would improve a podcast where it does not matter what you think, only what you can prove? Dust scale companies from a hundred million dollars to $500 million

Speaker 1 by buying, not building. On this episode, he proves why acquisition beats creation.
The show starts now.

Speaker 2 I can't possibly tell you guys how excited I am to have Dush on the podcast today because we're in an environment that just it's rare to find someone who speaks your language and just goes against all everything that everyone else is saying.

Speaker 2 So, before we get into that, thank you so much for being on the podcast.

Speaker 2 Thank you, Charles. It's an absolute delight and a pleasure.
Looking forward to it.

Speaker 2 And for those of you who are watching online, you actually get to see his puppy behind you, which is what I'm going to be staring at the entire time.

Speaker 2 You get your puppy best. So there's two guests for the price of one.
We live in a time that's just, it's just this addiction to hustle more.

Speaker 2 This idea that you've got to start up and you've got to wake up at 4 o'clock in the morning, work out 17 times, have five meetings, oh, and then go work out some more.

Speaker 2 This is idea of just you have to start.

Speaker 2 And before we get into any of this, if you had to choose between purchasing a company and systematizing it or starting your own company, what one would you choose nine times out of 10?

Speaker 2 Purchasing a company hands down, hands down. And I'll explain the reason why.
Because

Speaker 2 the greatest failures of business happen within the first three years of a company's life, right?

Speaker 2 And very often, people start the company based on romantic notions of being their own boss, you know, setting their own schedule, but that never happens because in the time when you start a company, and very soon, the first 15 days you discover that you are in fact working for other people.

Speaker 2 They're just not your boss. You happen to be working for your customers.

Speaker 2 You happen to be working for investors, people that you borrowed money from, your parents, whoever else has lent you money, you're working for all of them, right?

Speaker 2 So this,

Speaker 2 let's get rid of this myth once and for all that you're working for yourself, right? None of us really work for ourselves. We work for other stakeholders.
You work for your customers.

Speaker 2 You work for your clients. You work to deliver value to the people that you do business with, whether they're suppliers, your customers, your clients, your patients, if you're a doctor,

Speaker 2 whatever, all your constituents, right?

Speaker 2 The other reason why

Speaker 2 it really makes better sense to buy a going concern than start a business is limiting friction.

Speaker 2 It's just like going from 40 miles an hour to 60 miles an hour is a lot easier than going from zero to 20. It's simply limiting friction.
Law of physics, right?

Speaker 2 It's very, very hard to get something moving from a standstill and rest.

Speaker 2 than to keep something going faster or at the same speed. So a going concern, a business that's already operational has customers, they have relationships, they have suppliers.

Speaker 2 So, there's an established sort of momentum to the thing that you can either speed up or just coast on for a little bit. But if you're starting something, it has no momentum.
It has none whatsoever.

Speaker 2 You have to create it. And creating momentum from rest, as any physicist would tell you, is the hardest thing to do.
So, that's another reason why you don't ever want to go buy or go start a business.

Speaker 2 You want to buy a business that's already running.

Speaker 2 I couldn't possibly agree with you more. This idea of the startup myth and the grinder myth and just getting out there and pushing that hard just doesn't make sense.

Speaker 2 The hurdle, though, is there's not many people who understand how to come in, stabilize, systematize, scale, and sell. They don't even know that that concept exists.

Speaker 2 On top of that, there's very few people who even done it. I mean, you've taken companies that were making less than $100 million, making over 500 million.

Speaker 2 You've also taken companies and you've sold them for 20% more than what the previous person thought, what their valuation was.

Speaker 2 So there's a whole world that doesn't exist, not only from knowledge, but from actually finding the people to do this.

Speaker 2 So when you're coming into this and we're shattering a bunch of preconceived notions on here where people just watch too much Instagram, like, oh, I just work hard, which there's some of that, but systems will always set you free.

Speaker 2 And you can always systematize things. You and I have both done this with previous owners.
We come in like, oh, you do, you're a physician. You do this.

Speaker 2 this all right we're going to go buy five or six other practices systematize your operation scale it that's the end result but in order to get there there's some mistakes that people make there's some things that people just do categorically wrong and before we even started the call we we talked about one of them if you walk into this and you said hey what's the major mistakes that people do other than starting the business which if you're listening people please don't do that don't there's a there's a huge opportunity right now where boomers are selling and they that rock bottom prices to buy these companies if you learn the systems that we're going to talk about, you're going to have a much better chance of success because you're not going against physics.

Speaker 2 You're not going against friction. What are the things that you've experienced that like absolutely don't do this when either purchasing a company or systematizing a company?

Speaker 2 What are the things that just keep you up at night and make you want to just pull your hair out?

Speaker 2 That's actually a really, really good question. So when you're purchasing a company, there are a few things to look out for.

Speaker 2 I mean, there are obviously things that you need to think about when you're selling a company. But when you're purchasing a company, there are things that you want to look at.

Speaker 2 First of all, why are you buying the company?

Speaker 2 What is the motivation? Do you know anything about the industry? Do you know anything about the owners, the current owners of the business?

Speaker 2 Do you know anything about the market? Do you know how it's growing or shrinking? Do you know why they're selling? Those are all fairly simple, straightforward things.

Speaker 2 I've seen a lot of situations. In fact, I was speaking to one of my clients who is in the construction industry.
He's got a very successful business building homes, single-family homes.

Speaker 2 And he's a developer and he's built massive communities of single-family homes. And

Speaker 2 on a whim, he came to me saying, Hey, Dusha, I'd like your help. I'm thinking of buying this art supplies company.

Speaker 2 So, what they do

Speaker 2 is that they not only supply art supplies, but they have painters and artists that are working on kind of a job rate, and they paint these little paintings, and these people sell these paintings to be used as decor,

Speaker 2 right?

Speaker 2 So, first of all, mass-produced painting, okay, that's something to think about as whether you really want to get into that or not. And then next, is

Speaker 2 the very fact that you're going to then have, you a warehouse full of paintings of various sizes of various subjects, everything ranging from farm animals to bucolic scenes and so on.

Speaker 2 And that's the business. Okay.
So you've been building homes and you've done very well at that. And he started the business.
He got through the hump. He got through the limiting friction.

Speaker 2 Now he's at cruising speed. Now he wants to go buy this art supplies and art company.
So I said, why are you doing this?

Speaker 2 What's the driving factor? No, it seemed like a cool business. Okay,

Speaker 2 my sense, my first response was, okay,

Speaker 2 how do you know it's a cool business? I mean, have you operated the business? No.

Speaker 2 Do you know anything about the art business? No. Do you know anything about who the customers are and why they would want to buy mass-produced art? No.

Speaker 2 Why would you do this? Well, the answer simply came down to,

Speaker 2 well, you know, when we build these communities of homes, we have a show home, right?

Speaker 2 And we always go out and buy art to stage these homes so that when buyers, prospective buyers come in, they look at a home that looks like some place that they might want to live.

Speaker 2 And you buy art as cheap as you can to furnish the rooms and make it look lived in.

Speaker 2 And so I'm thinking, why don't we go buy the company that does this art?

Speaker 2 So my question to this person was, okay,

Speaker 2 you buy art for one show home for every community, right? And maybe you might buy 10 paintings for a home? No, no, less than that, maybe five. Okay.
And how many communities do you build in a year?

Speaker 2 Oh, one in two or three years. Okay, so there are probably 300, 400 homes in a, in a...

Speaker 2 community. Yeah, that's right.
So you buy five paintings every two or three years. and you want to buy the company that makes these paintings, that sells them as cheap as possible, for what reason?

Speaker 2 That is the dumbest idea I've ever heard, right? So we got to talking about that. And I

Speaker 2 was able to then disabuse him of this notion and say, okay, here's what I would recommend you do. Why don't you talk to these people and find out? why they would want to sell.

