Don’t be Afraid to be Vulnerable
BRX Pro Tip: Invest More in Creating Content than Advertising
BRX Pro Tip: Invest More in Creating Content than Advertising
Stone Payton: [00:00:00] Welcome back to Business RadioX Pro Tips. Lee Kantor and Stone Payton here with you. Lee, you know, when we’re in business, so many of our listeners, and of course we are, you have to be thoughtful about where you invest your resources, and your counsel, our counsel, in most situations is to invest more in creating content over advertising. Yeah?
Lee Kantor: [00:00:26] Absolutely. This is a tip that I heard from one of my favorite authors, Ryan Holiday, and he says – his recommendation is to invest more of your marketing dollars in creating content rather than advertising. He says that even if advertising has a better ROI, which is debatable, he feels better creating more content that’s a value and that serves as a community rather than just pushing out ads that try to sell somebody something.
Lee Kantor: [00:00:56] And, I couldn’t agree more with this. I mean, this is why we do these tips. I would feel a lot better sharing information and knowledge that I’m getting with my community rather than running an ad that says, “You know, hey, buy my stuff.” I think over the long run, you’re going to be much better served by having a portfolio of content that shows how smart you are and how passionate you are and how you serve your community rather than have a portfolio of ads that are saying, you know, you should buy this or you should buy that.
Lee Kantor: [00:01:36] So, I think that it is a much better use of your marketing dollars to invest in your own content that you’re creating for your own personal brand and the brand of the business that you’re working on rather than just running ads and hoping that somebody interacts with them.
BRX Pro Tip: 3 Steps to Documenting Processes
BRX Pro Tip: 3 Steps to Documenting Processes
Stone Payton: [00:00:00] Welcome back to Business RadioX Pro Tips. Lee Kantor and Stone Payton here with you this morning. Lee, let’s talk about a process for process, three steps to documenting process.
Lee Kantor: [00:00:12] Yeah. I think that documenting your processes is super important and no matter what your business is, there’s no way that you can delegate anything unless you have these processes documented. So, I think that this is one of the main jobs of a business leader in any venture that you have is to create some documentation if you want to grow outside of yourself.
Lee Kantor: [00:00:36] So, here is my simple three-step process to documenting process. Number one, write down the process you are documenting. What is it? What is the outcome you expect from doing it? That’s it. You got to get this down. This is a process. This is why we’re doing this.
Lee Kantor: [00:00:52] Second, flesh out the most important steps of the process to the best of your ability. So, start kind of putting down, okay, this is the goal. This is what I’m trying to accomplish. These are the steps that it takes to accomplish that. And then, as you start doing that, flesh out the most important steps of the process. So, get more granular with each step, adding more and more detail along the way, and then understand that each process is a work in progress. It’s going to change. It should be a living, breathing thing that gets optimized more and more over time.
Lee Kantor: [00:01:27] So, if you just do those three steps, write down what it is, this is the outcome I expect, here are the most important steps, and then getting more granular with each of the steps, over time you will be creating this manual of all the processes in your business. It doesn’t have to be a big hairy deal. It can be simple at first. It can be broad strokes at first, but just start documenting it and just understand that as you do it more and more, you’re going to keep optimizing it and keep adding detail to it over time.
Lee Kantor: [00:01:59] You don’t have to be intimidated by the whole process of documenting these processes or else you’re never going to do it. But as you do them and you flesh them out, you’re creating a more robust manual that’s going to help you at some point to delegate some of these processes. And ultimately, you’ll have a manual on how to do every aspect of your business which you can eventually sell.
Joseph Pergolizzi with Website Closers
For the past 25 years Joseph Pergolizzi with Website Closers has been an entrepreneur. He solely started three businesses, all bootstrapped, and exited each of them. From brick and mortar business, ecomm business (Amazon) to a 400 franchisee business that spanned over across 5 countries.
Joseph has done strategic work for Airbnb and Burton. All told, he’s worked with over 1,000 entrepreneurs to start, scale, exit and buy businesses. From first timers, all the way up to Steve Jobs and his executive team.
Joseph has a real estate portfolio and invests in early stage companies.
Follow Website Closers on LinkedIn, Facebook, Twitter and Instagram.
This transcript is machine transcribed by Sonix
TRANSCRIPT
Intro: [00:00:07] Broadcasting live from the Business RadioX studios in Atlanta, Georgia. It’s time for Buy a Business Near Me, brought to you by the Business Radio X Ambassador Program, helping business brokers sell more local businesses. Now here’s your host.
Stone Payton: [00:00:32] Welcome to another exciting and informative edition of Buy a Business Near Me. Stone Payton here with you this afternoon. This is going to be a fantastic episode. Please join me in welcoming to the program Exit Coach, Business Broker and advisor Joe Pergolizzi. How are you, man?
Joseph Pergolizzi: [00:00:52] I’m great. I’m great. Stone, nice to talk with you.
Stone Payton: [00:00:55] Well, we are delighted to have you on the show. I’ve got a thousand questions. We won’t get to them all. But before we go there, let’s give the folks a little bit of a primer, mission, purpose. What are you and your folks really out there trying to do for people?
Joseph Pergolizzi: [00:01:12] Yeah, it’s a great question. I put it succinctly, you know, for the business owner, we create life changing events for them. You know, there’s a lot of sweat equity that goes into building a business and and there’s a lot of appreciation that can get built into it. So, you know, that’s sort of their victory lap when they exit a business. And for some business owners, it’s actually a sigh of relief, as we all know. And then for the buyers, you know, that’s their their next big opportunity. The buyers are on the hunt. And so they’re looking for a business that has inherent value and they want to scale it. So, you know, we work both sides. And again, you know, we we like to say we create life changing events and we also help people hunt for their next big opportunity.
Stone Payton: [00:02:01] So let’s talk about time and timing for a moment, partially because I think our listeners will benefit, but also, you know, this kind of this some of this kind of content is really helpful for me. My business partner and I, we’ve got we’ve got a good business. And, you know, I don’t think we’re close to an exit, but when, for example, when should a business owner or a set of partners be sort of trying to get their ducks in a row and be thinking about prepping for a productive exit?
Joseph Pergolizzi: [00:02:32] Yeah. Yeah. To talk about, let’s say, business partners first. It’s important to to be on the same page, right? Because people’s timelines can be a little bit different. Someone might be close to retirement or maybe somebody has plans for another venture. So communication is everything. Sometimes your business partner is really like a second marriage. And, you know, I think just sitting down and start to having the conversations and, you know, keeping things open, what’s your plan or when would you like for this to happen? And, you know, do you want to stick around? And I’m thinking this and sometimes, you know, you have a business partners that will buy out other business partners. So I think for the partnership, the first thing is to start having the conversations yesterday and after you guys have come to some sort of agreement, then the clock is ticking, right? Because what you start to see is some business owners are starting to make decisions a little bit differently if they’re planning, let’s say, for their exit in a year or two. So maybe they’re investing a little bit more money, maybe in initial biz dev or maybe they’re looking at their hiring plan or scaling back. So I think once it starts coming up in your mind, then that’s the best time to start talking to somebody. Because again, one of the biggest things is we deal with is people who, you know, we talk to and they’re like, wow, I wish I spoke to a year ago. I didn’t realize there was so much to think about or I would have done things differently and there’s no pressure. A good broker, it’s all about a relationship. So a business owner should never feel like it’s too soon because it never is. Never.
Stone Payton: [00:04:25] Is that. Yeah. Well, as you were describing that process, I’m trying to envision Lee and I in the same room with a broker. And I wonder if sometimes, you know, you mentioned like a second marriage, you almost have to put your your your therapist hat on. Maybe sometimes as an advisor, do you ever find that’s the case?
