September 17, 2025 • 47 mins
In this episode, Brandon Neely sits down with David C. Barnett, a small business transaction expert, consultant, and author of The Business Fortress. With decades of experience helping entrepreneurs buy, sell, finance, and strengthen their companies, David brings a wealth of wisdom about what makes a business resilient versus fragile.
The conversation follows David’s journey from his early business curiosity and career with the Yellow Pages to navigating the 2008–09 financial crisis, and eventually building a practice that helps business owners worldwide. Along the way, Brandon and David dig into the big ideas from The Business Fortress and what every entrepreneur needs to know if they want their company to last.
Together, they explore:
- Why profits alone don’t guarantee success, and how the cash conversion cycle can make or break a business.
- The difference between owning a business and owning a job, and how systems create freedom.
- The myth of “passive income” in small business ownership (and what to aim for instead).
- The risks of overleveraging, mixing personal and business finances, or overpaying for a company.
- Practical tools for building resilience, including high cash value life insurance and a strong balance sheet.
- How to set clear criteria for when your business is an asset and when it’s time to pivot.
This isn’t just theory. It’s a real-world conversation about the challenges, risks, and rewards of entrepreneurship and how to build a business that can withstand storms while still serving your life, not consuming it.
👉 If you’re a business owner, thinking about buying a business, or simply want to protect the one you’ve built, this episode will give you practical strategies and a new perspective on what it means to build with the end in mind.
00:00 Introduction and welcome
00:32 Meet David C. Barnett: small business transaction expert
04:19 David’s early business lessons from the Yellow Pages
07:05 The 2008–09 financial crisis and a shift into business brokerage
09:55 The “Business Fortress” concept: building resilient businesses
12:10 The cash conversion cycle: why growth can threaten cash flow
14:58 How resilient businesses survive downturns
18:21 The myth of passive income in small business ownership
20:00 Why industry experience and research matter before buying a business
24:00 Small business as a risky, illiquid asset class
29:00 Bridging the gap between business and personal finances
32:00 Setting clear criteria for business viability and involving your team
34:00 Final advice: build with the end in mind, read The Business Fortress
35:00 Where to find David online + closing remarks
Watch on YouTube: https://youtu.be/AYprdPp8HMk
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:01):
Hey guys, welcome to WealthWisdom Financial podcast.
Uh, if you noticed, uh,I'm in my home office.
It, it is summertime, so weare doing the home thing.
Uh, sometimes the officething, it just depends.
Uh, you know, it's summer, so gotta gotta.
Beef hanging with the fam.
Uh, as we run businesses, I like to havebusinesses that isn't just controlling
(00:24):
me, but I'm helping control, uh, it anddoing the things I wanna do and love.
And so, uh, today.
I'm interviewing a good friend.
Uh, he's also a co-author with areally good friend of mine, uh,
and his name is David C. Barnett.
So David C. Barnett is a smallbusiness transaction expert.
(00:48):
You'll see why, uh, I havehim on the show today.
Um, he's based in Canada, a uh,and he works with entrepreneurs
across the globe through online.
Consulting training programsand valuation services.
Uh, again, that's so important.
Uh, if you listen to this, really takenotes on this because beginning with
(01:11):
the end of mind is really important.
David helps business owners buy, sell,finance, and improve their companies
with over two decades of experience.
He's facilitated.
Dozens of business deals and advisehundreds of clients worldwide.
He's also the author of 10 Amazon.
(01:32):
Um.
Best books, right?
And all kinds of different things fromlocal investing and franchising pitfalls.
And he has a YouTube channel, uh, aswell, which I think we're gonna be on it.
So, uh, totally subscribedto his YouTube channel.
Look for the episodewith Amanda and Brandon.
Um, and he's also had Mark Willis, mymentor, uh, on the podcast and he coro.
(01:57):
This book, uh, with my mentor Mark Willis.
And so I really wanted to have himon today because I've read the book.
I know how powerful the book is, but Iwanted you to hear from him why he wrote
it, and um, why you should read it.
So David, thanks for coming on our show.
(02:20):
So, uh, welcome to theWealth Wisdom Financial Show.
Brandon, thanks so much for inviting me.
It's great to be here today.
I'm looking forward to this.
Awesome.
So, um, so in Canada you say a alot, is that, is that what they do?
I, I don't even know.
I've heard a rumor That's true.
I, I don't notice it, but Ithink maybe it's like a, like
(02:42):
something you just get used to.
Maybe you just, after awhile you don't realize.
Yeah.
Uh, I, yeah.
It's kinda like being in Texas.
People think I don't havean accent, but then if I go.
Like, I'm from southeast Texas, butnow I have a Yankee accent apparently.
So I don't know.
Uh, it, it's weird.
My, they all call meYankee when I go back home.
So, uh, I love how the businessfortress reframes business ownership.
(03:07):
Like tons of owners think they'rebuilding wealth when really they're just
building a fragile house of cards, right?
Uh, you've seen that all the time.
So I wanna explore how tomake the fortress real.
Like this book is the Business Fortress.
Um, sure.
So that the businesses thatthey can protect, grow, do the
(03:31):
things that they wanna love.
But I wanna ask you, how do, if, ifsomeone's coming into this world,
why should they look at this?
Why should they research you?
Tell us a little bit aboutyou and why they should.
Uh, take your, your wi your wisdom.
Okay, so you wanna talk about me first?
(03:52):
Yeah.
Let's you first a little bit.
So I, I'm one of those guys who'salways had an interest in business.
Ever since childhood I've had those,you know, businesses that kids do.
And, uh, as I got older, I realized thatI wanted to be involved with business.
So I went away to university andstudied business thinking that
this would make me into a, youknow, a business person, right?
And what they really do at universityin those business schools is they teach
(04:13):
you how to be a part of a big machine,like in one of these big companies.
And my heart really was inthe world of small business.
The businesses that we see every day whenwe're driving through our communities.
Um, and a lot of the businesses thatare really locally owned, right.
You know, the tire shop, the grocerystore, the, the bakery, like all that
kind of stuff, tradespeople, et cetera.
And so when I got outta university, Ireally got an amazing opportunity to learn
(04:37):
about those kinds of businesses because Igot a job with the Yellow Pages and this
was back in the 1990s when Yellow Pageswas basically the, the Google of its day.
Yeah.
If you needed to geta plumber, uh, 'cause.
Oil, it was broken.
You opened up the yellow pagesand you found a plumber in your
town and you called them upand someone would come over.
And so I would go and I wouldmeet with those people and I
(04:58):
would learn how they made money.
I would say like what kind of business?
What kind of customer do you ideallywould wanna have, you know, calling you
up or coming through your front door?
Um.
What does it mean for you if youmake a thousand dollars sale?
A thousand dollars sale for aplumber is very different than a
thousand dollars sale for the guyat the auto parts place, right?
Because different businesses havedifferent costs that go into that sale.
(05:20):
And so all of these differentbusinesses have a different kind of
business model and they make moneyin different ways, and a customer's
worth a different amount to them.
And so I get to learn all this stuffover the course of a seven year
career, and I traveled around andreally had a chance to talk with.
Almost everyone in thesmall business space.
And so as things evolved and peoplemoved away from the Yellow Pages and got
(05:40):
into the online world, I also evolved.
I became a finance brokerfor small businesses.
So I started to help people get loans,uh, capital leases on equipment.
I helped people do things, uh, likewhat are called factoring facilities
when you actually sell your accountsreceivable to get more cash upfront.
And so I got the chance tostart looking at a lot of small
business financial statements.
(06:01):
As I was helping people obtain money,and you can imagine that being a
broker for small business finance, um,you're meeting the people who can't
get helped at the bank because thebank is the typical source of money
for a small business and it's often theplace with the lowest interest rates.
And so I was dealing with peoplewho were being told no by the bank.
(06:23):
And so I was seeing people who, youknow, had issues in their business.
Maybe they didn't have a long enoughtrack record, or maybe there was something
wrong with their business beyond thescope of their own understanding.
They thought they had a great business,but their banker told them that
something like maybe their debt to equityratio was off, and they didn't really
understand like, what does that mean?
What does it mean?
Mm-hmm.
Like, my debt to equity ratio is off.
(06:44):
And so I got to learn a lotabout the, the struggles that
small businesses go through.
And I, I actually was able to helpa lot of those people either with
financing that I was able to arrangethrough sort of second tier lenders,
or I was able to take that case andrepackage it and bring it back to
the Main Street bank and show them I.
(07:05):
Hey, here's why you shouldgive this a second look.
Like this really should be a deal thatyou guys are doing at the big bank.
Yeah.
And a lot of the times I wassuccessful with that too.
And so I got a chance to, to meetand learn, uh, with these people.
And then the big financial crisis happenedin 2008, 2009, and a lot of my sources of
sort of subprime quality, small businessfinancing, they went out of business.
(07:28):
Mm-hmm.
And I, I needed to pivot.
I pivoted into the worldof business brokerage.
So this is where you helppeople buy and sell companies.
And again, I was thrust into theworld of small business financial
statements and looking at theperformance of small businesses.
And, you know, we wouldwork on valuations, showing
people what they were worth.
We would show people what kind of buyerslikely gonna buy their business, what
(07:50):
they're likely gonna pay, what thedeal would likely look like for them.
Most businesses are notpurchased on cash terms.
So we would be showing thesebusiness owners, you know, what
would likely be the terms of sale.
You know, are you gonna haveto hold some kind of financing
on this transaction, et cetera.
And so I, I grew through that period, um,and developed my, my knowledge even more.
(08:12):
Business brokerage is a littlebit of a cashflow rollercoaster.
Uh, business brokers typically getpaid when they sell a business, and
you can have months at a stretch whenyour office has no sales closing.
And so it was up and down and up and down.
And I had a young chil, I hadyoung children at the time.
It was just a little bit too much.
So I decided to leave the industryand actually became a banker.
Which put me again in a positionwhere I'm looking at financial
(08:35):
statements all the time.
Yeah.
And so I'm, I'm seeingall of these patterns.
I'm seeing all of these small businessesand how people are operating them and
the, the way they manage their businessand the way they manage their wealth
in conjunction with their business.
Eventually the bank reorganized.
I had an opportunity to take a packageto leave, and I decided to go back into
(08:55):
the world of helping people buy and sell.
But this time with a different model.
And so, uh, today I leada team of five people.
We work with people aroundthe world helping them buy
and sell small businesses.
We do valuations, we docoaching through that process.
Um, and, um, and we, instead of beingbrokers, getting paid a commission, we are
consultants and we charge for our servicesas we do them throughout the process.
(09:18):
So it smooths out our cash flow.
But the same problems that I was seeingwith those businesses that were trying to
borrow money when I was trying to brokercommercial debt for small businesses.
We still see those same problems todayin businesses that people wanna sell.
