June 6, 2024 • 25 mins
Welcome back to another episode of the Apex Business Advisors Podcast, featuring hosts Andy Cavanaugh and Doug Hubler. Fresh from the International Business Brokers Association (IBBA) conference, our hosts share experiences, humor, and insider stories. This episode highlights the importance of maintaining professional decorum even at industry gatherings and the invaluable networking opportunities such conferences provide.
Doug discusses the necessity of presenting accurate and transparent data to buyers while avoiding pro formas or projections in Due Diligence. Andy emphasizes the importance of business valuations, realistic expectations about potential growth, and the critical role of timing and banks in the valuation process.
Packed with actionable insights and anecdotes, this episode offers essential guidance for both buyers and sellers navigating the business selling process.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Music.
(00:40):
Welcome back to the Apex Business Advisors podcast.
I am your host, Andy Kavanaugh, joined by the president of Apex and soon to
be Hall of Fame, IBBA Hall of Fame, induction MC.
You know what? And president of Apex, Doug Hubler.
Doug, how's your IBBA petitioning gone to get us on stage?
(01:07):
They've not returned my call. But I'm not giving up.
I still see this as an opportunity for them to listen to us.
Now, talk about Hall of Fame.
Did you see those jackets those guys were wearing? The Hall of Fame jackets. They were.
They looked a little loungy. They were gimmicky.
(01:29):
They might as
well have been velvet kind of for crushed velvet jackets
but um i think my favorite part was the big gold hof on the right yeah it was
huge yeah they yeah but you know what good for them like i don't want to now
it sounds like sour grapes those folks that were part of the Hall of Fame,
(01:52):
and there were a dozen or so guys,
and there was a woman who was part of the very beginnings of the association.
And to tell you, those folks really are huge contributors to the IBBA, and they deserved it.
They've held positions with the board. It's all...
(02:15):
You know, it's a volunteer. They are running the organization over the past
few decades, and they teach courses and workshops, and they're on committees,
and they've been doing it forever.
And so, hey, they got a nice jacket and an award.
And their picture made. Their picture. I think they've got videos.
(02:38):
One of the things that I genuinely appreciated was their Hall of Fame speeches were relatively short.
Like they had to be coached. There was one guy that, the one guy that went on
and on was actually accepting.
With someone else. I think it was, was it his dad? No.
Or a colleague. It was a memorial. Yeah. Somebody who had been very important
(02:59):
to the organization who had passed in the last year.
When you start seeing the guy up there in the tuxedo, start giving the old watch check.
Well, you know, the IBBA conference, we talked about it.
A handful of weeks ago about that we were going there.
And my experience this year was a little different than the previous ones that
(03:20):
I'd gone to because I was a presenter. Right.
And you did a great job, by the way. I appreciate that. Thank you.
Sold out standing room only back to the gills, hanging from the rafters,
signing up for next year.
The, the thing about when you're a presenter is there's kind of the.
You miss a pretty good amount on the conference actually.
(03:42):
And a lot of the reason where I like going to the conference is I like learning
from other brokers and it's nice to give back and it's nice to contribute and
it's nice to, to present.
And I got tons of feedback and people coming up and asking me questions after
the, after the course and stuff like that.
But what that does is before your course, and I'm glad that I did this.
(04:03):
And I think I told you this when you came in the room, I was like,
I'm glad I brought my own tech. Yeah.
So I work off of a MacBook and all of the, all of the computers that they had
there set up were, were PC windows and the formatting was off. Right.
And I, I, I logged onto theirs and saw the first slide and I was like, oh man.
(04:27):
And I'm like, well, I'm glad that I went up to my room.
And the other thing that I did, and this is probably because I'm a one-man cluster,
I didn't wear what I was presenting for the morning session because I was like,
I'm going to eat lunch and I'm going to get something on.
I'm going to spill this stuff on my tie. Right. And then I'm going to have this
food stain that I'm just going to be distracted about.
(04:48):
So I actually didn't end up even eating lunch because I was right after lunch
and I had to be in my room 20 to 25 minutes before to get miked up and all of that stuff.
And so I could have just worn my clothes because I didn't even get lunch.
But the reports from you and others is that I didn't miss out on much,
but I definitely housed a pizza later that night.
(05:11):
Right. Yeah. But yeah, as a presenter, you miss stuff before and you miss the
sessions right after yours. Yeah.
But you, you, you know, the contribution there is important and they're always
looking for fresh content and new, new presenters.
So congratulations on that there.
I did take a picture of you. Thank you. And I think we'll be posting that.
(05:33):
I think you probably framed it. You're posting it everywhere.
It's my LinkedIn profile picture. So let me ask you something about,
about my presentation and some of the other presentations. Oh,
we're going to be honest now? Mm-hmm. Okay.