Speaker 2 Had that conversation and he said, look, I'm not interested in buying, right? Let me be very frank up front. So you're not coloring the answer by making it look more attractive to me.

Speaker 2 I'm not interested in buying. Why would you want to sell? And their answer was,

Speaker 2 you know,

Speaker 2 we sell a few paintings to developers like you, but otherwise it's a really hard business. And

Speaker 2 we sell a few paintings on Amazon.

Speaker 2 where we list them as art and people look at them. We put them on

Speaker 2 eBay and we'll put them on a bunch of different sites and people buy a few. But no,

Speaker 2 it's a very unpredictable business. And we have artists that we need to pay.
Yes, we pay them on a per painting basis, but there's no quality control.

Speaker 2 They just produce stuff and we put it in the warehouse. We have a warehouse full of paintings, some which haven't sold for a very long time.
So I don't know if this is really going to make it or not.

Speaker 2 So then you look at it and you go, okay, so then that that tells you the answer why are you buying a business that you have no idea what the pitfalls are what the challenges are why not go buy something that would be accretive to your business so you've built this property development business why not look at something adjacent to that

Speaker 2 and that might be any number of different things but certainly not art right so that's that gives you an example of why it's really important to think about the business you're buying and whether you have any possible way of moving the needle in that business.

Speaker 2 If you've got a great idea as to how you can really blow the business up, sure. And if you know something about the business, that helps.
But other than that,

Speaker 2 it's really important to focus on what is it that you're good at? What are you passionate about? What do you know a lot about?

Speaker 2 And how can you leverage that by making that business more efficient, more functional?

Speaker 2 Absolutely. I also think there's this fallacy that most business owners have that, hey, I've been successful here, therefore I'm going to be successful over here.

Speaker 2 And that's just not the reality you run into. There's a lot of luck.
There's a lot of chance. There's a lot of network that happened when you do, if you are successful in one business.

Speaker 2 It doesn't mean that you're going to be as successful, even if you're in the same industry and you go to a different state.

Speaker 2 I've seen so many people, you know, I was, well, I used to own an IT company. We would crush it.
We're in South Florida. I was absolutely crushing it.

Speaker 2 And then I went to go help out and consult with someone who was in Kansas City and we got destroyed. Absolutely destroyed.

Speaker 2 Because what worked here doesn't work there, even though it was the same industry. I love what you said before.
You know, what is the main purpose? What are you trying to do?

Speaker 2 Are you passionate about it? I talk to people all the time.

Speaker 2 If you've got your passion project and you're willing to work 80 to 100 hours a week and make $500,000 a year over here on option A, which is what you love, or option B, you're going to sell lemonade, but you never have to work and you're going to make half as much.

Speaker 2 Which one do you want? If you choose option B, you're my people and I can help you and I can help you scale. If you're option A, I can't help you.
Please go find someone else.

Speaker 2 If you're driven by passion, if that's what you love, I love that about you. You guys are the people who make art and movies and music.
I love that. I'm about systems and scaling and selling.

Speaker 2 And we were talking about this prior to starting.

Speaker 2 Before you buy a business, one of the things you and I adamantly agree on is you need to know

Speaker 2 that you're going to sell it.

Speaker 2 Before you purchase it, you know how you're going to scale it and how you're going to sell it.

Speaker 2 But one of the things you talked about, which I loved, was not only that you're going to sell it, but whom specifically you're going to sell it to. Could you speak a little more about that?

Speaker 2 Sure, absolutely. So,

Speaker 2 you know, if you've, if you've read The Seven Habits of

Speaker 2 Successful People, Stephen Covey, the very first thing that he talks about is begin with the end in mind.

Speaker 2 So that's good in all areas of human endeavor, and especially in business, because if you're going to start a company or buy a company, right, think about what you want to get out of it.

Speaker 2 Is this going to be a lifestyle business that you go into your dotage with? Is that something you're going to be running when you're 80?

Speaker 2 Or is that a business you can hand over to your children? Now,

Speaker 2 a lot of people feel like when their kids are in their early teens, they entertain this second fantasy of wanting to hand the business over to their children. That rarely ever works well.

Speaker 2 Right? It rarely ever happens.

Speaker 2 Kids don't want it.

Speaker 2 Kids don't want it.

Speaker 2 They're a different generation. They don't want it.

Speaker 2 You're passionate about this business. You've given your blood, sweat, and tears to build this business to where it is.

Speaker 2 But your kids don't necessarily share that passion.

Speaker 2 And so, at best, they might think of it as something that they've got to do as an obligation to please dad or mom, right?

Speaker 2 At worst, they want to have nothing to do with it. They want to run as far away from it as fast as possible.
So

Speaker 2 please don't go into a business thinking, oh, I'll hand it over to my kids.

Speaker 2 If it happens, that's a bonus, but 99 times out of 100, it won't happen, right? So please don't expect.

Speaker 2 Then the next is

Speaker 2 think about who you're going to sell the business to, exactly as Charles mentioned.

Speaker 2 And this is not even thinking about the type of buyer,

Speaker 2 but rather who specifically.

Speaker 2 What is the name of the company that is going to buy your business, right? Who specifically? And it doesn't have to be just one. It could be two or three or four, right?

Speaker 2 But

Speaker 2 you could say, for example, I want to sell my business to eBay or Amazon or IBM or Starbucks, any company, doesn't matter.

Speaker 2 But if you're building a soft drinks brand, all natural, and you decide, I'm going to sell it to Coca-Cola or to Pepsi, great, that's fantastic. But then

Speaker 2 you have a game plan. You know what companies like Coca-Cola and Pepsi look for in the companies that they buy.
And it might be far, far away from their core product, but that doesn't matter.

Speaker 2 That is exactly what they want. And so now you can fashion the business in the shape that your prospective buyer would want to see it when you get ready to sell, right?

Speaker 2 So that gives you the exact marching orders, the exact battle plan to get you to the shape that you want to be when you get that offer from Coke or Pepsi.

Speaker 2 But generally thinking largely about, oh, I don't know, I'm sure somebody would want to buy it. It's a really valuable company.
That's a recipe for disaster.

Speaker 2 The thing is,

Speaker 2 you know, when you're selling a company, there are five reasons why

Speaker 2 companies buy other companies. And if you're a smaller company and hoping to sell to a larger company, there are two types of buyers.
There's a financial buyer and there's a strategic buyer.

Speaker 2 Financial buyers want to buy the company, either fix it up or not,

Speaker 2 but sell it soon thereafter.

Speaker 2 Maybe put it together with a couple of other companies, do a roll-up, as it's called, and then sell it for a massive profit. That's a financial buyer.

Speaker 2 Now, obviously, to a financial buyer, it is very important that they buy your company at the lowest possible price because that's where they get the most in their spread between the buying price and the selling price.

Speaker 2 And then there's a strategic buyer, and the strategic buyer is buying it for a strategic reason. It's not purely financial.

Speaker 2 Now, you're going to get a much better price from a strategic buyer because they are looking for your business to add something to their existing business.

Speaker 2 And strategic buyers have five reasons why they would want to buy a business. The first,

Speaker 2 talent acquisition, right?

Speaker 2 So you have somebody within your business. It may be you, it may be your management team, it may be your technology team, whatever it is.

Speaker 2 You have people in your business that they want to get. And usually it's the owners, the co-founders that they want to get.

Speaker 2 And they can't hire these people. And the way to do it is to buy the company.
So talent acquisition is number one.

Speaker 2 So if that's one of the things you've got to think about, okay, how do you develop the talent to a point where it's noticed outside your business so that people come looking?

Speaker 2 The second is technology acquisition. You might have...
a piece of technology, you might have a patent, you might have something that somebody wants.

Speaker 2 Again, what they will try to do is to license that technology and come along and say, hey, can I license the technology?

