E279: 94% of Buyers Never Close—Here’s Why the Best Deals Go to the Ones Who Don’t Pay the Most

Episode Transcript
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Speaker 1 (00:00):
A lot of it is experience that you have and
I have, is knowing what questions to ask potential buyers
and potential sellers. For sellers, it's you know, I always
start with things like, have you talked to a financial
advisor to see what you know? Basically, you know if
you can give them an estimate of what it might
be worth. And you can't do that, I can't tell

(00:22):
market's going to do. But whether you say it's worth
two million, four million, six million, range is what does
your advisor say about that. I've been through it before,
and I just told a couple of clients in the
last few days simply this too will pass. I mean,
we had COVID, we had the real estate collapsed, the

(00:42):
Great Recession, and like oh nine or so, yeah, nine
to eleven, we've gone through it. We're you know, we're
in the spring of twenty twenty five. Now, you're right.
Uncertainty is the word I saw. There are buyers of
all types and sizes when it comes to to experience inabilities,
and just saying I want to do it doesn't mean

(01:03):
you can. And it's sometimes it's a good good for
them to have an advisor that they're going to pay
money to because you know that's the first test. I
am really serious, I'm going to hire someone.

Speaker 2 (01:24):
Hello and welcome to the How to Acceit Podcasts where
we introduce you to a world of small to medium
business acquisitions and mergers. We interview business owners, industry leaders, authors,
mentors and other influencers with the sole intent to share
with you what it looks like to buy or sell
a business. Let's get rolling and now a moment for

(01:50):
our sponsors, I want to highly recommend you get Acquisition
Officionaudo magazine. Every month. Acquisition Officient Auto Magazine brings you
tactics for business buying and selling you won't find anywhere else.
Learn firsthand from industry leaders who share their success stories,
featuring in depth interviews and stories from leading figures in

(02:10):
the business acquisition industry. This multiplatform mobile magazine speaks to
acquisition entrepreneurs wheretherver they are in the journey. And I
want you to visit Acquisition Afficionaudo dot com today. Hello
and welcome to the Hot Exit podcast Today. I'm here
with John Martinka and he is the founder and runs

(02:32):
no Comos advisory services. I get both those writer or
even come close on either one of them. You got
the name right, and the company name is Nicomas Nicomas. Okay.
So you've been in this space for a while. You've
got multiple books, like five books out, some of the
ones you guys out there might know, Exiting with style
and grace and more money. This says, if they can
sell pet rocks, why can't you sell your business for

(02:54):
what you want and those types of things? You been
doing this for looks like thirty plus years if.

Speaker 1 (03:01):
I'm almost thirty years yeah, about thirty years.

Speaker 2 (03:04):
Yeah, about thirty years okay, And so I'm just I'm
really excited to have you here today. We always start
with the origin story. What got you into helping people
buy and sell companies?

Speaker 1 (03:15):
Serendipity. So I I was a rotary club president, and
the gentleman who was the president the year before me,
we got to know each other pretty well all those
board meetings and things for you know, a few years,
and we were a little closer in age than a
lot of the other people in the club. There was
a brand new club and so some veterans had come

(03:36):
over to start it, and our wives got along. So
we did some hanging out and one day I got
the comment of something like, I've always thought you'd be
good in this business. And he knew I like but
didn't love what I was doing, and you know, gave
it some thought. He said, you know this, this seems
to fit. I like working with people. I like variety.

(03:59):
I don't have the end your brain. And I can
work on the same bridge project for years in a
row much three maybe not even three hours in a row.
And when you're working in M and A buy sell,
you have different stuff every hour of every day. It seems.

Speaker 2 (04:15):
Yeah, I get it. I'm a severely ADHD and this
is the ADHD guys dream. Right, everything's new, everything's creative.
I constantly get why did they do that? Right? And
then there's always a little bit of a puzzle in
mystery to things. Right. A lot of these businesses they
grew organically over years and not on by design. But

(04:37):
you know, sometimes by half instance they've created something you
know that is incredible. But you know, a lot of times,
when you're looking at it in hindsight, it's remarkable to
what you'll find in some of these companies.

Speaker 1 (04:52):
Yeah, you're right, And when people look at it from
the outside, they go, I can't figure out how they're
making so much money with what they're doing or not doing.
And that's what opportunity is to a lot of buyers
is these are really nice businesses that maybe don't have
the technology that's come out in the last five or
ten years, or using AI or just not having the

(05:17):
systems and documenting what they do over and over to
replicate easier.