And, you know, as far as they'reconcerned, they think that their business
is great or you know, or, or they'vehave other troubles or whatever going on.
(09:43):
But we've just seen the same thingso often, and I've seen the people
who are actually living a secure,carefree, comfortable life in their
business and who don't worry about.
A small sales dip and who don'tworry about the things that are
happening in the headlines, you know,with respect to, you know, trade
issues and all that kind of stuff.
(10:04):
And it's because they run their businessin a very different sort of way.
And that was one of the principleaims that I had when I joined up with
Mark to write the business Fortress.
Is to talk about how you can run abusiness in a more secure and solid
way and get rid of some of the anxietyand stress that normally is a part
of being a small business owner.
(10:27):
That, I mean, right there, I couldsee myself starting our business and
thinking, you know, all of this, this,I don't know, great stuff that's gonna
happen, but didn't, uh, trying to sell it.
Um, I, I still have a, in my downstairs,I have a place for the Yellow pages.
Um, in my old house, um, which iscrazy 'cause I told my 7-year-old, I'm
(10:51):
like, you don't even know what that is.
Uh, so, so I was just thinking about that.
Um, and as me and Mark and, and nowyou in, in this industry, I see the
thi same things over and over again.
Uh, and you're like, wow.
Um, they keep having the, theproblems, the same problems, but,
but the book really does some clear.
(11:14):
Clarity.
But oftentimes, again, we, we talkto business owners all the time.
We see the same problems.
Um, and you, you talk about businessowners needing a fortress, what's the
most dangerous misconception you seeamong owners who think they're secure?
What are, what are some things that,that you see as really dangerous?
(11:36):
Well, one of the most common issueswith small business owners is that
they live on the income statement or,or the p and l as some people refer
to it, the profit and loss statement.
Mm-hmm.
Where they're thinking about thesales and what it costs 'em to deliver
those sales, and they're thinkingabout the expenses of their business.
And it's very intuitive to dothat because you're thinking about
(11:56):
what you're doing every day, whichis making sales to customers and
serving the customers mm-hmm.
And paying the bills for your overhead.
And so the, the income statement, uh,describes that activity and it's the
place where people are comfortableand that's where they tend to focus.
And so if there's, for some reason,like a shortage of money or whatever,
mo, most people's reaction is,oh, I better make another sale.
I better go and sell more.
(12:17):
Mm-hmm.
One of the things that we tryto teach in the book is to
develop a balance sheet mindset.
And that's a completely different,uh, one of the, of the primary
financial statements that people have.
And the, and the balance sheetdescribes the, the state of
affairs in your business.
So this is the amount of inventory, theamount of accounts, receivables, payables,
(12:37):
cash, et cetera in your business,the amount of your debts, et cetera.
Mm-hmm.
And so this is what isdescribing your current position.
And one of the things that oftensurprises many small business
owners is that you can actually.
Make more sales and threatenthe existence of your business.
Yeah, most people want to believethat selling more always means that
(12:58):
you're gonna end up with more profit,but you can actually make more sales
and earn more profit and run outtacash and end up not making payroll.
And it all has to do with what we call thecash conversion cycle and understanding
how your business transforms.
Sales into the ultimate cashthat you need to pay your bills.
So this is, this is part of, you know, a,a big part of the book is understanding
(13:22):
what is my business model, what is thecash conversion cycle, and how can I
change the cash conversion cycle so thatI can be a better steward of the dollars
that pass through my hands and look at.
Building my balance sheet, whichis what is gonna end up creating
a more resilient organization.
And you know, when, when, uh,when we focus entirely on sales
(13:45):
and profits, and then what, whatdo we do with those profits?
For a lot of people, they work reallyhard trying to build up a business.
Initially.
They don't have a lot of earnings.
And so when those earnings start tocome in, they start to make more money.
The.
The first thing people wanna dois take that money out because
they've earned it, right?
Yeah.
Like they've, they've done the work toget this money, and that's precisely
the moment where they could be makingthe choice to build the balance sheet,
(14:10):
and they lose out on the opportunity tobecome more resilient whenever there's
a downturn in the general economy.
And sales start to go down for everybody.
The person who has, you know, learned tolive on the, on the amazing profitability
of a high sales level, and they'rerelying upon that income to support
their lifestyle when things change.
(14:31):
That's the person that suddenly not onlyhas to make personal lifestyle changes,
but also make changes in the businessto reduce those expenses quickly.
And that's hard to do.
Yeah.
A lot of those people end upin an over leveraged position.
They end up getting into debt, thenthey have to service the debt that
speeds up the, the shrinkage oftheir cash position, uh, and they
(14:51):
end up weaker and weaker and weaker.
Meanwhile, the people thatfocused on their balance sheet.
They're the ones that pick up the assetsof these businesses when they close.
And so I've, I've been around longenough to see this story over and over
again where, you know, people that arefull of excitement and energy and build
a business really quickly and neverwork on the balance sheet end up in a
(15:15):
very fragile and precarious position.
While the people who worked on theirbalance sheet, they, they preserved
their cash, they paid down their debts,they strengthened their debt to equity
ratio, which we can get into if you want.
Those are the people that are ready.
And so when things go bad, they're theones that, that, that grow quite frankly.
They, they, they take over thecustomers and the assets of
(15:36):
their competitors that fail.
Uh, and at the end of it all, they end upwith the bigger footprint economically.
Now you guys see why, um,I had him on our show?
Um, because as you getlistened to our show, right?
Um, we talk about this stuff all the time.
Sales can actually just, justgetting the big sale can cause.
(15:57):
Sometimes bigger problems 'cause we'reactually masking the, the infrastructure,
the, the health of the business.
Um, knowing your numbersis, is really important.
And, and again, everyone has a planfor your, your money, uh, to you.
And that's what those, um,statements, I believe help.
(16:18):
So.
Um, in your experience, how has,how often is a business really
just a job in disguise for people?
Yeah.
Like what's the turning point forthem to become the self-employed
owner to a true asset?
Yeah, it, it, it's a great question.
You know, th there are not many smallbusinesses which would meet that
(16:42):
definition of not being the owner's job.
Um, and uh, and for most peoplethat's okay because, uh, they are
looking for a place to spend theirtime to create value and earn.
Profits are a paycheck.
And so, uh, in order to really get tothe point where it's no longer a job,
you have to be able to not go there.
And so it could be a lot simplermaybe for a sandwich shop
(17:03):
owner to get to that point.
You know, you see a lot offranchise sandwich shops where the
owner isn't going to be present.
That's a, a business that theyown, but it can be deceiving too.
So, you know, if you think about a wellorganized systematized business, you
might think about McDonald's, right?
Yeah.
I, I have a friend whoowns three McDonald's.
He works 40 to 50 hours a week, andhe does not set foot in any of them.
(17:28):
He is doing sort of the CEO level workof a person that owns three McDonald's.
He's supervising thenumbers as they come in.
He's reviewing certain kinds of likesecurity footage and things like that.
He's reviewing the orders.
He's making sure that thepurchasing ratios are in line with
the expenses that they expect.
Uh, he's dealing with HR issues, he'sdealing with all kinds of stuff, banking.
(17:50):
Making decisions about newcapital equipment, et cetera.
It's a full-time job just supervisingwhat is happening in those businesses.
I, I actually deal with a lot of,uh, of people who want to get into
the world of buying a businessand, and one of the things they'll
say is, I don't wanna buy a job.
I wanna buy a businessthat is running on its own.
And what I will say to that person is thatif they think about the local gas station,
(18:14):
let's say you live near an Exxon station.
That Exxon Station has a manager whoruns the day to day, but the head office
of Exxon does not let that person runthe business all year and then submit
financial statements to head office.
There's somebody in the communitywho's called the regional manager.
And that person is looking at theperformance of that individual station
(18:37):
along with maybe 15 or 20 locations.
Right.
And that person is looking at the, theweekly sales, they're looking at the,
you know, the, the split between gasolinesales versus corner store item sales.
Like they're, they're, they're kindof supervising that manager to make
sure something is not going wrong.
And when they see something in thenumbers that shows that there's a problem.
(18:58):
That regional manager will oftenzoom in and go talk to that
manager and they'll figure out why.
Yeah, yeah.
Oh, there's street, there's streetconstruction going on right now.
Okay, well of course your sales are down.
It's hard to get in here.
But, or, or is there something else?
Is somebody stealing?
You know, is there a shopliftingproblem is, are certain
deliveries getting delayed?
Are you running out a premium?
Like, like they're gonna dive in there andthey're gonna figure out what is going on.
(19:20):
We have to fix this.
As a business owner of a smallbusiness, if you don't want to be
in the store every day, you have tohave that regional manager skillset.
You have to know the business wellenough that you can look mm-hmm.
At some kind of dashboard of informationabout that business, and you will
immediately know what's going on inthat business or what might be wrong.
(19:41):
And this is where a lotof buyers fall down.
You know, I, I, there was this, uh,transmission shop that was for sale.
Yeah.
And it was advertised as an absenteeowned transmission shop, and the
person who owned it spent, uh, themajority of the year down in Florida.
And this was up in a northern state.
Yeah.
And um, the issue though was thatthis guy had managed it himself
(20:04):
for 20 years and then he trainedother people to do those roles and
he then started to go to Florida.
Now from Florida.
Because of the computer and internet.
He was still doing payroll, hewas still doing the banking.
He was still looking at the POS system.
Every day he would pick up the phoneand call the manager and in a 10
minute conversation, know exactlywhat was going on in that business.
(20:27):
So was it really absentee owned orwas it just being managed remotely?
Yeah, exactly.
I think, I think it wasmanaged remotely, right?
Exactly.
But it was being advertisedas absentee owned.
And so that's a trap for somebody.
Mm-hmm.
Because if you don't know the transmissionbusiness and you bought that kind of
business, you would not have the skillsetthat this gentleman had to be able to
(20:50):
remotely manage it the way that he did.
And so, uh, for a lot of the clients thatI work with that wanna buy a business.
Even if they're buying something thatthey think they can do this with, they
often need to go in there onsite, learnto be the manager, and then they can build
the systems and processes, learn whatthe KPIs are, learn what numbers they
want on their dashboard for management.
(21:12):
Then they can step back andtrain someone else to do that
day-to-day management role.
And they will then understand what'sgoing on in the business because they've
been in it and, you know, so, so it's,it's, uh, it, there's nothing easy.
About small business.
Uh, and I know you know this 'causeyou've been in small business, but what
the people I think that kind of get,uh, get tricked into this, uh, or, or
(21:34):
fall for the, the sort of daydream ofsmall business maybe are people that
work in big companies where you'rereally good at the thing you do.
And then you convince yourself thatthat means you're good at business.
But the, the, the, the trick withbig companies is that there's a
hundred other people doing theirsmall role very well as well.