Speaker 2 Would you, and I'll pay you cents on the dollar every time I use the technology.

Speaker 2 You could agree to that if that works where you have multiple people who license that technology, that might work well.

Speaker 2 But if it's a particularly large company, your better bet would be to say, I'd rather you buy the company than license the technology, right?

Speaker 2 So technology acquisition is another very powerful reason why somebody would want to buy your company. The third reason is territory expansion.

Speaker 2 Now you have, whether it is country or local geography, it could be a state or a county or a city.

Speaker 2 Typically it's a country. So for example, you might have a real lock on certain states or a certain country.

Speaker 2 on your product or in your market.

Speaker 2 And somebody from outside the territory would look at it and go, okay,

Speaker 2 I could

Speaker 2 open up a facility here in this market, try to hire people, try to get to understand the market and try to sell. It's going to take a long time.
It's going to cost a lot of money.

Speaker 2 It's going to be expensive. It's going to take time.
Or I could just go buy someone who's already there, right? Who knows the market, who has their presence, who has existing customers.

Speaker 2 and just buy them up for a good price. Now, all of that knowledge comes to me, all of that local presence comes to me, and I can start to do business right away.
That's a very logical reason.

Speaker 2 You see this happening with car dealerships, right?

Speaker 2 Car dealerships often change hands. And

Speaker 2 the people who buy or the companies that buy car dealerships in towns and cities tend to be large national networks, right?

Speaker 2 And they don't have a local presence in the market. They go and buy a local dealership.
There are steady customers who come there to service their cars. The service department gets revenue.

Speaker 2 So there's a steady revenue stream that they can bet on rather than going and building that up from scratch. So

Speaker 2 territorial expansion, being able to expand into other territories simply is another great reason why somebody would want to buy your company.

Speaker 2 The third reason or the fourth reason is customer acquisition. You might have some really very attractive customers, and it would take a long time to break into those customers.

Speaker 2 You know, for example, large companies, and I've had a business where we were chosen suppliers to companies like Boeing and Rolls-Royce and Polaroid and Fort Motor and BMW and so on.

Speaker 2 Now, with these companies, it's not even the fact that they want to buy your product. The biggest hurdle is becoming an accredited vendor to those companies.
They put you through the ringer.

Speaker 2 They make you jump through all kinds of goops just just to be listed as an approved vendor. That process can take as much as a year for the larger companies.

Speaker 2 Boeing, it takes easily a year to be listed as a supplier. So

Speaker 2 what better reason than to say, okay, you know what? You have Boeing as a customer. What I'd love to do is to just buy your company.
Now

Speaker 2 I've bought that approval process. I've bought that approval status.
Now I can continue to sell into Boeing. So being able to buy your access into your customer base is hugely attractive.

Speaker 2 So this is another reason why as a business owner, you might want to think about investing in acquiring marquee big name blue chip customers because they make you so much more attractive.

Speaker 2 It doesn't matter how much you've sold them. You could have sold them green widgets.
for $10,000, $15,000, $20,000. Does not matter.

Speaker 2 But the fact that you're an approved vendor of these companies, you can put them on your masthead as people that bought from you is huge. That can change your multiple dramatically.

Speaker 2 And finally, the fifth reason is competition.

Speaker 2 When you compete with a bigger company and you're better and you dance around their feet and win business out from under them, you're in their crosshairs.

Speaker 2 So what they would want to do, They try to put you out of business in every which way possible, but they haven't been as successful. You're just that good.

Speaker 2 Then the next thing they would do is want to buy you, either buy you and shut you down, or buy you and incorporate you into the business. Either way, you walk away with a nice package.

Speaker 2 Because again, that's a strategic decision and they will pay good money to achieve that effect. So these are some of the things you'd want to think about when you're buying a business.

Speaker 2 So I also love that you're not talking about grand ideas. You're not talking about these far-off fantasies.
You're not talking about, I'm going to work work hard and it's going to make it work.

Speaker 2 You're talking about getting very system, getting very strategic and get very tact. You know, one of the examples that I'll talk about is there was a restaurant that was just garbage.

Speaker 2 It was absolute garbage. And that exciting company was like, I'm going to buy that restaurant.
And he's like, I go, okay, why are you buying the restaurant? I need the liquor license.

Speaker 2 It is faster for me to buy this company that's falling apart, this restaurant that's falling apart. And I'm going to obtain that liquor line.
It's going to save me time.

Speaker 2 One of my other favorite stories about this and being strategic with this is don't just try and sit there and, you know, again, going over the five that you shared, don't just sit there and say, hold on, okay, well, I'm going to make myself attractive don't do that one of the and i can't mention his name he started a podcast specifically because he wanted to get a specific guest so he could sell a building to that specific guest so he literally built his company so it'd be really attractive but he couldn't get through the gatekeepers he couldn't get in front of people so he's exceptionally tactical he opened a podcast he started it he scaled the podcast he it was the person's second guest on the show was this guy got him on the show, turned around, and he has now sold a building.

Speaker 2 And I think he's in the process of selling more to this individual. And now they're strategic partner.

Speaker 2 So it isn't this, hey, I've got this idea of grandma makes wonderful cookies and my family really likes the cookies and your family likes the cookies. That's not what we're talking about.

Speaker 2 It's being very tactical with your decisions and how you're going to get there.

Speaker 2 And with that tactical, that brings into the idea of, you know, how do you get it so that when you come into our organization, what are the first things you do?

Speaker 2 Because your job is to help systematize and scale. And I talk about this all the time.
Stabilize, you systematize, you scale, you sell. This is how this works.
It's really simple.

Speaker 2 Just stay in the S lane. And when you're coming into organizations, I know I have my methodology, and I know the biggest problem.

Speaker 2 I wish we could type it up and have like cards that would reveal it because I think it's almost identical.

Speaker 2 What you find is the biggest problem in organizations versus what I find the biggest problem.

Speaker 2 What do you find is the biggest issue when it comes to systematizing and scaling an organization across the board? And then I'll tell you mine as well. Right.

Speaker 2 So,

Speaker 2 what tends to happen?

Speaker 2 And this answer kind of varies depending on the size of the organization right if it's a small to medium business you know under under a hundred million dollars in revenue right then it's if it's grown from its nascent stages it was a startup and it grew to a hundred million dollars in period of time one of the challenges is they're still kind of in startup mentality where There's no clear roles or responsibilities.

Speaker 2 I mean, people have titles related to their roles, but everybody kind of does everything.

Speaker 2 People don't play their positions, right? This, I would tell you, is the death knell of any company that's looking to scale.

Speaker 2 And I'll give you an example that you might find kind of interesting. If you've seen little kids playing soccer, right, the four, five, six years old, right? They're out there on the field.

Speaker 2 They're having a great old time.

Speaker 2 But what happens is, when you see the ball moving, right, on the field, you see all the kids moving around with the ball because everybody's on the ball because they want to be on the ball.

Speaker 2 That's where the fun is. They don't want to be in their positions.
And that's bunch ball, right? Everybody forms a bunch and they move all around with the ball.

Speaker 2 But if you see, as they grow older and as you get into more professional soccer, you see people play their positions. You don't have the goalie go out and do a...
do a kick from turn left to center.

Speaker 2 It just doesn't happen because he needs to be there to guard the goal. Playing your position is something that people, organizations learn over time.

Speaker 2 In the early stages, it is, oh my God, so-and-so, you know, Jennifer has a good contact, somebody she knows. Her hairdresser's sister is the procurement person at this company.

Speaker 2 So let's get Jennifer involved in this. No.

Speaker 2 If Jennifer's role is in sales, great, let's do that. But if Jennifer's role is in the warehouse, let's not do that.
And if she can provide the name of the person that's involved, great, wonderful.

Speaker 2 Then that gives us an in. But let's not have people who are not related to that particular function get involved in that process.
So people need to play their positions.

