[ 00:00:00,450 ]Let’s go!

 

[ 00:00:18,150 ]Welcome into Behind the Brand Podcast. I’m your host, Adam Hayes. To my right is my co-host, Bob Payton. And to our left today is our guest, Brad Scoffin. Welcome to the show. Welcome. Thank you. Thanks for having me. Absolutely. All the way from Michigan. Yeah, it’s far north of Michigan, right? The winter’s coming. That’s what they say. You drove a snowplow down just to get here. no we’re in michigan we don’t need that yeah did you write your snow machine down yeah no just Just a normal vehicle. Just a normal vehicle. Don’t need chains. Don’t need nothing. Back when I lived in California, driving up in the snow, it’s like, ‘Stop, put chains on.’ Who needs that? Well, thanks for coming.

 

[ 00:01:03,850 ]Obviously, you know, Brad and I know each other and I’ll let you tell, you know, obviously what you do, but I’ve met Brad. We said, ‘I think.’ pre-coveted yeah I’ve been friends ever since and uh ended up joining uh Abb as company from a brokerage standpoint and so we thought we’d have you come down and have a talk. Well, appreciate you having me. You bet. Well, tell us about ABB, the origin story. So the origin story. My partner, his name is Larry Baumgart, was a solo practitioner, and I lost my job, got let go from a sales position. and was looking, and somebody says, you need to meet Larry. You guys have really hit it off. And that was a little over 10 years ago. We formed our business.

 

[ 00:01:51,030 ]Actually, coming up, I guess, on our 10-year anniversary on February 29, 2016. So we’re elite babies. Oh, that’s cool. So we’re only a couple years. We only had a couple anniversaries. And from there, we’ve gone from two employees to now 10. A couple down here in Indiana and the rest are in Michigan. Well, I have one that kind of does business with us out in Southern California. And yeah, we’re looking to add another person come January. Maybe adding somebody in Ohio here in the coming months. I saw you just welcomed aboard a new one in Fort Wayne as well. Yeah. Dr. Mark Hagar. All right. Yeah. I haven’t even met him yet. He’s so new. I saw his picture in the email. Yeah. Good. You got it. That’s good.

 

[ 00:02:38,040 ]That’s a good sign. Yeah so, abb, uh, story of that, we started off as my partner used to do business valuation, so okay, old school, that he was, it’s like he wanted to an a name, so he’s advanced business appraisers, uh, so he’d be high up on you know the alphabetical order list, right in case somebody was using the phone who does that right, um and then uh, we got away from that because we don’t, we do business valuations as a service in a value add, but that’s not what we want to be known for, so we change the name at that point in time, it was advanced business advisors, correct, and yeah, to keep the same uh initials, but it’s like, didn’t know who we were, so then we changed to advanced business brokers, and then we went through rebranding, uh, and logo, and changed that to abb, so that’s where we’re at now is abb.

 

[ 00:03:29,700 ]So we’re a boutique business brokerage. We help people sell their business when they want to retire. My running joke is I always tell people I get to tell them their baby’s ugly. Yes. and we get it. They’ve worked hard and built a business. Uh, but we come in and tell them what the market will probably pay for their business and it’s usually vastly different than what they’d like to get. Right. I want to sell everybody for 10 20 million, but they’re worth a fraction. Yes, yeah. Yeah. So what’s going on in the marketplace right now? Because I think, you know. The expectation of the silver tsunami and, you know, people wanting to exit their business in mass succession. Is that a reality or is it still coming, or where are we at on that timeline?

 

[ 00:04:13,100 ]Definitely coming, um, and it will be, probably, ongoing. The stats out of the Exit Planning Institute is that in the next 10 years, 73 percent of all privately held businesses will transfer transfer to somebody else. Um, that’s majority of those are the baby boomers, that’s the silver tsunami. Um, how those and how successful they’ll be at it is vastly different than what’s in people’s minds. So in that same survey that Exit Planning Institute did, the vast majority of people want to transfer it to a family member or to their employees. And then the second biggest category is sell. Then there’s a category of other. And what’s other? Well, I want to die at my job. It’s a great exit strategy for the person. In flames. It works 100% of the time.