Yeah.
And you don't even see all the stuffthat's going on in the background
(21:55):
that's being taken care of for youwhen you're in that big company.
But when you're in the smallbusiness, everything falls.
Everything falls on the owner's shoulder,and it can be quite overwhelming,
especially if you're trying to work thereduring the day and take care of a lot of
this stuff in the evenings, for example.
So, so in that, I mean, again, I seethis all the time where people are
(22:17):
sold a, um, something on TikTok or,or, uh, social media, YouTube, oh, just
buy this thing and I'll teach you howto do this and, and, um, then there's
no way you're gonna lose, but, but.
It's, it's a passive income deal.
And so you probably seethese ads all the time.
(22:37):
And so then they have these clientsthat come in and they're like, well,
I'm gonna do this and I'm gonna buy awashing machine, uh, company or whatever.
Uh, you probably heard the dry cleanerdeal, uh, because it's passive.
I don't have to do anything.
Uh, no one's there.
And and how do you combatthat when it's so pervasive?
When I, I think about this as, oh,well, if I just make a bigger sale,
(23:00):
more, more sales, it'll be con fine.
Um, but having those systems and, andwhat systems would you start saying.
If I was gonna buy a business,what's a key system I need to be
looking for right from the beginning?
Well, I, I think that if anyone'sgonna buy a business, they should
know something about business.
Buying a business is not for new people.
(23:22):
Buying a business is for business people.
Uh, you, you need to have someidea what you're getting into.
And the amazing thing about businessis that you can actually get paid to
learn business by working in a business.
Mm-hmm.
So, so if you have a, a corporate jobof some kind, and you're thinking,
I wanna own my own small business,I wanna own a, a, I don't know,
(23:43):
a salon or something like that.
Yeah, yeah.
Well, you can go work in a salon.
Yeah.
And you can see firsthand onyour own what is going on there.
Yeah.
And not just the way a customer seesit, but you know what's going on there
all the time in the salon and reallyget an idea of how these things operate.
The, the other thing is thatthere's a vast amount of
information available out there.
(24:04):
So, um, you know, there are.
Publicly published records ofbusiness performance that are,
uh, aggregated from tax returns.
And so you can look up, for example,beauty Salon and you can find the data
sorted by quartile where, um, you can,uh, see like what does a bottom quartile
performing beauty salon look like?
What does a mid.
You know, what do themid quartiles look like?
(24:25):
What are the top tier look like?
And you can see the data as far as salesand you know, all the expenses and cost
of goods sold as a percentage of revenue.
And you can then see how thesebusinesses are performing.
Um, it's amazing to me how manypeople don't do that kind of research.
And so like.
I just have to stop you there.
Like, one of the things I saw for usis we interned, uh, at a coffee shop.
(24:51):
This was in 2000 7, 0 8 beforewe opened up our coffee shop.
We interned, we worked for freeat a coffee shop and then, and,
and they were like, well, whywould you do that for free?
Like, well, because we'regonna learn everything.
And then the owner went onvacation for a week and we
were able to run the operation.
(25:11):
We did it for free, for, it was goodfor her, uh, the owner and for us.
And so by interning, I didn't had noexperience in business, but uh, got
some by interning and then, and then westarted that business and now I'm like,
oh, that was just the training ground.
Yeah, of owning a business isstarting a business, um, that we did.
(25:35):
And, and people are like, yeah,but it was just a coffee shop.
I'm like, you don't understandall the crazy stuff that happens,
that payroll, all the things thatAmanda did that no one knows.
Um, and you just said like the systems.
And that's why when I have allthese like entrepreneurs coming in,
they're like, I'm just gonna do this.
(25:56):
And I'm like, yeah, you need an Amanda.
You need somebody inthe background building.
And that's what you're saying is, isthere's, there's an Amanda system or
something happening, uh, that you need.
I'm not just saying that she'sthe magic, but I would say she is.
Um, that's why she's, you, you wantto have systems and then you want
(26:16):
have some kind of idea of what'sgonna happen when the systems.
Fail.
Mm-hmm.
Or when an ex, an ex, uh, what doyou call it, an exception occurs.
Yeah.
Yeah.
So I'll, I'll give you an example.
You could have a receiving system fora small warehouse where trucks arrive,
the truck driver comes around with somepaperwork, it's gotta be signed off.
You gotta count the pallets comingoff, and then you have to input
(26:39):
that inventory into the computer.
And then there's a certain way to storethe inventory in the warehouse of a
certain place to put different things.
Right.
So, so that would be a very natural.
Kind of system for somebody todevelop if they were owned a
business that had a small warehouse.
Yeah.
Now how does the system work whensome of the employees show up stoned,
(27:00):
right?
Yep.
And, and, and so like I love to throwquestions out like this to people that
are in, that you're describing and wherethey say, I'm just gonna get a business.
I'm gonna do this.
Right?
So, so what is the process whenyou have impaired employees now?
Mm-hmm.
Driving around in a forklift.
Moving tens or hundreds ofthousand dollars worth of stuff
around, what's your process then?
(27:22):
Right?
And, and then it oftenbecomes an exception.
Now we have to have sort of thevoice of ownership or the voice
of management has to come in hereand start making some decisions.
And it's funny because bigger companiesprobably have a system for this.
Yep.
Like, like they've got a documentedpolicy and some manager can open
a book somewhere and it can say,okay, if you have an employee in
(27:43):
this condition, this is what you do.
You know, number one, do this.
Number two, do this.
Number three, call hr. Like whatever.
Right?
Like number one, take the keys out ofthe forklift keys outta their hand.
Number two, ask 'em to leave.
Number three, call hr. Like.
If, if you're a small business owner andyou've never had to deal with that kind of
thing before then, then you can get stuck.
And I know this because I've had clientsof mine call me and say, Dave, one of
(28:07):
my employees just showed up and gotinto a fight with another employee.
What do I do?
And, and I'm like, you need toget help from an HR professional.
Right.
Right.
Some of it, I, I feel like it's obvious.
Like I, I don't know.
Maybe I'm just, um, I, I have no ideaif I, if I'm just smarter or something,
but I'm like, um, okay, if I havea coffee shop and I have a recipe
(28:31):
for a drink, if I deviate from therecipe, then it's not the same drink.
And so the, the customerwants the same drink.
Whether barista one orbarista three does it.
And then you have clients or oror staff that come in and say,
well, let's, let's do it this way.
And they're like, no,that's not the way it works.
(28:52):
Here's the recipe, here's the system,here's the way in which we do it.
And that's kind of like the McDonald'smodel, but you have to still make sure,
like whenever from from a businessperspective, we were buying a lot of
milk and people would just, the staffwould just throw away extra milk.
It's like, all right, well wehave 15 gallons of different,
(29:15):
half, half open milks.
And I'm like, wait, we gotta figureout and measure it out because we're.
We have waste.
Uh, and, and then on the flip side, allthese people are like, if I, I'm broke,
so I'm gonna, or I have a little bitof 401k money, so I'm gonna go buy a
business so I can make sure I'm good.
Um, and they've never actually.
(29:37):
Been behind the bar of anything,or, you know what I mean?
Um, and I, I find that interesting.
Um, what, what I find interestingis when I, I I do meet a lot of,
uh, business owners who are inindustries where staff earn tips.
Mm-hmm.
And, uh, what's amazing to me is that,uh, there are several of them that
I've met over the course of time whounderstand that some of their employees
(29:59):
earn more in the business than they do.
Mm. Yeah.
And, and that, that's a big shockerto people typically on the street
who, who just assume that businessowners, you know, are successful,
wealthy people, et cetera.
Uh, the truth of the matteris there's a lot of businesses
out there that are marginal.
Uh, and there's a lot of businesses,you know, when you hear about.
(30:21):
You know, businesses sort of pushingback against things like minimum
wage increases and things like that.
You know, when when minimum wage goesup, people like to say, well, you know,
the workers deserve it, we have to givethem more money, et cetera, et cetera.
But what you then are doing to thebusiness owner is that business
may not be making a lot of money.
Yep.
And so the business owner thenhas to make a decision, do I eat
(30:45):
the cost and of labor increase?
Do I just take it outta my profits?
If, if that's even an option, or do Iraise my prices and risk losing customers?
Yep.
Right.
And this is, this is theconstant tightrope that small
businesses always are facing.
And we're seeing it again herewith the, the, the trade tariffs
and things that are coming in.
(31:05):
When, when the, um.
Tariffs against steel were announced.
Um, I had all kinds of people callme up saying, you know, I'm looking
for solutions because the cost of oneof my most, one of my biggest inputs
into my process just went up by 50%overnight by a government rule, right?
And, and what do I do?
(31:25):
Like, I don't know if my customerswould be willing to buy what
I sell if they had to pay.
That much more on top of theprice that I'm already charging.
And, and this is where, um, you know,I don't think the public necessarily
understands the value the business brings.
I heard, um, you know, someone, uh, apublic official actually say that, oh,
(31:47):
well, you know, if a business isn'tmaking much money, maybe it's not a
business we want in our community, but.
That, that's very dismissive andvery arrogant because there are
businesses that don't make any money,but they still employ 10 people, and
as long as they're functioning, those10 people are getting a paycheck.
The minute they stop functioning, thosepeople are no longer making money.
But business is difficult.
(32:07):
Like there's a, a. A central bankerfrom the 1950s named John Exter,
and he was studying what happensto money in a, in the a time of
panic, like economic uncertainty.
Yeah.
And he ended up creating something calledJohn Ester's inverse pyramid of liquidity,
where he tried to describe how peoplewant to trade some assets for more liquid
(32:29):
assets when things are, are in a panic.
Right?
Yeah.
And so at the very bottom, at the,the point on the bottom, he put
gold and then there's things like.
Currency notes, treasury bills fromthe government, publicly, this set
of stocks, all these other differentkinds of investments with each
layer going up, being less liquid.
A small business is way up at thetop because it's highly illiquid.
(32:51):
You can buy a small business and then ifyou decide you don't like it, it could
take you two years to sell it again.
Yeah, so it's.
You know, it's, it's, it's highly illiquidand it is a risky asset, uh, because
so much is outside of your control.
I, I use the example of,of, uh, like Coca-Cola.
You know, Coca-Cola is sold everywhere.
It's a big, giant company.
(33:12):
If I opened up.
A very, uh, you know, tasty microbrewery, for example, in a small town.
Mm-hmm.
And everyone decided to drinkmy beer instead of Coca-Cola.
I would have a successful businessat the expense of Coca-Cola, but
they probably wouldn't even notice.
Yeah.
Because the, the sales theywould lose in the small town.
Don't even register becausethey're such a big company.
(33:34):
But now a canoe competitor couldopen another microbrewery across
the street from me and thatcould put me outta business.
Yeah, because my economicfootprint is so small, I'm.
