014 | Reconsideration Of Exit Strategy, With David Barnett

Today’s interview is reconsideration of exit strategy. Today, I’m talking with a private transaction advisor and former expert business broker and strategist David Banner about the rules on how to consider exit. In a business deal that every entrepreneur needs to understand follow. So welcome, David.  It’s great to be on the show.  So David de is a well known transaction advisor and has a significant experience in sales of small and medium sized businesses. And he has graciously consented to this interview, to share his extensive knowledge and experience and wisdom to help us stay on track in this area of entry and exit strategies, so that every entrepreneur can understand these rules when they are expanding their business and making the exits.  Alright, so without wasting any further time, let’s get started. So, David, I will run through a few questions about your experiences, and your background and education so that the audience can understand where you’re coming from. So and after that, we’ll dive into the core questions about exit strategies.

Alright, so let’s get started. And could you tell us a little bit about your background education and experience?  transaction advisor or broker of small and medium sized businesses? 

So, you know, I’ve always been interested in business. And when I was a child and a teenager growing up, I was always looking for opportunities to do business to make money for myself, right. And so being from the east coast of Canada, we get a lot of snow. So I remember I did newspaper routes, and I mowed lawns until I saved enough money to buy a snowblower at a yard sale. And I developed a clientele so every time we had a snowstorm, I would go through my neighborhood, and I had all these people that were paying me $20 this was back in the 80s. So $20 was like good money to clean their driveway. And I got up to seven or eight so it started to be impressive for me know $160 every time it snowed And if it was really bad, I sometimes could charge a little more. And I’d have the time, of course, because school would be canceled that day, right?  And so as I got through high school, I realized I wanted to be involved in business. And so I went to business school, I attended Bishop’s University in southern Quebec. And it took a few years, but I began to realize that they weren’t actually teaching me how to be a businessman in business school. They were teaching me how to be a middle manager in these big enterprises.  And that’s not where my heart was. My heart was in, you know, understanding and working with the businesses that we see when we drive on the street or on the highway. And when I got out of school, I was very fortunate. It was the the end of the 90s and I got out of university and I got a job with the yellow pages. When the yellow pages were still a really important and relevant media for business. Back in those days, if you took plumber into Google, you would get a plumber in California. Yeah, they had they hadn’t figured out the local searching yet. And so if if you came home from work and you saw water, you know leaking from your walls, you grab that phone book and you opened it up under p for plumber, and you called someone and so for seven years, I went around, and I met with the owners and managers of these small and medium sized businesses. And I asked them, you know, when the phone rings, who would you like it to be? Yeah. And I learned about their business models. And I learned about how they made money and what kind of clientele they were looking for. And I learned how to best show them how my product could help them grow. And that love of working with small businesses that it propelled me in my entire career. Eventually, of course, I realized the Yellow Pages weren’t going to be you know, that significant down the road with the internet and all that kind of thing. And so I left and I started a business and I ended up selling that business and It was the first time I was ever involved in a business sale. It was a home service business. So we were working with homeowners. And I didn’t like those clients. I didn’t like those customers as much as I enjoyed spending time with business owners. And so I went looking for another opportunity. And I set up a new company as a brokerage of commercial debt. So I was helping people get business loans and lines of credit, what we call factoring facilities, which is when we sell our accounts receivable for cash. And I was working with these small businesses for a couple of years. And then we hit that financial crisis in 2008 2009. And that’s when I had to make a change. And one of the things that I noticed when I was a finance broker is that there was a real underserved market in where I live here in New Brunswick on the east coast of Canada, for people to help people buy and sell businesses. I remember, back in those days, you can buy a home with 5% down payment. And it was very common if you wanted to buy a house that you would give yourself 10 days to arrange financing and this kind of thing. And I remember once I got a phone call from a bank, and they said, David, we’ve just met this lovely couple, they just immigrated to Canada from Korea, and they have a contract to buy a convenience store. And it’s on the paperwork for buying a house. And it says that they have 10 days to get 95% financing is just like a house. And that kind of thing isn’t how businesses are financed. It’s not how it works. But there they were working with someone who had no idea how to sell a business. They were just trying to get their hands on that commission check. And so I made the decision at that time to pivot myself into the world of business brokerage. I joined up with an international franchise brand because they gave me the opportunity to do some training. And I spent two and a half years doing studies. He’s in that domain. I had to travel and spend a week in Ottawa, a week in Atlanta and a week down in Orlando. And I became the first person in New Brunswick to obtain my certification as a business intermediary. And over the next 36 months, I ran my business brokerage. And in three years, I sold 36 businesses. And by most measures, I was one of the most successful Business Brokers ever to be around here. And it was terrible. It was one of the worst businesses I’ve ever been involved in. it was awful. It was exciting. Because I love to solve problems. And, you know, I want to help people, oh, good business. People want to help people. They want to solve someone’s problem right now. And this is how we provide value. And so I was able to work with people try to figure out these difficult problems of how we get the buyer who’s in one place to fit with the seller who’s in a different place. And what was awful about it
The business model. And sometimes I would work with a seller for two years before they agreed to hire me to sell their business. And it can sometimes take years to sell. The one of the first businesses I listed when I started was a fried chicken franchise restaurant. And it was the last business I sold when I decided to close my office. So for four years, I worked on that file before I earned any money. And there were three different periods, some of them as long as nine months without any businesses being sold, and so no big money coming in. And I couldn’t do it. I have two children at the time they were younger, four or five years old, and I couldn’t even make a commitment to budget money every month for their education plan. And so as a father, I was feeling let I wasn’t performing. I wasn’t doing what I was supposed to do. While I was helping people achieve their goals, I was helping them have success, but it wasn’t working for me. Yeah. And that’s the next thing we need out of a business, we have to deliver value. But it’s got to be the vehicle for what we need, you know, personally, for sure, though. So I left I left the industry. I took a position with a bank, and I was traveling among the three maritime provinces, visiting clients. And my phone kept ringing, I think. And it was people that had been given my name. They said, David, I’ve found a business I want to buy or David, I’m trying to sell my business and I was told you’re the guy. And I would just say to these people, no, I’m sorry, I can’t help you. And until one day, Bob called me and Bob had been one of the buyers that I met back when I own my office. And Bob said, Dave, I found a business that I want to buy. And my accountant and my lawyer, keep telling me what kind A deal I need to make, but neither of them seems to be able to tell me how to get there. I need your help. And I just said to Bobby said, Look, I have a job. I’m committed during the daytime, I’m not a broker anymore. If you want to hire me, I’m going to have to charge you like a consultant and I can’t meet you during business hours. And without missing a beat. He just said great Saturday at nine. said, All right, and this was how I ended up being pulled back into the world of helping people buy and sell businesses. And over the next two years, my consulting clientele grew to the point that I was earning more money from consulting than I was from the bank.