Joseph Pergolizzi: [00:04:47] Oh, yeah, absolutely. There’s a fine art to to choosing the right words, to setting the stage, to making everybody feel comfortable about something that could be very personable to them. So absolutely, there’s a finesse. And I think that that gets lost. It’s not really on the radar for for a lot of business owners. But there are some ways where we’re building trust independently and hoping to get everybody to to feel candid about about talking about what their plans are. So, so yeah. And in other situations, too, what we. I do is we might, let’s say, talk to you first, Stone, and have a candid conversation with you and then have a candid conversation with Lee. And then the three of us might get together. So, you know, that’s common to we we’ve done that. Yeah. Yeah, absolutely. It’s a fine art. We you know, we tend to think that sometimes we’re a CPA, sometimes we’re a business coach, sometimes we’re out. We are a therapist, sometimes we’re a confidant. Yeah. The good brokers are really wearing multiple hats. Absolutely.
Stone Payton: [00:06:09] So speak to this this idea, I think the right word is valuation. But figuring out what the true market value, practical market value of your business is, because I can anticipate that sometimes, you know, I mean, this is our baby. You know, we’ve worked on this thing for 18 plus years. I was telling you before we came on the air and I don’t sometimes we may not have the realistic view. Can you just speak a little bit to the valuation process?
Joseph Pergolizzi: [00:06:36] Yeah, absolutely. So the way I’ve grown to learn about valuations is that there’s actually, let’s say, three valuations happening at the same time. And so to to put this more into context, a business owner is selling for one of three reasons. They’ve come to the conclusion that they are burnt out. They’re done. Time is very important to them. It’s not so much the money. A lot of entrepreneurs are thinking about their next venture, and some entrepreneurs are just looking for their price. So sometimes it’s burnout, sometimes it’s on to the next venture, and sometimes they’re just building their business until they get to the price. Now, on the flip side, the market is the second sort of valuation. You know, the market speaks. We always say that I could think what a business is worth. You could think what a business is worth. But at the end of the day, what’s the buyers? What are the buyers going to think? And this is an interesting predicament because sometimes you are exactly the right thing that a company is looking for and or a business owner is looking for, and they’re evaluating, build or buy. So they’ll look at your business and they will actually potentially pay a little bit more of a premium. And then you have other buyers who are just discount shoppers, and they’re going to look for every single way to, let’s say, lower the valuation or I should say lower the value of your company.
Joseph Pergolizzi: [00:08:13] And again, to not to to a broker’s warn. But, you know, we’re always assessing where is this buyer coming from? Who are they? So the buyer is going to have their own valuation. And then there’s the business valuation. And what we look at is historically and what we also look at is what the scalable opportunities are, because that’s the buyer speak. Buyers are always looking for how to build this business back up. And when we look at a business, we’re always looking for what’s the low hanging fruit, what’s the feasibility, what are the opportunities, how do we get the cream to come to the top? So we will look at what the average multiple is. Let’s say on seller discretionary earnings. And seller discretionary earnings are the net revenue bottom line of the business, plus all the, let’s say, fringe benefits that the owner partakes in the cell phone, the travel, the coffee. So those get added back into the bottom line as well as the owner’s salary. So seller discretionary earnings comprised of net revenue depreciation, fringe benefits, owner salary, and then we apply a multiple to it. And multiples can range depending on the type of business you’ll see. You know, the multiples can range from someone who’s desperate, wanting to get out. Maybe it’s around two X, it’s a very good business. You can have 4x5x67x on software companies.
Joseph Pergolizzi: [00:10:00] And you know, the other thing that’s commonly overlooked, Stone, is the deal structure. So a lot of business owners don’t necessarily understand that they’re not going to get a check for their full price at close. And for some, that presents a problem. But if let’s say I listed your business at $1,000,000, someone might come in and offer you 900,000, let’s say, in cash and 100,000. In seller financing. Other people might say, okay, your list price stone is $1,000,000. How about I give you 600,000 cash? But I’m going to ask and I’m going to actually give you I’m going to ask for a 700,000 seller note. I’m going to give you 7%. I’m going to pay you over the course of three years or two years. So now your $1 million business valuation is actually getting $1.2 million because of the structure of the deal. And again, those are just loose numbers. Yeah, but there’s just such a database of of different deal structures that kind of can influence a purchase price. So again, to overview, there’s your timeline, there are your reasons, there’s the market, what they think, what they want. Then there’s the actual financials and the business, the scalability. And then maybe the fourth thing is what the terms are. So yeah, it’s a matrix and a good broker should probably be able to go through this with somebody over the course of 30 minutes an hour. And yeah.
Stone Payton: [00:11:47] Well, it’s it’s such a fascinating arena to me. I got to know the back story, man. How did you end up in this line of work?
Joseph Pergolizzi: [00:11:56] Oh, thanks. You know, I was a studio art major in college, and a small business opportunity came across my plate. It was a business I knew really well, and I think my parents understood that I was a struggling student. And back in 1994, they lent me 15,000 to to buy out this business. And I put my heart and soul into it and it made $30,000 its first month. So I knew I had something. And then about five years later I sold that business. So I had my first exit when I was around 26. And then, you know, I waited around, I knew what opportunity felt like and I started a food franchise. And, you know, when I had that franchise, I was so fortunate. I had a great mentor, the late Ira Noxon. I always say his name incorrectly. I’m looking at a picture of him, and Ira wrote the book on how to buy and sell your business for Entrepreneur magazine. And I learned so much from Ira. He was such a salt of the earth guy. And, you know, you think you think business at a certain high level is all this polish. It’s really not. It really is a little scrappy at the end of the day. And Ira taught me quite a bit and, you know, just life experience dealing with big companies. I’ve worked with Apple, Steve Jobs, I’ve worked with Burton, Airbnb, and just to better understand everything from the first time entrepreneur all the way up to the biggest companies in the world, what’s the fabric? What are the makeups of the people? And I had probably just enough confidence to to think I could do it at a certain point in my career. And then, you know, you take the leap. I’m learning every single day. What I what I know today is very different than my approach. Four years ago, I think, like you said right before the call, we’re always learning. So. So, yeah, I’ve had the colorful career and really, really fortunate. You can only connect the dots going back, as they say, not forward. Yeah.
Stone Payton: [00:14:22] So you mentioned, in my words, you’re working both sides of the equation. You work with buyers and sellers. How does the whole and so I know you’re helping sellers get ready to sell and do well, but how does the whole sales and marketing thing work for you? Like, how do you get to to write new business and and help folks? What is that? That looks to me like it would be a real challenge.
Joseph Pergolizzi: [00:14:52] Are you talking about finding businesses to help sell and also find buyers as well?
Stone Payton: [00:14:58] Yeah, yeah. Particularly finding buyers I would think would be tough, but. Yeah.
Joseph Pergolizzi: [00:15:02] Oh, wow. There’s so many buyers.
Stone Payton: [00:15:04] Oh, okay.
Joseph Pergolizzi: [00:15:04] All right. I have exponentially more buyers right now. And then I do having that. I do have sellers. There’s you know, there’s these are my formulas. I’m giving out my there’s three types of entrepreneurs. There’s the pioneer. Let’s call them the artist, the people that have the creativity. Then there’s the guy that’s into systems and scaling. And then there’s, let’s say, the expert who knows how to turn around a business that’s failing. And you’d be surprised the artists are really in the minority. And there’s so many people who are scholars who are on the hunt that don’t possess the creativity, the artistry, the passion, but they understand operations. So we develop our networks pretty easy because anybody that inquires about a business that’s a pass on a business, they’re abi on any number of businesses thereafter. So if we get 100 leads, 100 bylines on a deal, those are now 100 buyers that are now in my CRM and every buyer I deal with first time entrepreneurs all the way up to private equity and family offices. And those people are really neat to talk to. They’re buying and selling businesses all day long on their own. You know, the hardest thing for a broker is, is can be finding the sellers and cultivating those relationships. And, you know, that’s networking. The best form of networking that we find is referrals from our sellers and spending time with great people like you.
Stone Payton: [00:16:57] Well, thank you for that. But what this is underscoring for me and I mentioned this yesterday, we did an episode in this series. As I’m learning more and doing more interviews in this arena, I’m finding I’m beginning to understand this. This world is far more relationship oriented, relationship dependent, relationship centric than I guess I originally had it framed up in my mind. In my mind it was so transactional. And that’s not the case at all, is it?