Speaker 2 So that's one of the things that happens in small companies that have come to a reasonable size. Growing from there, it is just implementing processes and sticking with them.
And

Speaker 2 in smaller companies that have grown big, there is a resistance, an inbuilt resistance to process, because they believe that it stifles creativity.

Speaker 2 Well, there is no place for creativity in accounting. There is no place for creativity in process, right? So don't worry about stifling creativity.
Things need to run in a scalable fashion.

Speaker 2 If it works for five customers, it's got to work for 50, it's got to work for 500, it's got to work for 500,000.

Speaker 2 And you're not going to be able to do that if you don't make processes that are scalable and so

Speaker 2 that's the that's one of the biggest challenges i found in companies even going from a hundred million to five hundred million plus

Speaker 2 the processes take a long time to bed down now there is an opposite problem that that creeps in as well when companies become so big

Speaker 2 Let's say they're over five, $10 billion,

Speaker 2 then processes become the definition of the company. So they can't think outside the process.
That's taking that to the other extreme.

Speaker 2 But processes are extremely important as you're scaling because lack of process will stifle you and

Speaker 2 the complete business will ride to a halt because everybody's tripping over everybody else. Nobody knows whose bailiwick this is, whose responsibility this is, and it just all breaks down.

Speaker 2 Absolutely. I love how it's talking about, because most people don't do this because everything's about starting up.
It's not about scaling.

Speaker 2 Where you are in the scaling process, how much revenue you're generating, changes what the hurdles are.

Speaker 2 When you come to liberalization, with a small organization, my biggest hurdle I run into is the owner. The owner's in my way 99.9% of the time.

Speaker 2 Like, if I could just fire you, I can scale your company because you think this company is you. It's not you.
Yes, congratulations. You've got it close to $100 million.
Model tough.

Speaker 2 Like, get out of that. That is a very good person.

Speaker 2 Very good. Do a chair and send them off to Switzerland.
I'm like, go ski the slopes in the next six months, come back, and your company will be four times what it was. Just go away.

Speaker 2 But I also love the fact that, you know, every accountant on the planet is going to come trying to shoot us in the face for telling them that they're not wanting creativity, but that is what it is.

Speaker 2 There is this narrative of you need to get processes and SOPs and you need to get these systems in place in order to stabilize.

Speaker 2 But you have to be fluid enough as you grow to look back at that and say, hey, this is what needs to change.

Speaker 2 And when you're doing your scaling, especially in the beginning, everyone is so focused on, I just need to pay my bills, just need to pay my bills.

Speaker 2 Having people come in who are just creative seems so counterintuitive, but it's one of the ways that's going to get you to scale because you need all these different things.

Speaker 2 So when you first enter an organization, are there specific questions? Because again, you're, you're a scaler. This is something that you do on a high level.

Speaker 2 Your organization comes in and says, not only I'm going to help you scale, but I'm going to help you get exceptionally more on your multi.

Speaker 2 So, you know, you thought you were going to get a three times multiplier. We're going to build this and put this together.

Speaker 2 And some of the things you've already talked about, about making it building it for those two types of buyers, you know, you're going to build your proposal and you're going to put this to look a certain way.

Speaker 2 And there's a little secrets that we'll get to later.

Speaker 2 But when you first come into scaling versus selling, what are the normal questions that first come out of your mouth that tell you, yeah, I definitely can work with these individuals, or dear God, they're about to run into a wall and I don't want to be anywhere near this accident.

Speaker 2 Right. So, Charlos, you made a really, really good point that I want to sort of key off of right here.

Speaker 2 And that is, you spoke about the role of the founder in scaling. And you made a very, very,

Speaker 2 very, very perspicacious comment to say that

Speaker 2 founders often are their biggest hurdles in terms of scaling. And there is a psychological reason to this, which everybody will understand, which is basically that the business is their baby.

Speaker 2 They've created it, right? They've nurtured it.

Speaker 2 They brought it to this point. So there's this myth of infallibility that they've internalized.

Speaker 2 They believe that nobody can understand the business better than they can or as well as they can, and nobody has as much vested interest in the business as they do.

Speaker 2 That second thing may be true because they may have, you know, predominantly or all of the stock, and so they stand to benefit the most. That's fine.

Speaker 2 But what that does is it also gets in the way because they're not able to make the really courageous decisions because they're held back by fear. What if this fails?

Speaker 2 Well, yeah, if you focus on how it's going to fail, then you probably will. It's called target fixation, right?

Speaker 2 Where, you know, if you're riding a bicycle, you know this. When you're first learning to ride a bicycle.
Riding a motorcycle. Yeah.
Hard to predict a motorcycle. You're going to do it right.
Yeah.

Speaker 2 And if you go exactly where you look, and if you keep looking at that hedge, saying, I don't want to run into that hedge, that's exactly where you're going to go.

Speaker 2 So target fixation is a real problem with fighter pilots, with motorcycle riders, bicycle riders, and founders of businesses, right? Yes.

Speaker 2 And so what happens is they often fall into the trap that they most fear because they're fixated about not falling into that trap.

Speaker 2 And somebody coming in that doesn't have that deep vested interest is able to look at it much more objectively and much more from a broader view and say, okay, what does this business need and how can we best scale it?

Speaker 2 What is the general environment within which this business is operating? What are the regulatory

Speaker 2 impositions on the business? What can we do to drive this business further? That's the kind of thinking that founders, no, I'm not saying every founder.

Speaker 2 There are founders who are exceptional, who are able to remove themselves from that and be able to make that, but they're a very tiny minority. Very ego.

Speaker 2 Very

Speaker 2 There's so much ego involved with founders. Um, and they think, hey, it's not, you know, no one could do it as good as well as I can.

Speaker 2 And when I, when founders come to me, I do this all the time, like, no one can do it well as I can. I'm like, you're right.
There's some people are going to do better.

Speaker 2 There's a majority going to be worse. But if they get you 80% of the way there, we can systematize the other 20%.

Speaker 2 We can do that, but you cannot scale. What got you here won't get you there.
It's the Tarzan idea. Exactly.
As you go through swinging vine to vine, you got to let go of something or your stomach.

Speaker 2 And getting the founder out of the the way is normally the biggest hurdle. And it's just this ego and it's fear because there's a movie with Brad Pitt.
It was called Fight Club.

Speaker 2 And he says, you're not your khakis. That's a problem for founders.
They think they are the business. They're no longer fathers or mothers or wives or husbands or whatever it is.

Speaker 2 They think that this is who they are, especially the white people, especially guys.

Speaker 2 So it's, it's a huge problem. So whenever I'm brought in,

Speaker 2 it seems like you're echoing the same thing. I sit with the founders.
I'm like, all right, I'm going to tell you right now.

Speaker 2 I mean, knowing anything about your business, your biggest problem that I'm going to run into is you. You need to get out of the mic.
And they're like, wait, what?

Speaker 2 I'm like, I don't hear anything about your business. I can tell you right now, your biggest problem is because I wouldn't be here if you had this under control.

Speaker 2 If you could systematize it, you could scale. I wouldn't be sitting paying my fees.
So that is a huge hurdle.

Speaker 2 And then asking them these questions when you break it down and say, this is what's going on. What do you really want? What is your goal? Who do you actually want to sell it to? What do they want?

Speaker 2 What pain are they in? How are you meeting that? It's a huge narrative.

Speaker 2 When you walk into these organizations and you're running into these founders and you run to the next firm, which is personnel, which,

Speaker 2 you know, Susie's been there forever and she's my founder's actor, whatever it is. Well, how do you deal with personnel struggles?

Speaker 2 What is your best advice when you have someone who is trying to scale and they've had the same staff or how do you motivate the staff? How do you take them to training? What do you do with them?