Speaker 2 (05:23):
Now you've wrote this ride through multiple up cycles in
the market, down cycling in the market, different politicians in
the appropriate place. We don't usually talk about politics here,
but I do want to set aside some time in
this conversation today where we'll get to what's our current
economic cycle and how do you think that the buying

(05:46):
and selling a business is impacted by that? And what
does the future look like. But let's start off with
talking a little bit about more of what you guys do,
because you told me right before you hit real record button.
Your daughter works with you. She does the cell side,
you do the buy side. How did that come about?
How did you end up becoming a family run business.

Speaker 1 (06:07):
Well, Jessica's worked for me with me since twenty eighteen,
and I've done a lot of work for buyers. In fact,
my first book out now about a dozen years is
titled Buying a Business that makes You Rich, Toss your job,
to toss your job, not the dice, and it's aimed
at the individual buyer, the corporate executive that says I've

(06:29):
had enough of the corporate world, or corporate world says
we've had enough of you. Then they've got the skills
and they've they've been able over the years to pick
up experience managing people, processes, money, and most importantly, and
we hope most importantly, enthusiasm, which is culture. And it's

(06:50):
not quite we. I do one and she does the other.
It's blended. But she decided after a while that she
preferred to work with on the cell side more than
the buy side. And we set up this separate company
so she could have some equity. And we target the
lowered little market deals of five to about fifteen million.

(07:10):
We don't do main street businesses, and we don't want
to work. Really the true investment bankers work. They've got
more resources than we do. And we want to bring
a professional touch to that very professional touch to that market.

Speaker 2 (07:25):
Now, you're up in the northern part of the West coast, right,
you're up in the round Seattle, Washington. Is what you said.

Speaker 1 (07:31):
Earlier, right, Kirkland, Washington.

Speaker 2 (07:34):
Now that's a pretty good sized area. Is that where
you guys primarily do business is to have you help
people buy and sole companies outside of your area.

Speaker 1 (07:41):
Yeah, we concentrate on the northwest, Seattle, Portland, et cetera.
Over the years, at least fifteen states and Canada that
we've had clients. These days, especially with technology, it's easier
than ever to work with someone in a different location.
Zoom and teams and Google meet even local. Sometimes a

(08:04):
buyer will want to meet with the owner and they say, oh,
let's do the first one online, even if it's a
you know, you're half an hour aways here, let's do
it online. We get to know each other. Then I'll
see the facility.

Speaker 2 (08:14):
Right, it's a it's a lot better than a phone call.
I agree, but there is something missed in the ability
to really build a rapport. It can be done on zoom.
I do it on zoom all the time, but there's
still something to be able to shake somebody's hand, look
them in the eyes, see their full body posture, you know,

(08:34):
the whole read the room. You know, there's still something
you said for that.

Speaker 1 (08:40):
You're right. This is a relationship business. If the seller
doesn't like and trust the buyer not going to trust
their company and their people to him or her. And
if the same thing goes the other way, if a
buyer doesn't feel warm fuzzies about the sellers, you know
something's off here. And if I feel something's off, it's
not going to get better. It's time to say.

Speaker 2 (09:00):
Ass That's something a lot of people do miss. We
talk about this a lot on the show, and I
always tell people there are two areas in the world
that if you got the or two skills in the world.
If you've got these two skills down really well, you
could write your ticket any any realm. And the first
of those two skills is building deep report with other
human beings. If you can get on the phone or

(09:22):
a zoom call and really get to know somebody and
build rapport with them, you're ahead. The second one is
enrolling people into your vision, being able to create a
culture and a movement and to lead people towards the direction.
If you can build a report, then you know and
then create a movement, you can you can do almost anything.

Speaker 1 (09:44):
Yeah, those are good advice.

Speaker 2 (09:47):
How in all these years that you've been doing this,
how important do you see the relationship side of it,
because you know, over money, over the books, over everything else,
what do you see that as being the most important.

Speaker 1 (10:04):
Yes, First of all, from my case, my position and
people in the M and A industry, you have to
have relationships with the you know, show say the platinum
level referral sources who are going to entrust their clients
to their good clients for you to work with it,

(10:26):
and it carries all the way through. It's a people business.
You know. This is not half a billion dollar deals
where a group of CFOs come in with a with
a spreadsheets and say this makes sense or this doesn't
make sense. This is even at a twenty million dollar
deal or even thirty forty. These owners are overwhelmingly in

(10:50):
favor of having someone take care of their people, their customers.
They want to see the name on the door five
ten years from now.

Speaker 2 (10:59):
Yeah, they want to know that their employees and their
own customers and their business there was, the brand and
legacy they created are in safe pair of hands. You
mentioned earlier, you were your rotarian, you were the president twice.
I don't know if you know this on my LinkedIn profile.
I was in Rotary International for a little while. That said,
talk about the different types of businesses that you've worked with.

(11:22):
Are there any type of businesses you just don't work with,
or you get to the full gamut of industrial manufacturing
and home services the whole nine yards, or is there
some area that your expertise is No.