A hundred percent in one market, a hundredpercent in one category, a hundred percent
reliant upon a group of local peoplethat want to come and drink my product.
(33:56):
And as soon as there's a strong competitorthat then threatens to divide that market,
there may not be enough of a marketfor them either, but the fact that they
open up could actually kill us both.
Right.
And, and so these risks are everywhere.
Uh, small business is one ofthe riskiest asset classes.
There are.
It, it can be quite lucrative, whichis why people get drawn into it.
(34:18):
Um, but I, I mean, I'm nota, a cheerleader for people
that, that don't know anythingabout business to get into it.
I think that, you know, babysteps are the way to go.
So, you know, get a job in the industrythat you think you might wanna be an
owner in to really learn how it works.
Yeah.
Maybe start some kind of side hustle.
Where you can get some experiencein the industry and really learn the
(34:40):
ins and outs, make some contacts,uh, build a network of understanding,
you know, a network of people amongstthe suppliers and things like that.
There's all kinds of ways thatyou can try to mitigate risk.
I think that buying a business.
Definitely is a way to reduce riskbecause you already get customers,
but the problem that I see a lotof people doing is they'll end up
(35:01):
in a bad deal where they overpay.
And when you overpay for a business,well now you can't suffer any
shortage of sales because of thedebt service you've committed to.
So it's, it's almost the same risk asdoing a startup and not finding enough
customers with this one big exception.
If you start a business, often you'rerisking your savings and maybe,
(35:22):
you know, credit card balance orwhatever that you've put into it,
and if it fails, you lose that money.
But if you buy a business.
Then lose customers and can't makeyour payments and the business fails.
You could be on the hook for a personalguaranteed bank loan of hundreds of
thousands or millions of dollars.
And so the opportunity forloss is, is there as well.
(35:43):
And then that's, that's why we're inbusiness, Brandon, because, uh, people
come to us for help to analyze dealsthat they're gonna be looking at.
And, and, and through seeing the successand the failures over the course of time.
I mean, that's all the experiencesthat I have that, that went into the
book when I was writing with Mark.
Yeah.
And, uh, the reason that Mark and Idid it together was because one of
(36:05):
the tools that I've seen people usesuccessfully in making their business more
resilient is the bank on yourself style.
Uh, high cash valuelife insurance policies.
It's, it's a tool that gives you.
Uh, options with respect to liquidity.
Um, and, you know, it givesyou a lot of power, like, where
else can you borrow money?
And you are the one thatdictates the repayment terms.
(36:25):
You can even pause the payments ifyou want, with no repercussions.
Like, there's so many advantages, but,you know, for, for people out there that
own a business, um, this book is not.
You know, sort of a marketingpiece for Bank on yourself.
Uh, one of the things that, that I setout with Mark at the beginning is I
said, look, I do not want any one starreviews on Amazon saying this is just
(36:49):
a book about pitching life insurance.
Yeah.
This book is about small business,and it's about building a stronger
small business that is moreresilient to downturns and ultimately
builds more value for a sale.
And, uh, is gonna be betterat providing for you and your
family in a more predictable way.
Um, and, you know, we show alldifferent kinds of tools in there
(37:10):
that you can use to achieve this.
Uh, you know, just lifeinsurance being one of them.
Well, and as, as I want to close itup here, but knowing you guys hear
my story a lot of times, but mm-hmm.
As I was reading the book, you know,thinking about last to get paid, you
know, the staff makes more than me.
(37:31):
Um, I'm the greatest assetstill, even though the other, um,
we're not making a ton of money.
We are the greatest asset.
If we go, then the business goes right.
Um.
And knowing that we are in a world likeI was a coffee shop, you know, everybody
loves Starbucks, but they would beafraid to walk into my coffee shop, and
(37:53):
then I'd have different taxes becauseI'm a coffee shop, not a grocery store.
And the grocery store didn't have acertain tax on their coffee because,
and I've had clients yell at usbecause they're like, well, how you,
why are you paying this extra tax?
I'm like.
Because it's a restaurant thingand they're not a restaurant,
even though they're a restaurant.
Um, and it would get really confusingand frustrating and big business
(38:17):
plays, different rules and smallbusiness we're trying to help.
And so I would say.
As you guys are listening to this,support your small business owners, right?
Um, sometimes maybe they, it lookslike they're making decent money.
Oftentimes it's a struggle.
It's really hard.
Um, but, uh, I want to close withthis is as you think about business,
(38:41):
um, just one final question ishow do you connect personal?
Because a lot of times, uh, thebusiness owner is, is stressed, doing
all the things, and they, they deflector they don't take care of personal.
How do we bridge the gap betweenbusiness and personal and how do you
(39:01):
see this book helping in bridging that?
Yeah, so, so, um, personal and businessgets mixed up whenever there's scarcity.
Because when, when there's abundance,what you, you know, what I do in my
business is all of my employees andmyself we're paid twice a month.
And that money goes from my businessinto my personal account, and I
(39:24):
run my household on that money.
And so when I'm at home doing my personalstuff with my household and everything,
I'm running my household just likeevery other employed person out there.
I'm living within mymeans, laid out with that.
Paycheck that I get, and thenwithin my business, I know that
that payroll is a certain expenseI have to pay out every month.
And I, and my business, you know, workswith that and my business is profitable.
(39:48):
I can then focus on my business knowingwhat my expenses are and knowing what
my sales are, et cetera, and I canfocus on making it run correctly.
Mm-hmm.
When we end up, when we end up withproblems of mixing the personal of
the business, it's often becausethese things happen, something
goes wrong in the business.
Now I don't wanna take moneyoutta the business 'cause
(40:08):
I'm afraid I might need it.
So I don't pay my personal,you know, paycheck or salary.
Mm-hmm.
From the business.
Mm-hmm.
Yep.
But then there's some kind ofurgent need in my personal life
because I didn't take a salary.
Now I've got this bill that'slate that's gotta be paid.
So the only place I know of toget money is from the business.
And so as soon as this chain ofevents begins, you lose control.
(40:31):
And now all of a sudden.
You don't really know what's going on.
And a lot of the times with smallbusinesses, if they, if there something
is going wrong, it's often because theyjust don't know their numbers, they don't
have good bookkeeping, they're not ableto look at their financial statements and
their business and see what's happening.
It's not being kept up to date,it's not accurate, et cetera.
(40:53):
Then they start doing things liketaking money outta the business
account for personal stuff, andthen they don't record it properly.
Yeah.
And, and it becomes more and more obscure.
We lose visibility into what's happening.
And all of this is going to do isit's going to, uh, do two things.
What, what's that famous,uh, quote of a bankruptcy?
It happened very slowly atfirst and then all at once.
(41:15):
I, I don't even know the quote, butit, it sounds like a good quote.
So, so what happens is, is that.
You, you start to play thisjuggling game with cash.
Yep.
And you, and then you start to think thatyou're smart with it because you seem
to be able to juggle it and you seem tobe able to be on top of these things.
But what is happening is that both inyour business and your personal life
(41:36):
is there are accruing liabilitieswhich you're not recognizing.
Yeah.
So the, the business, even thoughyou've got these cash shortages, may in
fact be earning an accounting profit.
Which means you will have some kind oftax bill due, and that means all of a
sudden you're gonna get to the end ofthe year, the accountant's gonna tell
you, you made money, now you gottafile a tax return and you owe taxes.
(41:57):
And then like, where are yougonna get the money for this?
Yep.
And so you, you end up on this slipperyslope of juggling things between personal
and business, and then you hit a brickwall with something like a big tax bill.
And then you say, oh my God, howam I gonna deal with this now?
And then people make one of two choices.
They either choose to address it, whichoften means having tough conversations
(42:20):
with creditors, um, you know, withtheir landlord, with people like that.
And it may lead to closing thebusiness, may lead to them having
to go talk with a bankruptcyattorney or something like that, or.
They choose to ignore further, which meansthey're just dragging this stuff out.
Now they owe money to the government,now they owe money to other people.
Right.
And it just, it just makesthe problem worse and worse.
(42:41):
And, um, unfortunately, I've seenpeople go through this and the, the
key to the whole problem was thatthere were issues in the business.
Which were never fixed.
And the the, the worst thing that canhappen is if your business starts to
fail, and then you start to feed thatbusiness with your own personal resources.
Uh, the purpose of a business is toprovide a product or service in a way
(43:04):
that earns you money so that you canthen support yourself and your family.
And if the business isn't doingthat, you have to set some very clear
criteria for what needs to happenand what the timeline needs to be.
You need to draw your red line, youknow, if you wanna put it that way.
Yeah.
Where you say, we have to figureout how to get the sales up to here,
how to get the profits up to hereso that this makes money again, and
(43:26):
we have this much time to do it.
And.
If you wanna be really forthrightand honest, you need to bring
your team in on this too, becausetheir jobs are at stake as well.
And working together, you're gonna havea greater opportunity to come up with
different ideas and try different things.
But if you cannot achieve that goal, ifyou cannot hold the business around in
(43:47):
time to do what you know, to meet thatdeadline, then you have to realize that
the business is no longer an asset.
It's a liability.
Yeah.
And you want to get rid of liabilities.
You don't wanna let them drag you down.
And so, you know, that's the pointwhere people have to start thinking
like, how do I shut this thing down?
Mm-hmm.
Uh, do I go get a job?
Like how am I gonna support myself?
(44:08):
Um, you don't want to let a business turninto a liability and then turn into an
anchor that drags you down into the water.
Yeah, I think that, um, is again,why we sold overflow, um, and the
changes that were happening wasbecause of those, those things.
And again, why, um, we, I highlyrecommend the business fortress, uh,
(44:32):
again, how to grow, scale and protect.
Like, grow, protect,and exit your business.
Um, it is on Amazon.
Um, the reason that I think it'sso powerful, it's, it's not just,
again, the life insurance is thereason that I was able to sell the
business and not close the businessbecause of those things that we did.
Not knowing the, this book was, I mean,what didn't exist then, but, but some
(44:56):
of those things and why I think thisis powerful and, and so as you guys
are running businesses, as you are.
Thinking, Hey, it's gonna be, um,the golden brick road, whatever,
yellow brick road after I buy thisbusiness, it's gonna be perfect.
Sun, sunshine, and rainbows.
Um, that's not always the case.
And so building with the end inmind, uh, also get this book, even
(45:21):
if you have a successful like years.
I'm, I'm on the moon.
It's, it's great.
Well, at some point you might wannasell or, or have the ability to sell.
So get this book so that way you are ina even better position to sell it for a
higher number versus a smaller number.
So any closing things you wanna leave, um.
(45:42):
Um, these guys with beforewe, uh, end it, uh, no.
Just if, if anyone out there isinterested in the topic of buying,
selling, financing, or managingsmall businesses, uh, just come
find me anywhere on social media.