So are you doing this full- time now?

And then with that came the books that I’ve written and the YouTube channel which has been an important part of how I promote myself. So the YouTube channel now goes back five years with one video every week, and it’s all driven from questions that people have sent in about buying and selling businesses. And so it’s become this big resource of information. And it, of course, allows new people to find me and, and come to me. And that’s basically what I do now. So I still help people buy and sell businesses, but I do it as a consultant, and I’m not earning commissions anymore, I’m just charging people for the help I give them in much the same way that a lawyer or an accountant does, you know, you go to them, you know, with a legal issue or a tax thing, and they do it and they bill you and you get paid. So that’s what happens with me now. That’s great. And are you operating worldwide? Or is there a particular area, a country that you focus on? I work with people internationally, and I sort of limit myself to what I guess we could refer to as the Anglosphere, you know, so English speaking countries or former British colonies. Were there, some commonality to the systems and rules. So, you know, if somebody has an, because the way the deals are structured tends to be the same everywhere, but people have different names for things. So, you know, there’s a publicly available registry of debts that have been registered by banks in Canada, and it’s called the PPSA, and they’ve got the same thing. And Singapore just has a different name.

Alright, so now let’s get into the core of the interview, which is about exit strategies. So, tell us a little bit about how a person should go about thinking, you know, when they want to exit their business? What are some of the rules they should consider?