Joseph Pergolizzi: [00:17:28] Not? Not. Not at all. Not at all. It there’s so much we have to know and understand. It’s well beyond an MBA. But at the end of the day, like we said in the beginning, it’s somebody’s baby. And and the good brokers, I think, have some form of, let’s say, like moral responsibility to do the right thing for everybody because it’s the gravity of the situation is a big deal. And we have to be able to invest in people. That has to be a genuine relationship. And and, you know, there’s there’s a lot a seller doesn’t know. They don’t know what they don’t know. And we have to tread lightly because at the there’s always curveballs and sometimes we’re a firefighter. And the more transparent, the more trust we have, the more trust there is in a relationship, the easier it is to overcome the unexpected. So it’s both. I think there’s an ethical or moral component to our work, you know, because it is someone’s perhaps, you know, family wealth lineage. We could be creating generational wealth. And and how great is it? How great is that? But it also is for the preservation of of the deal, looking out for everybody’s best interests. And it really counts to have a great rapport, you know, which is I always feel like I’m selling against that, right? Because when I was before I was in brokerage, I used to think brokers were put in the same category as a used car salesman. Right. But, you know, to your point now, I’ve realized I’m a therapist. I’m a psychologist.
Stone Payton: [00:19:38] Now, don’t a lot of sellers and maybe I’m just projecting my own my own bias and preconceived notions. But but don’t some sellers really want to keep the fact that they’re selling the business kind of on the down low like they don’t?
Joseph Pergolizzi: [00:19:51] Absolutely. Yeah, we see that every single day, which is great. It’s best it’s it’s so best to not play that hand if you don’t have to, whether it’s looking out for employee retention or, as I say, putting, putting blood in the water. If you’re a shark to your competitors, you want to be really strategic about that. And to my to your first question, when should you start to look for selling your business? And I said the sooner the better. And that’s because a broker then has time to assess the. Target’s right to have conversations with the sellers to extract as much information as possible. You know, my my food franchise that I sold, I thought someone who was Italian was going to buy my pizza franchise, and it was someone from Sri Lanka who knew. So so yeah, the to answer your question, it’s always best to just hold those cards tight, consult with a broker you trust, have a strategy around that. Sometimes it doesn’t impact a business at all because potentially you have, you know, the next CEO or or operator in the business. But it really helps if a good broker can sort of put out all the cards, put out all the scenarios, weigh them, put them in sequential order on how to approach, what to say, all those things. So hold the cards. Start talking about start talking to a broker yesterday. Yeah.
Stone Payton: [00:21:38] Okay, so let’s, let’s talk about me some more. It’s like one of my favorite topics, but no. And I have talked about we have studio partners, we call them, they’re really our highest level of client. But we we have several physical studios around the country and we have presence in other markets. And one of the thoughts that Lee and I had was selling most or all of the business to that group of people. You know, almost like I don’t know, is that like an internal sale? So is that something you would ever advise on? Do you still is that still kind of the same path? You would still want to seek out a professional to guide us through that process, right?
Joseph Pergolizzi: [00:22:18] Yeah, absolutely. And. I, I would say you have you have identified a really good, let’s say, buyer network. And the strategy that I would impose there would be learning more, let’s say, about your top five. Which ones do you have the best relationship with? Which ones have the best upside to? And, you know, another thing that goes along with the valuation is which transaction is going to give you the least amount of brain damage? Because something that a lot of sellers don’t realize is there’s a period of due diligence and you might think that you sign and know why you’re done. You’re not a good broker is going to assess a buyer and say, well, what are they going to be asking from stone? What kind of financials, what kind of contracts, what kind of consulting contract are they going to really ask you for? What what are their expectations? So there is really something to relationship with a buyer and assessment of who actually is going to close because the buyer can back out at any point in time unless once, of course the APA is signed. So that would be something that I would do. We would do with you is take a step back, look at all the markets, look at identify some targets and then which ones have you had conversations with? Which one are you most friendly with? And by all means, we would still take you to market. And the only caveat I would say to that, though, is if the stars really aligned where you had a really good buyer who you got along with, who’s going to close and you got a good, fair price, just be done, you know, like don’t go back to market for an additional 5%, even 10% just be done because it’s a roller coaster ride. And there is really something to say for eliminating brain damage. That is your question.
Stone Payton: [00:24:39] No, it absolutely did.
Joseph Pergolizzi: [00:24:41] Okay.
Stone Payton: [00:24:42] All right. So before we wrap, let’s if we can, let’s leave some pro tips. I guess you’d call them for some buyers and sellers. I mean, the number one pro tip is reach out to Joe and his team and have a conversation with them. But just some things that they maybe can begin to think about. I don’t know if it’s a book they should read, if it’s something that they should be talking about amongst themselves. But let’s let’s leave him with a few tips to kind of help them begin to think through this kind of thing.
Joseph Pergolizzi: [00:25:09] Yeah, great question. One of the things that we spend a lot of time as brokers on is evaluating your books, and it’s really important to keep as clean as possible. Your books do not have have your own business checking account, have your own business credit card. If you can negotiate some good contracts, that’s first and foremost. Just make sure there’s a clear delineation starting today with your books between personal and business, get separate business accounts, do not co-mingle to businesses under one account, do not. That is just a nightmare. And talk about due diligence. You’re going to run into a lot of problems. So books are first. The second I think is working on your mindset. Do not be fixed either on a price or who’s going to buy your business. Leave that up to the professionals. So many people get in their own way, so start having a flexible mindset. The third is, Oh, just escape me, give me a second. Understand what your motivations are going to be. How much gas do you have left in the tank for something like this? What kind of price would you like for your business? Is something a little bit more attractive? Do not wait to sell your business. If revenues are good, the moment your revenues start to drop, that is the absolute worst time to sell your business. Going level on your revenue is fine, but as soon as you start tailing off in your revenues, it could almost be too late at that point.
Joseph Pergolizzi: [00:27:09] You could be potentially, quote unquote, a distressed asset. That’s why it’s so important. Talk to somebody tomorrow. Understand where your investing. Spins may or might mean may or may not should go in your business. You know, those are the big high level things, mostly around numbers, some around mindset. And, and yeah, I could talk for hours, but those would be sort of the main things to think about a book, you know, maybe, maybe even going back in your own mind and thinking, why did I start this business in the first place? You know, write your own book at that point. One of my favorite books of all time is I believe it’s How to Grow a business or How to Start Your Own Business. It’s a short book. I read it some 25, 30 years ago. Do I have it on my shelf? I do have it on my shelf somewhere. Maybe reading how to start a business book, you know, beginning with the end in mind, you know, playing little mind tricks on yourself like that to start really understanding what you’ve built. What do you want out of it? Yeah, I’m a big fan of reflection, if you can’t tell.
Stone Payton: [00:28:32] Well, I can. And I’m so glad that I asked the question because I think these are absolute pearls. And one of the things that you I don’t know about challenged my thinking, but certainly informed my thinking is apparently you can get a lot more creative with the deal structure than I anticipated as well. And back to that mindset. Be open to different ways to structure that deal 100%.
Joseph Pergolizzi: [00:28:57] I’d say it’s. You know, it’s 30 to 40% of what’s involved on my end is the deal structure. And in my world, if if I’m working with an adjacent buyer, somebody else who’s, let’s say, representing the buyer or seller, that’s that’s what we’re talking about. What deal structure do we need to get this deal done? How much cash does the buyer have or how much cash does the seller want? We always start there and, you know, all of a sudden we could throw down the equity card where equity could be a real good insurance policy for a buyer if they know a seller wants to stay involved, because then they’re sort of still confident in their business. And the seller could be like, Well, I can’t get my full price, but I might be able to retain 25% equity and I could have the option to sell the 25% at a higher price, higher valuation in 3 to 5 years, and still get a little, you know, nice little chunk of change after a year. So, oh, my gosh, you know, the deal the deal can be the deal is in the terms I say that cautiously, but I also say it from experience that the deal could be made in the terms.
Stone Payton: [00:30:30] Oh man, this is great stuff. I can’t thank you enough for investing the time to visit with us this afternoon. This has been an inspiring, informative conversation. You really have stimulated my thinking. I want to make sure that our listeners, if they’d like to reach out and have a conversation with you or someone on your team, let’s leave them with some coordinates, whatever you think is appropriate, a website, a LinkedIn, whatever works for you. But I want them to be able to connect with you.