If you type David Barnett's smallbusiness in any of the podcast
catchers or YouTube, you'll find me.
I've been online now for over 11 years.
I've.
(46:03):
Like 700 videos on different topics.
Uh, and that's the stuff that me and myguests talk about on a regular basis.
And, and if you are thinking aboutgetting to a position where you
wanna sell your business one day,I'd, I'd love to help you out.
You can find more informationjust by looking me up online.
Cool.
And you guys know if you've look usup, um, and you want to talk to David,
uh, while we have a direct connection.
(46:24):
So, uh, thanks guys for joining us.
Don't forget, hit that like, subscribe,buy that book, uh, if you're a
business owner absent and out's abunch of business owners recently.
Um, because I know how valuableit is, I read it, I'm like, oh my
gosh, if I would've had this, um,probably would've made less mistakes.
Uh, so, um, David and Mark are amazing.
(46:46):
Um, I know Marcus, I've, I've had knownhim for years, so, uh, and I'm really
glad to have connected with you David.
So thanks again for joining us andwe will see you guys next time.
Thanks, Bryn.
Hey guys, welcome to WealthWisdom Financial podcast.
Uh, if you noticed, uh,I'm in my home office.
It, it is summertime, so weare doing the home thing.
Uh, sometimes the officething, it just depends.
Uh, you know, it's summer, so gotta gotta.
Beef hanging with the fam.
Uh, as we run businesses, I like to havebusinesses that isn't just controlling
(00:24):
me, but I'm helping control, uh, it anddoing the things I wanna do and love.
And so, uh, today.
I'm interviewing a good friend.
Uh, he's also a co-author with areally good friend of mine, uh,
and his name is David C. Barnett.
So David C. Barnett is a smallbusiness transaction expert.
(00:48):
You'll see why, uh, I havehim on the show today.
Um, he's based in Canada, a uh,and he works with entrepreneurs
across the globe through online.
Consulting training programsand valuation services.
Uh, again, that's so important.
Uh, if you listen to this, really takenotes on this because beginning with
(01:11):
the end of mind is really important.
David helps business owners buy, sell,finance, and improve their companies
with over two decades of experience.
He's facilitated.
Dozens of business deals and advisehundreds of clients worldwide.
He's also the author of 10 Amazon.
(01:32):
Um.
Best books, right?
And all kinds of different things fromlocal investing and franchising pitfalls.
And he has a YouTube channel, uh, aswell, which I think we're gonna be on it.
So, uh, totally subscribedto his YouTube channel.
Look for the episodewith Amanda and Brandon.
Um, and he's also had Mark Willis, mymentor, uh, on the podcast and he coro.
(01:57):
This book, uh, with my mentor Mark Willis.
And so I really wanted to have himon today because I've read the book.
I know how powerful the book is, but Iwanted you to hear from him why he wrote
it, and um, why you should read it.
So David, thanks for coming on our show.
(02:20):
So, uh, welcome to theWealth Wisdom Financial Show.
Brandon, thanks so much for inviting me.
It's great to be here today.
I'm looking forward to this.
Awesome.
So, um, so in Canada you say a alot, is that, is that what they do?
I, I don't even know.
I've heard a rumor That's true.
I, I don't notice it, but Ithink maybe it's like a, like
(02:42):
something you just get used to.
Maybe you just, after awhile you don't realize.
Yeah.
Uh, I, yeah.
It's kinda like being in Texas.
People think I don't havean accent, but then if I go.
Like, I'm from southeast Texas, butnow I have a Yankee accent apparently.
So I don't know.
Uh, it, it's weird.
My, they all call meYankee when I go back home.
So, uh, I love how the businessfortress reframes business ownership.
(03:07):
Like tons of owners think they'rebuilding wealth when really they're just
building a fragile house of cards, right?
Uh, you've seen that all the time.
So I wanna explore how tomake the fortress real.
Like this book is the Business Fortress.
Um, sure.
So that the businesses thatthey can protect, grow, do the
(03:31):
things that they wanna love.
But I wanna ask you, how do, if, ifsomeone's coming into this world,
why should they look at this?
Why should they research you?
Tell us a little bit aboutyou and why they should.
Uh, take your, your wi your wisdom.
Okay, so you wanna talk about me first?
(03:52):
Yeah.
Let's you first a little bit.
So I, I'm one of those guys who'salways had an interest in business.
Ever since childhood I've had those,you know, businesses that kids do.
And, uh, as I got older, I realized thatI wanted to be involved with business.
So I went away to university andstudied business thinking that
this would make me into a, youknow, a business person, right?
And what they really do at universityin those business schools is they teach
(04:13):
you how to be a part of a big machine,like in one of these big companies.
And my heart really was inthe world of small business.
The businesses that we see every day whenwe're driving through our communities.
Um, and a lot of the businesses thatare really locally owned, right.
You know, the tire shop, the grocerystore, the, the bakery, like all that
kind of stuff, tradespeople, et cetera.
And so when I got outta university, Ireally got an amazing opportunity to learn
(04:37):
about those kinds of businesses because Igot a job with the Yellow Pages and this
was back in the 1990s when Yellow Pageswas basically the, the Google of its day.
Yeah.
If you needed to geta plumber, uh, 'cause.
Oil, it was broken.
You opened up the yellow pagesand you found a plumber in your
town and you called them upand someone would come over.
And so I would go and I wouldmeet with those people and I
(04:58):
would learn how they made money.
I would say like what kind of business?
What kind of customer do you ideallywould wanna have, you know, calling you
up or coming through your front door?
Um.
What does it mean for you if youmake a thousand dollars sale?
A thousand dollars sale for aplumber is very different than a
thousand dollars sale for the guyat the auto parts place, right?
Because different businesses havedifferent costs that go into that sale.
(05:20):
And so all of these differentbusinesses have a different kind of
business model and they make moneyin different ways, and a customer's
worth a different amount to them.
And so I get to learn all this stuffover the course of a seven year
career, and I traveled around andreally had a chance to talk with.
Almost everyone in thesmall business space.
And so as things evolved and peoplemoved away from the Yellow Pages and got
(05:40):
into the online world, I also evolved.
I became a finance brokerfor small businesses.
So I started to help people get loans,uh, capital leases on equipment.
I helped people do things, uh, likewhat are called factoring facilities
when you actually sell your accountsreceivable to get more cash upfront.
And so I got the chance tostart looking at a lot of small
business financial statements.
(06:01):
As I was helping people obtain money,and you can imagine that being a
broker for small business finance, um,you're meeting the people who can't
get helped at the bank because thebank is the typical source of money
for a small business and it's often theplace with the lowest interest rates.
And so I was dealing with peoplewho were being told no by the bank.
(06:23):
And so I was seeing people who, youknow, had issues in their business.
Maybe they didn't have a long enoughtrack record, or maybe there was something
wrong with their business beyond thescope of their own understanding.
They thought they had a great business,but their banker told them that
something like maybe their debt to equityratio was off, and they didn't really
understand like, what does that mean?
What does it mean?
Mm-hmm.
Like, my debt to equity ratio is off.
(06:44):
And so I got to learn a lotabout the, the struggles that
small businesses go through.
And I, I actually was able to helpa lot of those people either with
financing that I was able to arrangethrough sort of second tier lenders,
or I was able to take that case andrepackage it and bring it back to
the Main Street bank and show them I.
(07:05):
Hey, here's why you shouldgive this a second look.
Like this really should be a deal thatyou guys are doing at the big bank.
Yeah.
And a lot of the times I wassuccessful with that too.
And so I got a chance to, to meetand learn, uh, with these people.
And then the big financial crisis happenedin 2008, 2009, and a lot of my sources of
sort of subprime quality, small businessfinancing, they went out of business.
(07:28):
Mm-hmm.
And I, I needed to pivot.
I pivoted into the worldof business brokerage.
So this is where you helppeople buy and sell companies.
And again, I was thrust into theworld of small business financial
statements and looking at theperformance of small businesses.
And, you know, we wouldwork on valuations, showing
people what they were worth.
We would show people what kind of buyerslikely gonna buy their business, what
(07:50):
they're likely gonna pay, what thedeal would likely look like for them.
Most businesses are notpurchased on cash terms.
So we would be showing thesebusiness owners, you know, what
would likely be the terms of sale.
You know, are you gonna haveto hold some kind of financing
on this transaction, et cetera.
And so I, I grew through that period, um,and developed my, my knowledge even more.
(08:12):
Business brokerage is a littlebit of a cashflow rollercoaster.
Uh, business brokers typically getpaid when they sell a business, and
you can have months at a stretch whenyour office has no sales closing.
And so it was up and down and up and down.
And I had a young chil, I hadyoung children at the time.
It was just a little bit too much.
So I decided to leave the industryand actually became a banker.
Which put me again in a positionwhere I'm looking at financial
(08:35):
statements all the time.
Yeah.
And so I'm, I'm seeingall of these patterns.
I'm seeing all of these small businessesand how people are operating them and
the, the way they manage their businessand the way they manage their wealth
in conjunction with their business.
Eventually the bank reorganized.
I had an opportunity to take a packageto leave, and I decided to go back into
(08:55):
the world of helping people buy and sell.
But this time with a different model.
And so, uh, today I leada team of five people.
We work with people aroundthe world helping them buy
and sell small businesses.
We do valuations, we docoaching through that process.
Um, and, um, and we, instead of beingbrokers, getting paid a commission, we are
consultants and we charge for our servicesas we do them throughout the process.
(09:18):
So it smooths out our cash flow.
But the same problems that I was seeingwith those businesses that were trying to
borrow money when I was trying to brokercommercial debt for small businesses.
We still see those same problems todayin businesses that people wanna sell.
And, you know, as far as they'reconcerned, they think that their business
is great or you know, or, or they'vehave other troubles or whatever going on.
(09:43):
But we've just seen the same thingso often, and I've seen the people
who are actually living a secure,carefree, comfortable life in their
business and who don't worry about.
A small sales dip and who don'tworry about the things that are
happening in the headlines, you know,with respect to, you know, trade
issues and all that kind of stuff.
(10:04):
And it's because they run their businessin a very different sort of way.
And that was one of the principleaims that I had when I joined up with
Mark to write the business Fortress.
Is to talk about how you can run abusiness in a more secure and solid
way and get rid of some of the anxietyand stress that normally is a part
of being a small business owner.
(10:27):
That, I mean, right there, I couldsee myself starting our business and
thinking, you know, all of this, this,I don't know, great stuff that's gonna
happen, but didn't, uh, trying to sell it.
Um, I, I still have a, in my downstairs,I have a place for the Yellow pages.
Um, in my old house, um, which iscrazy 'cause I told my 7-year-old, I'm
(10:51):
like, you don't even know what that is.
Uh, so, so I was just thinking about that.