 

[ 00:04:59,650 ]It does. But it stinks for the employees. It stinks for family members. It stinks for clients, vendors. It’s not a good strategy. That’s how people want to leave. 50% internal, 30% sell, and then this other. The reality of it right now is only about 20%. Are transferring internal only about 10% are selling on the open market and then about 40% a little more than that are actually just closing down and liquidating. So turning the lights off. So people are losing jobs when they could have solved. They just don’t plan enough in advance. And then the other numbers are still those people that want to die at their job. Or they’re realizing they can’t sell for the price they thought, so they have to work another three to five years.

 

[ 00:05:43,900 ]But we are seeing more and more businesses entering the market, and the challenge is is that they’re all over the map. The information coming out from online about what’s going on and what price you can get and multiples are expanding, meaning that they think value is going up. And that’s true of companies that have a good management team and have predictable and good, clean books. Profit. Yeah. Diversified client base. Yeah. And that’s the challenge is that most smaller businesses that are doing less than 10. Million those aren’t the facts. Yes, right. And so they’re seeing their multiples compress versus you know, somebody who’s got a 50 million dollar company and a great c-suite and a team that’s growing the business that’s going to command a higher value. Yeah, and that was the debate.

 

[ 00:06:34,030 ]You know, I’ve had this with a couple of different people. I think I even called you after our friend Randall Clo. You know, we question the Silver Tsunami number. It’s used a lot for marketing purposes, sell books, sell online training, all those kind of things. But when you start chopping down the numbers and percentages, the question is, will there really be? More sellable. Businesses out of that tsunami or is it just more that are literally just going to close— you know, and that’s, you know, it’s a debate. But you know, everybody volume—I think we’ve seen a little uptick in volume at least from first half of this year, but um, yeah, you just kind of wonder if it what it’ll look like yeah so so I

 

[ 00:07:19,620 ]this is just my personal feeling I think every business is sellable, but what it’s going to sell for and how it’s going to sell you know because it could be drastically no seller wants to ever do it financing of their business yes even if it’s just a small percentage they want out completely just give me my cash and I want to move to Florida well highly Unlikely you might have to finance some of it, make the deal work, because think from the buyer’s perspective, they just need to lessen that risk. So I need that seller to be motivated to answer the phone. Uh, and if they still have some skin in the game, even if it’s 10 or 20 percent, then there’s even from the seller’s perspective, I think they’d want to control their tax situation as well.

 

[ 00:07:57,380 ]And that could help offset the tax situation by having an annuity. Because again, so the value of a business is driven by two things: its ability to make money and what are the risks. Yeah. If you ask any business owner, They don’t see any risk in the business until they have to sell or finance it and they don’t want to take any risk. And it’s like, ‘Okay, put that hat back on when you’re thinking of how the buyer is looking at your business.’ But that’s it. They just want out. They just want their money. Their attorney may be telling them, ‘Hey, anything you sell or finance, just count it as gone.’ So then it’s total upside yeah even though yeah so is and it’s an emotional logic that gets in the way of of that business logic because you’re absolutely right structuring a deal um whether it’s seller financing or other structured payments can actually lead to huge taxes yes yeah um

 

[ 00:08:49,180 ]and that’s the only one that we see on a regular basis is if the business owns the real estate and that’s one that is easier it’s hey i’ll sell my business but then i’ll lease back the property and they get an income stream but they’re not getting that huge tax bill on both things right that’s easier for them to to do but this anything else wow they just want the cash up front yeah So talk a little bit about, I mean, you’ve been doing this for a decade. So talk about the psychology of sellers. Be careful. Be gentle. You know this. Well, I do, but it’s interesting. And anything, you know, business owners and working with them, you know, you’re a consultant. You’re their friend. You’re their coach. Advisor. Therapist.

 

[ 00:09:37,640 ]Yeah, the therapist. And it truly is. It is a very much. An emotional time for them to go through because it is their baby— they’ve spent more time at their business and with their employees than they did with their kids growing up. So there’s a huge emotional tie. If you think about it, in selling a house that you’ve lived in for 20 years, there’s no ties that don’t take that. It’s just the house that you built, or that you’re great-grandfather built, and everybody was born there. You’ve held every day now. How hard is it to give up that? If you’ve got a business where you put all your blood, sweat, and tears into, there’s that emotional touch. Just to let go, right? And then there’s also the psychology of just— I want to be validated for what I did.