Speaker 1 (11:34):
We're generalists. I used the analogy of a CPA. CPA
can do taxes for almost every business. Maybe there's a
specialty business that you need an industry expert. You know,
taxes or taxes, financial statements or financial statements. What someone
does to help a client buy or sell at business
crosses industry lines. We choose not to work with professionals

(11:58):
like doctors dentists. We don't do well based on size.
We're looking at companies that are of a decent size
that you have a better chance of getting rid of
owner dependency. So you know, we're not going to compete
with the brokers selling the deli, the dry cleaner, you know,
the one off restaurant, that type of thing.

Speaker 2 (12:20):
It's tough for those too, for those doctors and dentists
and stuff like that, because they're so dependent upon the advisor, right,
I know we used it. I have aller these really
bad allerties. From the time I was tiny, probably eight
or nine years old, until I was in my twenties.
We went to doctor Ralstong until he retired, right. But

(12:41):
the day he retired, we found an office closer to
where we lived because we were driving twenty five thirty
miles into town to go to him, because that's who
we always went to. He's the guy my dad had
throat a four month he had tire raid cancer and
he was the ear nose and throat specialist that I
identified that and saved his life. So he was one
of those guys who just until you're retired, that's who
we went to. Once there retired, we didn't go to

(13:03):
his office, and whoever he sold it to or whatever
his business went to, we went to. If we did
some referrals and found somebody else, right, So those are
tough to sell just because you're going to that guy
because it's him. You're going to that chiropractor, like I'm
looking for a good chiropractor on here. When I find one,
I'll ride. I'll ride that chiropractor until he's retired. I
won't go anywhere else, because you know, that's pretty touchy

(13:23):
having somebody, you know, look at your medical records and
make life choices for you, or you know, align your
spine and hope they don't paralyze you on accident.

Speaker 1 (13:32):
Yeah, you're right, it is. That's as personal as it gets,
those things we're talking about, and that's why a lot
of I've seen deals in those spaces, whether it's accounting
or medical things, and a lot of it is tied
to continuing revenue that you know, people aren't going to
just go to another one because it's closer because my

(13:56):
buddy's not there anymore, or someone bought it and raised
their raids, which is what's going on with veterinarians. I
know our vets. The founders son took it over, Second
Generations sold it in a roll up, and the people
are great. Definitely, the prices have gone up, et cetera.

Speaker 2 (14:15):
That and on top of you have all the regulations
right in order for it. You either have to be
a doctor of the same you know, with all the
license and everything, or you have to set up a
medical service organization or a dental service organization. And and
then you're dealing with people who are you know, if
you're if they're spending the money to drop to build
a M s O or D s O out and

(14:36):
then they're you know, they're sophisticated enough that they've got
their own teams, and I can see what you'd avoid that.
Now you're being in the Seattle area, you're one of
the probably I think there's probably maybe less than a
dozen hot spots for technology across the United States. You
got the Bay area, San Francisco, you got you know, Seattle,
Washington Portrait, you know where Microsoft up there, up in

(14:58):
that area where a lot of tech, small tech companies are.
And then you know some other places in the world
or New York and other stuff they are small tech centers.
Do you get to deal with a lot of the
tech side of things too or.

Speaker 1 (15:11):
A little bit? Uh, It just depends on the type
of tech business. And you know, not emerging companies. We're
not you know, we're obviously not in the let's raise money,
let's gamble on it. Sometimes it'll manifest itself that you know,
anyone in tech thinks they're a SaaS business when they're
not a SaaS business, and they should get paid for

(15:31):
the company like a SaaS business. I do have a
couple of SaaS for prospective clients, and I bring in
a a friend of mine in California who has his
company has a SaaS division, and they know it. I'm
not gonna you know, I don't want to learn it.
It's if it's a different world. So we we like
operating businesses, and there are there are some operating businesses

(15:52):
that you'll produce some kind of technology or help companies
use that technology. Things like that.

Speaker 2 (16:01):
Okay, and then is there is there anything that's your
favorite like you if you had if you could line
out a list of clients that were I don't know,
pest control, you would just that's what you do all
day long. Is there something you just really love selling?

Speaker 1 (16:15):
No, not by business type. We like operating businesses in
our size range, and we want, you know, on our
website it says we want to work with nice people.
I would sooner work with a on a little smaller
deal or a great client than a larger deal writing
in our sweet spot or at the client. That's a
you know, comes across as a joke.

Speaker 2 (16:35):
I used to have one on my website that says
I have a a whole quota one and I have
to reserve that for my in case I have to
put that hat on.

Speaker 1 (16:42):
Yeah.