Um, and as me and Mark and, and nowyou in, in this industry, I see the
thi same things over and over again.
Uh, and you're like, wow.
Um, they keep having the, theproblems, the same problems, but,
but the book really does some clear.
(11:14):
Clarity.
But oftentimes, again, we, we talkto business owners all the time.
We see the same problems.
Um, and you, you talk about businessowners needing a fortress, what's the
most dangerous misconception you seeamong owners who think they're secure?
What are, what are some things that,that you see as really dangerous?
(11:36):
Well, one of the most common issueswith small business owners is that
they live on the income statement or,or the p and l as some people refer
to it, the profit and loss statement.
Mm-hmm.
Where they're thinking about thesales and what it costs 'em to deliver
those sales, and they're thinkingabout the expenses of their business.
And it's very intuitive to dothat because you're thinking about
(11:56):
what you're doing every day, whichis making sales to customers and
serving the customers mm-hmm.
And paying the bills for your overhead.
And so the, the income statement, uh,describes that activity and it's the
place where people are comfortableand that's where they tend to focus.
And so if there's, for some reason,like a shortage of money or whatever,
mo, most people's reaction is,oh, I better make another sale.
I better go and sell more.
(12:17):
Mm-hmm.
One of the things that we tryto teach in the book is to
develop a balance sheet mindset.
And that's a completely different,uh, one of the, of the primary
financial statements that people have.
And the, and the balance sheetdescribes the, the state of
affairs in your business.
So this is the amount of inventory, theamount of accounts, receivables, payables,
(12:37):
cash, et cetera in your business,the amount of your debts, et cetera.
Mm-hmm.
And so this is what isdescribing your current position.
And one of the things that oftensurprises many small business
owners is that you can actually.
Make more sales and threatenthe existence of your business.
Yeah, most people want to believethat selling more always means that
(12:58):
you're gonna end up with more profit,but you can actually make more sales
and earn more profit and run outtacash and end up not making payroll.
And it all has to do with what we call thecash conversion cycle and understanding
how your business transforms.
Sales into the ultimate cashthat you need to pay your bills.
So this is, this is part of, you know, a,a big part of the book is understanding
(13:22):
what is my business model, what is thecash conversion cycle, and how can I
change the cash conversion cycle so thatI can be a better steward of the dollars
that pass through my hands and look at.
Building my balance sheet, whichis what is gonna end up creating
a more resilient organization.
And you know, when, when, uh,when we focus entirely on sales
(13:45):
and profits, and then what, whatdo we do with those profits?
For a lot of people, they work reallyhard trying to build up a business.
Initially.
They don't have a lot of earnings.
And so when those earnings start tocome in, they start to make more money.
The.
The first thing people wanna dois take that money out because
they've earned it, right?
Yeah.
Like they've, they've done the work toget this money, and that's precisely
the moment where they could be makingthe choice to build the balance sheet,
(14:10):
and they lose out on the opportunity tobecome more resilient whenever there's
a downturn in the general economy.
And sales start to go down for everybody.
The person who has, you know, learned tolive on the, on the amazing profitability
of a high sales level, and they'rerelying upon that income to support
their lifestyle when things change.
(14:31):
That's the person that suddenly not onlyhas to make personal lifestyle changes,
but also make changes in the businessto reduce those expenses quickly.
And that's hard to do.
Yeah.
A lot of those people end upin an over leveraged position.
They end up getting into debt, thenthey have to service the debt that
speeds up the, the shrinkage oftheir cash position, uh, and they
(14:51):
end up weaker and weaker and weaker.
Meanwhile, the people thatfocused on their balance sheet.
They're the ones that pick up the assetsof these businesses when they close.
And so I've, I've been around longenough to see this story over and over
again where, you know, people that arefull of excitement and energy and build
a business really quickly and neverwork on the balance sheet end up in a
(15:15):
very fragile and precarious position.
While the people who worked on theirbalance sheet, they, they preserved
their cash, they paid down their debts,they strengthened their debt to equity
ratio, which we can get into if you want.
Those are the people that are ready.
And so when things go bad, they're theones that, that, that grow quite frankly.
They, they, they take over thecustomers and the assets of
(15:36):
their competitors that fail.
Uh, and at the end of it all, they end upwith the bigger footprint economically.
Now you guys see why, um,I had him on our show?
Um, because as you getlistened to our show, right?
Um, we talk about this stuff all the time.
Sales can actually just, justgetting the big sale can cause.
(15:57):
Sometimes bigger problems 'cause we'reactually masking the, the infrastructure,
the, the health of the business.
Um, knowing your numbersis, is really important.
And, and again, everyone has a planfor your, your money, uh, to you.
And that's what those, um,statements, I believe help.
(16:18):
So.
Um, in your experience, how has,how often is a business really
just a job in disguise for people?
Yeah.
Like what's the turning point forthem to become the self-employed
owner to a true asset?
Yeah, it, it, it's a great question.
You know, th there are not many smallbusinesses which would meet that
(16:42):
definition of not being the owner's job.
Um, and uh, and for most peoplethat's okay because, uh, they are
looking for a place to spend theirtime to create value and earn.
Profits are a paycheck.
And so, uh, in order to really get tothe point where it's no longer a job,
you have to be able to not go there.
And so it could be a lot simplermaybe for a sandwich shop
(17:03):
owner to get to that point.
You know, you see a lot offranchise sandwich shops where the
owner isn't going to be present.
That's a, a business that theyown, but it can be deceiving too.
So, you know, if you think about a wellorganized systematized business, you
might think about McDonald's, right?
Yeah.
I, I have a friend whoowns three McDonald's.
He works 40 to 50 hours a week, andhe does not set foot in any of them.
(17:28):
He is doing sort of the CEO level workof a person that owns three McDonald's.
He's supervising thenumbers as they come in.
He's reviewing certain kinds of likesecurity footage and things like that.
He's reviewing the orders.
He's making sure that thepurchasing ratios are in line with
the expenses that they expect.
Uh, he's dealing with HR issues, he'sdealing with all kinds of stuff, banking.
(17:50):
Making decisions about newcapital equipment, et cetera.
It's a full-time job just supervisingwhat is happening in those businesses.
I, I actually deal with a lot of,uh, of people who want to get into
the world of buying a businessand, and one of the things they'll
say is, I don't wanna buy a job.
I wanna buy a businessthat is running on its own.
And what I will say to that person is thatif they think about the local gas station,
(18:14):
let's say you live near an Exxon station.
That Exxon Station has a manager whoruns the day to day, but the head office
of Exxon does not let that person runthe business all year and then submit
financial statements to head office.
There's somebody in the communitywho's called the regional manager.
And that person is looking at theperformance of that individual station
(18:37):
along with maybe 15 or 20 locations.
Right.
And that person is looking at the, theweekly sales, they're looking at the,
you know, the, the split between gasolinesales versus corner store item sales.
Like they're, they're, they're kindof supervising that manager to make
sure something is not going wrong.
And when they see something in thenumbers that shows that there's a problem.
(18:58):
That regional manager will oftenzoom in and go talk to that
manager and they'll figure out why.
Yeah, yeah.
Oh, there's street, there's streetconstruction going on right now.
Okay, well of course your sales are down.
It's hard to get in here.
But, or, or is there something else?
Is somebody stealing?
You know, is there a shopliftingproblem is, are certain
deliveries getting delayed?
Are you running out a premium?
Like, like they're gonna dive in there andthey're gonna figure out what is going on.
(19:20):
We have to fix this.
As a business owner of a smallbusiness, if you don't want to be
in the store every day, you have tohave that regional manager skillset.
You have to know the business wellenough that you can look mm-hmm.
At some kind of dashboard of informationabout that business, and you will
immediately know what's going on inthat business or what might be wrong.
(19:41):
And this is where a lotof buyers fall down.
You know, I, I, there was this, uh,transmission shop that was for sale.
Yeah.
And it was advertised as an absenteeowned transmission shop, and the
person who owned it spent, uh, themajority of the year down in Florida.
And this was up in a northern state.
Yeah.
And um, the issue though was thatthis guy had managed it himself
(20:04):
for 20 years and then he trainedother people to do those roles and
he then started to go to Florida.
Now from Florida.
Because of the computer and internet.
He was still doing payroll, hewas still doing the banking.
He was still looking at the POS system.
Every day he would pick up the phoneand call the manager and in a 10
minute conversation, know exactlywhat was going on in that business.
(20:27):
So was it really absentee owned orwas it just being managed remotely?
Yeah, exactly.
I think, I think it wasmanaged remotely, right?
Exactly.
But it was being advertisedas absentee owned.
And so that's a trap for somebody.
Mm-hmm.
Because if you don't know the transmissionbusiness and you bought that kind of
business, you would not have the skillsetthat this gentleman had to be able to
(20:50):
remotely manage it the way that he did.
And so, uh, for a lot of the clients thatI work with that wanna buy a business.
Even if they're buying something thatthey think they can do this with, they
often need to go in there onsite, learnto be the manager, and then they can build
the systems and processes, learn whatthe KPIs are, learn what numbers they
want on their dashboard for management.
(21:12):
Then they can step back andtrain someone else to do that
day-to-day management role.
And they will then understand what'sgoing on in the business because they've
been in it and, you know, so, so it's,it's, uh, it, there's nothing easy.
About small business.
Uh, and I know you know this 'causeyou've been in small business, but what
the people I think that kind of get,uh, get tricked into this, uh, or, or
(21:34):
fall for the, the sort of daydream ofsmall business maybe are people that
work in big companies where you'rereally good at the thing you do.
And then you convince yourself thatthat means you're good at business.
But the, the, the, the trick withbig companies is that there's a
hundred other people doing theirsmall role very well as well.
Yeah.
And you don't even see all the stuffthat's going on in the background
(21:55):
that's being taken care of for youwhen you're in that big company.
But when you're in the smallbusiness, everything falls.
Everything falls on the owner's shoulder,and it can be quite overwhelming,
especially if you're trying to work thereduring the day and take care of a lot of
this stuff in the evenings, for example.
So, so in that, I mean, again, I seethis all the time where people are
(22:17):
sold a, um, something on TikTok or,or, uh, social media, YouTube, oh, just
buy this thing and I'll teach you howto do this and, and, um, then there's
no way you're gonna lose, but, but.
It's, it's a passive income deal.
And so you probably seethese ads all the time.
(22:37):
And so then they have these clientsthat come in and they're like, well,
I'm gonna do this and I'm gonna buy awashing machine, uh, company or whatever.
Uh, you probably heard the dry cleanerdeal, uh, because it's passive.
I don't have to do anything.
Uh, no one's there.
And and how do you combatthat when it's so pervasive?
When I, I think about this as, oh,well, if I just make a bigger sale,
(23:00):
more, more sales, it'll be con fine.