 

[ 00:10:25,320 ]So I’ve worked and given everything to the community and giving that bigger number means I did a good job. And again, it’s just disconnected from truly how would you value this if you were buying it from yourself today? Um and so you’ve got to realize that being able to sell it and keeping it around— whether it’s to an employee, to your kids, or to an outside third party— should be validation enough. But yeah, they want a big number and they want a big number because they hear that their buddy sold or that their their friends sold for this. You know, it’s like, ‘Hey, the fish was this big, right? Even though it was a bluegill.’ Right. Yeah, you hear that at the locker room talk or the country club evaluation, as they call it.

 

[ 00:11:15,390 ]Yeah. Because there’s no way to check. Business sales are not recorded publicly. House sales so you don’t have as accurate information to be able to compare yeah and they i mean they also uh well you just said i just thought now it’s going in my head that’s awful i’ll think of it later keep going yeah what what are the the biggest roadblocks you most commonly run into as far as getting people to want to utilize our service or as far as helping them get to the settling table or closing the business? Let’s start with the first one. Okay. You know, our biggest roadblock really is people don’t know we exist. It’s a relatively new industry. And I’ve run into people all the time that my business isn’t sellable.

 

[ 00:12:00,160 ]And it’s like everything sellable, even if you’re just selling a job or an owner operated business or investable business, they just sold the different markets and different channels. So some people just don’t know. Plus, this is something they’re going to do once in their lifetime. So they don’t know what they don’t know. And some think, ‘Oh, I can just do this myself.’ And I’m happy if somebody finds a path. They can do it. Sure. But the challenge is, can you do the selling of the business and all the things that you’ll have to go through and continue to run your business that’s already taking 60 hours a week of your time? Yeah. Because the best sales happen when the business is running on all cylinders and in full growth mode.

 

[ 00:12:42,250 ]Yeah. Otherwise, if you get a business that’s the owner checks out and it’s starting to deteriorate, they call it in our world retrading. At the end, once you start getting to the closing table, whoever’s buying you is now getting scared because numbers are going different. Yeah, the trailing 12 months is now lower than it’s been. And so the only way to do that is to change the deal, whether it’s price, structure, or both. And so yeah, getting um sellers to understand where the value of what we bring, because I’ll be honest with you, we get paid—uh— the most money of the whole team. It is a team approach, whether there’s a banker involved and an attorney, or a CPA and your wealth advisor, but we only get paid for getting you across the finish line.

 

[ 00:13:31,240 ]And so, you know, helping them, you know, really set that in motion. And again, looking at it through the buyer’s perspective and keeping it moving is the challenge. And the sellers, you know, the others, when they’re trying to do it themselves, assuming they even have the time, which usually they don’t, but if they did, it usually ends up being a serial. One after the other. I’ve got a buddy that I know I’ll sell it to. And then they burn six months figuring out at the end that That doesn’t happen. And then they do it again and they do it again. Right, so you’re doing everything in serial versus in parallel, and it really— you know— one, they end up getting frustrated, and two, they just keep doing it.

 

[ 00:14:14,790 ]So that’s something that I think we bring to the table is we’re— I call it— we go in parallel. We give them, you know, more than one choice, hopefully, back to sellability. But you know, instead of just keep pushing it out and pushing it out, it actually compresses the time. Yeah. So, yeah, because most sellers they’ve got a timeline that they’re on, they want to be retired, and they want to buy that house, summer that’s warmer, buy their boat or whatever it is. Yeah. We had one— the excellent manufacturing business— want to sell to an employee. So we had a valuation done. Fast forward two. years later it finally blew up because the uh employee couldn’t get enough financing together that’s the other constraint yeah and so the seller turns to us and says okay i’m done trying to sell it to my employee

 

[ 00:15:05,270 ]have this done uh you know how long is it going to take and it is a process it’s six months to two years depending on the size and scope of the business and he says well no i need this done in the next two months because i’m out of here right and it’s like well it doesn’t work that way a year ago right in parallel right um because creating that buying pool and and our job really isn’t just about uh our worst clients they should Say are the ones that say, ‘I want them the fastest for the most money’ because they’re making decisions on a different, different business plan. The best clients are the ones that say, ‘I want my employees taken care of,’ ‘I want the clients taken care of,’ ‘I want the impact in the community to still be there and ‘I want to get a fair price’ and ‘I want everybody to get, you know, what they deserve.’ Um, but yeah, it’s when it’s just about money bad decisions happen.