Well, it's just you and me. I'm going to be honest. I felt a little overdressed.
So I went full suit and tie. Right. Right. And all of the other presenters that
(05:57):
I went into were dressed like if they threw a coat on.
But they would take it off shortly after they started probably. But it was like.
Super casual and so it usually is
now the one other person who wore a
suit he was 80 some years
old okay so i'm in 80 i'm in good company was he
(06:20):
a hall of famer he was a he was a he has a phd and in a in tax so i mean you're
in you're in good company you know it's just kind of one of those things where
you like the session i went to before you you need to be professional i would
always We always err on the side of looking professional.
(06:40):
This is a professional organization. You're representing Apex.
So I think wearing a suit was fine, and I'd tell you to do it again.
Okay. Well, just maybe something a little darker in case I spill something.
Hey, wear red. Wear red. Hey, IBBA, what are you having for lunch right before?
Well, the other thing too about this conference was admittedly lesser attended
(07:05):
than the previous conferences.
What? They were saying it wasn't as well attended because it was on Mother's Day.
Well, okay. Now, you were at the last years.
To me, it didn't look like it was any last. No, we had quite a few vendors there.
We had banks there that were participating also.
(07:26):
Oh, there were banks there? I didn't realize. It was a huge crowd. It was a huge crowd.
The people at check-in just said that it was. And it might be a percentage because,
to your point, those folks that were inducted into the Hall of Fame,
when they were having the IBBA conference, it was probably them and about 12 other people.
Yeah. And now you're up near 1,000. Right. But I think that they said there
(07:48):
was maybe only like 750 or 800 people that attended it.
That was a huge, that was really good because when we, it has grown since we
started getting involved back 20 years ago.
And then it was the IBBA kind of took a dive during the financial crisis,
you know, down to a few hundred members.
Now we're back up to, I think we're over 2000 numbers or something.
(08:12):
So. Yeah. So I don't know, maybe they were talking that it was a percentage
of members that attended versus not attended.
Personally, if they don't do it on Mother's Day again, I'm not going to have
my feelings hurt because it's kind of a bummer when you're like either.
And again, Again, it's one of those things where part of the value,
like I had considered like, okay, do I just go for Saturday?
(08:33):
And it's like, okay, this is an important event. We learn a lot.
I don't want to shortchange it. Do I bring my wife? Well, then I bring her.
Then I'm going to want to, okay, I'm going to- You're not going to be networking.
Exactly. And like, hey, I'm going to go bust off and go hang out with you. And so-
It's a little unfortunate. I did just break away right after lunch on Sunday so I could get home.
(08:58):
Well, you do know that we were the prior weekend, which would normally have
been a time where we would meet.
That was a Kentucky Derby in Louisville.
Was that a busy time? That was fairly busy.
Was that a busy time for them? There were a few people. A few people attended that.
And I think they felt like people would want to go watch that versus go to the meeting.
So they didn't do it that weekend. And then this coming weekend is the PGA tournament there.
(09:24):
So we were kind of, I think it was kind of forced into that weekend.
I think they got a smoking good deal on the venue is why it was forced into that weekend.
Right. Okay. It's between the Derby and Valhalla and Mother's Day. It's a business.
Smoking good deal. Yeah. Well, all joking aside, I enjoy the conference.
I always feel like I come back from the conference refreshed with brand new
(09:47):
ideas that I can just come and have you just throw them right over the fence
to you for implementation.
But in all seriousness, I think that, and I sense it from my colleagues that
go, that it's always like just a handful of nuggets that you pick up.
And I'm hearing chatter in the hallways about phrasing or something that people have picked up.
(10:13):
Every time we go, we learn something, which is the whole point in going and
which is why it's probably been 15 years ago where I started to require certification of brokers.
And I think everybody has been happy with the results of their own.
(10:33):
You go into it not knowing what to expect.
And then afterward, you're like, you know, this has been a great thing for me
individually, for Apex, for the industry.
And so we're going to continue to go every year. We're going to contribute to it. Yeah.
I enjoy going and I think, and I want to talk about, I don't want to talk about
every class because like, quite frankly, there's some classes that are aimed
(10:57):
at how to be a better broker, which don't necessarily translate to,
it translates, but it's not really relevant to how we're going to help our buyers and sellers.
But did you attend any classes that you would say, this was something I learned that will 100% help me,
work with my buyers and sellers. You know, I think one of the things that I
(11:18):
would want to tell people is the reason we go and the reason we take these classes is it's,
and that we can share to our clients and to our customers that this is the way it's done.
And it's not just Apex broker saying this, this is industry-wide best practices.
(11:38):
And so what we take away, we can implement immediately.
And so I was in, I went to, I think one of the good classes I went to that I
could share is it was related to due diligence and the due diligence process.