And it’s exactly the same as when you think about your own business and your customers. Maybe I can illustrate really clearly with with a story. About a lady that had this little up, it was like a snack counter with like muffins and cookies and coffee. And she hired me because she wanted to sell her business. And the very first step in the process was always to do an evaluation. So I came back to her after and I said, look, I think I can probably sell your business for about $130,000. And she said, Oh, no, I need a quarter million.  said, Oh, well, then it’s easy. All you have to do is institute a policy where no one’s allowed to buy one cup of coffee. It’s a two cup minimum. And she said, Well, no, most of the customers don’t want two cups of coffee. They only want one. And two, which I asked her. What on earth do their desires have to do with it? Yeah. And then it started, she started to realize, Oh, right. This is what we’re doing. When you decide to sell a business. It’s just like selling anything else. You’re taking That business, which is a very tough thing to get your arms around businesses is not a thing. It’s a system. It’s a bunch of people and inventory and tools and machines working together to create a cash flow that supports the owner and their family. And when you sell that the price that someone’s going to want to pay is dependent upon, number one, how risky they think the cash flow is. And number two, do they believe that they can carry it on? Right? So because what they’re buying is that income for themselves. And so we have to think about the business like a piece of inventory in a shop, what is going to make it attractive, right? And so if somebody believes that the you know, the, the object in the store is attractive, but the price is way too high, they’re not going to buy it, that all the pieces have to fit together. And so it’s not about what the seller wants or needs. It’s about what the buyer is willing to do based on what the buyer needs. And the one of the big reasons why there’s a sticking point here is that often the people who create businesses are entrepreneurs. So they have a vision for the future. And they say, How am I going to make that happen, and they work on it, and they finally build this business. And then they want to sell it for whatever motivation. The buyer, however, they’re not an entrepreneur necessarily. They’re a person that wants to own a business. And they’re thinking, if I have to hand over this money, what do I get in return? See, the buyer actually has an investment mentality. And so they’re looking at what are the risks of this cash flow? And what am I going to have to pay to obtain it, and they’re not going to make that move, unless they think that there’s some sort of profit in it for them. The other will, the other category of buyers are a little bit different. They’re strategic buyers. And then they’re motivated a little bit differently. They’re looking for ways that their enterprise can become better through acquiring something else. But again, they’re always going to compare that acquisition with doing it themselves, or other things that they might do with the money, which might even mean doing something completely different. Right. So now, when you mentioned the buyers, are not entrepreneurs themselves, do they generally? Do they generally expect the original or the seller of the business to continue running the business? Or do they actually take over and run the business themselves? So it depends At what point in the marketplace you’re at and what industry you’re in? So there’s always the, you know, the thing that gives the business value is what we call goodwill. It’s it’s the the, the activity of the clientele. And the question always comes down to who who owns a goodwill? Is it the business, or is that the owner, right. And so you could be in an industry, for example, like an architecture firm, where the owner has prestige and fame and has won awards and is a has a certain level of fame. And people are coming to that firm, because they want to do business with that person. So in this instance, it’s the person that owns the goodwill, if I’m going to buy that firm, I need to tie the deal to the presence of that person, until people can get to know me, and know that I’m just as good. You know, the seller has endorsed me as being a capable person who can serve the clients, etc. If it’s a business, where it really is the business that owns the goodwill, so think about a shop on the corner, you know, a convenience store, most of the people may have met the owner, but they don’t really know who the owner is, and they don’t really care, it’s just between their house and the bus stop. That’s the place I stopped to buy, you know, my candy and snacks, right. And so in that instance, they’re going to be a transition period where the seller is going to teach the buyer how to run the business. But it’s probably not going to be that long. Because the seller, the buyer doesn’t require the presence of the seller in bigger enterprises. You know, sometimes it’s part of the deal. In big deals or the mid market, when we get into the millions of dollars of sales. Sometimes the buyer doesn’t buy the entire organization, sometimes they buy 80% of it, the seller stays on for a small stake, they get to convert part of what they created into cash for their own investments, but they keep their foot in the boat so to speak, so they can participate in whatever the future brings.

All right. So that’s fascinating. I’ve never been involved in transaction, but I’ve helped many startups actually make exits. And, you know, from the technology point of view, so it’s very fascinating to understand how this all works. Now, what happens if, if a person or a business seller does not prepare well, and they rush into getting their business?