Speaker 2 (16:43):
No, so you can't be one ever. But that said,
it was just kind of a semi joke because I
don't deal with people I don't like either. You know,
you hit a certain point in your life where you've
got enough income coming in and stuff like that. If
I'm miserable working with you, uh, there's I don't stick around,
right I Just like I'll tell you ahead of time.
We end up pretty quickly. If I think I can't

(17:05):
work with somebody, if I think they're going to be
you know, if I dread, if I see the phone
ring and I dread answering it, that's not doing the
mini service and not doing me any service.

Speaker 1 (17:15):
Yeah, I've had clients like I've had a few over
the years. Everyone has Usually when I you know, I know,
I figure out with my clients if I picked up
the phone how long it's going to be. In fact,
there's one he's been a friend for many years and
he's been a client three or four times, and I
referred him to his attorney. And I joked once I

(17:37):
had a call where so and so and I was
off the phone in twenty minutes, and the attorney said,
how did you do that?

Speaker 2 (17:43):
I'm that guy. I am that guy. I have a
gift for gab, so I have the and as funny
as I'll respect you. Hey, I got to go in
it right there because I know I'm that guy right where.
I have a couple of friends, even my own sister.
I was like, I gotta go, and know I'll still
keep talking like, no, you do't understand. I have a
client here. I got to go, and they'll just keep
going I'm not that guy. But yeah, I'll call you

(18:06):
for a two minute call and we'll be on there
for an hour.

Speaker 1 (18:09):
So yeah, so what I would do with this particular
person is call them it say, and I say, look,
I'm on the road, I have a meeting in twenty
five minutes. I have twenty minutes to talk.

Speaker 2 (18:19):
That said the that's not a bad thing in a
lot of cases because you do get to build report
that way. Right on to the biggest flaws I see
with new guys getting into the space wanting to buy
a company, is they get on there and within three
minutes or starting to ask for financials.

Speaker 1 (18:35):
Yeah it believe me, that's not new, but it's becoming
more and more prevalent. It's becoming more prevalent as we've seen. Yeah,
let's just face it. So many colleges, our universities are
teaching acquisitions, entrepreneurship, entrepreneurship through acquisitions, and there there should

(18:56):
be criteria for buying or qualified for buying a business
that sellers should happen. And it's not just money. I
have seen so many deals. In fact, one a week
or so ago, a past client, I helped him buy
five companies. He's now a number seven or eight. He

(19:18):
got a bolt on acquisition and he said there were
multiple offers. I was the lowest and I got it
because they said I was the best buyer. So it's
building that relationship and talking about what you can do,
not just hey, I took a class and I want
to buy a business you don't have, as I mentioned before,

(19:39):
don't If you don't have that experience managing people, processes, money,
and enthusiasm, maybe you should get it.

Speaker 2 (19:47):
Yeah, there's something he said for that. There's a reason
why search funds. And I've interviewed the guys that like
the ogs, David Dotson and those guys who's he was
like he created like the second search fund ever, first
one was out of Harvard. He teaches the ETA program
at Stanford. I interviewed him and one of the things
we discussed is like, why do search funds take, you know,

(20:10):
twenty four to thirty six months to find a business?
Egos like I say, it's by design because these guys
are straight out of NBA, A lot of them haven't
ever had a job, and it takes thirty six months
to kind of build the fortitude and understand, you know,
especially the if you're the one of the investors that
this guy can't handle the business, and you know you
train them along the way you know you can. He says.

(20:31):
A lot of the training they need to run the
business happens through the search process and evaluating multiple companies
and building relationship with different CEOs, and a lot of
those skills transfer into being able to run it when
they have it. And that's the reason they you know,
by design, they want them to take twenty four to
thirty six months to actually do the acquisition.

Speaker 1 (20:52):
So yeah, well that makes sense because they're there are
buyers of all types. Inside is when it comes to
experience and abilities and just saying I want to do
it doesn't mean you can. And it's sometimes it's a
good good for them to have an advisor that they're
going to pay money to, because that's the first test.

(21:16):
I am really serious. I'm going to hire someone that's
going to help me through the process, hold my hand,
make sure I don't do something stupid, ask the right questions,
get the right answers, put me on the spot, and
all of that. And you know, we're seeing with the
economy today, I've seen buyers that are it's a great
excuse for them to say no, I think this is

(21:36):
not the right time, given the tariffs or the stock
market went down, and I didn't pull my equity out
to fund the deal, and so I think I'm just
gonna I'm not going to do it. Well, they were
going to do it anyway. They were going to be
one of the ninety four percent that of buyers that
never buy. And I've always taught ninety to ninety five

(21:59):
if you know, do you know my friend Richard Parker
or DIO. Yeah, Richard told me the other day he says, yeah,
I use ninety four percent. Now, I think with all
these searchers out there, it's it's climbed from ninety and
it's a it's a fun process, but you got you know,
you have to go into it that you're a hunter
or not a trapper. So you have to go out

(22:21):
and get them, and you have to be willing to
make the kill and you know, eat what you kill,
right it is.