And things to, obviously I'm not going to go through the whole thing,
(11:59):
but I think there were a couple of nuggets in there that are
important for buyers and sellers to
know why we do or don't do
certain things and one of
them is is just the fact that we do
not provide pro formas
or we don't provide projections
(12:22):
on businesses is because legally we
would be held responsible or the seller would be held responsible if a buyer
didn't attain those numbers whether it's revenue or cash flow or whatever so
what What we can provide is data that allows the buyer to do their analysis.
(12:44):
We can answer a lot of questions about trends and that kind of thing,
but we cannot legally put together a projection for the buyer.
Which is really something buyers should be doing themselves anyway. Right.
Because it's going to be based on their skill, their belief on how they can do it.
But now one thing we can look at is if a buyer all of a sudden says in month
(13:05):
one, I'm going to 10X revenue, we might talk to them about maybe,
hey, you know what? Pull it back a little bit. Maybe 8X.
But I think that as far as for us to actually create a projection model is really
us telling you that it's going to rain on Thursday.
(13:25):
And if it doesn't rain on Thursday, then it's on us. And I think,
you know, when I confirmed with a banker friend of ours that,
you know, the banks even get asked by the buyers to provide a projection.
The banker's like, no, that's not what we do.
A bank would be liable. This is something a buyer needs to do.
(13:47):
They need to do their analysis.
Now, we would fully expect a buyer to ask the questions and have a discussion
with the seller about this.
Maybe what the trends are, the way things are looking, are there new clients,
are there any things that are going to get in the way of, you know,
hitting numbers similar to the prior year, that kind of thing.
(14:09):
But I'm not going to put something in writing that could go back on the seller.
Yeah, the course that I attended that really kind of stood out,
again, most of the stuff that I would, I missed a couple sessions just because of the presentation.
So, don't feel like I went to, like, normally I think it's about,
you get about five sessions in over the course of the conference with the kind
(14:35):
of the whole groups together. Then you go to the breakouts and then the whole groups together.
And then they leave a lot of time for the vendor fair, which you can get some
new information out of there.
But I think when 50% of the marketplace is banks, it gets a little overwhelming.
Well, maybe it's almost embarrassing because then you're actively avoiding the
(14:59):
bankers because you only talk
to so many bankers at one place and everybody's saying the same thing.
And I think there are brokers around the country that do struggle with getting
financing, but we typically don't have an issue. We've got some great banks.
And so I'm not out searching for somebody who's going to do a deal,
not going for loan brokers.
And I had a guy grab me and he called me. I passed him up. He said, hey, Doug.
(15:25):
And I'm thinking, oh, it's somebody I know. I turn around and he's in my face
shaking my hand. Hey, I'm so-and-so.
Like, oh, my God, I just got.
How do I get out of this? I'm 15 minutes now in trying to get out of the conversation.
Yeah, your whole thing is spent on how do I get out of this?
So one of the courses that I attended was on valuations and kind of the process
(15:50):
of where a valuation is done with when a bank, when the SBA does it.
And this was a company, and full disclosure, they were selling valuations.
(16:12):
Mm-hmm. front end and then we will marry it to the bank's valuation so that it's SBA.
So a two-part valuation that is teed up for part B.
So part A gets you, this is what the business is valued at so that when you
get all the way down here to part B, you don't have surprises.
(16:34):
And it was interesting to sit in on that and understand where it was a banker
and after we just trashed all the bankers,
very knowledgeable SBA lender and the valuation firm co-presenting this.
And so it was interesting to hear the bank's process.
(16:57):
So did the bank and the valuation company work together on the timing of this?
Are they kind of in agreement on how that would work? Yeah. So they co-presented,
which was interesting because when I got my presenter's package,
it was like, do not sell your services.
And then we've got a valuation firm selling valuation services and an SBA lender
(17:19):
selling, hey, this is us, this is our bank.
But essentially what the whole premise, just to boil it down,
was the valuation firm was saying, we'll do a valuation upfront.
And the bank was saying, it's the last thing that we do with the change in the SOPs.
The last thing that we do is a valuation because that's where we spend money. Okay.
(18:10):
They go get a lease. They sign an APA. They go through the closing checklist.
And then we get about a week from there and it's like, okay,
we've got the APA approved by the bank. We've got the lease approved by the bank.
We've got the offer to purchase. Okay, everything's approved.
Now we're going to order the appraisal.
(18:32):
Wow. And so it's at that stage because they don't want the deal to fall apart
at any of those other critical points.
And so that's when they do the valuation.
And if that valuation, it's the last thing to come back.
And if it comes back, that $750,000 business is only valuing at $500,000.
(18:53):
Well, those are things we'd sure want to know up front. We have an issue.