 

[ 00:15:58,010 ]So then, the next obstacle, and so they agree, and they’re like, ‘Hey, we want to work with you. Get us across the finish line. Then, what’s the next big, biggest hurdle that you?’ So there are several. I can’t say that there’s just one, because every deal is different. But there will be hurdles and roadblocks. I had a garage door business that. The guy was trying to sell it on his own. I call him and says, ‘Hey, you know we’re at an impasse. We’re just not going to get across the finish line.’ Um, and I came in and we had it actually closed in two weeks time, because they were both just speaking slightly different dialects of the same language.

 

[ 00:16:34,050 ]So sometimes it’s just not understanding— some of the terminology or the deal structure— and you’re arguing about things that really you’re not arguing; you’re agreeing with, but you don’t know that you’re agreeing. And then some of it, you know, we had one deal three days before close, the seller pulled out. Um, because he didn’t want to be—don’t— didn’t want to be again. His sense of purpose. He didn’t know what he wanted to do next. Right. So that’s probably the the biggest roadblock. They don’t even know there is. If they don’t know what they’re going to do post close, whether it’s retire, whether it’s go do something philanthropic, whether it’s play golf all the time or garden. If they don’t know what they’re going to do next, they’ll self-sabotage the deal.

 

[ 00:17:16,849 ]And that’s what happened with this guy. His sense of purpose was always showing up to this place, and he wasn’t ready to not have a place to go, and he hadn’t planned for that. We try to avoid that as much as possible. I can’t always predict that when that comes up. So that’s always a big roadblock. And then, again, sometimes we see people. It’s oh, that went too quickly. I should have asked more. It’s like, no, it just happens. Let’s let’s move on with it. We had one deal down in Texas. The guy wanted $18 million for his company. We did the valuation work. He was worth about $22,000, $23,000. Good. Put them on the market. We got offers in that mid-20 range. Wasn’t good enough.

 

[ 00:18:06,190 ]I need more. So we found some other fits, that actually there’s different synergies that led to higher value. And we found two buyers that were willing to pay around $30 million. Still not high enough. And we call that valuation creep. Wow. Where all of a sudden, well, if I can get that, then I can get this. Um and yeah, not knowing you know where your exit point is and just what you can become, it’s okay if you didn’t get the ultimate top dollar. Yeah, um, you know, having a deal that gets across the finish line, so there’s all sorts of reasons that the number, because of all the companies brought to market, only 20 to 30 percent actually sell. Some of it’s because they’re overpriced.

 

[ 00:18:45,700 ]Some of it’s because they check out in the middle and the business is deteriorating or just slowing down. And so it’s not going to get the price they originally thought. And then there can be downturns or changes in structure. Correct. Maybe a key employee. And that’s, again, where some of the biggest challenges, from a buyer’s perspective, is the owner’s too big a part of the business or the books are a mess. And if something changes that mid-cycle, it may just be. Hey, I’m done, I’m out. Because if you lose a key employee or if you have family members working, are they going to stick around? And as a buyer goes through and does that due diligence, the comfort level has to go up.

 

[ 00:19:26,670 ]And that’s where, again, it comes back to setting the expectations for that fair point, because. I had somebody say, ‘Okay, I think I get how your business works. It’s like selling your house, and the person buying it is going to move in with you for six months. Right. And then you move out. Months later. So you have to live together for a while. We call it a transition period. And if one side or the other feels slighted, how do you think that works? Not well.’ If you feel like you got low-balled as a seller, are you going to be helpful? If you feel, as a buyer, that you overpaid, you’re going to want a lot more from that seller. And it’s got to be where you both feel good.

 

[ 00:20:11,070 ]Or, I had a mentor early in life said that in negotiations, if you both feel like you gave up a little too much, but you can live with it. That’s a win. That’s the middle point where you should be. Um, so it’s tough. Yeah. Yeah. What’s the number one thing you see kind of going into 26? Know just in terms of the market, you know again, owners and sellers a lot of noise. Yeah, okay. So there’s noise on all sorts of fronts. I mean, AI is exploding for all of us. Getting offers to buy my, you know, XYZ-type business. I don’t own an XYZ-type business. So that AI is hallucinating a little bit. AI is out there. We’re seeing right now, private equity leading with phone calls and calling up a company and saying, ‘I’ll give you $20 million for your company.