Um, but having those systems and, andwhat systems would you start saying.
If I was gonna buy a business,what's a key system I need to be
looking for right from the beginning?
Well, I, I think that if anyone'sgonna buy a business, they should
know something about business.
Buying a business is not for new people.
(23:22):
Buying a business is for business people.
Uh, you, you need to have someidea what you're getting into.
And the amazing thing about businessis that you can actually get paid to
learn business by working in a business.
Mm-hmm.
So, so if you have a, a corporate jobof some kind, and you're thinking,
I wanna own my own small business,I wanna own a, a, I don't know,
(23:43):
a salon or something like that.
Yeah, yeah.
Well, you can go work in a salon.
Yeah.
And you can see firsthand onyour own what is going on there.
Yeah.
And not just the way a customer seesit, but you know what's going on there
all the time in the salon and reallyget an idea of how these things operate.
The, the other thing is thatthere's a vast amount of
information available out there.
(24:04):
So, um, you know, there are.
Publicly published records ofbusiness performance that are,
uh, aggregated from tax returns.
And so you can look up, for example,beauty Salon and you can find the data
sorted by quartile where, um, you can,uh, see like what does a bottom quartile
performing beauty salon look like?
What does a mid.
You know, what do themid quartiles look like?
(24:25):
What are the top tier look like?
And you can see the data as far as salesand you know, all the expenses and cost
of goods sold as a percentage of revenue.
And you can then see how thesebusinesses are performing.
Um, it's amazing to me how manypeople don't do that kind of research.
And so like.
I just have to stop you there.
Like, one of the things I saw for usis we interned, uh, at a coffee shop.
(24:51):
This was in 2000 7, 0 8 beforewe opened up our coffee shop.
We interned, we worked for freeat a coffee shop and then, and,
and they were like, well, whywould you do that for free?
Like, well, because we'regonna learn everything.
And then the owner went onvacation for a week and we
were able to run the operation.
(25:11):
We did it for free, for, it was goodfor her, uh, the owner and for us.
And so by interning, I didn't had noexperience in business, but uh, got
some by interning and then, and then westarted that business and now I'm like,
oh, that was just the training ground.
Yeah, of owning a business isstarting a business, um, that we did.
(25:35):
And, and people are like, yeah,but it was just a coffee shop.
I'm like, you don't understandall the crazy stuff that happens,
that payroll, all the things thatAmanda did that no one knows.
Um, and you just said like the systems.
And that's why when I have allthese like entrepreneurs coming in,
they're like, I'm just gonna do this.
(25:56):
And I'm like, yeah, you need an Amanda.
You need somebody inthe background building.
And that's what you're saying is, isthere's, there's an Amanda system or
something happening, uh, that you need.
I'm not just saying that she'sthe magic, but I would say she is.
Um, that's why she's, you, you wantto have systems and then you want
(26:16):
have some kind of idea of what'sgonna happen when the systems.
Fail.
Mm-hmm.
Or when an ex, an ex, uh, what doyou call it, an exception occurs.
Yeah.
Yeah.
So I'll, I'll give you an example.
You could have a receiving system fora small warehouse where trucks arrive,
the truck driver comes around with somepaperwork, it's gotta be signed off.
You gotta count the pallets comingoff, and then you have to input
(26:39):
that inventory into the computer.
And then there's a certain way to storethe inventory in the warehouse of a
certain place to put different things.
Right.
So, so that would be a very natural.
Kind of system for somebody todevelop if they were owned a
business that had a small warehouse.
Yeah.
Now how does the system work whensome of the employees show up stoned,
(27:00):
right?
Yep.
And, and, and so like I love to throwquestions out like this to people that
are in, that you're describing and wherethey say, I'm just gonna get a business.
I'm gonna do this.
Right?
So, so what is the process whenyou have impaired employees now?
Mm-hmm.
Driving around in a forklift.
Moving tens or hundreds ofthousand dollars worth of stuff
around, what's your process then?
(27:22):
Right?
And, and then it oftenbecomes an exception.
Now we have to have sort of thevoice of ownership or the voice
of management has to come in hereand start making some decisions.
And it's funny because bigger companiesprobably have a system for this.
Yep.
Like, like they've got a documentedpolicy and some manager can open
a book somewhere and it can say,okay, if you have an employee in
(27:43):
this condition, this is what you do.
You know, number one, do this.
Number two, do this.
Number three, call hr. Like whatever.
Right?
Like number one, take the keys out ofthe forklift keys outta their hand.
Number two, ask 'em to leave.
Number three, call hr. Like.
If, if you're a small business owner andyou've never had to deal with that kind of
thing before then, then you can get stuck.
And I know this because I've had clientsof mine call me and say, Dave, one of
(28:07):
my employees just showed up and gotinto a fight with another employee.
What do I do?
And, and I'm like, you need toget help from an HR professional.
Right.
Right.
Some of it, I, I feel like it's obvious.
Like I, I don't know.
Maybe I'm just, um, I, I have no ideaif I, if I'm just smarter or something,
but I'm like, um, okay, if I havea coffee shop and I have a recipe
(28:31):
for a drink, if I deviate from therecipe, then it's not the same drink.
And so the, the customerwants the same drink.
Whether barista one orbarista three does it.
And then you have clients or oror staff that come in and say,
well, let's, let's do it this way.
And they're like, no,that's not the way it works.
(28:52):
Here's the recipe, here's the system,here's the way in which we do it.
And that's kind of like the McDonald'smodel, but you have to still make sure,
like whenever from from a businessperspective, we were buying a lot of
milk and people would just, the staffwould just throw away extra milk.
It's like, all right, well wehave 15 gallons of different,
(29:15):
half, half open milks.
And I'm like, wait, we gotta figureout and measure it out because we're.
We have waste.
Uh, and, and then on the flip side, allthese people are like, if I, I'm broke,
so I'm gonna, or I have a little bitof 401k money, so I'm gonna go buy a
business so I can make sure I'm good.
Um, and they've never actually.
(29:37):
Been behind the bar of anything,or, you know what I mean?
Um, and I, I find that interesting.
Um, what, what I find interestingis when I, I I do meet a lot of,
uh, business owners who are inindustries where staff earn tips.
Mm-hmm.
And, uh, what's amazing to me is that,uh, there are several of them that
I've met over the course of time whounderstand that some of their employees
(29:59):
earn more in the business than they do.
Mm. Yeah.
And, and that, that's a big shockerto people typically on the street
who, who just assume that businessowners, you know, are successful,
wealthy people, et cetera.
Uh, the truth of the matteris there's a lot of businesses
out there that are marginal.
Uh, and there's a lot of businesses,you know, when you hear about.
(30:21):
You know, businesses sort of pushingback against things like minimum
wage increases and things like that.
You know, when when minimum wage goesup, people like to say, well, you know,
the workers deserve it, we have to givethem more money, et cetera, et cetera.
But what you then are doing to thebusiness owner is that business
may not be making a lot of money.
Yep.
And so the business owner thenhas to make a decision, do I eat
(30:45):
the cost and of labor increase?
Do I just take it outta my profits?
If, if that's even an option, or do Iraise my prices and risk losing customers?
Yep.
Right.
And this is, this is theconstant tightrope that small
businesses always are facing.
And we're seeing it again herewith the, the, the trade tariffs
and things that are coming in.
(31:05):
When, when the, um.
Tariffs against steel were announced.
Um, I had all kinds of people callme up saying, you know, I'm looking
for solutions because the cost of oneof my most, one of my biggest inputs
into my process just went up by 50%overnight by a government rule, right?
And, and what do I do?
(31:25):
Like, I don't know if my customerswould be willing to buy what
I sell if they had to pay.
That much more on top of theprice that I'm already charging.
And, and this is where, um, you know,I don't think the public necessarily
understands the value the business brings.
I heard, um, you know, someone, uh, apublic official actually say that, oh,
(31:47):
well, you know, if a business isn'tmaking much money, maybe it's not a
business we want in our community, but.
That, that's very dismissive andvery arrogant because there are
businesses that don't make any money,but they still employ 10 people, and
as long as they're functioning, those10 people are getting a paycheck.
The minute they stop functioning, thosepeople are no longer making money.
But business is difficult.
(32:07):
Like there's a, a. A central bankerfrom the 1950s named John Exter,
and he was studying what happensto money in a, in the a time of
panic, like economic uncertainty.
Yeah.
And he ended up creating something calledJohn Ester's inverse pyramid of liquidity,
where he tried to describe how peoplewant to trade some assets for more liquid
(32:29):
assets when things are, are in a panic.
Right?
Yeah.
And so at the very bottom, at the,the point on the bottom, he put
gold and then there's things like.
Currency notes, treasury bills fromthe government, publicly, this set
of stocks, all these other differentkinds of investments with each
layer going up, being less liquid.
A small business is way up at thetop because it's highly illiquid.
(32:51):
You can buy a small business and then ifyou decide you don't like it, it could
take you two years to sell it again.
Yeah, so it's.
You know, it's, it's, it's highly illiquidand it is a risky asset, uh, because
so much is outside of your control.
I, I use the example of,of, uh, like Coca-Cola.
You know, Coca-Cola is sold everywhere.
It's a big, giant company.
(33:12):
If I opened up.
A very, uh, you know, tasty microbrewery, for example, in a small town.
Mm-hmm.
And everyone decided to drinkmy beer instead of Coca-Cola.
I would have a successful businessat the expense of Coca-Cola, but
they probably wouldn't even notice.
Yeah.
Because the, the sales theywould lose in the small town.
Don't even register becausethey're such a big company.
(33:34):
But now a canoe competitor couldopen another microbrewery across
the street from me and thatcould put me outta business.
Yeah, because my economicfootprint is so small, I'm.
A hundred percent in one market, a hundredpercent in one category, a hundred percent
reliant upon a group of local peoplethat want to come and drink my product.
(33:56):
And as soon as there's a strong competitorthat then threatens to divide that market,
there may not be enough of a marketfor them either, but the fact that they
open up could actually kill us both.
Right.
And, and so these risks are everywhere.
Uh, small business is one ofthe riskiest asset classes.
There are.
It, it can be quite lucrative, whichis why people get drawn into it.
(34:18):
Um, but I, I mean, I'm nota, a cheerleader for people
that, that don't know anythingabout business to get into it.
I think that, you know, babysteps are the way to go.
So, you know, get a job in the industrythat you think you might wanna be an
owner in to really learn how it works.
Yeah.
Maybe start some kind of side hustle.
Where you can get some experiencein the industry and really learn the
(34:40):
ins and outs, make some contacts,uh, build a network of understanding,
you know, a network of people amongstthe suppliers and things like that.
There's all kinds of ways thatyou can try to mitigate risk.
I think that buying a business.