So what they're saying is the valuation company, at least as a precursor view,
feels comfortable that it will hit it.
So they're not too concerned that it's not gonna, when they go through the full
valuation with the bank, it shouldn't be a problem.
Yeah, so part B of the, the part A is basically the valuation firm does the
(19:18):
bank valuation at part A.
As we go through the process, the bank is approving the buyer. Sure.
And then the part B is the part that the bank has to have prepared to submit to the SBA. Yeah.
So part B is really just a, okay, we're now going to convert this valuation
into what the SBA needs to.
(19:42):
But it was very eye-opening as to when in the process they're actually doing it.
But then when you hear the guy talking about it, about, you know,
we know the statistics of how many of these deals fall apart in due diligence,
why a bank might not want to spend that money and then have to deal with somebody
going, hey, I want my money back.
Yeah. You know, I guess, and that was one of the things, and we could debate
(20:03):
this probably on another episode, is most of our deals, after we've gone through
the initial work, the initial interview,
and the information that goes to the buyer, once we get to an offer,
the majority of the time, it's going to close.
It's priced correctly. We have a good offer. for there, there's obviously some
(20:26):
work and some hurdles, but the majority of the time we're going to get to closing.
So anyway, I guess, and that's in their experience that works best for them.
So, yeah. And it sounds like this is something that they've kind of pushed to
the back based on the amount of deals that have fallen through and some of the
new guidelines that came out in October,
(20:46):
that it's a relatively recent change that they would do these maybe a little
earlier in the process as part of helping the buyer through financial due diligence.
So that was one of the most eyeopening things that I had, but yeah,
you know, another successful IBBA conference that, uh, learn, learn something from.
I have another thing that I'd like to talk about if you've got a minute.
(21:10):
Just one. Just, and I think this is one of the things that we,
we kind of, we talk to our, our clients and we want to make sure things are
disclosed, we have the sellers sign a disclosure agreement,
so that the buyer knows going in if there are any things that they should be
(21:31):
aware of, anything that's material or licensing required, is there licensing
required, or is there family in the business that may be leaving?
And there's a whole list of things that we want to have disclosed. But sometimes.
Things come up and that may be material to the transaction and may impact the
(21:54):
buyer negatively if they continued.
And in those situations, it's always best to disclose that. And I think we've always done that.
We've always encouraged the sellers to disclose anything that's going to be material.
And I think this is another case where you go to these meetings and it's just
more ammunition as to why you do that.
(22:17):
There are plenty of examples of people getting sued by not disclosing information properly or timely.
Or let's say a seller's losing a client and it's 10% of the business or 15% of the business.
They know it's happening and it may not be for six months, but they know they're
(22:38):
going to be losing a client.
And those things need to be disclosed. And it might hurt the deal.
It may change the pricing.
But if you don't disclose it, you're going to run into some serious problems later.
And the legal hassle, stress, and cost just isn't worth trying to hide it from a buyer. Yeah.
(23:00):
And I heard that, that example, I also heard like regulation changes or process
changes or even a key employee that is leaving somebody that's very integral to the business.
And, you know, it's kind of one of those things where don't try to justify it.
Like, I think, you know, a lot
of times in life, we try to, we try to do something then apologize later.
(23:21):
Right. Right. Whereas, you know, most of the time in these business transactions,
there's no later apology.
It's, it's going to be litigated. Right. And I think we just have to be.
Like you say, it's kind of, you're just going to, if it even has a perception
of being an issue, it needs to be discussed.
Yeah. And it can be a phone call, but I think phone call with maybe a follow-up
(23:47):
email, some documentation that it's disclosed.
Well, and we have always talked about the seller's disclosure statement that
we have our sellers create and fill out, that those are living documents.
So if something changes, update that document.
Right, right. Right. But you just hope that you hope that the seller tells us.
Right. Right. You know, so sure.
(24:07):
All right. Well, again, another another successful IBBA conference.
Really looking forward to we're not going to beat this this drum,
but really looking forward to our I think we should do a breakout session on
how to get your own podcast broker and then Hall of Fame emcees, all that.
So, all right. Well, go out to the Apex website.
(24:32):
I think shortly Doug will be putting a vote here button for us to,
like one of those surveys, like, hey, vote for us to get into the Hall of Fame.
Maybe there's a signature.
Maybe we send out for signatures to get us on there. Yeah. Let's petition the IBBA. So, okay.
Other than that, we're just going to encourage you to go check out the
(24:54):
blogs all of our listings are out there sold businesses
always a fun one i met with a seller a
few weeks ago and he was asking what what are the what type of businesses have
you sold and you know it's nice to just point them right out to the sold listings
because um you know sold listed sold listed you know for us it's just kind of
day in and day out but it's a great great thing we have a lot of them out there
(25:16):
not every one of them is on that but there are quite Quite a few.