Speaker 2 Ready, great, great question. So let's start with the founder first.
So,

Speaker 2 you know,

Speaker 2 what rarely works?

Speaker 2 just as we finished talking about the fact that founders are often the biggest hurdle in terms of scaling because they've, they brought it from zero to 100, taking it from 100 to 500 to five, it requires different skills.

Speaker 2 And I would liken it to driving in first gear all the way from zero to 100 miles an hour. You just can't.
You blow the engine up, right?

Speaker 2 So once you get from zero to 10, you change from first to second, and then you move up the gears. When you're cruising on the highway, you're in fifth or sixth gear, and you're cruising along.

Speaker 2 So it's the same sort of thing. But what you don't do is when you get to the highway, you don't strip your gearbox and throw out the rest of the gears.
I've got fifth gear now. I'm on sixth gear.

Speaker 2 I'm good. I don't need the rest of the gears.
No, you're so you still need those people. So what I, I, my suggestion would be:

Speaker 2 if you are a founder of a business, don't fear. I mean, it's not as if you're going to be rendered irrelevant or you're going to be rendered useless to your business.

Speaker 2 You're incredibly valuable, but recognize that your value is to provide guidance, counsel, knowledge, expertise, all of the experience that you've gathered over time to the people who are taking this forward.

Speaker 2 So you're there on reserve. You're there if needed.
right?

Speaker 2 So you are not at the center. You are not driving the business.
You're there to provide guidance as a senior statesman, as the graybeard in the room.

Speaker 2 You can provide all of that counsel that would help your business move forward. So that's one thing.
Because, you know,

Speaker 2 the natural reaction of a founder that's listening to this, watching this, going, oh, geez, there's no way I'm getting out of my business. No, you don't get out of your business, but

Speaker 2 you don't drive it. You act as the guidance, you got, you provide the governance, you provide all of that.

Speaker 2 Be chairman of the board, you know, and call the management team in every month at a board meeting, have them present to you what they're doing, see if there's movement from month one to month two.

Speaker 2 If there isn't, ask them why not. That's where you can provide the greatest value.
And again, having been in the business, having started the business, you have relationships.

Speaker 2 Leverage those relationships. If your management team comes to you and says, we're having trouble in this particular area, that's where you can say, you know what, there's a couple of ideas I have.

Speaker 2 One is, let me call my friend so-and-so who's done this before and probably he can offer some guidance.

Speaker 2 Or, hey, you know, this is an idea that we tried some time ago, didn't work as well, but maybe there's a different spin on that we can try now. But that's where you can add the greatest value.
So

Speaker 2 I think elevating the founder to the role of a chairman and having a board of directors with the founder driving that, holding the management team accountable is absolutely critical.

Speaker 2 And that's the greatest way for the company to succeed.

Speaker 2 Yeah, there's a huge difference between being an owner and an operator and getting someone who grinded and was there every single day as the operator.

Speaker 2 and getting them to say, surprise, you're actually the owner.

Speaker 2 We need to pivot your roles here because, again, we need to get you you in different gears. And I love that analogy of being in different gears.

Speaker 2 One of the other things is, you know, we talk about where we break down command, where we empower people beneath our command, and we give them that extreme ownership.

Speaker 2 We talk about this in military operations, getting commanders that you can just assign command to and then getting out of the way.

Speaker 2 And a lot of the founders and a lot of the owners that are trying to scale that I run into, that I go, well, I don't really trust Susie in sales or Mike in accounting.

Speaker 2 I don't know if they could do that. I said, well, then we've got some hiring to do.
We've got some pivots to do. And there's just two things.

Speaker 2 There's one is there's this lie because you've been there as the operator that's forced them and you tried to control them and that maybe have stifled their brilliance.

Speaker 2 Or you just have an individual who just can't get you where you want to go. You talk about all the time, what got you here won't get you there.
You have to be able to have that pivot.

Speaker 2 So being able to go to your employees and figuring out which ones that your staff are like, you know what, if I empower this individual, if I decentralize command, push that down towards them, can I have, is there enough flexibility in the organization where not this as a founder is my new role?

Speaker 2 I'm going to sit here and I'm going to learn how to manage as a board of directors, as the CEO, to sit there and say, okay, this is what Susie's going to do. And this is her idea.

Speaker 2 All right, I think it's a good idea. Let's see if she can implement it.
But I'm going to keep an eye on her. I keep an eye on these things, but I'm not going to stifle her growth.

Speaker 2 I'm going to empower them and decentralize command because you can't be anywhere all at once. We talk about this all the time.
You can have everything you want.

Speaker 2 You just can't have it all at the same time. You just, but it just doesn't work.

Speaker 2 People love sushi and ice cream and pizza and chicken and steak. You can't have it all at the same time.
You're going to, you're going to get indigestion. Same is true for your organization.

Speaker 2 Being able to decentralize command is so vitally important. Absolutely.

Speaker 2 So as you're running into this and, you know, you, you're identifying businesses that you would go into. Are there certain businesses if you're like, hey, I want to buy a business? Okay, I get it.

Speaker 2 You know, these guys have convinced me.

Speaker 2 I'm not going to fall into the trap of getting up at four in the morning and watching too many Instagram videos and thinking, I'm going to, all right, starting doesn't work.

Speaker 2 Scaling matters, starting doesn't work. I hope that that's the only thing you guys are listening to.
You walk away with this. Okay, I get it.
I need to scale something.

Speaker 2 I'm going to purchase something. There's amazing programs from the government.
If you're starting at a lower level, there's amazing ways to do this. What are the businesses that you're looking at?

Speaker 2 You're like, you know what? These are the industries. These are the things that if I was going to scale it, I would not do this restaurants.

Speaker 2 But I would

Speaker 2 have these over here.

Speaker 2 What are the industries and initiatives, not restaurants, that you're looking at that are like, I would, I would, these are ones that would entice you or that you've seen?

Speaker 2 Because again, you've taken companies from lost $100 million to over $500 million very quickly. What are the industries like if my life depended on it, I had to scale it? What would I do?

Speaker 2 Which are the industries you'd go in?

Speaker 2 Yeah. So

Speaker 2 one of the key things about looking at

Speaker 2 businesses to buy

Speaker 2 is defensibility, right? How defensible is the market? What are the barriers to entry? So technology companies really,

Speaker 2 you

Speaker 2 hit the high points on that. So, if you look at what is the,

Speaker 2 again, there's sort of five or six factors, I'd say five factors in buying a company.

Speaker 2 We talked about the five factors in selling a company. There are about five factors in buying a company that you'd want to look at.
And defensibility is

Speaker 2 one of the main ones, right?

Speaker 2 What is the barrier to entry?

Speaker 2 Who are the competitors? How easy is it for them to step in and do what you're doing?

Speaker 2 And

Speaker 2 you might have a cool new idea, but can a very large company just throw a lot of money at it and just put you out of business or do something that you're doing better?

Speaker 2 So defensibility becomes very important. So from that perspective, technology is very exciting.
Any kind of technology. Now,

Speaker 2 people will immediately go, what about blockchain? Problem with blockchain is not a lot of people understand what blockchain is, right?

Speaker 2 So, again,

Speaker 2 you know, one of the things that I constantly keep harping on is do what you know and you'll do well. So, if you don't understand blockchain, then don't get into blockchain.

Speaker 2 If you can understand the business.

Speaker 2 Right, exactly. So,

Speaker 2 to answer your question, Charles, what are the kinds of businesses that I would be excited about? Technology businesses are exciting.

Speaker 2 And look for businesses that are solving niche problems, not massive,

Speaker 2 large-scale problems, but niche problems. And the reason I say this is because large-scale problems are being solved by very large companies, or it's a large enough opportunity.

Speaker 2 for very large companies to focus their attention on. They can throw a ridiculous amount of money at it and get it done.

Speaker 2 But if you're looking at niche problems, and I'll take an example of an extremely niche application.