Well, you know, it’s obviously going to affect the value. Remember, I said that the value of the businesses is a function of the cash flow. That’s what gives us the price. But whether or not someone’s willing to buy depends on whether they think they can carry on the cash flow under their stewardship. And so a disorganized business has systems, they just exist within the head of the owner, right. And if they can be documented, if we can have a playbook of rules, standard operating procedures, this kind of thing. So that we can show a buyer, this is how we run the business. I’ll tell you a quick story. And it will help to illustrate this. I had a restaurant for sale. And it was quite a good restaurant, they did about 1.4 million in sales. And there were about 40 people that work there. A lot of them were part timers, students and people like this, because they were very busy on the weekends. And you know, lot of people on the weekends and the rest of the week, they didn’t need so many. And the buyer and seller, were having a meeting in my office, and the buyer asked the seller, how do I know the employees are going to stay? Because I need the employees to run this business? Yeah. And the seller just looked at him and said, How about this, I guarantee you the 12 months from now all of them will have quit. And the buyer just was horrified at the statement. And the seller explained, you have big turnover in our business. It’s normal for our industry. And that’s why I’ve created the system that I use to help me find the qualified candidates, and then train them quickly so they can start adding to the team. And so he explained why he ran certain ads in certain places why he in the bottom of the ad, he asked people to call a phone number. He said, You know, I get emails all the time respond to that app, but the ad doesn’t say the email, it says to call. This is the way I know that people have actually read it. Right. And when people call, I don’t talk to them at all I do is make an appointment, and half of them don’t show up to the appointment, which is great, because this is how I sorted out who’s going to show up for work. Yeah, right. And then he talked about his training. And so when the buyer understood that the risk of losing employees was managed by a system created by the seller, they all of a sudden were much more comfortable with the prospect that some of these employees might depart. And that they would be able to learn the system in order to carry on the same way that the seller had,

And you mentioned cash flow and evaluation. So I guess that’s very important for this type of transaction. Now, what is the recommended duration of the lifetime of the business so that they have enough evidence of a cash flow?

Well, you know, what it I’ve had people who have needed to sell because of some sort of urgent pressing personal issue that have had very young businesses, and they’ve still managed to find someone who’s willing to buy basically, it doesn’t necessarily come down to price be quite often comes down to terms, the most difficult thing, the most difficult problem that the buyer is going to have is finding the money to buy the business, right. And so if you think about anyone who sells anything expensive, they understand this. So if you go down to the car dealer, they’ve got automobiles there for sale for $40,000. Yeah, and they know that most people don’t have $40,000 in the bank. Yeah. And they’re prepared. They’ve got forms there from the bank, and they’ve got forms there for leasing. So that when the customer comes in, they say, look, we know you have a problem with the money, because you don’t have it. Also, this is what we can do, there’s a payment, you can you can have every two weeks if you wish, and you can buy the car, right? It’s the same thing with selling a business, it is extremely difficult to get financing to buy a business, we can get financing to buy things. Yeah, so if a business has tangible assets, equipment, vehicles, furniture, you know, these things we can get financing for. But if we have a lot of profit and very little in the way of tangible stuff, then the financing is not going to be available. And we have to turn to the seller to be able to provide that in in the world of real estate financing is not a problem, because the banks are more than happy to give a mortgage to buy a piece of real estate, because they know it holds its value and it can be resold. But if I buy a pizzeria that has great earnings because of an amazing product. And I think that I know better than the seller and I changed the sauce. Yeah, I can destroy the business in a week. Yeah, there’s nothing for the bank to take. They can’t repossess anything. So when when we have a business that’s, you know, not selling the gut reaction of most business owners is, is to say, let’s cut the price. And that’s not the thing to do. The thing to do is to communicate a willingness to finance a greater portion of the transaction. So you advertise, you know, business for sale, seller is willing to finance because this is the problem that the buyers face. Whether or not it’s a business they like or they want to buy. That’s their decision. But if they decide they want it, the hurdle will be how do I then get the money?

Now, I’m going back to the question, just to clarify, is there a way to sell the business even before they have the cash flow coming in? So let’s say to start up, it’s something that they anticipate, you know, if this product does work, it will, you know, it will gain traction and get cash flow? So is it does that happen as well? Or do you have to have some, you know, evidence of positive cash flow coming in for a number of years before that business becomes an attractive sale?