 

[ 00:20:58,880 ]Sign this LOI.’ Uh, and and all that. And they have no intent of buying it for 20 million. They just want to get it locked down where they’re exclusive with it so they’re not actually out shopping the market. And then they go in and do due diligence and say, ‘Oh, not really. That’s your fault.’ We’ll give you $200,000. We’ll give you $12 million. You thought you were getting $20. And that changes the dynamic. I’ve got a client that sends me those emails every time he gets them. From PE? It’s a lot. Yeah. Yeah. And so there’s noise of that, there’s noise in just the marketplace, from sellers thinking that again go on the internet and you do some research and now you know that you should be worth $8 million.

 

[ 00:21:40,220 ]Well, no, there’s a lot of reasons. That’s not your business. Every business is different. So what are the risk factors and things like that? And just knowing what you really would get. And it also is buyer dependent. If it’s an individual financial buyer versus a strategic versus private. Equity versus family office, they’ll all see value slightly differently, and what is it you want your legacy to be? If it’s just the big pile of cash we have those—um, or is it? We sold a business, small manufacturing business worth a couple million bucks. And we had an offer from private equity, an investment group, and an individual financial buyer. And the individual financial buyer was the son she never had. She was 82 years old, sharp as a tag, great person—um.

 

[ 00:22:27,300 ]And the financial buyers are typically—uh— slightly lower their total price because it’s very dependent upon what a bank will lend them. And yeah, it was a great match. She’d go into the plant probably once a quarter just to catch up with people. But yeah, it was super happy. And that was the best fit for her. Now, others are looking for maybe a strategic buyer to come in. And take this idea that they’ve put together and take it to the next level. And that synergy is that rocket fuel. And that’s a better fit. There’s no right or wrong to that. Interesting. Yeah. So a lot of noise, a lot of just being unsolicited. The other side of it, we’re going to see because of silver tsunami, a lot of businesses come to market that have done no preparation.

 

[ 00:23:23,470 ]Again, they’ve done the research, they think they’re worth 8 million, they’re going to get offers at a million, and think they’re being lowballed. And that might even be very generous. And, and they don’t have a frame of reference, right? Yeah, and that’s where this back to the tsunami of you know how many of those businesses are totally owner-dependent, right? I mean, to an extent, that you know they don’t think about it, but then when you start doing the digging, look at the financials, how things work, and then you start asking questions that owner-dependency is a huge factor, and I think there’s a bunch of them, especially in that older bunch, that’s going to be a challenge. Everybody wants it to be simple. Simple math is great. So everybody wants to know what their multiple is.

 

[ 00:24:07,480 ]So multiple is M equals P divided by E. Price divided by earnings gives you a multiple. Okay. Problem is, is that’s defined by the price you got, not by the price you’re going to get. And so, unfortunately, if we go back to middle school or high school, algebra says that P should equal M times E. But it doesn’t work that way because you don’t know what P is going to be. P is what somebody is willing to pay. And so they want math to be easy that way. And it just doesn’t work that way. And think of it this way. If it were that way, people would buy houses. I like using house because people can understand that. They buy houses by offering a price.

 

[ 00:24:52,390 ]Yet if you want to get a benchmark of what the neighborhood’s like when you look on Zillow, this neighborhood is selling for an average of $200 a square foot. But you don’t offer— I’ll give you $205 a square foot. You offer. You know, for her thousand for that house, if you take two houses that look identical, have the same square footage, you know they’re in a neighborhood, and are they going to sell for the exact same price? Maybe. By the way, you walk into one and it’s got an all new kitchen, brand new floors, updated windows. You walk into the other one and it smells of, you know, pets. You know, there’s black mold on the wall. The kitchen’s from 1970. Okay, so with a business, it’s the same way.

 

[ 00:25:38,860 ]What’s what’s the inner workings, you know, are the employees, you know, are they well trained and are they cross-trained? Uh, do you have employees that the workforce is, you know, the average age is 62 versus 45? Right. Is the equipment past usable life or that I’m going to have this huge capital expenditures? Yeah. So those are the factors that people don’t look in. And again, to the buyer, it’s just all sorts of risk and other things. And there’s always going to be something down the road. So when you buy something, there’s going to be that unforeseen. You know, something happens. Interesting, yeah. So how’d you get to Abbey? What were you doing before that? Before that, so I grew up in financial services. Right out of college.