Yeah. So, all right. Until next week, if you're looking at buying or selling
a business, we got you, fam.
Music.
Music.
(00:40):
Welcome back to the Apex Business Advisors podcast.
I am your host, Andy Kavanaugh, joined by the president of Apex and soon to
be Hall of Fame, IBBA Hall of Fame, induction MC.
You know what? And president of Apex, Doug Hubler.
Doug, how's your IBBA petitioning gone to get us on stage?
(01:07):
They've not returned my call. But I'm not giving up.
I still see this as an opportunity for them to listen to us.
Now, talk about Hall of Fame.
Did you see those jackets those guys were wearing? The Hall of Fame jackets. They were.
They looked a little loungy. They were gimmicky.
(01:29):
They might as
well have been velvet kind of for crushed velvet jackets
but um i think my favorite part was the big gold hof on the right yeah it was
huge yeah they yeah but you know what good for them like i don't want to now
it sounds like sour grapes those folks that were part of the Hall of Fame,
(01:52):
and there were a dozen or so guys,
and there was a woman who was part of the very beginnings of the association.
And to tell you, those folks really are huge contributors to the IBBA, and they deserved it.
They've held positions with the board. It's all...
(02:15):
You know, it's a volunteer. They are running the organization over the past
few decades, and they teach courses and workshops, and they're on committees,
and they've been doing it forever.
And so, hey, they got a nice jacket and an award.
And their picture made. Their picture. I think they've got videos.
(02:38):
One of the things that I genuinely appreciated was their Hall of Fame speeches were relatively short.
Like they had to be coached. There was one guy that, the one guy that went on
and on was actually accepting.
With someone else. I think it was, was it his dad? No.
Or a colleague. It was a memorial. Yeah. Somebody who had been very important
(02:59):
to the organization who had passed in the last year.
When you start seeing the guy up there in the tuxedo, start giving the old watch check.
Well, you know, the IBBA conference, we talked about it.
A handful of weeks ago about that we were going there.
And my experience this year was a little different than the previous ones that
(03:20):
I'd gone to because I was a presenter. Right.
And you did a great job, by the way. I appreciate that. Thank you.
Sold out standing room only back to the gills, hanging from the rafters,
signing up for next year.
The, the thing about when you're a presenter is there's kind of the.
You miss a pretty good amount on the conference actually.
(03:42):
And a lot of the reason where I like going to the conference is I like learning
from other brokers and it's nice to give back and it's nice to contribute and
it's nice to, to present.
And I got tons of feedback and people coming up and asking me questions after
the, after the course and stuff like that.
But what that does is before your course, and I'm glad that I did this.
(04:03):
And I think I told you this when you came in the room, I was like,
I'm glad I brought my own tech. Yeah.
So I work off of a MacBook and all of the, all of the computers that they had
there set up were, were PC windows and the formatting was off. Right.
And I, I, I logged onto theirs and saw the first slide and I was like, oh man.
(04:27):
And I'm like, well, I'm glad that I went up to my room.
And the other thing that I did, and this is probably because I'm a one-man cluster,
I didn't wear what I was presenting for the morning session because I was like,
I'm going to eat lunch and I'm going to get something on.
I'm going to spill this stuff on my tie. Right. And then I'm going to have this
food stain that I'm just going to be distracted about.
(04:48):
So I actually didn't end up even eating lunch because I was right after lunch
and I had to be in my room 20 to 25 minutes before to get miked up and all of that stuff.
And so I could have just worn my clothes because I didn't even get lunch.
But the reports from you and others is that I didn't miss out on much,
but I definitely housed a pizza later that night.
(05:11):
Right. Yeah. But yeah, as a presenter, you miss stuff before and you miss the
sessions right after yours. Yeah.
But you, you, you know, the contribution there is important and they're always
looking for fresh content and new, new presenters.
So congratulations on that there.
I did take a picture of you. Thank you. And I think we'll be posting that.
(05:33):
I think you probably framed it. You're posting it everywhere.
It's my LinkedIn profile picture. So let me ask you something about,
about my presentation and some of the other presentations. Oh,
we're going to be honest now? Mm-hmm. Okay.
Well, it's just you and me. I'm going to be honest. I felt a little overdressed.
So I went full suit and tie. Right. Right. And all of the other presenters that
(05:57):
I went into were dressed like if they threw a coat on.
But they would take it off shortly after they started probably. But it was like.
Super casual and so it usually is
now the one other person who wore a
suit he was 80 some years
old okay so i'm in 80 i'm in good company was he
(06:20):
a hall of famer he was a he was a he has a phd and in a in tax so i mean you're
in you're in good company you know it's just kind of one of those things where
you like the session i went to before you you need to be professional i would
always We always err on the side of looking professional.