Speaker 2 (22:26):
And I've seen more than one. Yeah, I'm I've been
only in this space.

Speaker 1 (22:31):
I was.

Speaker 2 (22:31):
I owned a real estate investment firm. I've done a
bunch of different stuff. I can't I was in the military,
got out, became a defense contractor. All my friends were
making money in the dot com went into that, got
burned out in it, got a marketing degree, was a
marketing coach, and you know, started a you know, one
of my clients was a real estate investment fund group.
Got out of that, figured out how profitable was. Had

(22:54):
a conflict with that, you know, that particular client, because
he bought my marketing agency. But anyway, random market. Started
my own real estate investment fund and I did that
really well for eight or ten years two thousand and
seven twenty seventeen, and then the market shifted on me
and they kind of got into this about twenty nineteen,
twenty twenty, so four or five years now. I like

(23:17):
the advisory s service side of it because I'm partially retired.
So I bought a pest control company. At the beginning,
it was way too small, and then I realized, I
just don't want to be the operator and I don't
care what the you know, I'm friends with Jeremy Harper,
Carl Allen, all these guys who sell that you can
buy a company put somebody else in as the operator. Yeah,
you can, but it's not as easy as they make

(23:38):
it out. That's marketing. Hep right. You got to be
willing to get in there and run this thing yourself
for a while and be oh yeah, and be able
to run it well until you can a lot of
people just miss out on it. Takes eighteen months to
twelve months, eighteen months to place a great operator, a
good CEO, to hunt them down placement and see that
they work, and you might go through two before then,

(23:59):
who's in a right this thing? Until that happens, right.

Speaker 1 (24:03):
You have to know how things work so you know
when things are off track. And I'll give you two
quick examples. My client I just mentioned, who's very has
the gift of gab first company he bought, he bought
in a more scientific based industry. He was a business
guy at banking and finance and the owner and the

(24:25):
owner had like forty some experience years experience in the
industry and own the company for twenty It got grown
in a point it needed a business person. But if
that owner worked part time because he could see things
going off kilter almost immediately, whether it was through numbers
or jobs or actions that you me or that buyer

(24:45):
would take a long time to figure out. And you
have to know that stuff before you can have someone
else do it. So and you know, I want to
tie back to my being in rotary. Every year we
go to Antigua in the Caribbean every February. We take
students from the Belvy, Washington School District's Tech program. We

(25:08):
donate computers and set up Wi Fi networks and as
at club for that we donated over ten thousand computers
with laptops now fifteen hundred or more every year last
few years. And we found a wonderful, absolutely wonderful Italian
restaurant there. And you know, when I first called to

(25:29):
make the reservation, a local had referred it to us.
The son of the owner answered and I said to
my wife, this guy's really Italian and mom is really Italian,
and I get the restaurant is is it Mama Mia?
I think in Antiga. But the story for businesses as
we got to know her, we went there three or

(25:50):
four times in ten days. She's from Rome. For somehow
she owned this restaurant building and it's a boutique hotel
on the coast, and she had it with a general
manager for a few years and it went downhill to

(26:10):
the fact that she had to come in and renovate,
re up, do everything to get it. Basically across a startup,
because you don't get the passion for a small business.
And this is a people business, a restaurant and a
you know, boutique hotel. They don't like they don't like

(26:33):
the service. There are plenty other places to go to.

Speaker 2 (26:36):
But aren't most businesses pacialist business I'll give you a
good example. I still have a stake in this small
pest control company. I bought it to employ some family members,
so I still work with them and chat with them
and help them do some marketing in it. But I
sold it back to them because I'm eighteen hundred miles away.
Now it doesn't make sense. But that said, the reason
customers come back is both my cousin and uncle that

(27:00):
work there. They're fun to be around. So when they
show up to do a job for you, they're having
a good time with the clients they're making. They're not
making them uncomfortable about having cockroaches or bed bugs, like, yeah,
this happens all the time. People get these, but you know,
they can build a relationship with people, they're fun to
be around, and they have a passion for what they do.
The reason that he's got clients that keep coming back

(27:22):
and keep coming back isn't because we got the lowest prices.
You know, we're down there, but you know it's it's
because the relationships he can build with people. And most
small businesses are like that. Most of those small businesses,
I think, unless you're in a commodity industry where you're
trying to be the cheapest guy on the ship, that's
that's a quick way to be broken my world.