 

[ 00:26:26,860 ]I worked for Morgan Stanley for 10 years and did a lot of equity benefits because I liked working. employee benefit world. So I did stock purchase plans and 401k plans, pension plans, and had a buddy recruit me away to work in health and welfare. Side, so doing health insurance. And that’s where I was until the company I was at went from an outside sales force to an inside one and my position was eliminated. And that’s what led me to starting to look for somebody said, ‘Hey, you need to meet Larry,’ and it was a great fit. Larry was doing this, and it was. I’ve always been entrepreneurial. I mean, my start— if you want to know the whole journey. Back in middle school, I had a paper route growing up.

 

[ 00:27:16,560 ]I used to babysit a lot. I used to walk to middle school and get. I grew up in Southern California, so you could walk the whole day long. And I’d stop at the local pharmacy and buy a bag of Jolly Ranchers. I’d sell candy. It was allowed. Yeah. And I, you know, I, you know, you know, triple or quadruple my money every day that I did that. Yeah. Whoa. That’s pretty cool. So. When I got laid off, I was looking and being courted by different financial services, payroll, insurance companies, financial services companies for a role. And somebody said, ‘You need to meet Larry.’ And it was definitely a leap of faith because in this world. Starting from zero. Yeah, you’re starting from zero and you starve your first year, starve less your second year.

 

[ 00:28:09,870 ]Then you make a really good living thereafter. But we don’t get paid in our world. Until the end of the process. So, and again, it is a process. For selling a company, it’s usually six months to two years. Larger it is, the shorter so six to eight months; smaller ones are, you know, eight to twelve months, and some really small ones can take a couple years if they’re selling a job because somebody has to want find the buyer. Yeah. They have to want to, well, and I get people all the time that just say, ‘Well, you know, this is a great living.’ It’s like, ‘Well, I’ll tell you what, I’ll hire you today for $500,000. You want to come work for me?

 

[ 00:28:47,590 ]Oh, by the way, to get this job, you got to pay me 10 million up front. Right. Okay. Wait a minute. That changes the dynamic.’ and so, uh, the smaller ones it’s just finding that right buyer that wants to buy a job at that point in time for that price and so you do starve at first but once you have that pipeline then, and with the silver tsunami and just people moving on and selling jobs, I’m not worried about the next 10 years. And by then I’m probably, we’re not going to worry about it. I’m not necessarily retiring, but I’m definitely slowing down at that point. So what do you think about the youngins, I’ll call it, that are coming out, you know, ETA, entrepreneurship through acquisition?

 

[ 00:29:32,630 ]Do you find, do you touch that? Because I’ve run into them in the last year. And I think, so far, a majority are very unrealistic about the realities of buying a business. That’s just my opinion, but I’m older. Maybe they’ll be successful and it’ll be fantastic, but I do worry. That again, it’s a bit of the hype and marketing that has sucked him into that mindset that I can just buy a plumbing business and I’ll set it up on my couch and take the phone calls, you know, or whatever. And it just really doesn’t work that way. So I’m just curious your thoughts. It is a great question. And we’re seeing that’s another aspect of noise out there. It reminds me of back in the 80s of ‘get rich quick’ by building a real estate empire.

 

[ 00:30:16,760 ]And they’d have all these workshops. Charles Givens. Yeah. And yet, you know, the only person that really made a lot of money with the people promoting that. ETA’s probably got a lot of similar aspects to that. I think ETA is a great way to go. So I’ve done work for score and SBDC and why start a business when you can buy an existing one but you got to be realistic about it and right now we’re seeing so many ads online, buy a business that’s generating $250,000 of free cash for, you know, no money out of your pocket and do it in 90 days. And it’s like. Okay. Sign me up for 10 of those.

 

[ 00:30:56,400 ]Because, first of all, when you buy a business, you’re not going to be getting all that cash flow because you’ve got a big mortgage or loan to pay off, right? So that’s going to eat away that cash. And you’ve got to pay yourself— a reasonable salary, but then he’s got to reinvest it. And then the other struggle I have with a lot of these ETA approaches is they think exactly that I’m going to buy a great business and sit back and just let it. Come to me, yeah. Come to me, uh. And there is no such thing as a passively run business. You can build it into passive income as you move yourself up out of the business, but you’re still going to have to invest time and effort to get it to where you need it to be.