Definitely is a way to reduce riskbecause you already get customers,
but the problem that I see a lotof people doing is they'll end up
(35:01):
in a bad deal where they overpay.
And when you overpay for a business,well now you can't suffer any
shortage of sales because of thedebt service you've committed to.
So it's, it's almost the same risk asdoing a startup and not finding enough
customers with this one big exception.
If you start a business, often you'rerisking your savings and maybe,
(35:22):
you know, credit card balance orwhatever that you've put into it,
and if it fails, you lose that money.
But if you buy a business.
Then lose customers and can't makeyour payments and the business fails.
You could be on the hook for a personalguaranteed bank loan of hundreds of
thousands or millions of dollars.
And so the opportunity forloss is, is there as well.
(35:43):
And then that's, that's why we're inbusiness, Brandon, because, uh, people
come to us for help to analyze dealsthat they're gonna be looking at.
And, and, and through seeing the successand the failures over the course of time.
I mean, that's all the experiencesthat I have that, that went into the
book when I was writing with Mark.
Yeah.
And, uh, the reason that Mark and Idid it together was because one of
(36:05):
the tools that I've seen people usesuccessfully in making their business more
resilient is the bank on yourself style.
Uh, high cash valuelife insurance policies.
It's, it's a tool that gives you.
Uh, options with respect to liquidity.
Um, and, you know, it givesyou a lot of power, like, where
else can you borrow money?
And you are the one thatdictates the repayment terms.
(36:25):
You can even pause the payments ifyou want, with no repercussions.
Like, there's so many advantages, but,you know, for, for people out there that
own a business, um, this book is not.
You know, sort of a marketingpiece for Bank on yourself.
Uh, one of the things that, that I setout with Mark at the beginning is I
said, look, I do not want any one starreviews on Amazon saying this is just
(36:49):
a book about pitching life insurance.
Yeah.
This book is about small business,and it's about building a stronger
small business that is moreresilient to downturns and ultimately
builds more value for a sale.
And, uh, is gonna be betterat providing for you and your
family in a more predictable way.
Um, and, you know, we show alldifferent kinds of tools in there
(37:10):
that you can use to achieve this.
Uh, you know, just lifeinsurance being one of them.
Well, and as, as I want to close itup here, but knowing you guys hear
my story a lot of times, but mm-hmm.
As I was reading the book, you know,thinking about last to get paid, you
know, the staff makes more than me.
(37:31):
Um, I'm the greatest assetstill, even though the other, um,
we're not making a ton of money.
We are the greatest asset.
If we go, then the business goes right.
Um.
And knowing that we are in a world likeI was a coffee shop, you know, everybody
loves Starbucks, but they would beafraid to walk into my coffee shop, and
(37:53):
then I'd have different taxes becauseI'm a coffee shop, not a grocery store.
And the grocery store didn't have acertain tax on their coffee because,
and I've had clients yell at usbecause they're like, well, how you,
why are you paying this extra tax?
I'm like.
Because it's a restaurant thingand they're not a restaurant,
even though they're a restaurant.
Um, and it would get really confusingand frustrating and big business
(38:17):
plays, different rules and smallbusiness we're trying to help.
And so I would say.
As you guys are listening to this,support your small business owners, right?
Um, sometimes maybe they, it lookslike they're making decent money.
Oftentimes it's a struggle.
It's really hard.
Um, but, uh, I want to close withthis is as you think about business,
(38:41):
um, just one final question ishow do you connect personal?
Because a lot of times, uh, thebusiness owner is, is stressed, doing
all the things, and they, they deflector they don't take care of personal.
How do we bridge the gap betweenbusiness and personal and how do you
(39:01):
see this book helping in bridging that?
Yeah, so, so, um, personal and businessgets mixed up whenever there's scarcity.
Because when, when there's abundance,what you, you know, what I do in my
business is all of my employees andmyself we're paid twice a month.
And that money goes from my businessinto my personal account, and I
(39:24):
run my household on that money.
And so when I'm at home doing my personalstuff with my household and everything,
I'm running my household just likeevery other employed person out there.
I'm living within mymeans, laid out with that.
Paycheck that I get, and thenwithin my business, I know that
that payroll is a certain expenseI have to pay out every month.
And I, and my business, you know, workswith that and my business is profitable.
(39:48):
I can then focus on my business knowingwhat my expenses are and knowing what
my sales are, et cetera, and I canfocus on making it run correctly.
Mm-hmm.
When we end up, when we end up withproblems of mixing the personal of
the business, it's often becausethese things happen, something
goes wrong in the business.
Now I don't wanna take moneyoutta the business 'cause
(40:08):
I'm afraid I might need it.
So I don't pay my personal,you know, paycheck or salary.
Mm-hmm.
From the business.
Mm-hmm.
Yep.
But then there's some kind ofurgent need in my personal life
because I didn't take a salary.
Now I've got this bill that'slate that's gotta be paid.
So the only place I know of toget money is from the business.
And so as soon as this chain ofevents begins, you lose control.
(40:31):
And now all of a sudden.
You don't really know what's going on.
And a lot of the times with smallbusinesses, if they, if there something
is going wrong, it's often because theyjust don't know their numbers, they don't
have good bookkeeping, they're not ableto look at their financial statements and
their business and see what's happening.
It's not being kept up to date,it's not accurate, et cetera.
(40:53):
Then they start doing things liketaking money outta the business
account for personal stuff, andthen they don't record it properly.
Yeah.
And, and it becomes more and more obscure.
We lose visibility into what's happening.
And all of this is going to do isit's going to, uh, do two things.
What, what's that famous,uh, quote of a bankruptcy?
It happened very slowly atfirst and then all at once.
(41:15):
I, I don't even know the quote, butit, it sounds like a good quote.
So, so what happens is, is that.
You, you start to play thisjuggling game with cash.
Yep.
And you, and then you start to think thatyou're smart with it because you seem
to be able to juggle it and you seem tobe able to be on top of these things.
But what is happening is that both inyour business and your personal life
(41:36):
is there are accruing liabilitieswhich you're not recognizing.
Yeah.
So the, the business, even thoughyou've got these cash shortages, may in
fact be earning an accounting profit.
Which means you will have some kind oftax bill due, and that means all of a
sudden you're gonna get to the end ofthe year, the accountant's gonna tell
you, you made money, now you gottafile a tax return and you owe taxes.
(41:57):
And then like, where are yougonna get the money for this?
Yep.
And so you, you end up on this slipperyslope of juggling things between personal
and business, and then you hit a brickwall with something like a big tax bill.
And then you say, oh my God, howam I gonna deal with this now?
And then people make one of two choices.
They either choose to address it, whichoften means having tough conversations
(42:20):
with creditors, um, you know, withtheir landlord, with people like that.
And it may lead to closing thebusiness, may lead to them having
to go talk with a bankruptcyattorney or something like that, or.
They choose to ignore further, which meansthey're just dragging this stuff out.
Now they owe money to the government,now they owe money to other people.
Right.
And it just, it just makesthe problem worse and worse.
(42:41):
And, um, unfortunately, I've seenpeople go through this and the, the
key to the whole problem was thatthere were issues in the business.
Which were never fixed.
And the the, the worst thing that canhappen is if your business starts to
fail, and then you start to feed thatbusiness with your own personal resources.
Uh, the purpose of a business is toprovide a product or service in a way
(43:04):
that earns you money so that you canthen support yourself and your family.
And if the business isn't doingthat, you have to set some very clear
criteria for what needs to happenand what the timeline needs to be.
You need to draw your red line, youknow, if you wanna put it that way.
Yeah.
Where you say, we have to figureout how to get the sales up to here,
how to get the profits up to hereso that this makes money again, and
(43:26):
we have this much time to do it.
And.
If you wanna be really forthrightand honest, you need to bring
your team in on this too, becausetheir jobs are at stake as well.
And working together, you're gonna havea greater opportunity to come up with
different ideas and try different things.
But if you cannot achieve that goal, ifyou cannot hold the business around in
(43:47):
time to do what you know, to meet thatdeadline, then you have to realize that
the business is no longer an asset.
It's a liability.
Yeah.
And you want to get rid of liabilities.
You don't wanna let them drag you down.
And so, you know, that's the pointwhere people have to start thinking
like, how do I shut this thing down?
Mm-hmm.
Uh, do I go get a job?
Like how am I gonna support myself?
(44:08):
Um, you don't want to let a business turninto a liability and then turn into an
anchor that drags you down into the water.
Yeah, I think that, um, is again,why we sold overflow, um, and the
changes that were happening wasbecause of those, those things.
And again, why, um, we, I highlyrecommend the business fortress, uh,
(44:32):
again, how to grow, scale and protect.
Like, grow, protect,and exit your business.
Um, it is on Amazon.
Um, the reason that I think it'sso powerful, it's, it's not just,
again, the life insurance is thereason that I was able to sell the
business and not close the businessbecause of those things that we did.
Not knowing the, this book was, I mean,what didn't exist then, but, but some
(44:56):
of those things and why I think thisis powerful and, and so as you guys
are running businesses, as you are.
Thinking, Hey, it's gonna be, um,the golden brick road, whatever,
yellow brick road after I buy thisbusiness, it's gonna be perfect.
Sun, sunshine, and rainbows.
Um, that's not always the case.
And so building with the end inmind, uh, also get this book, even
(45:21):
if you have a successful like years.
I'm, I'm on the moon.
It's, it's great.
Well, at some point you might wannasell or, or have the ability to sell.
So get this book so that way you are ina even better position to sell it for a
higher number versus a smaller number.
So any closing things you wanna leave, um.
(45:42):
Um, these guys with beforewe, uh, end it, uh, no.
Just if, if anyone out there isinterested in the topic of buying,
selling, financing, or managingsmall businesses, uh, just come
find me anywhere on social media.
If you type David Barnett's smallbusiness in any of the podcast
catchers or YouTube, you'll find me.
I've been online now for over 11 years.
I've.
(46:03):
Like 700 videos on different topics.
Uh, and that's the stuff that me and myguests talk about on a regular basis.
And, and if you are thinking aboutgetting to a position where you
wanna sell your business one day,I'd, I'd love to help you out.
You can find more informationjust by looking me up online.
Cool.
And you guys know if you've look usup, um, and you want to talk to David,
uh, while we have a direct connection.
(46:24):
So, uh, thanks guys for joining us.
Don't forget, hit that like, subscribe,buy that book, uh, if you're a
business owner absent and out's abunch of business owners recently.
Um, because I know how valuableit is, I read it, I'm like, oh my
gosh, if I would've had this, um,probably would've made less mistakes.
Uh, so, um, David and Mark are amazing.
(46:46):
Um, I know Marcus, I've, I've had knownhim for years, so, uh, and I'm really
glad to have connected with you David.
So thanks again for joining us andwe will see you guys next time.
Thanks, Bryn.
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