Speaker 2 So

Speaker 2 there's an app called Splitwise.

Speaker 2 I don't know if you've heard of it. Basically, what it does is if you

Speaker 2 go on vacation with your friends, or if you're

Speaker 2 you know, if you have a golf trip with your buddies and you're going out and you know you go to a restaurant and somebody buys beer and somebody buys lunch and somebody pays for the golf and you know you you go out and you just a three-day vacation you do all of that right now you just record your expenses uh and you decide you know whether it's going to be shared equally or this person gets a 40 share that person gets a 10 share whatever it is and the app splits it up and then you even have within the app the ability to pay people and set up account it's a very niche application not a huge thing but that's a cool application that

Speaker 2 is something that is, yeah, it's so niche that do you think Venmo is going to do that, PayPal is going to do that? Probably not. That's not

Speaker 2 in their focus area. So, and I give that only as an example, in that find niche applications like that, where the barrier to entry is reasonably high.

Speaker 2 and it requires a lot of effort and it's a small enough market that as a small to medium company, you can go in and make a really big impact on it. So that's one thing.

Speaker 2 But I also want to go back to a question that you asked earlier, Charles, which I didn't answer fully. And that is, when you go into a company, what do you do with the staff, the people, right?

Speaker 2 In terms of training? Do you train them? What is the culture? How do you deal with that?

Speaker 2 So the biggest challenge is, again, the culture of an organization that you go into.

Speaker 2 And if it's a founder-run organization, there are people that are close to the founder that have been with them forever. So exactly as you said, Susie's been with me from day two.

Speaker 2 She was my executive assistant. She was my assistant.
She did everything. Then we made her project manager and then we made her vice president.
And then now she handles this and that.

Speaker 2 Now, Susie may not be truly equipped to handle the job that she's doing, but there's a loyalty debt that's being repaid in this particular situation. And that's perfectly fair.

Speaker 2 So the trick is to find the right seat on the bus for that person. It's not to say, well, Susie's outlipped there.
Welcome. Thanks, Susie.
Good luck, so long, goodbye. Right?

Speaker 2 There's no need to do that. That is a heartless approach, and there's absolutely no need to do that.

Speaker 2 But there is probably something she's extraordinarily good at that has delivered value to the enterprise all this while. So, why not find what that is? So, in answer to your question, what do you do?

Speaker 2 The thing that I do immediately is to sit down and do a deep dive on people's capabilities and skills. What do they do best? What do they like to do? What are their passions? What lights them up?

Speaker 2 And let's find something. And if it's a successful business, you can always find a role for somebody.
that is passionate about doing something,

Speaker 2 a role doing that very thing. And they will be phenomenally successful doing that.
Everybody benefits. A rising tide lifts all boats.
Everybody's happy.

Speaker 2 And you're also rewarding that loyalty and you're helping build that culture because a lot of people think that when you come in and you're going to scale, somehow you're going to wipe out the original task force, the original group that got you there.

Speaker 2 And that's not always the case. And I have to understand that you're dealing with emotions.
You're dealing with people. You're dealing with people.

Speaker 2 AI hasn't come in and just completely automated everything yet. You're still dealing with this human condition.
So being able to support that human condition is huge. Yeah, that's huge.

Speaker 2 I'm there. Yeah, I never, I never, unless someone's stealing or unless someone's toxic to the environment, I never tell people, hey, let's come in and let's wipe the stack.
Don't do that.

Speaker 2 Let's gather as much information as possible. And that's, again, when I talk about decentralized command, Suzy might have been in the accounting role, but the truth is Suzy is great at sale.
Awesome.

Speaker 2 Susie, this is your passion. This is what you're great.
I'm going to go create an idea. What do you think? You've been here longer than I have.
Let's create some sort of thing. Give you a help.

Speaker 2 Absolutely. And then you sit down with the owner who's no longer operating as an operator, but is actually operating as a CEO, is making the plan.
Say, hey, this is what Susie has.

Speaker 2 I know you trust Susie. I'm just coming in.
I don't know anything about Susie. If you're telling me you trust Susie in the beginning, I'm going to, I'm going to, I'm going to respect that.

Speaker 2 This is what she's doing. Why does it work? Why doesn't it work? What doesn't she know? Perfect.
Now I'm going to help empower the owner to start educating Susie, saying, hey, that's a great idea.

Speaker 2 We actually tried that. And this is why it didn't work, but we did this and it did work.

Speaker 2 And then Susie, now you're working with your people and you're empowering them to get the heck out of Dodge build so that they can go do this.

Speaker 2 When you're talking about companies to purchase, you know, you talk about two things, and my audience will kill me if I don't get the other three out of you.

Speaker 2 So they're talking about two things about what you're looking at.

Speaker 2 What are the other three things that when you purchase a business that you'll hate? These are the ones that, you know, this is what I so we've already got two. We've already got defensibility.
Right.

Speaker 2 What are the other ones that you're running in? Okay. So we talked about the five factors, right? One is culture.
The number one is culture.

Speaker 2 What is the culture of the company? Is it an environment where it fosters cooperation?

Speaker 2 People feel like they belong. Again, you know, having one-on-one conversations with the team within the company is huge.
It's absolutely revealing where you sit down and say, okay,

Speaker 2 so what is the culture like? Have people describe their culture.

Speaker 2 Not the CEO, not the founder, but the employees, the rank and file employees. Have them define the culture.
And they're never going to tell you, this is a toxic place.

Speaker 2 I can't wait to get the hell out of here. They're going to tell you it is a very competitive place, right? They're going to tell you nice euphemisms for what it is.

Speaker 2 So pay very, very close attention to what they're saying. More importantly, what they're not saying.

Speaker 2 If they're not singing the praises of everyone specifically, They're saying it's a very competitive place, something to watch out for. It could be toxic, right? So culture is important.
Next is

Speaker 2 what is their secret sauce, right?

Speaker 2 What is the barrier to entry? We've talked about that, right?

Speaker 2 So what are they doing that has been hard to replicate by other people, if there is something? And it

Speaker 2 might be relationships, it might be technology, it might be the way they do something, it might be customer service, it might be just obsessive focus on quality, whatever it is, right?

Speaker 2 Something brought them to this place. And that thing is something you need to understand.

Speaker 2 Because if you don't, the minute you acquire the business, you didn't understand what that key secret sauce was, then you lost it, right? Because the people may stay, they may not stay.

Speaker 2 Then the next thing is the people themselves. Are they likely to stay? Are they not? Because what are you really buying? What are you really buying?

Speaker 2 If it's a technology company, then you're buying

Speaker 2 patents, you're buying technology, you're buying intellectual property,

Speaker 2 there's a bunch of assets you can ascribe some value to.

Speaker 2 But if it's a business that doesn't have a lot of technology and there is just a business that they've been in, an art supply company is one of those, it's a commodity product, right?

Speaker 2 So what are you buying here? Customer relationships? And so think very clearly about what is it that you're buying.

Speaker 2 And if every employee walked out the door two months after you completed the purchase, what does that leave you with? That's really important. And then

Speaker 2 the sustainability of the business. And I don't mean sustainability in the sense of,

Speaker 2 you know, environmental sustainability. I mean sustainability in the sense of being able to stay in business, be successful and grow, right? What is the competitive environment?

Speaker 2 Who are the people that are snapping at the heels of this business? And

Speaker 2 why have they grown? Have they grown? And why have they grown? And what is that magical ingredient that makes this business sustainable? And can you maintain that level of sustainability? And finally,

Speaker 2 is the business accretive to your business? So

Speaker 2 in accounting,

Speaker 2 there is accretive businesses and there's subtractive businesses, right? Accretive is something that adds to your business. So if you vertically integrate a business, then that's accretive.