 

[ 00:31:35,630 ]There is going to be some kind of transition. So, because if it was truly just cash flowing— lots of money— with no effort, probably not selling it. Why would I yeah? Why would I sell it? Right? Um… or my kids will want that because they can. They can collect a lifetime annuity. Yeah. So there is always work. Now, ETA is definitely here to stay, but the challenges and the education— because I’m helping build a program up in Kalamazoo on that. Yeah, great program. Coming to reality of what work is needed and it’s just not easy street. I have a friend that’s been been doing his search for a little over a year now. and he’s again made four or five offers.

 

[ 00:32:17,990 ]Some of them he gets laughed out, because the owner says, ‘Oh, you’re not even close.’ Right it’s like, ‘Well, this is what the bank can support. What it is reasonable with the amount of risk.’ Back to the hurdles, right? Yeah. And so it’s just right place, right time, and it’s not going to instantly happen. So somebody that is going through the process has to realize, you know, what they’re buying, have realistic expectations, and realize it is a long process. Our sales cycle for helping somebody is two to four years. So I said to sell a business is six months to two years, but the more they can start planning in advance— if somebody wants to think about retiring, if they wait till the end, the only curb appeal you’re going to do is very little.

 

[ 00:33:02,720 ]You can’t just slap a new coat of paint on it. If you want curb appeal, you’ve got to clean up your books. That takes two or three years. You’ve got to structure your management team. So those kinds of things. And there’s great ways to do that. I don’t do it, but we know consultants that will, right? I think we do. Yeah. That if you have a three to five-year runway, then you can make lots of changes. And you should really run your business as if you were going to exit from the start. Hey, today, if you want to retire tomorrow, great. You run it like you’re going to. But you may work another five years and then change that vision. But if you’ve always got it running so it can be sold.

 

[ 00:33:47,410 ]You’ll be running it more efficiently. You’ll have more time. You’ll make more money. It’s just exponentially good. Yeah, back to your comment before about what they’re going to do next. I find it interesting that, and I’ve got one seller in particular that’s already sold. And I have him speak to current sellers because his whole world drastically changed, right? I mean, it’s a life-changing event to sell a business. But he didn’t quite know, you know, he kind of knew what he might do, but not really. And now he’s doing something, I’ll call it totally off the ranch, I’ll call it, that he would have never envisioned. If he had not let go right, right, and so it’s really neat to see,

 

[ 00:34:30,460 ]you know, someone actually make the exit and then end up doing something you know he went from what I’ll call a trade-based business to commercial real estate investment to a certain extent, and it, you know, he said, ‘I would have never fathomed I could do that and he said, ‘I worry that I held on too long, that I could have sold it before and done this quicker.’ And so you got that whole dynamic as well. Yeah. Okay, we do see people that hold on way too long and then they expect to get the price they could have got four years ago. Right— it’s like, well, now it’s worth this, and here’s what’s just the reality. Yeah, valuation again, another myth. It’s it— worth what somebody’s willing to pay for today, for your business.

 

[ 00:35:10,240 ]Um, it doesn’t matter what the numbers say. It’s what somebody’s willing to pay. Correct. Um, and sometimes once they pay more than what you ever thought they would. But usually, it’s the other way. The opposite. There’s just too much risk. We had one, and a great story. It was a plastics manufacturer. Dad was 86. didn’t want to sell because he loved showing up. He didn’t do anything but uh. Son said, ‘Dad, I want to retire. I’m 65. I want to be able to do things with my wife while we still can, and um, and so Dad says, ‘Well, I guess then it’s time to sell. Uh, but you know, again, he had unrealistic expectations. He wanted a very lofty number. He says, ‘Oh, but if you sell it for this, you’ll make your money back.

 

[ 00:35:58,230 ]It’s like nobody invests, 10 million dollars, just to get the money back. Right? And nobody invests 10 million to make 10 right. Um, that there’s just too much that way. Yeah, um, and so but it was funny he wanted that number because that’s the number he felt he should get and was more about that validation. He didn’t Need that. He actually ended up with about half of what his number was. And that was more than enough than he ever needed. Happy once he came to grips with why he was selling what he was doing, what he could do with that, he still gets together with Frank on our team up in Muskegon. They get together once a quarter for coffee and just catch up. He’s introduced us to a few other people, yeah.