(06:40):
This is a professional organization. You're representing Apex.
So I think wearing a suit was fine, and I'd tell you to do it again.
Okay. Well, just maybe something a little darker in case I spill something.
Hey, wear red. Wear red. Hey, IBBA, what are you having for lunch right before?
Well, the other thing too about this conference was admittedly lesser attended
(07:05):
than the previous conferences.
What? They were saying it wasn't as well attended because it was on Mother's Day.
Well, okay. Now, you were at the last years.
To me, it didn't look like it was any last. No, we had quite a few vendors there.
We had banks there that were participating also.
(07:26):
Oh, there were banks there? I didn't realize. It was a huge crowd. It was a huge crowd.
The people at check-in just said that it was. And it might be a percentage because,
to your point, those folks that were inducted into the Hall of Fame,
when they were having the IBBA conference, it was probably them and about 12 other people.
Yeah. And now you're up near 1,000. Right. But I think that they said there
(07:48):
was maybe only like 750 or 800 people that attended it.
That was a huge, that was really good because when we, it has grown since we
started getting involved back 20 years ago.
And then it was the IBBA kind of took a dive during the financial crisis,
you know, down to a few hundred members.
Now we're back up to, I think we're over 2000 numbers or something.
(08:12):
So. Yeah. So I don't know, maybe they were talking that it was a percentage
of members that attended versus not attended.
Personally, if they don't do it on Mother's Day again, I'm not going to have
my feelings hurt because it's kind of a bummer when you're like either.
And again, Again, it's one of those things where part of the value,
like I had considered like, okay, do I just go for Saturday?
(08:33):
And it's like, okay, this is an important event. We learn a lot.
I don't want to shortchange it. Do I bring my wife? Well, then I bring her.
Then I'm going to want to, okay, I'm going to- You're not going to be networking.
Exactly. And like, hey, I'm going to go bust off and go hang out with you. And so-
It's a little unfortunate. I did just break away right after lunch on Sunday so I could get home.
(08:58):
Well, you do know that we were the prior weekend, which would normally have
been a time where we would meet.
That was a Kentucky Derby in Louisville.
Was that a busy time? That was fairly busy.
Was that a busy time for them? There were a few people. A few people attended that.
And I think they felt like people would want to go watch that versus go to the meeting.
So they didn't do it that weekend. And then this coming weekend is the PGA tournament there.
(09:24):
So we were kind of, I think it was kind of forced into that weekend.
I think they got a smoking good deal on the venue is why it was forced into that weekend.
Right. Okay. It's between the Derby and Valhalla and Mother's Day. It's a business.
Smoking good deal. Yeah. Well, all joking aside, I enjoy the conference.
I always feel like I come back from the conference refreshed with brand new
(09:47):
ideas that I can just come and have you just throw them right over the fence
to you for implementation.
But in all seriousness, I think that, and I sense it from my colleagues that
go, that it's always like just a handful of nuggets that you pick up.
And I'm hearing chatter in the hallways about phrasing or something that people have picked up.
(10:13):
Every time we go, we learn something, which is the whole point in going and
which is why it's probably been 15 years ago where I started to require certification of brokers.
And I think everybody has been happy with the results of their own.
(10:33):
You go into it not knowing what to expect.
And then afterward, you're like, you know, this has been a great thing for me
individually, for Apex, for the industry.
And so we're going to continue to go every year. We're going to contribute to it. Yeah.
I enjoy going and I think, and I want to talk about, I don't want to talk about
every class because like, quite frankly, there's some classes that are aimed
(10:57):
at how to be a better broker, which don't necessarily translate to,
it translates, but it's not really relevant to how we're going to help our buyers and sellers.
But did you attend any classes that you would say, this was something I learned that will 100% help me,
work with my buyers and sellers. You know, I think one of the things that I
(11:18):
would want to tell people is the reason we go and the reason we take these classes is it's,
and that we can share to our clients and to our customers that this is the way it's done.
And it's not just Apex broker saying this, this is industry-wide best practices.
(11:38):
And so what we take away, we can implement immediately.
And so I was in, I went to, I think one of the good classes I went to that I
could share is it was related to due diligence and the due diligence process.
And things to, obviously I'm not going to go through the whole thing,
(11:59):
but I think there were a couple of nuggets in there that are
important for buyers and sellers to
know why we do or don't do
certain things and one of
them is is just the fact that we do
not provide pro formas
or we don't provide projections
(12:22):
on businesses is because legally we
would be held responsible or the seller would be held responsible if a buyer
didn't attain those numbers whether it's revenue or cash flow or whatever so
what What we can provide is data that allows the buyer to do their analysis.