Speaker 1 (27:43):
Yeah, that's that's true. It it but a lot of
and I'm not arguing at all. I'm saying there are
some businesses where it's the business does it may not
know the end customer, but they have the relationship with
whom they sell to, and that person may fabricate what
they did or pass it on. So if you go

(28:06):
into Target and you buy something, it had many steps
along the way, from a distributor who bought it from
a manufacturer who bought parts from many other manufacturers.

Speaker 2 (28:19):
You just because you pick something up at the store.
I pick up this mouse. That mouse may have been
made by Logitech, but if you can get around and
there there might be five things in there they order
from somebody else. Right. And it wasn't until I got
into this industry where it really hit me. Is like
there's a lot of things like I didn't know people
made that, right, Somebody made you know, the little optical

(28:40):
device that goes inside of the mouse that I'm holding onto.
Somebody made the little magnet that goes onto the you
know power cord that goes onto the Mac. You know
the way that Mac attaches to my laptop. Right.

Speaker 1 (28:53):
Yeah, there are so many niche businesses that you know,
when you're in this industry, you say, yeah, I guess
someone did have to make that. Or we're an aerospace
country going yeah, and you know all the Boeing suppliers.
We're working with one now, and I you know, you
see all the stuff that they make, and now say, well,
you walk in the plane and you walk down the aisle,

(29:14):
you'll see, you know, and I'll start rattling off all
the little parts that they've had a part of the
process to make and finish and get into the final product.

Speaker 2 (29:26):
Let's go into like kind of what's happening in right now.
Right Let's just kind of jump from where we're talking about.
Let's let's talk about the current economic and political environment
and some of the uncertainty that some of the business
sellers and even business buyers might have about what's happening.
What's your gut feel on on all this.

Speaker 1 (29:47):
I've been through it before, and I just told a
couple of clients in the last few days simply this
too will pass. I mean, we had COVID, we had
the estate collapsed, the Great Recession, and like oh nine
or so, yeah, nine to eleven, we've gone through it.

(30:08):
We're you know, we're in the spring of twenty twenty
five now, you're right. Uncertainty is the word. I saw
a pull yesterday that said the number one word that
people pick when describing the current administration is what's going
on is chaos. There's chaos, there's uncertainty, and a lot
of people just don't know what to do. Uh, there

(30:28):
is worry. I think there are I think there are
owners who would like to sell are just saying are
they going to discount it because of what's going on?
You know, if I'm not desperate to sell, and and
let's face it, you know, I heard on one of
your other podcasts someone said most businesses are sold because
they're distressed, divorce, death, you know, something like that. I say, no,

(30:50):
I say most businesses are sold when there's burnout, retirement,
something happens in the personal life. But in these cases,
if you've got a business, they're making million bucks a year,
and you say, well, the buyer's going to try to
discount it because of what's going on with terriffs and
uncertainty and all of that, I'll hang on to it
for a little while. I'm still making a million dollars
a year. And on the buy side, yeah, some people

(31:13):
have backed out, not not surprisingly. I think there are
a lot of there's still a lot of buyers out there.
I know there are some that are saying, well, if
the seller wants to sell now with what's going on,
they're going to take a lower price. Not necessarily. You know,
one of the true rules of business buying and selling

(31:36):
is the seller controls the deal. If it's a good business,
you know, mature, profitable, they control it. The buyer controls
the deal if it's a bad business. And that's why
when you hear statistics and people go, well, eighty or
ninety percent of you know, businesses never sell, it's because
they're not worth buying. But the ones worth buying definitely sell.

Speaker 2 (31:58):
I think the reason these guys say that's the four
d's or five d's to forest disease. I forgot what
them all are? Death? What's the other one?

Speaker 1 (32:09):
Disability might be one.

Speaker 2 (32:11):
Or dysfunction, like the businesses in distress. Right, Yeah, they're
selling it because they've run it or you know, something's happened. Uh.
The reason that is is the reason that a lot
of people think that's what's for sell out there, and
the reason that they that's what they're looking for is
those are more negotiable, right when somebody has pressure from
that side, when they're facing one of the five d's,

(32:32):
they you know, they no longer thinking about selling. They
probably need to sell it somehow, so that gives more,
you know, more more leverage for the buyer to you know,
to get creative. Uh. And a lot of these guys
are looking for your creative deals either because they like
the challenge of it. There's actually I know, I know
a couple of guys right now who one of the

(32:53):
guys I talked to, he's got two three million dollars
in his account, but he just likes the creative side
of it. So he's trying to find more owner, find steals,
do a less banking.

Speaker 1 (33:01):
He does it.

Speaker 2 (33:01):
He has a bunch of kind of like me. He
has a real estate portfolio. He doesn't want to leverage. Uh,
it's collateral, so he doesn't want to go to the
SBA route.