 

[ 00:36:45,520 ]So, uh-uh. You know. Psychology once you get past some of the psychological barriers is huge. Way bigger than I’d imagined. To be frank, so yeah. And then fatigue— that you were talking about— is very real. Seller fatigue, buyer fatigue, and that’s sometimes half our battle. Because once something stops, that momentum, then fear sets in. Whether it’s the buyer or the seller, oh no— they’re doing something different. Something’s happening. And it— it could just be, um, yeah, a lawyer went on vacation for one week, and it backlogged everything. Three weeks. Um. And that ripple effect is, you know, the bank needs something changed. Then an attorney has to change something. Then, all of a sudden, what should take, you know, 30 to 60 days, takes, you know, three to six months. Right.

 

[ 00:37:34,680 ]And. Or things like the SBA shutting down for. Oh, yeah. Months right, yeah, a couple of our deals that’ll now close at the probably one will close in December and one in January, but these should have been done in September, right man. Change gears. What do you like to do for fun? Fun, what’s that? Yeah, oh yeah, I know you do, yeah, obviously you have some hobbies always, you know, so you gotta have some outlet, yeah. Um, I do enjoy gardening. So I have a really nice garden at the house. My wife and I love doing home projects. So we just went through and gutted our whole first floor. And we do some of the work, but hired out a lot of that this time around. Smart. Yep, yep.

 

[ 00:38:21,840 ]So what’s in a garden? Well, just about everything. I’ve got asparagus. I’ve got beets. I’ve got eight different kinds of tomatoes. Well, not now. They’re gone. bell peppers and some jalapenos and some eggplant. Let’s see what else is in the three different kinds of cucumbers: acorn squash, summer squash, zucchini, spaghetti squash. I’m trying to remember what else is there. I love fresh vegetables. Can any stuff that that’s what’s going to eat through all of it or no? I can the beets because I love those on my salad. Um and can some pickle some the cucumbers. Uh, the rest of the stuff we eat through. Uh, we did we canned some of the tomatoes and made some tomato sauce and some salsa. But yeah, the rest of the stuff we eat through or eat what we can.

 

[ 00:39:16,319 ]Nice. Yeah. And you’ve got a big barn, I hear. Yeah. I’m envious. I’ve seen pictures of it. It’s like, I don’t know, how big is it? Project was a 30 by 50 pole building. Okay. Um, that then has a 50 by 11 foot. It’s a big man cave because it’s just as much hers as mine still. Um, yeah. So it’s got four glass garage doors. So um and we’ve got uh almost a full kitchen out there. The only thing it doesn’t have is hot water, but you can heat that up on the stove. There’s a stove, a refrigerator, a bathroom out there, pool table, you know, but we love to entertain. Our church youth group comes out every Sunday and uses it for youth ministry.

 

[ 00:40:02,540 ]And then we throw parties and bring people together and, you know, whatever we can do. Some business outings there, some bourbon and scotch tastings. Yeah, there we go. There we go. That’s another hobby. That’s actually cheaper hobby than golf. I bet. Yeah. You’re probably correct. It’s funny because it can be metered. Yeah. Well, people say, ‘Oh, you spent, you know, whether it’s a hundred dollars, a hundred. 50 or 200 on a bottle. And it’s like, yeah, it’s going to last me for two years. I’m going to sip on it and things like that.’ You can spend that on one round of golf and it’s gone. Along with a lot of golf balls. Amazon, dollar a bowl. We tested some last weekend. They’re okay; they’re good enough. Right, it’s like they’re not perfect, but for a buck. Thank you. worth trying, yeah, yeah. And the idea is to get better, so you don’t lose them. Exactly. I’m a hack. My son’s the golfer. Yeah. Yeah. He’s a single-digit index. I’m lucky to shoot bogey golf. Yeah. Well, I don’t play enough. If I’m under 100, I’m happy. Yeah. So that’s how it works. Thanks for coming on. Yeah, thanks. Great having you. Appreciate it. Appreciate you guys having me. You bet. Absolutely.