Speaker 2 So instead of buying from a supplier, you're buying from yourself. So that makes sense.
So if you're,

Speaker 2 let's say you're, you're a bakery and you want to vertically integrate, so you say, you know, I'm going to go build

Speaker 2 a place where, you know, I can grow wheat and I can get my wheat supplies directly from my own farm. And so I'm vertically integrated.

Speaker 2 Or, you know, I have access to yeast and wheat and milk and sugar and all of these things that go into my bakery products. I'm making all of that.
So that's potentially accretive.

Speaker 2 But a subtractive business is where you go,

Speaker 2 you're a builder and you go buy an art supplies business. That's subtractive because it's going to take away your attention.
It doesn't add anything to your business.

Speaker 2 It's not like by buying that business, you're making this business more attractive. It isn't.
So that is subtractive. So that's another thing you need to think about.

Speaker 2 What is this business? What is the combination of the businesses doing? If you have no business right now and you're buying a new business, okay, that's one thing.

Speaker 2 But does that map to what you know and what you do? And have you been in a business?

Speaker 2 So if, for example, you've been in a distribution business, you go, you leave your existing employer, go buy another distributor.

Speaker 2 Okay, that makes sense because you know the ins and outs of the business. Having worked for someone, now you're going to run your own business.
You have a chance at it.

Speaker 2 so that's something i would look for those are some of the factors

Speaker 2 here so we've got and those are huge factors and i think going into this environment where okay you talked about what not to do which is don't don't don't start a business just stop that stop that immediately secondly these are the mistakes that happens when you try to purchase a business and what you need to look out for so we've gotten through the those two the next thing that you're just i don't know anyone else that does what you do when you're looking at set selling a business because I've been very blessed to exit multiple companies, right?

Speaker 2 I've never, even all the years that I've done this, I've been able to bring sunlight in and say, okay, I see your business. I see how it's operational.
I see what your multiplier is.

Speaker 2 I see what's, you know, I understand EBITDA. I get all of that.
I'm going to get you more than what you can right now. Like, I'm saying what?

Speaker 2 That is a science. There's a magic thing.

Speaker 2 When I sat down with friends of mine who talked about this, they're like,

Speaker 2 what? No one knows about this. So if I don't ask you these questions, I will be mad.
So

Speaker 2 one of the things that you go into when you're like, hey, I'm going to sell your business and I'm going to get you a higher move and I'm going to get you more value than you believe it's worth.

Speaker 2 What are the things you look at when you're trying to exit out the business and you're talking to the business owners, finding like, you know what, I'm done. I'm a boomer.
I've had enough.

Speaker 2 My kids aren't going to take this. I'm done.
I'm completely burned out. My staff doesn't have the ability to take it because they've gone down those avenues, right?

Speaker 2 They're like, hey, I'm going to go down these different rabbit holes and try and exit from this. How does someone who is exiting out of an organization, organization, how are they going through?

Speaker 2 Because we've already talked about know who your seller is before you even bite it.

Speaker 2 I talked about that.

Speaker 2 You need to know exactly who they are, what their name is, how much is that going to be so, what pain they're in, why they're acquiring you, what are the reasons strategic, is it financial?

Speaker 2 That all makes sense.

Speaker 2 But as you're trying to build this and you're putting together the entire pitch for this, what are some of the things that you found that have created radical results on going, all right, this has gotten that 20% more than you thought?

Speaker 2 What are the three less shifts that you're willing to share? Great question. So we talked earlier about the five reasons why a company would buy another business, right?

Speaker 2 Talent acquisition, technology acquisition, customer acquisition, territory acquisition, and competition, right? These are the five reasons.

Speaker 2 So if you decide which of these five reasons you most map to, so you've figured out who your potential buyer is. And it may not be just be one.
It could be two or three.

Speaker 2 It could be either this company or this company or or this company. That's fine.

Speaker 2 So once you decide that this is the broad class of companies that you are going to sell to, then the next step is, what is the reason why that company would buy you?

Speaker 2 It is most important to understand why they're buying rather than what they will pay, because what they will pay will come after, right?

Speaker 2 Most business owners, most founders focus so much on what's the value? What's the multiple I can get? And how much can I jimmy that out.

Speaker 2 And when you're focused on that, you're approaching it in a very counter-strategic manner because you're just coming across as somebody who's negotiating purely on the numbers.

Speaker 2 Value hasn't been established, right? This is like selling anything.

Speaker 2 You don't talk about the price until you've established the value because otherwise the conversation just gravitates directly to price. You're selling on price and nothing else.

Speaker 2 And that's the worst position you can put yourself in as a seller.

Speaker 2 So if, for example, you decide or you find out that there are these three potential companies that want to buy or could want to buy your business, and what they're looking to acquire is your technology.

Speaker 2 Let's just say that's the case. Now,

Speaker 2 now you figure out how that technology maps to what each of these companies is doing

Speaker 2 and come up with a projection of how it can be accretive to their business. Always look at it from the other guy's point of view.

Speaker 2 All of us get so focused on our own stuff, we're always looking at it from our point of view. We forget to look at what's in it for the other guy, right?

Speaker 2 If so-and-so is going to come by my company, why is he doing that? Okay, so he's going to acquire technology. Okay, what does that do to his business? Try to project if you can.

Speaker 2 And this could be the same for talent acquisition, technology acquisition, you know, territorial expansion, any of of these reasons. And you say, okay, what does this add to their business?

Speaker 2 And come up with a projection that adding your business to theirs would result in X. And you don't have to be accurate.
It's impossible to be accurate. But you would have a general idea.

Speaker 2 If it's going to increase their business by 20%

Speaker 2 or 50%,

Speaker 2 whatever that number is. Now you can then work out an increase in the valuation of your business more than what they're offering is only a small fraction of the benefit they'll be getting.

Speaker 2 Now you're selling on value. You're not selling on price, right?

Speaker 2 You're relating it to a return on their investment. Okay, you're going to spend an extra 10 bucks and for that you're going to get a hundred bucks.
That's an easy argument to make, right?

Speaker 2 But if you're now discussing on whether it should be, never mind the value, we're just talking about I want 10 bucks more. And they're saying, I'll give you $3 more, not a penny.

Speaker 2 And you're saying, okay, well, okay, maybe not 10. We'll go down to nine.
So you're never going to meet.

Speaker 2 This is ridiculous. It's horse trading.
That's never going to work, right?

Speaker 2 But the value you get is by picking the point at which you are the most attractive and then deriving a value equation to the increase in value of your business to the return they're going to get.

Speaker 2 That's where you get get the most.

Speaker 2 Love it. And so when people come into this and they work with you, how long does it normally take for you to systematize or scale or exit? Because

Speaker 2 getting access to you,

Speaker 2 it's rare. Again, I don't know anybody who does what you do, especially at the level of success that you've had.

Speaker 2 So it's why I'm so grateful that you came on the podcast because these are conversations that aren't happening.

Speaker 2 All you're getting are the influencers are like, yes, this is how you do it, or just give me your money and I will do it. That's the only few options you're getting.
And that's just toxic.

Speaker 2 It's unbelievably toxic. When someone comes in,

Speaker 2 what is the life cycle of this? What is an average person?

Speaker 2 If I'm starting with, I've already got an established organization and I'm just burnt out and I don't want to do it anymore and I want to exit out versus, hey, I'm tired, but I still want to be part of this and I still want to scale it.

Speaker 2 When you've got someone who's a seller versus a scaler in this, I mean, those are two very different people. Very different people.
Very different. Exactly.

Speaker 2 Their energy, what's going on, they're like very, very different. What is the life cycle for both of those? How long does this this take?

Speaker 2 What are the things that they would need to do before even contacting you? Say, okay, do this first and then come get to me. Right.

Speaker 2 So, you know, the life cycle really depends on the stage that they're at in terms of how organized they are, you know, what systems they have in process, you know, et cetera.