Well, let me answer that question by giving you an analogy. Because I find that people, people are able to think these things a little bit more clearly when they think about, you know, other industries. So, if I went and bought a dump truck, and a backhoe and parked them in my driveway, what would you say that I had?

You have a vehicle and dump truck and some equipment.

There are no, that’s not what I have, what I have is a pre revenue foundation company. Okay, so I bought some tools to go and dig foundations, but I don’t have any customers or sales yet. Sure, how the next day, I decided it was a really poorly planned idea. And I didn’t want to do it anymore. And I wanted to sell it, I have an option. Because I’ve got a truck and a backhoe that I can sell. Yeah, those things have value. If we’re talking about a business like a software business, then the question is, what is it that we have here to sell? because no one’s going to buy the cash flow? And it comes down to that code? Or, you know, or the features of this product? And is there anybody else out there? Who would like to have this? And what are they willing to give us for it? Because, you know, in the world of software and technology, you know, some people might say, yeah, we’d like to have that it might enhance our other products. Yeah. And maybe if it would take us a year to develop this, there’s a certain value, obviously to us acquiring you is we can save time. Other people in the development space, they’re going to say, you know what, if I didn’t write the code, I don’t trust it. It doesn’t matter what the price is. I don’t want it inside my thing. Yeah. And so and that’s the problem is coming, finding someone who’s going to see value in it based on what it’s doing. Because it’s not an investment. If it’s not producing a cash flow.

Okay. Do you do you actually deal with the software exit as well?

I’ll tell you, I’ll tell you the the the space that is becoming more and more apparent for me and my clientele, is what I will call online small businesses. Oh, you know, when you think about technology, and you think you think about SAS companies, and people trying to develop these tools that are infinitely scalable. There’s also something online, which is a real old fashioned small business. So somebody has a product or a service online. And they’re advertising themselves online, and they’re creating sales. And they’ve got 1,2,3,4 employees that are working to fulfill the service or the product to the customer. And they’re making money, and they’re running a business, instead of having a you know, a place down at the shopping center. They’re doing everything online. And those businesses are starting to come up for sale. The scene never makes sense to sell a good business ever. Yeah. Because the risk involved in small businesses so great, that the multiples are very low. And most sellers, when they find out what their businesses like they’re going to sell for they just go Geez, I’ll just keep it for the next three years, and I’ll have the same money and I’ll still own it. Businesses go up for sale for five big reasons. Number one is burnout and fatigue. Yeah, number two is divorce, followed by poor health, the need to relocate and retirement. And so if you think about it, if I have a good business that I’m running online, I can run it from my laptop in Jamaica, how far, right? Thinking of Canadians, right? I can run it, I can run it down south. And I’m earning, you know, 100 and 150 grand for myself, why would I ever want to give that up. And it’s always a pressing personal concern, that pushes someone to need to give it up. And that’s when they’re willing to make a deal, and they’re willing to sell it. And I’m starting to see that more and more people who figured out how to make money online 10-15 years ago, and now things are happening to them, that are that are forcing them to have to turn that page, the world of the technology startup, the SAS stuff, that’s Silicon Valley stuff, it’s really a speculative space, where people are looking for that home run one in a million shot for that new version that you know, the next Shopify or Facebook or whatever it is, and, and really the people who are going to be buying into those things, they’re taking a special collective angle. Like if you look at the venture capitalists that operate in that space, they’re making, you know, several dozen investments, knowing that most of them will go anywhere, hoping that one of them is going to be a home run. And that’s not typically the space that you find a true business buyer. Yeah. But your business buyer is they hate their boss. Yeah. Or they own a business already that they want to grow through acquisition. They’re looking to put their money into something that’s going to pay them back.