Joseph Pergolizzi: [00:30:57] Oh yeah. And I would welcome any anybody reaching out, whether you’re planning selling your business yesterday or you want to start talking because you want an exit in two years or just any general questions, just please reach out to me. I love what I do every single day. First and foremost, you can find me on LinkedIn. It’s Joe Pergolesi. The way you spell my last name is P is and Peter is an Edward R as in Roger G is and George O as in Oliver L as in Larry I as in Ivan Z as in Zebra Z as in zebra eyes. And Ivan, so you can find me on LinkedIn at Joe Pergolesi. I’m not the doctor. So there’s a doctor in Florida. I am the execution and business broker. Or if you want to email me, it’s simply J. Pergolesi, which I just spelled out a moment ago. So J pergolesi at website closers dot com.
Stone Payton: [00:31:59] Well, thank you again, Joe. This has been fantastic. You’re doing important work, man, and we really appreciate you.
Joseph Pergolizzi: [00:32:06] Thanks so much for the opportunity. Stone Glad I could be a service to you and your listeners.
Stone Payton: [00:32:11] All right. This is Stone Payton for our guest today, Joe Pergolesi and everyone here at the Business RadioX family saying we’ll see you next time on Buy a Business Near Me.
WBENC 2022: T.J. Lewis with Ally Financial
T.J. Lewis, Ally
TRANSCRIPT
Intro: [00:00:04] Broadcasting live from the Business RadioX studios in Atlanta, Georgia, it’s time for GWBC Radio’s Open for Business. Now, here’s your host.
Lee Kantor: [00:00:18] Lee Kantor here, broadcasting live from WBENC’s National Conference 2022. This is the 25th annual conference here. So, we’re excited to be here and we’re inside the GWBC booth, booth 1812, if you wanted to stop by and see us. Right now, we have TJ Lewis with Ally Financial. Welcome, TJ.
TJ Lewis: [00:00:37] Thank you. Thank you very much. Happy to be here.
Lee Kantor: [00:00:39] Well, you’re a partner here with GWBC. Talk about why that’s important for Ally to be partners with GWBC.
TJ Lewis: [00:00:46] Yeah. So, Ally, just to give a little bit of background on myself and Ally, I joined Ally in January 2020 actually to launch our supplier diversity program. So, we’re a relatively new program. And in doing that, we knew we needed to really partner with some of the best councils in the area, and we have some key markets in the southeast, as well as the Midwest, and we immediately contacted Roz. I’ve known Roz from previous roles and knew that we wanted to kind of jumpstart our program engaging with the GWBC, and it’s it’s been a fabulous partnership that we’ve had over the last two-and-a-half years.
Lee Kantor: [00:01:36] So, you started this from scratch for Ally?
TJ Lewis: [00:01:38] We did. I did. So, I joined in. Ally’s known for very strong DE&I culture efforts, our corporate citizenship work that we had as a team. We had just gotten to the point where it was time for us to launch the supplier diversity program and I was honored to be selected-
Lee Kantor: [00:01:58] To champion that.
TJ Lewis: [00:01:59] … to champion that. And it’s been a joy. But keep in mind, I gave you the timeline, January 2020.
Lee Kantor: [00:02:07] I know. That was an interesting starting point.
TJ Lewis: [00:02:08] Right. Exactly.
Lee Kantor: [00:02:10] Like, hey, do you know that there’s a pandemic going on here?
TJ Lewis: [00:02:12] Well, it just—we didn’t know, and that was the thing. So, a couple of months in, less than three months in, we’re in the middle of the pandemic. And actually, one of the first things we did was we sat down with like the GWBC and some of the other councils, in particular, on the local side, and said, okay, we knew we had to reach a lot of the businesses that were being impacted the most.
Lee Kantor: [00:02:40] Right. And they needed the services of Ally and they needed the Ally to be an ally.
TJ Lewis: [00:02:45] Yeah, that’s right. And they needed the opportunities. And how do we do that? All of a sudden, WBENC, the national conference is going to be canceled. Everything’s canceled, right? And so, actually, we sat down, we talked with Roz and team, and we came up with some pretty innovative things, where we brought the access through virtuality, virtual events.
Lee Kantor: [00:03:05] Right. You had to figure out a way to make it happen, because business didn’t stop for everybody.
TJ Lewis: [00:03:09] Exactly. And that’s what’s been meaningful. So, it’s funny because being here today, I’ve worked—my team has worked with a lot of the the folks at GWBC for years, and we had never met them in person.
Lee Kantor: [00:03:22] And you never met them, right?
TJ Lewis: [00:03:24] That’s right. So, it’s exciting just to be here.
Lee Kantor: [00:03:27] It’s like a reunion.
TJ Lewis: [00:03:28] Yes, that’s exactly right. Exactly right. I joke that we’re not just a square box with a photo, right?
Lee Kantor: [00:03:34] Right.
TJ Lewis: [00:03:34] It’s real people.
Lee Kantor: [00:03:35] It’s hard to believe.
TJ Lewis: [00:03:36] Right. And so, it’s just been really exciting to be here, and the partnership and things that we’ve been able to do. We got involved in their mentorship program, where we were able to mentor a couple of women-owned businesses, and we’re doing that again this year.
Lee Kantor: [00:03:52] And the impact is real. Like this isn’t just something that a corporate higher ups are talking about, like, yeah, that’d be a nice thing. You’re seeing the real results of that relationship and the impact that makes not only on the individual business owner, but also their family, their community. I mean, the impact really trickles out and ripples out well beyond that individual.
TJ Lewis: [00:04:13] Without a doubt, and that’s what keeps us charged. And partnering and working with the GWBC and organizations like this just keeps us going. And we figure out ways to be more innovative and creative.
Lee Kantor: [00:04:29] Right. More creative and to make things happen, because you have to—you can’t stop innovating, or else, you’re going to die on the vine here. You got to keep kind of changing to adapt to what’s happening, because the world is so chaotic and changing so rapidly, you have to help them kind of dream bigger, really.
TJ Lewis: [00:04:48] That’s right. And just kind of tying it in, I mean, so Ally, if you know anything about Ally Financial, we’re a digital financial institution. And so, that’s kind of a disruptor. It’s kind of an innovator in this space.
Lee Kantor: [00:05:02] So, how do you kind of—as having a digital footprint, but you’re serving individuals locally and hyper locally, how do you kind of thread that needle to be available to them as they need you every day in a local market, but also have this kind of global really presence?
TJ Lewis: [00:05:20] Yeah. I mean, well, it’s the principles of the company. Well, we’re able to serve anyone everywhere.
Lee Kantor: [00:05:28] Right. But also you want to be hyper local so that you can serve the community.
TJ Lewis: [00:05:32] And that’s just in the communities that we operate and serve and across the 11,000 employees that we have. We are very active in those communities across the board. And so, it’s just part of that.
Lee Kantor: [00:05:46] That’s the culture and the DNA of the organization.
TJ Lewis: [00:05:48] Absolutely right. Absolutely right. And it’s actually why it was so fruitful starting the program here. It was—we already had a good culture, so it wasn’t about it’s just the right thing to do, everyone’s like, what can we do to help?
Lee Kantor: [00:06:02] Right. How can we do more?
TJ Lewis: [00:06:03] Yeah, exactly. Exactly. And that’s been exciting, working with Roz and team to, to really come up with those things. They’ve been really instrumental. We started a couple of things. Like we have—we do an annual symposium that we hosted virtually, and that all came out of the pandemic. We probably wouldn’t have done that, but we had to.
Lee Kantor: [00:06:24] Right. It’s kind of forced your hand there, but it’s one of those things, where after the pandemic, you’re like, well, let’s keep doing that, why not?
TJ Lewis: [00:06:31] That’s right. And then, that turned into then we do quarterly spotlight events, where we have a lot of the women-owned businesses are getting involved. They’ll pitch to our our teams. And what we found was in addition to how we we come to conferences like this, we actually do virtual events, where they’re able to talk directly to our buyers internally in house, and they’ve loved it. So, again, it’s just—the innovation that we’ve been able to get creative around is really exciting.