(12:44):
We can answer a lot of questions about trends and that kind of thing,
but we cannot legally put together a projection for the buyer.
Which is really something buyers should be doing themselves anyway. Right.
Because it's going to be based on their skill, their belief on how they can do it.
But now one thing we can look at is if a buyer all of a sudden says in month
(13:05):
one, I'm going to 10X revenue, we might talk to them about maybe,
hey, you know what? Pull it back a little bit. Maybe 8X.
But I think that as far as for us to actually create a projection model is really
us telling you that it's going to rain on Thursday.
(13:25):
And if it doesn't rain on Thursday, then it's on us. And I think,
you know, when I confirmed with a banker friend of ours that,
you know, the banks even get asked by the buyers to provide a projection.
The banker's like, no, that's not what we do.
A bank would be liable. This is something a buyer needs to do.
(13:47):
They need to do their analysis.
Now, we would fully expect a buyer to ask the questions and have a discussion
with the seller about this.
Maybe what the trends are, the way things are looking, are there new clients,
are there any things that are going to get in the way of, you know,
hitting numbers similar to the prior year, that kind of thing.
(14:09):
But I'm not going to put something in writing that could go back on the seller.
Yeah, the course that I attended that really kind of stood out,
again, most of the stuff that I would, I missed a couple sessions just because of the presentation.
So, don't feel like I went to, like, normally I think it's about,
you get about five sessions in over the course of the conference with the kind
(14:35):
of the whole groups together. Then you go to the breakouts and then the whole groups together.
And then they leave a lot of time for the vendor fair, which you can get some
new information out of there.
But I think when 50% of the marketplace is banks, it gets a little overwhelming.
Well, maybe it's almost embarrassing because then you're actively avoiding the
(14:59):
bankers because you only talk
to so many bankers at one place and everybody's saying the same thing.
And I think there are brokers around the country that do struggle with getting
financing, but we typically don't have an issue. We've got some great banks.
And so I'm not out searching for somebody who's going to do a deal,
not going for loan brokers.
And I had a guy grab me and he called me. I passed him up. He said, hey, Doug.
(15:25):
And I'm thinking, oh, it's somebody I know. I turn around and he's in my face
shaking my hand. Hey, I'm so-and-so.
Like, oh, my God, I just got.
How do I get out of this? I'm 15 minutes now in trying to get out of the conversation.
Yeah, your whole thing is spent on how do I get out of this?
So one of the courses that I attended was on valuations and kind of the process
(15:50):
of where a valuation is done with when a bank, when the SBA does it.
And this was a company, and full disclosure, they were selling valuations.
(16:12):
Mm-hmm. front end and then we will marry it to the bank's valuation so that it's SBA.
So a two-part valuation that is teed up for part B.
So part A gets you, this is what the business is valued at so that when you
get all the way down here to part B, you don't have surprises.
(16:34):
And it was interesting to sit in on that and understand where it was a banker
and after we just trashed all the bankers,
very knowledgeable SBA lender and the valuation firm co-presenting this.
And so it was interesting to hear the bank's process.
(16:57):
So did the bank and the valuation company work together on the timing of this?
Are they kind of in agreement on how that would work? Yeah. So they co-presented,
which was interesting because when I got my presenter's package,
it was like, do not sell your services.
And then we've got a valuation firm selling valuation services and an SBA lender
(17:19):
selling, hey, this is us, this is our bank.
But essentially what the whole premise, just to boil it down,
was the valuation firm was saying, we'll do a valuation upfront.
And the bank was saying, it's the last thing that we do with the change in the SOPs.
The last thing that we do is a valuation because that's where we spend money. Okay.
(18:10):
They go get a lease. They sign an APA. They go through the closing checklist.
And then we get about a week from there and it's like, okay,
we've got the APA approved by the bank. We've got the lease approved by the bank.
We've got the offer to purchase. Okay, everything's approved.
Now we're going to order the appraisal.
(18:32):
Wow. And so it's at that stage because they don't want the deal to fall apart
at any of those other critical points.
And so that's when they do the valuation.
And if that valuation, it's the last thing to come back.
And if it comes back, that $750,000 business is only valuing at $500,000.
(18:53):
Well, those are things we'd sure want to know up front. We have an issue.
So what they're saying is the valuation company, at least as a precursor view,
feels comfortable that it will hit it.
So they're not too concerned that it's not gonna, when they go through the full
valuation with the bank, it shouldn't be a problem.
Yeah, so part B of the, the part A is basically the valuation firm does the
(19:18):
bank valuation at part A.
As we go through the process, the bank is approving the buyer. Sure.
And then the part B is the part that the bank has to have prepared to submit to the SBA. Yeah.
So part B is really just a, okay, we're now going to convert this valuation
into what the SBA needs to.