I know a lot about the Silicon Valley transactions and how they operate. So you’re right on that, you know, they’re not actually buying any value. They’re just, you know, speculating or just putting a lot of bets and hoping one will pay off. All right. And now let’s talk a little bit about the buyer side. So if a buyer is interested in buying a business, where do they go? How I mean, do they contact you? Or do they Is there a listing service where they can go and look up businesses to by.

so the world of businesses for sale is a secret world, because if people become aware that businesses for sale, the business can be damaged, right? employees, customers, suppliers, they can all react in different bad ways if they find out businesses for sale. So if you go online, there’s a couple of big listing websites where businesses are listed for sale. And to go back to that example I gave you about the restaurant that was for sale. When I advertise that restaurant, it said, family friendly restaurant located in southern New Brunswick with revenues of 1.3 million, and cash flow to the owner of 120 grand a year. Right. And that’s all it said. And so somebody who is looking for a business that’s interested in a restaurant might make an inquiry, and it would come to the broker or directly to the seller. And they would say, I’m interested in this business, I want to know more. And usually at that point, they’re asked to sign a nondisclosure agreement, and then they’re given for the information, they can start that conversation. The point where I come in to helping buyers is, you know, number one, it’s with training. And number two is with consulting. So sometimes I’ll get clients who found a business that they want to buy, and they think it’s a good deal. But they don’t trust themselves, to move forward with it, because they’re afraid that there’s something they’re not seeing. And so they’ll come to me and they’ll say, look, can you look at this with me, and I’ll engage with that file, and I’ll examine it, and I’ll come back with different things that they should be looking at, I’ll do a ballpark evaluation, show them if it’s overpriced, or not, etc. The other side of things is the training. So, you know, there’s all those resources I have on YouTube. And then there’s some books that I’ve written. But then I’ve got an online course, which is nine and a half hours, it’s based on a full day seminar that I’ve been doing now for almost 10 years, on how you actually do the transaction and how you evaluate the business, finance the business, put the deal together. And then further to that, if people want more help, I’ve got a group coaching program that I do. And there’s actually members all over the world in that program. And we work on finding businesses that are not yet for sale. Because here’s the thing, 80% of small businesses sell without any kind of intermediary at all. Which means that there’s a connection of some kind between the buyer and the seller. It’s only usually when sellers are unsuccessful finding a buyer on their own, that they’re even going to go to some kind of broker, and it’s going to end up on a website. So if you go to those listing websites, you’re actually looking at the leftovers, I think, which makes sense, because in the brokerage space brokers Commission’s tend to be from 10 to 12%. Yeah, real professional Business Brokers. Sometimes businesses like corner stores are sold by real estate agents and people like that. But for real business, those are the commission rates. And so a seller doesn’t want to write that check. Yeah, if they can find a way to sell that business without the intermediary, they’re likely going to explore that. And so that’s the kind of work I do with people in the group coaching program.

All right, going back to the exit strategy. So what are some of the rules that entrepreneurs should follow to make sure their exit strategy is not a death trap to themselves?

Yeah, again, they need to think about the buyer. So what is the buyer going to want to buy. And here are some of the problems that I see very frequently. And there’s actually a giveaway on my website, 12 things to do before you consider selling your business. And here’s a couple of them. Number one, creating a Frankenstein. So I very often seen a business where it’s a gas station towing company that is existing in a business in a building that they own, which is also a strip mall, it has seven other locations. So they put that thing up for sale. And and the guy across town who owns it owns a tow truck company. He’s not interested in a gas station or a strip mall, and the real estate investors over in Toronto that are trying to buy up properties all over the place. They’re interested in the strip mall, but they don’t want a gas station or a towing company. Yeah, right. And so you’ve created a business that excludes potential buyers. There was a great example here in town for years, this guy had a nine unit strip mall with a lighting Center at the end, he sold lamps and chandeliers and fixtures, this kind of thing. And when he went to sell the business, he put it all up for sale at once. nine units strip mall with lighting design center. And here’s the problem is nobody who would have an interest in owning a lighting center would have the capital to put a down payment on a nine unit strip mall. Yeah, and the real estate investment trusts have no interest in owning a lighting center. Yeah. And so it sat there for three years on the market. And it didn’t sell. And one day he just quit. He closed the lighting center, found a new tenant for the space. And then the building sold right away. Because it was simply now a property. Yeah. And there’s a lot of buyers for property. So you have to think about who is the buyer going to be? Are they going to be in my industry? Are they going to be a person who doesn’t like their job or doesn’t have a job that’s looking for a business to create a revenue for themselves? And how can we make sure the field of buyers is as large as possible? So another example is that oftentimes, business owners will buy the real estate that their business is located in believing that this is a smart idea, because they’re paying down a mortgage instead of paying rent. Yeah. When they go to put the business up for sale, though, if they bundle those two things together, then they need a buyer who wants their business, who also wants the building and has enough of a down payment for both? Yeah. And in any market, there’s always a lot more people with 50 or $100,000, than there are with $500,000. Right? And so if we want to sell the business quickly, we have to figure out how can we make it as affordable as possible. So in that scenario, what my advice is often to sellers, is let’s sell the business, get the buyer to sign a lease with us. And now we have the option of holding the real estate to create a passive income. Or we can sell it to someone who has a portfolio of investment properties. And they can collect the rent on the 10 year lease. Sometimes the buyer wants the property, they just can’t afford it in that moment. And so what we’ll do is we’ll get them to sign a lease, but then maybe we also grant them an option to buy the property in three years time at a fixed price. And now they’ve got time to create their own financial statements. So they can show a banker that they’re capable of running the business, and they’ll be able to qualify for that mortgage in three years time.