Lee Kantor: [00:06:59] And it must be so rewarding, too.
TJ Lewis: [00:07:01] It is. It is.
Lee Kantor: [00:07:02] Now, how do you attack an event like this, conference? Like there are so many people, like you said, it’s like a reunion where these are the first time you’ve seen in person probably a lot of these folks. What’s the strategy for you personally? Are you speaking and are you on a panel or are you doing any speaking? Are you kind of just going into booths and introducing yourselves?
TJ Lewis: [00:07:21] Yeah. So. A lot of the work that we’ve done was kind of on the forefront. A lot of the companies that we’ve met with and we know that they’re here, we actually scheduled a lot of time to try to follow up, meet with them in person.
Lee Kantor: [00:07:34] Because it’s an efficient way to really do a lot of face-to-face conversations.
TJ Lewis: [00:07:38] That’s right. Because everything else we’ve been doing for the most part has been virtual. And so, we’re taking that—the time to have that human touch. There’s always ad hoc meetings. I’ve been in this industry a while, so knowing a lot of people, a lot of companies that it helps. And so, we really, as a team, have kind of—we did our homework upfront, came in with a game plan. We do certain engagements.
Lee Kantor: [00:07:59] So, that’s great advice for someone that is new to this industry and had to work a conference is you’d better be doing some upfront work and plan this out, or else, it’s overwhelming. There’s too many people and too many things happening if you just show up and think you’re going to just wing it.
TJ Lewis: [00:08:14] That’s right. That’s right. Now, you’re 100% right. The homework is done. You’re almost in execution mode when you get here, not like wandering around.
Lee Kantor: [00:08:20] Right. You better be because you’re invested so much to get here, so you might as well get the most out of it.
TJ Lewis: [00:08:24] Absolutely. So, it’s been really fun. And I have a few team members that it’s their first conference here. And seeing that and with the changes, and it’s interesting, because it’s almost you couldn’t say like, how is it going to be, because it was all new for all of us, again, than what it was three years ago.
Lee Kantor: [00:08:42] Now, for the folks that should be connecting with you in terms of supplier diversity, are there certain niches that you want to work with or any women business is fair game here?
TJ Lewis: [00:08:54] Yeah. Our approach is if you have a product or service that you believe can help our institution, we’re here to listen. And so, because sometimes, we have a focus in certain areas, but our foundation is being a disruptor, and sometimes, disruptors, they come from areas you’re not thinking about.
Lee Kantor: [00:09:13] You couldn’t have anticipated.
TJ Lewis: [00:09:15] Right. Exactly. So, we keep an open mind around. So, really, I’m interested in companies that I may have never think that, we’re a financial institution, this isn’t going to, sometimes, they’re the ones that
Lee Kantor: [00:09:28] Surprise you.
TJ Lewis: [00:09:29] … can surprise you and be that supplier you really want to engage with.
Lee Kantor: [00:09:33] Right.
TJ Lewis: [00:09:33] Yeah.
Lee Kantor: [00:09:33] So, now, if somebody wants to learn more about Ally, what’s the website?
TJ Lewis: [00:09:38] Yeah. So, our ally.com, you can—you’ll hit the supplier diversity page as well. But one of the things, if people are interested, they can actually send an email to us in supplierdiversity@ally.com.
Lee Kantor: [00:09:53] And that’s A-L-L-Y?.
TJ Lewis: [00:09:55] A-L-L-Y, yes. And our team, we respond to that. We do—when we look for suppliers to potentially pitch us, we do have like a one pager that we would send to those companies, and they can fill that out, and we can get information on them to learn more.
Lee Kantor: [00:10:15] And that just gets the ball rolling.
TJ Lewis: [00:10:16] Gets the ball rolling. And so, you send an email there and our team will respond.
Lee Kantor: [00:10:22] Alright. Well, TJ, thank you so much for sharing your story today. You’re doing important work and we appreciate you.
TJ Lewis: [00:10:26] Thank you. Thank you. Thank you for having me.
Lee Kantor: [00:10:28] Alright. This is Lee Kantor. We’re broadcasting live from WBENC National Conference 2022 inside the GWBC booth and we’ll be back in a few.
About WBENC
The Women’s Business Enterprise National Council (WBENC) is a leading non-profit organization dedicated to helping women-owned businesses thrive.
We believe diversity promotes innovation, opens doors, and creates partnerships that fuel the economy. That’s why we not only provide the most relied upon certification standard for women-owned businesses, but we also offer the tools to help them succeed.
About GWBC
The Greater Women’s Business Council (GWBC®) is at the forefront of redefining women business enterprises (WBEs). An increasing focus on supplier diversity means major corporations are viewing our WBEs as innovative, flexible and competitive solutions. The number of women-owned businesses is rising to reflect an increasingly diverse consumer base of women making a majority of buying decision for herself, her family and her business.
GWBC® has partnered with dozens of major companies who are committed to providing a sustainable foundation through our guiding principles to bring education, training and the standardization of national certification to women businesses in Georgia, North Carolina and South Carolina.
BRX Pro Tip: Asking the Money Question
BRX Pro Tip: Asking the Money Question
Stone Payton: [00:00:00] Welcome back to Business RadioX Pro Tips. Lee Kantor and Stone Payton here with you. Lee, let’s chat a little bit about asking the money question.
Lee Kantor: [00:00:10] Yeah. And I know this is something that is important to you and it is something that you are doing a great job with and that I’ve learned from over the years of working with you. But there is a secret, life hack tip, about how to ask that super difficult, uncomfortable question when it comes to sales. When you ask your prospect if they really do have the money to do the deal and it’s something that you do in a great way, in an elegant way, every single time, you just straight up ask them.
Lee Kantor: [00:00:44] I mean, it doesn’t have to be a big deal. It doesn’t require a big lead-up and some, you know, dramatic music playing. Just do it matter of factly. Simply ask them the money question. It’s not that difficult. Your service costs, what it costs. You shouldn’t be hiding from that fact. It shouldn’t be something that you sneak in. It is what it is.
Lee Kantor: [00:01:09] And if you feel weird about the price, that’s your own mental constraint. That’s you self-sabotaging yourself. I mean, if it requires you to sit in front of a mirror to practice quoting price until you can do it without stuttering or hedging, then do that. But your price is your price. This isn’t something that you should be quick to negotiate down on. This should be something that you should be proud of and feel confident that you’re providing such value that they’re getting a deal no matter what the price is.
Lee Kantor: [00:01:40] So, don’t make the money question into a big hairy deal. It is what it is. Just like your price is what it is. You shouldn’t have to be ducking this or hedging on this. It should just be spoken as a matter of factly as any other piece of information you have about your service or their business.
Stone Payton: [00:02:01] Well – and the other piece of this is communicating the answer to the money question either before or after and it can work both ways. But if you just communicate very clearly, very confidently, what the fee structure is, what the price is, and then you ask them if, you know, in their opinion, do they feel that that investment is something that they have, or how do you feel about that, or do you feel like you can afford it? Do you feel like you’ll get your return on that financial investment? If your every bit is candid with what the price is, then it makes perfect sense for you to be very candid and straightforward in asking the question.
Stone Payton: [00:02:38] The two go together and you should have a good, clear answer. You shouldn’t be making up the answer every time you’re talking. You should know what the answer is and you ought to be able to communicate it. There’s some science that says talk about a range. There are others that say, you know, tell them $2,348.17. And most cases I do the latter. And then, I’m pretty quick to follow that up, “You know, how do you feel about that? In your opinion, do you feel like that’s a good investment for what we’re describing?” Get that answer. Don’t leave that out there hanging because that energy does not serve in the conversation or the process at all.
Joshua Carnes with Lion Business Brokers
Joshua Carnes takes a measured and analytical approach to Mergers and Acquisitions, armed with data and research that helps business owners reach the right audience of potential buyers.
As President of Lion Business Brokers, Joshua brings clients an impressive background in marketing and consulting, with extensive training from the hands of a former CMO of Oracle. Years of high-level strategic marketing experience helped prepare Joshua to lead Lion Business Brokers and its successful team of Mergers and Acquisition Advisers.