Speaker 2 And then, and what is the stage of revenue that they're at, right?

Speaker 2 But in general, I would say for somebody that's looking to sell, from the point that we start talking and we decide, okay, let's work together because this is something that I'm willing to take on to the point where they get

Speaker 2 a transaction closing. It could be anywhere from six to nine months, right?

Speaker 2 As you said, willing.

Speaker 2 Although that you said willing to take on because it's something that comes across my door all the time. Yeah, like, hey, I've got this.
Help me scale.

Speaker 2 Well, yeah, I mean, that it's the best allocation of my time and it exactly that I can do it. The best allocation of my time.
And do I want to work with you? Because that's a big hurdle.

Speaker 2 It's like a big hurdle. It's a big hurdle.
Yeah. It is a big hurdle because, you know,

Speaker 2 again,

Speaker 2 I don't want to sound self-congratulatory, but

Speaker 2 I do get a lot of people coming to me saying, please help me and so on. And there's only so many hours in a day.
And when I commit, I commit, right?

Speaker 2 So

Speaker 2 I'm not going to say, I'll take you on. And, you know, 15 days later, say, you know, I kind of changed my mind.
I'm not going to do this. No, that's, you know, if we're on, we're on.

Speaker 2 So

Speaker 2 there's a due diligence process that we have to go through to make sure that this fits and then be able to say, okay, fine, this sounds like something I'm willing to work with.

Speaker 2 So the timing could be anywhere from six to nine months to a year, right?

Speaker 2 Now, for people scaling, again, it depends on the extent to which they want to scale. If they have a specific revenue number, for example, if they say, you know, I'm at, you know, $50 million

Speaker 2 and I have this goal that I want to hit $200 million in revenue by such and such a day.

Speaker 2 Yeah, we can look at that and say, okay, what are the processes? What do you have in place? What's the market?

Speaker 2 What's, you know, all the rest of it, do the due diligence and say, okay, is that realistic within the time frame? Yeah, probably.

Speaker 2 But are you setting that as a goal more as a stretch? Or is that a hard and fast number, right?

Speaker 2 Sometimes, you know, we all like to set set stretch goals and say, you know,

Speaker 2 I'd like to make a million dollars this year. And really, I'd be honestly, I'd be happy if I'd make 300,000.
That's a different thing, right?

Speaker 2 So we'd want to be pretty clear about what that goal is and what the achievability of that number is. Because again, we've got to have some really

Speaker 2 frank conversations about how achievable that is.

Speaker 2 If the business, if the margins in the business don't support that goal, then we've got to get real about it.

Speaker 2 Either we've got to change the fundamental aspects of the business, take on other products, put on, you know, bring in other products and services that increase the margin, or lengthen the timeframe, do whatever is necessary.

Speaker 2 But it does not automatically follow that every goal that you set for yourself will be achieved in the time that you set without any knowledge of what inputs go into that process.

Speaker 2 I tell business owners all the the time, it's good to want things. Doesn't mean you're going to get

Speaker 2 to want it. So not less want it.

Speaker 2 But I think also when you are working with someone, be it the owners or consultant that's coming in, listening to their words, listening to how they're showing up, listening to the experience, because when someone comes in on your level and you're like, hey, is it realistic?

Speaker 2 That is a very different narrative. That's a very different conversation as you go into it.

Speaker 2 So when you're talking to someone and they're like, hey, I can promise to do this in six to nine months, that's someone who probably doesn't have the experience level that you're looking for.

Speaker 2 Like you're looking into an environment where, because I've been brought into organizations and like, hey, take a look at this. I do my due diligence.

Speaker 2 And I'm like, okay, we can do this, but you're going to have to do all of this. And like, oh, God.
But I'm just like working out. You can only put on so much weight.
Exactly. Muscle mass.

Speaker 2 You can only put on 100 pounds of muscle mass at a week. Okay, we're going to super glue someone else to you.
That's about the only way we can do it. If it's your own mass, it doesn't work.

Speaker 2 So I could pick your brain for days. And I love this conversation and I want to have have more of them.

Speaker 2 But if someone's trying to get a hold of you and they're trying to get, to reach you directly, how do they find you? Or what materials can they learn?

Speaker 2 What is the best way to get in touch with you and to really continue this conversation?

Speaker 2 Because there are so many boomers out there and business owners who are exiting out going, listen, my kids don't want this. How do I exit this out?

Speaker 2 And then if you're also a person who is like, hey, I want to purchase a business because like filing listened to somebody and I'm not going to go start one. you know, how can someone get in touch?

Speaker 2 What resources would you recommend? Hey, go read this before you even contact me. What are the things that you would recommend on how to get in touch with you and the next steps?

Speaker 2 Actually,

Speaker 2 you know, the best way I would recommend, and I'm more than happy to devote the time,

Speaker 2 is we have an exploratory call. It doesn't have to be more than half an hour.

Speaker 2 We can have a quick exploratory call. And you can reach me,

Speaker 2 dush.brahmachandran at gmail.com. Super simple.

Speaker 2 I can put it in the chat, or you have the number.

Speaker 2 It'll be in the show notes. Yeah.
Yeah. Yeah.
Absolutely. It'll be in the show notes.
So everybody can hold you.

Speaker 2 So, and if you're going to say, read this before you even jump on a call with me, because I do that a lot of my time. So I'm like, go read this before you talk to me.
Just hear them.

Speaker 2 I give them a copy of my book or whatever it is. Are there certain books or there are certain materials or videos or movies or something like that?

Speaker 2 Please go watch this so we're speaking the same language before you show up. Right.

Speaker 2 You know,

Speaker 2 what I find is that I find it's very attractive to have people,

Speaker 2 you know, unsullied by external influences, come to you pure in themselves.

Speaker 2 And I love the fact that, you know, if somebody comes to me saying, you know, look,

Speaker 2 this is my business. This is what I want to do.
I want to get the raw, unfiltered version. So love to have an exploratory chat.

Speaker 2 I'm more than happy to invest. a half an hour, 45 minutes.
Initially, we'll go from there.

Speaker 2 And if and at the the end of that conversation, if it's not a good fit, I'll be absolutely honest and I'll say, you know, I'm not the right guy for you.

Speaker 2 There's a lot of other people that might be able to help you. This isn't me.

Speaker 2 But if there is an opportunity to proceed further, then I'll absolutely schedule a follow-up call and then we can get into more homework. We can say, you know,

Speaker 2 go check these things out.

Speaker 2 do this kind of homework and then let's have a follow-up call in a week or two weeks or whatever it is and go from there but the initial call i it would be really nice if somebody comes in completely unfiltered

Speaker 2 love it love it all right thank you so i have so many more questions that would go for hours on hours and so we'll probably need to come back and beg you to come back we'll just sit we'll just hide it behind an introduction like that uh but i really want to thank you for coming on and thank you giving some of the advice and some of the things that people just don't ever hear.

Speaker 2 So thank you so much for being part of this. I really appreciate it.
It's an absolute pleasure, Charles. And you're doing doing such good work.

Speaker 2 And I'm delighted to participate in this podcast with you. I have the greatest of admiration for you and what you've done, what you've built over time.
So it's just an honor and a privilege for me.

Speaker 2 So please don't thank me. I should thank you.
You're an absolute delight, friend for life.

Speaker 2 Absolutely. We're definitely going to do more stuff together.
I'm excited. We talked about some stuff offline, which for those of you who are listening, there's going to be more stuff coming.

Speaker 2 So it won't be the last time you hear from them. So I'm excited.
Thank you again. And I'll see you guys in the next.

Speaker 1 That's just proved that momentum trumps motivation. Stop building from zero by proving businesses with real customers and real revenue.

Speaker 1 Going from 40 to 60 miles per hour beats going from zero to 20 every time. Your next move isn't creating something new, it's acquiring something that works.