Speaker 1 (33:09):
And if you're willing to do that, there are plenty
of companies that aren't worth much, that are the owner
has a decent paying job as a company owner, but
not much more. There's got to be profit over and
above what it takes to pay everyone who's involved in
running the business. And if it's not there, you know,
you don't a buyer. You don't A buyer controls the deal.

(33:32):
You know, it also comes down to you. We're talking
about the economy, but it also comes down to type
of business for a buyer. And again the economy things,
it's going to change, it's going to pass, will get
things settled out.

Speaker 2 (33:44):
You know.

Speaker 1 (33:45):
Unfortunately, there's gonna be some small businesses hurt that shouldn't
be hurt. But one of your episodes, someone was talking
about these guys coming out of grad school and wearing
a three piece suit and buying it, you know, like
a heavy equipment business, landscaping business, and in my book,
buying a business that makes you rich, there's a story
of a guy was a CPA and he wanted to

(34:10):
get rid of his business. It was a cabinet making
shop and he had left being an accountant because he
thought it would be just so cool to make things.
And he couldn't understand his employees why they didn't have
the passion he had. He's I remember some of the things.
You know, they they they kill more, They care more
about their cigarette next cigarette break than what they're doing.

(34:32):
They you know, they live to get off of work
and go go have a beer or go fishing. And
why can't you know I'm talking about why can't they
be in here and you know, just giving it. They're
all for the company. He just didn't understand them, and
business was suffering. Yeah, it's something where your skills match up.

Speaker 2 (34:52):
That was me talking about that. We had a guy
I housed twice a month. On the first Tuesday and
the third Tuesday of every month, I host a hangout
where buyers can come on occasionally, well have a seller on.
I feel sometimes I feel bad when a seller comes
on because you got thirty buyers and a seller pops
in there, like okay, now they're like it's walking into
the sharks because they're like, I'll talk to you about

(35:13):
selling your company. Like everybody wants to set a meeting
with them. But if you're a buyer, if you're a
seller and you need to sell, it's a great place
to show up because you got thirty people in the
book of meeting with you right away. That said. The
one of the guys popped in there, he was right
out of Harvard and or one of the IVY is.
I won't call it Harvard. He was remember if Harvard.
He was an IVY guy, and he told me he
was gonna buy. He's gonna get into construction. I was like,

(35:35):
oh cool, was your dad into construction or did you
grow up around construction? No? No, no, there's just a
lot of it around me. I was like, he was
very very ivy. He was, you know, I told this
story many times on your you know, I had the
sweater vest and everything right, Like, the whole whole thing
is very ivy, very prim and proper. So I used
a couple of words that I thought might be a

(35:58):
contact switch for him. I dropped an f bomber too,
like no, you'reff and not. And he's like, oh, how
dare you talk to me that way? I said, See,
I said, you're getting ready to go into an environment
where that's the normal bit I get up around construction
and stuff. And I said, I promise you every construction
side I've ever seen, at least once a month to
have grown adults are having a fistfight, you know somewhere

(36:19):
on that facility, right If you don't know how to
handle that, know that that's partially normal, and be able
to identify that a little ahead of time when it's
dangerous and get rid of those people before we know
that are accustomed that that's how they deal with things.
You can get into all kinds of trouble both, you know,
with clients and with liabilities, and people get hurt and
workers comp and everything else. Right, and says you have

(36:41):
no business being in the construction business. If you want
to buy a construction company, go work for one for
two or three years.

Speaker 1 (36:47):
Yeah, learn how to be a project manager and be
around it all the time.

Speaker 2 (36:51):
And it's a different culture you're going to walk into.
It's a culture shock. And I just think I said,
they're going to eat you alive. Right. Uh, they're gonna
nickname you with the two fit of you stepping on
a construction site and you're gonna think it's funny. They're
gonna call you ivy or whatever when you walk in
and walk in, walk in, and you're gonna think it's
a term of endearment or something, and it's not. It's
a total like this, you know, not lack of lack

(37:13):
of trust and lack of respect until you to earn it.
It's a different environment.

Speaker 1 (37:18):
Yeah, and you know, I don't these days. I you know,
when you look at any construction site and you know
there's a preponderance of Hispanics and other minorities. I mean
the culture is definitely different. But they work hard and
they're I think they're because they need to support their families. Yeah,

(37:39):
and you know Clive Client's in construction. I've had my
son is in construction, and you know they what's the
best way to say this is that there's there's It's
not I don't it's prevalent. It's out there, maybe not
as prevalent as it had been.