Outside of the office, Joshua’s life centers on his three sons. He is actively involved with the local youth sports leagues and volunteer coaches his sons’ football and soccer teams. Joshua has been recognized by the U.S. House of Representatives for his work with at-risk youth.
Joshua is a member of the International Business Broker Association, M&A Source a Certified Business Broker by the North American Alliance of Business Brokers, and is recognized as an Industry Expert by Business Brokerage Press Inc. & Business Reference Guide.
Connect with Joshua on LinkedIn.
This transcript is machine transcribed by Sonix.
TRANSCRIPT
Intro: [00:00:07] Broadcasting live from the Business RadioX studios in Atlanta, Georgia. It’s time for Buy a Business Near Me. Brought to you by the Business Radio X Ambassador Program, helping business brokers sell more local businesses. Now here’s your host.
Stone Payton: [00:00:32] Welcome to another exciting and informative edition of Buy a Business Near Me. Stone Payton here with you this morning. You guys are in for such a treat today. Please join me in welcoming to the broadcast with Lion Business Brokers Mr. Josh Carnes. Good morning, sir.
Joshua Carnes: [00:00:51] Good morning, Stone. Thank you for having me.
Stone Payton: [00:00:53] Hey, it’s a delight to have you on the on the show, man. And I got a thousand questions. We won’t get to them all. But before we even really dive in very, very far, maybe if we could just get a little bit of an overview picture. Mission, purpose. What are what are you and your team really out there trying to do for folks?
Joshua Carnes: [00:01:15] Yeah. So the team at Lime Business Brokers, our goal is to strategically and confidentially help people sell their businesses. That’s probably the easiest way that I can put it. And you know, we’ve really created a team atmosphere where we try to strive to provide a higher level of service than most brokers out there. And we do that with some strategic marketing and consulting and and really just try to put client services back into the business brokering world.
Stone Payton: [00:01:44] So I get the sense you’ve answered that question before that was incredibly articulate and eloquent and so in the interest of clarity and so that we’re all operating kind of on the on the same definition, how would you define what a business broker really is and maybe even chat a little bit about, you know, when, when and why do I even need one?
Joshua Carnes: [00:02:09] Yeah. So business brokering is a lot like hiring a real estate agent to help sell your business, only completely different. And so that’s essentially what we do is we represent people looking to exit their business or to sell their business. And probably one of the hardest things about selling a business versus selling real estate is the confidentiality aspect of it, right? You know, when you’re going to sell a house, you put a sign up in the yard, everyone gets to drive by. You put on the Mlss. Everybody knows it’s that house for sale. In the business world, it’s not like that. You have to keep it confidential. So there’s no signs on the windows. No one ever knows it’s for sale. Generally, employees and everything like that don’t know if we’ve done our job well. Employees won’t even find out that the business is for sale until they’re meeting the new owner. Right. And so if your our services are really there for anyone looking to exit or sell. So at any point, if you’re considering that, whether it be now 12 months, 18, five, five years, whatever the timeline is, it’s really good to have a strategic partner on your side that knows how to navigate the exit world. And so. If in the near future and by near future, I mean in the next five years you’re considering exiting. That’s the time to start a conversation with the business broker.
Stone Payton: [00:03:37] Okay, well, that already surprises me a little bit, so that’s much further out than I would have anticipated. There just must be a lot of moving parts and a lot of ducks to get in a row, I guess, huh?
Joshua Carnes: [00:03:48] Well, there is so a lot of times people say, hey, I want to exit, but I don’t want to exit until I can walk away with X amount of money. Right. And so for us, we always believe the process starts with the number. And that number is what do you want to walk away with? And so sometimes it might take five years to get to that number. Right? Or sometimes you might be at that number right now, depending on the market. So if you if your business made money during COVID, right. We’re kind of coming out in this post COVID economy. If your business made money during during COVID, it’s probably gathering a 1 to 2% premium on what it would have gathered a couple of years ago. And so we might have been on a five year track, but all of a sudden you killed it during COVID. And so now we’re on a next year track, right? And so that’s why we say as soon as you’re considering it, engage with the professional, start getting either a business valuation or a broker opinion of value and find out where you’re at. And then you can make the strategic decisions necessary to get where you need to go. Right. And so for some businesses, that’s five years. Some businesses, they’re already on point and they’re ready to go.
Stone Payton: [00:05:01] So how do you I guess the right term is value price your business. And the reason I’m asking, I own 40% of a pretty successful organization, Lee. Lee and I will want to exit at some point. And and I know people I’ve been around them my whole life. Right. I so I know that Lee and I might fall into the trap of feeling like it’s worth a lot more than it really is. There’s got to be some science, some rigor, some discipline to this whole pricing or valuing of a business. Yeah.
Joshua Carnes: [00:05:35] Yeah. So and what’s interesting is so I would say valuing a business is a lot of science math and it’s a pretty straightforward formula. Right. But pricing a business is a little bit more art form and technique and knowing where the market is and things like that. Right? So they’re almost two different components. So but generally speaking, what you’re going to look at is cash flow and owner brings in and then we like to do is a little bit more strategic insight and saying, all right, what’s happening in this specific industry? But every industry kind of has a value range of, let’s just say 3 to 5 times cash flow, right? That’s a very generic. Some industries go for seven, eight, some industries go for one, two. But you can kind of throw a rule of thumb up there of 3 to 5 times cash flow, depending on how well you did. And then to to relate it back to the real estate aspect. Right. Some things are prettier than others. You know, some things have upgrades. Some things have long term contracts. Some things have other things. The prettier your business, the higher end of that multiple that you’re going to get, the dirtier your business, for lack of a better term, you know, the worse your books are, the more spotty your finances, things like that, the lower multiple you’re going to get, right? So it really is a range. It’s hard to put a hard number on it, especially when you’re on that pricing side. Excuse me.
Stone Payton: [00:07:05] Yeah.
Joshua Carnes: [00:07:06] When you’re on that pricing side, it’s hard to put a number out. We go for a range. When you’re doing a value for a bank loan or something like that, it’s completely different and more mathematical in nature.
Stone Payton: [00:07:16] So what’s the back story, man? How did you get into to this kind of work?
Joshua Carnes: [00:07:22] So for me personally, it’s actually a I find it to be a fairly funny story. I exited out of my own marketing consulting firm and did fairly well with that. I took some time off and I had a personal mentor coach in my life and I was going to go all in on a real estate business. And I was I was looking at what I was going to do, licensing, all of that. And I was going to become a real estate broker. And my my friend, who had been in my life for a long time, spoke into it, sat down and said, So you mean to tell me, Mr. Business owner, very successful person is going to go drive around a car with with a family and kids in the back of your car? That’s what you’re going to go do with the rest of your life. And I said, Oh, that’s a valid point. And he and he introduced me to someone who was already a business broker. And it was the introduction was, have you thought about doing something like that but for business? And that’s the story. As soon as I met with the guy and looked into the industry, I fell in love with it. And I’ve worked for a couple of companies and that line has come up on its own line is going on year seven and it has been an absolute blast and a joy going into helping business owners exit and get premium value for their business.
Stone Payton: [00:08:47] Well, I can tell that you enjoy it. It must be incredibly rewarding work, man. What are you. What do you enjoy the most about it?
Joshua Carnes: [00:08:59] So for me, it’s the nothing is ever the same. Right. And I love the challenge that our industry brings, the confidential nature of finding out who is going to be the next strategic buyer, who are we going to sell this business for? And it’s it’s pretty funny. It doesn’t matter if you have two manufacturing companies that are manufacturing the exact same product. The way that those deals get structured and done and how they get done is just going to be completely different. So for me, I enjoy the challenge of it and the fact that no deal is like the last deal I’ve been. I’m going on year ten here personally and especially with the changes in COVID and things like that. We’re walking in and I’m having meetings with guys who have been doing this for 20 and 30 years, and we’re seeing stuff where everyone’s looking around going, Wow, I haven’t really dealt with that before. How would we handle that? And so for me, that’s what I enjoy the most, is that strategic challenge. And I love the fact that I’ve got a team of role individuals, independent business brokers, but yet we’ve got guys, 20, 30 years, guys who have only been doing it two years, and we are able to come together and help each other and say, All right, what is the best move for this client? How do we advise them strategically? What’s the proper move? And let’s go forward with a plan of action. And having that strong team behind me is just something I love.