That’s great. All right, that’s very useful information. Of course. Now, are there any other critical rules that, that we should talk about our audience about, you know, when they’re considering as exit strategies.

You know, as far as hard and fast rules, you have to figure out if you need to, to control the timeline or not. And, this, this is a big thing, because if you if your exit is based upon a stranger buying your business, you don’t know how long it’s going to take to find that stranger, you don’t know how long it’s going to take to negotiate. And you don’t know how long it’s going to take to close, even if you have an agreement, that there can then be other factors that delay the closing. Right? You could be in a regulated industry that requires government approvals. There could be components related financing, there could be components, you know, who knows, right? And so we don’t control any of that. And for a lot of business owners, you know, they want to plan, for example, a retirement, they want to create a strategy. So what I say is, why don’t you develop your own buyer, and look at ways that you can find the right person and create a pathway for them to grow within your business and eventually end up being the buyer. It can actually end up being more lucrative for the seller. It can become something they control a timeline they control.

Okay, that’s a good advice. All right. Great. Thank you so much, David, for all this useful information. I’m sure our audience have much better understanding on what they need to consider when they think about exiting their businesses. Now, before I let you go, can you tell us a little bit about your company and your books? And if any anybody’s interested in buying and selling a business? How can they get in touch with you?

Yeah, sure. The sort of Grand Central Station for all of my stuff is over at my blog site, which is David see Barnett, calm. And and from there, there’s a tab called courses. And there’s a tab called working with David. And you can go in and find out, you know, all the different things that I do, you can see my courses, my books, it’s all listed at David C. Barnett, calm. And I would encourage anyone who’s interested in business deals. So if the whole idea of learning more about the stuff is exciting to you go to my blog site. And on the left hand side, you can sign up for my email list. And you just check off the categories that that interest you. And I send out emails all the time, but I send them just to the people who check those boxes, for what interests them. And, you know, so it’s, an easy way to keep on top of new stuff that’s coming out. And yeah, I, you know, I, I’m here to provide value and to serve. That’s,what I do for people. And my mission is to help prevent people from getting into bad deals, buyers and sellers. Just because I’ve had too many buyers over the years Tell me about how they got into a bad deal because they didn’t have the right information. And I want to I want to help protect those people. And unfortunately, the same kind of thing happens from the other side with the sellers in different ways. You know, one of the common things that I see is that people will come to me after trying to sell their business for years. And they say, David, I don’t know why I can’t sell this, can you help me? I’ll do an evaluation, I’ll say, look, here’s what your business is likely going to sell for. And here’s the likely terms of that deal. And they’ll say, you know what, when I started to try to sell this business years ago, I got an offer almost like that. But I didn’t know that was a reasonable offer. And so, you know, who knows what’s happened in that time, last two years of their life, their, you know, pathway has been delayed, the business likely has declined if they haven’t had their full enthusiasm and passion behind the business pushing it forward. And that’s tragic. You know, when someone makes a decision to sell, it’s because they need to something is making them need to sell the business. They’ve got to move forward with their life to whatever that next thing is.

Yeah, that’s, that’s for sure. And I’m sure you’re helping a lot of buyers and sellers out there. So thanks a lot for your service. And thank you for the interview. And also thank you, everyone for joining us today.   I’m sure you got a lot of useful information. And please do check out David’s website and sign up for his newsletter. Thank you so much.

Thank you had a great time.

 

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