(19:42):
But it was very eye-opening as to when in the process they're actually doing it.
But then when you hear the guy talking about it, about, you know,
we know the statistics of how many of these deals fall apart in due diligence,
why a bank might not want to spend that money and then have to deal with somebody
going, hey, I want my money back.
Yeah. You know, I guess, and that was one of the things, and we could debate
(20:03):
this probably on another episode, is most of our deals, after we've gone through
the initial work, the initial interview,
and the information that goes to the buyer, once we get to an offer,
the majority of the time, it's going to close.
It's priced correctly. We have a good offer. for there, there's obviously some
(20:26):
work and some hurdles, but the majority of the time we're going to get to closing.
So anyway, I guess, and that's in their experience that works best for them.
So, yeah. And it sounds like this is something that they've kind of pushed to
the back based on the amount of deals that have fallen through and some of the
new guidelines that came out in October,
(20:46):
that it's a relatively recent change that they would do these maybe a little
earlier in the process as part of helping the buyer through financial due diligence.
So that was one of the most eyeopening things that I had, but yeah,
you know, another successful IBBA conference that, uh, learn, learn something from.
I have another thing that I'd like to talk about if you've got a minute.
(21:10):
Just one. Just, and I think this is one of the things that we,
we kind of, we talk to our, our clients and we want to make sure things are
disclosed, we have the sellers sign a disclosure agreement,
so that the buyer knows going in if there are any things that they should be
(21:31):
aware of, anything that's material or licensing required, is there licensing
required, or is there family in the business that may be leaving?
And there's a whole list of things that we want to have disclosed. But sometimes.
Things come up and that may be material to the transaction and may impact the
(21:54):
buyer negatively if they continued.
And in those situations, it's always best to disclose that. And I think we've always done that.
We've always encouraged the sellers to disclose anything that's going to be material.
And I think this is another case where you go to these meetings and it's just
more ammunition as to why you do that.
(22:17):
There are plenty of examples of people getting sued by not disclosing information properly or timely.
Or let's say a seller's losing a client and it's 10% of the business or 15% of the business.
They know it's happening and it may not be for six months, but they know they're
(22:38):
going to be losing a client.
And those things need to be disclosed. And it might hurt the deal.
It may change the pricing.
But if you don't disclose it, you're going to run into some serious problems later.
And the legal hassle, stress, and cost just isn't worth trying to hide it from a buyer. Yeah.
(23:00):
And I heard that, that example, I also heard like regulation changes or process
changes or even a key employee that is leaving somebody that's very integral to the business.
And, you know, it's kind of one of those things where don't try to justify it.
Like, I think, you know, a lot
of times in life, we try to, we try to do something then apologize later.
(23:21):
Right. Right. Whereas, you know, most of the time in these business transactions,
there's no later apology.
It's, it's going to be litigated. Right. And I think we just have to be.
Like you say, it's kind of, you're just going to, if it even has a perception
of being an issue, it needs to be discussed.
Yeah. And it can be a phone call, but I think phone call with maybe a follow-up
(23:47):
email, some documentation that it's disclosed.
Well, and we have always talked about the seller's disclosure statement that
we have our sellers create and fill out, that those are living documents.
So if something changes, update that document.
Right, right. Right. But you just hope that you hope that the seller tells us.
Right. Right. You know, so sure.
(24:07):
All right. Well, again, another another successful IBBA conference.
Really looking forward to we're not going to beat this this drum,
but really looking forward to our I think we should do a breakout session on
how to get your own podcast broker and then Hall of Fame emcees, all that.
So, all right. Well, go out to the Apex website.
(24:32):
I think shortly Doug will be putting a vote here button for us to,
like one of those surveys, like, hey, vote for us to get into the Hall of Fame.
Maybe there's a signature.
Maybe we send out for signatures to get us on there. Yeah. Let's petition the IBBA. So, okay.
Other than that, we're just going to encourage you to go check out the
(24:54):
blogs all of our listings are out there sold businesses
always a fun one i met with a seller a
few weeks ago and he was asking what what are the what type of businesses have
you sold and you know it's nice to just point them right out to the sold listings
because um you know sold listed sold listed you know for us it's just kind of
day in and day out but it's a great great thing we have a lot of them out there
(25:16):
not every one of them is on that but there are quite Quite a few.
Yeah. So, all right. Until next week, if you're looking at buying or selling
a business, we got you, fam.
Music.
Popular Podcasts
United States of Kennedy
United States of Kennedy is a podcast about our cultural fascination with the Kennedy dynasty. Every week, hosts Lyra Smith and George Civeris go into one aspect of the Kennedy story.
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Follow now to get the latest episodes of Dateline NBC completely free, or subscribe to Dateline Premium for ad-free listening and exclusive bonus content: DatelinePremium.com
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.