Stone Payton: [00:10:24] Yeah, well, I can hear it in your voice. I know. It translates to the airways. I also got to tell you, I personally find it particularly attractive, the prospect of working with someone who has personally had a successful exit that. Yeah, that’s that, that checks a big box for me and it probably would for my business partner Lee and I as well. So going back to this, making your business pretty, you know, Lee and I have talked about and we’re a little further out probably, but we’ve we’ve talked about, you know, if and how we might want to exit. And one thing that I think we would have to continue to get better and better at and you tell me if this can be a friction point or one of those conversations. We we think we’ve got to get this thing where it really doesn’t depend on Lee in stone. Right. To to be successful.
Joshua Carnes: [00:11:16] You know, it’s interesting, too, and you get a lot of people who have spent 20, 30 years building up a business and then they think, okay, I’m ready to exit. And they had their own strategic plan. But where they never really brought in a professional, they just said, I’m going to do it for 30 years. It’s going to do X, Y, Z, and at the 30 years they’ll just sell it. And then you walk in and you go, Yeah, but if we remove you, the business dies. And that’s really a bad position to be in. And so, you know, even down to the thing, like I took this into consideration for myself with line business brokers, you know, I could have started Khan’s business brokers or something like that. But if you remove the coins from Caan’s business brokers, it dies, right? So line business brokers can live on past me. And so that’s probably one of the basic entry points that we try to get in to. Business owners that are going to exit is make yourself not a linchpin of the business. And for a lot of business owners, that’s hard to stomach, right? I built it up.
Joshua Carnes: [00:12:20] It’s mine. I’ve done all of this. And you’re telling me that it has to run without me? Yeah, that’s. That’s going to be the most valuable business is I mean, what? We’re closing on a business later today, knock on wood, where the business owners live in Florida, and they fly in once a quarter to meet with their management team and to make sure everything’s good. Guess what? That business is selling for a premium. Why? Because a new owner only has to do is come in and write a check. And at the end of the day, if he makes no changes, he knows how much money he’s going to make. Now, every owner thinks that they’re going to do a better or every buyer things are going to do it better. And that’s the great thing about it. But yes, the best business is are ones where the owners have strategic insight but yet could easily be replaced at any moment and the business could continue on or do even better.
Stone Payton: [00:13:12] Yeah, so we talked a little bit about I guess what I would call a prep window. It might be as much as five years or more, but once you get to that point of putting the business on the market, what what does that timeline look like? I mean, can it go pretty quick? Does it often take a year or two or is it just really depend on case by case?
Joshua Carnes: [00:13:35] Yeah. So it’s honestly a little bit of case by case, but more case by case with the broker that you choose to hire. Right. Theoretically speaking, we can put a business up online and market it within 24 hours, but that’s not going to be what’s best for the business coming up. So every business broker has their own process. And and we like to feel this. Our process is one of the. Things that separates us out from our competition. So our onboarding is somewhere in that 30 to 45 day window because we actually take the time to do a deep, in-depth analysis on every business that we bring on. And we create marketing material specific to that business. And the standard terminology for this stuff is called a CVR or Confidential Business Review or a SIM, a confidential information memorandum. And these documents are anywhere from 30 to 60 to 120 page documents, depending on the complexity of the business where we do a deep dive and really create a sales brochure for potential buyers to come in and buy this business. Now we do a couple little extra things where we also do what we call executive summaries, which are a little like two page highlights that are confidential. So you don’t get to know the business, you just know the numbers and the industry. We do some marketing videos around it and things like that, so our process does take a little bit longer to get you out to market from the time that you get there. But we feel the strategic prep in the beginning is what’s going to allow you to get maximum value in the end. So, you know, 32 to 45 days, I think is a good, good judgment for that.
Stone Payton: [00:15:16] So it sounds like you really do have a strong process for marketing someone’s business. How about how about your own sales in marketing? Like how do you get new business for four? How does the whole sales and marketing thing work for a business like yours?
Joshua Carnes: [00:15:34] So you know, what’s funny is I think that this is probably my biggest complaint about coming into this industry. You know, I used to be and I laugh because when I introduce people, I tell them I go, look, I’m an old sales schmuck, right? I’m an old marketing guy. I know marketing. And this industry is so archaic and so old for for lack of a better term, that unfortunately it’s still direct mail and cold calls. Wow. Probably one of the hardest things about coming into our industry is the lifecycle of a deal is 12 to 18 months. Right. So you need to be financially in a situation where you can go 12 to 18 months without a paycheck if you’re trying to come into this industry from from scratch. And not everyone can do that. But the other thing is, you know, the reality is there’s no market for people looking to exit their business. Right. There’s no there’s no checkboxes for. Yes, I want to exit my business in 6 to 12 months. That’s not a question that people ask to get on Facebook. Right. Right. So there’s no data list that you can just buy people looking to exit. It’s all right time, right place. And so it’s unfortunately for our industry, it’s just a consistent drumbeat of direct mail and getting in front of people. And then once they’re ready to start a conversation or have a conversation, hopefully they’re holding your post card instead of your competitors and at least start the conversation with you.
Stone Payton: [00:17:05] You mentioned a little earlier in the conversation a really important person in your life, a mentor that kind of helped you reframe where you were going to take the next chapter. Have I think I already know the answer to this. I’m going to ask it anyway. Have you had an opportunity to, to be a mentor to to others as as as things unfold for you?
Joshua Carnes: [00:17:29] I would hope so. Yeah. So, you know, thankfully we actually have brought on a couple of guys onto the team in the last couple of years who are brand new to the industry and they’ve been successful and I’ve been able to support them and do that and it’s really interesting. So some people when they they look at turnover in the industry, it can be pretty high because of that 12 to 18 month time. And, you know, knock on wood, we have seven brokers in the state of Texas. They work kind of all throughout the southeast. But we have seven brokers that are that are all spread out. And in all this time, we’ve yet to have any turnover. I, I say knock on wood, but we’ve made everyone successful. And it’s because I believe I take a personal interest in their success. And I want to see these guys succeed. And I feel that if I’ve hired someone, that I have a responsibility for them to be successful, to feed their family and do those things. And so it’s a little bit of a unique approach, but it’s worked for us. And so we have two brokers that have been doing this for less than two years, but they’ve already successfully closed at least two or three deals. They’re out there, they’re running, and I believe that they will have long term successful futures in this industry, whether it be with us or anyone else. And I would hopefully like to think that it was our base foundation that put them there to say, go be successful in a great industry.
Stone Payton: [00:19:02] That’s got to feel so good to know that you contributed to that. That’s got to be a real high in and of itself. Man.
Joshua Carnes: [00:19:09] No, I appreciate. And it’s for me, it’s it is it’s one of those joys of of this industry has been great for me personally. It’s a lot. It’s given me the freedom to coach my sons and youth football and do all of that type of stuff. Right. And so we really have a family oriented type of business where, you know, the other day I got a call and someone he was like, hey, I have to go babysit my grandkids for the next two days, but yet I’ve got this meeting and I was like, Not a problem. I’ll hop on the call. Right? And so we’ve really created that atmosphere of Family First and just do what you need to do and everyone will be successful. And let’s move on.
Stone Payton: [00:19:49] And I know in our work at the Business Radio Network, we Lee and I and our studio partners in other parts of the country, there are just some what would you call misconceptions, preconceived notions, assumptions, things. And some of them that we that we almost know we’re going to run into. We’re talking about to a prospective client on the on the client side of our work. My instincts are they’re the same may be true for you that there are some misconceptions and patterns of misconceptions, things that you’ve got to educate, inform, reframe for people. Is that accurate or are there some of those kind of things in your world?
Joshua Carnes: [00:20:29] Yeah. And in fact, I would say two of the largest ones are around our relation to real estate. Right. And so and it’s a problem because even I describe our industry is a lot like real estate but different, right. And so a lot of people think that a commercial real estate broker and a business broker are the same thing. And look, it is so far from the truth. We are two different worlds. I mean, even to the point where we don’t do commercial real estate, if there’s commercial real estate involved, we bring in a commercial real estate broker because that’s their specialty. So one of the biggest misconceptions is a, either that we do real estate or they can go to their real estate broker and that they cross translate and that that one’s pretty hard to say. Hey, look, these are just two very, very different industries and you need to specialize in both. And then the other one is kind of around timeline. I spoke to a gentleman the other day and he was like, Well, I need you to sell my business in four months. Average transaction time in our industry is 9 to 12, sometimes 18 months, like it can go out that long. This is not a quick, fast industry. And so sometimes setting sellers expectations of you’re going to walk on a journey with me for the next year. Just, you know, and we tell people to keep that in mind. When you’re hiring a business broker, they’re offering and their services are one thing, but you actually have to go work with this person for the next year. That is a big commitment. So personality should be something that people consider when they’re hiring a business broker. Can I allow this person into the inner depths of my business and can I have this person tell me what to do? Send me updated financials, talk to this guy. We’re going to hop on the phone with this guy and really do that and be intimate business wise for a year. And so timeline and industry are two of the biggest misconceptions in our in our that we run into.
Stone Payton: [00:22:37] Well and I don’t think it’s hyperbole after hearing you talk to you actually use the word intimate there’s this is a much more relationship oriented relationship dependent process then then I think some of us might have thought, you know, I guess my frame for it has been that this is more of a transactional thing. There’s a lot of relationship dynamics going going on here and there.
Joshua Carnes: [00:23:08] There is, especially when you get up into larger deals. So like businesses with enterprise value of north of 10 million, if the buyer pool at that level is so small that the reality is so, you know, we’re working with a manufacturing company that’s probably enterprise value, somewhere around 18 million. There’s there’s probably only about 10 to 15 people nationally that are going to take that business on. And so if we internally, as business brokers don’t have relationships with those buyers, we’re never going to get that business sold. And so there is a lot of relationship there and putting you know, it’s kind of nice. We’ve gotten some good feedback from private equity firms and family money firms that say, hey, we enjoy doing business with you because of the professionalism, right? But yeah, the relationship side is really big on both the seller side and ensuring that you trust us enough to get the best deal for you. But also from a buyer standpoint of knowing who the players are in the certain industries that actually have the money to buy your business. It’s a very that side is very relational as well.
Stone Payton: [00:24:19] So I was just thinking, as you as you were describing, that Lee and I are very much on the same page. We work incredibly well together. He has skills and knowledge and a perspective that I don’t. I sometimes can bring some things to the table and I’ve got to believe, like if we were sitting down with you, you might have to be like a couples therapist too at some point, because now we’re talking about the balance of our lives, right, if we’re wanting to. So do you ever find yourself like being part therapist? Like if you’re working with a with partners.
Joshua Carnes: [00:24:52] Especially with partners or you know, unfortunately, a lot of some of our best deals are partners that are splitting up. And so there’s a lot of the the counselor side that comes into play there. But also one of the questions that we ask all of our sellers, okay, so we we put a check for a couple of million dollars in your pocket. What’s the plan afterwards? Have you thought about what retirement looks like? What are you going to do with that money? Because you can’t just take $1,000,000 and go to Belize, right? Right. The federal government will come in and have a field day with you. So, you know, have you strategically thought about that? And and also to win it, it’s pretty, pretty funny. But almost always, when we go through this process, we’re eight, nine months down the road, we’ve got a buyer, they’ve made an offer. And then we tell the seller, all right, take a couple of days and consider it and think about it and make sure it’s right. Because, again, nothing is quick in this process, how emotional they become with. I’m really going to sell my business for this. Maybe it’s more, maybe it’s less, whatever it is. And so we really do have to do that piece of, hey, this is where we’re at. This is what’s going on. Yes, it’s your baby and you’re going to sell your baby. But we can do it in, you know, really walking them through that piece. So it does happen with partners or even with just regular, regular people who spent 20, 30 years building up a business. In that moment, they realize they’re about to let it go.
Stone Payton: [00:26:26] So. Yeah. All right. So before we wrap, let’s leave. If we could. Let’s leave buyers and sellers alike with some pro tips. Number one pro tip is, you know, reach out to Josh and his team. But, you know, maybe some things they can begin thinking about, maybe some reading some some little tweaks they can begin to start focusing on in their business. But if we could, let’s leave buyers and sellers with a few little pro tips. I guess you’d call them.
Joshua Carnes: [00:26:52] Yeah. So, you know, buyers are are unique in nature. If you’re a buyer, make relationships with as many business brokers as you can. And I know that’s not advantageous for me personally, but the reality is there’s no buyer representation in this industry. There’s no national MLRS system, anything like that. So if you’re a buyer, you need to be out there taking business brokers to launch and making relationships with them so that you can get on our list of notifications once a business comes available that you’re looking for. So that’s the pro tip. If you’re a buyer, if you’re a seller, clean up your financials. Make sure that your financials for the last three years or the next three years are nice and clean and tight. And what I mean by that is, look, some buyer or some business owners use their business as their personal piggy bank. Right. We have seen everything from a business owner that every day takes himself out to lunch at a nice lunch and spends 30 to $40 on a lunch on just himself. And he puts it on the business credit card to cell phones, to family trips, to seen everything to girlfriends who are getting leased vehicles. Right. The reality is, is the very first thing that a buyer is going to look at is your financials. So clean them up, tighten them up, make sure that everything is nice, neat and ready to go for buyers. And for those buyers that might have to go get bank financing. Right. A bank might have to look at your financials. So the cleaner your financials are, the easier it is to price your business, the easier it is to ask for a premium for your business and the easier it is to convince buyers to buy your business.
Stone Payton: [00:28:37] All right. So if someone would like to connect with you, what’s the best way for them to do that?
Joshua Carnes: [00:28:44] Yes. So you can call the team at one 800 5253542. I’ll answer that line directly if no one’s there, or you can get a hold of anyone on the team or you can visit us online at ion business brokers dot com that’s in business brokers dot com.
Stone Payton: [00:29:02] Well Josh Cairns with Lyon Business Brokers, it has been an absolute delight having you on the show. Thank you. Thank you for what you do. We appreciate the work. And we’re going to continue to follow your story with your permission as well. But this has been a real pleasure, man.
Joshua Carnes: [00:29:18] Hey, I appreciate you guys having us all. And thank you so much for inviting me out.
Stone Payton: [00:29:22] All right. This is Stone Payton for our guest today, Josh Carnes with Lyon Business Brokers and everyone here at the business radio family saying we’ll see you next time on Buy a Business Near Me.
BRX Pro Tip: Don’t be Afraid to Make Mistakes
BRX Pro Tip: Don’t be Afraid to Make Mistakes
Stone Payton: [00:00:00] And we are back with Business RadioX Pro Tips. Stone Payton and Lee Kantor here with you. Lee, sometimes, you’re having to fight a little bit of human nature here, but it’s important, I think, that you don’t be afraid to make mistakes.
Lee Kantor: [00:00:15] Yeah. I think a lot of times people’s fear of making a mistake holds them back. And it doesn’t matter what they’re doing whether you’re starting a new career and you’re a young person or you’re a startup and you have an idea and you want to kind of preplan it out a little too much. I think you’re much better served if you just start taking action, learning and iterating.
Lee Kantor: [00:00:39] I think that that formula of taking some action, learning what happened because of the action, and then tweaking whatever you learn from taking that action is much better than the folks that are just planning the plan to plan before they act. You don’t learn anything by doing nothing and hoping something is going to work out. You don’t really learn anything by just whiteboarding things over and over and playing out every hypothetical scenario without real data. You have to take some chances.
Lee Kantor: [00:01:11] Your action may work and may not work as you planned. But if you don’t take action, you’re not going to know for sure. And if you take an action and it doesn’t work out like you planned, you will have learned something. You know now something that doesn’t work. And, plus, you’re going to get market information to tell you, you know what, this part worked a little bit. This part didn’t work at all. So you are going to learn something. You’re going to be taught something from taking that action. So in my opinion, it is much better to err on the side of action, learn and iterate.
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