Speaker 2 (37:55):
So when you look at buyers and sellers and stuff,
how do you figure that out? Like if I was
an It's one of the things I have to watch,
Like what I I get people because of the show
and because of the podcast and everything. I get probably
a call a week where somebody goes, hey, I want
you to help me buy companies, And it's like, okay,
first of all, I only do that. I only do
one or two of those at a time. You have
to prove one one that you've ever you bought a

(38:17):
company or run a company before. I don't do new guys.
And secondly, what are you trying to buy? And what
your what's your history in that? And the reason I
ask all those questions is because I know that if
they're not fitting that culture, if they're not aware of
the culture within what they're acquiring. I'm gonna hear from
it six months after they buy that that we did

(38:37):
something wrong, right, so, or they're never gonna fully close.
They're gonna it's gonna hit them before closing time, before
they have to wire their down payments and stuff that
they're getting into something that's a little bit more than
they probably should.

Speaker 1 (38:50):
Yeah, it's a lot of it is experience that you
have and I have is knowing what questions to ask
potential buyers and potential sellers. For sellers, it's you know,
I always start with things like, have you talked to
a financial advisor to see what you know? Basically, you
know if you can give an estimate of what it

(39:11):
might be worth and you can't do that, you can't
tell market's going to do. But whether you say it's
worth two million, four million, six million, range is what
does your advisor say about that? You know? What are
you going to do? And buyers should be asking that
of sellers, what what are you going to do? You
want to sell, but what are you gonna do? And
if if they have a good answer, that's great. If

(39:32):
they say, well, I figure it out they're going to
get seller remorse if the answer is, oh, I'm going
to retire? Is does your spouse once you're around twenty
four to seven. And with buyers, it's the things you mentioned.
You know, what have you've done? Why do you want
to do this? Oh? What kind of skills do you have?

(39:52):
Have you managed people? Have you had budgetary responsibility? Things
like that make them make them aware this is going
to take a year or two. You know, We've been
lucky on the buyer's side. We've had just a few
times over the years where someone finds them buy something
in six months or less. But it's so rare, you know,

(40:14):
the one something fell in their lap in month one,
month two and they got the deal done.

Speaker 2 (40:20):
Yeah. Usually the case is, especially with the people I know,
they don't even know what they want to buy yet,
but they think, well, I'm I'm business agnostic, like meaning
I don't care if it's you know, manufacturing or home services.
I was like, you are now, but you won't be right.
You don't know what you don't know, So what's gonna happen?

(40:42):
I just explained it to these new guys. What's gonna
happen is and it's the best thing that could happen
to you. Go out and talk to a dozen business owners.
You think you want to own a pest control company,
call a dozen pest control companies and talk to a
mask them all a day in their life, right, get
to know the industry, get to know what you know,
what you would be doing on a day to day basis,
and then you know then talk to like you know,
some people that are thinking about selling. I've been through

(41:04):
this like I did the whole I thought I was
going to buy a coffee coffee roasting companies. I don't
even drink coffee, but I love the smell of it.
I thought it would be a great business to own.
I think you can turn them into subscription based where
recurring revenue businesses if you really plan it out, or
you know, if you have the good roasting company and
good products. But after three, four, five months, maybe even
six months of talking to different roasting companies, calling people

(41:26):
I knew, you know, I calling my friends and say,
who do you know that owns a roasting company, getting
one on one zoom calls with the owners of those
and learning the industry, I realized it's just not something
I want to be in right, learned a lot about
the industry, but there's just there's some things about it
that kind of reminds me of the diamondustry. The coffee
industry is a little bit dirty on the end on
how they treat the farmers. The growers, the middlemen make

(41:50):
most of the money, right, and it's something if you
really want to be run an ethical company, you got
to kind of manage all that and go visit the
farmers and make sure that you know they're being taken
care of and stuff. And uh, it was like I
had young kids at the time and still have kids.
I have a nine year old and a fourteen year old.
It just wasn't something I wanted to manage. But you
don't know that until you start talking to these customers,

(42:11):
until you start talking to businesses. If you're new and
you're thinking about getting into industry you've never been in before,
I always recommend don't even worry about whether or not
they want to sell right away. Just see if they'll
see if business owners in that industry, we'll talk to
you and tell you about the industry. Just learn as
much as you can about that industry and make sure
it's something you're ready to be involved in.

Speaker 1 (42:31):
Yeah, and there's a fragment and industry with a lot
of companies that you don't do a little bit of
this and a little bit of that for everyone, and
so they don't have a focus. So it's hard to scale,
you know. When you know, we started out this last
part of the conversation talking about what's going on with
tariffs and the economy. And one other thing I'm telling
buyers now is if you find a company that is

(42:54):
what you think you can handle us your right size range,
you get along with the owner, get the dark deal done,
forget the sharpening the pencil, and I'm going to get
the best deal, the best the lowest multiple. I can
get the darn deal done because right now there is none.
There are not as many good companies out there as

(43:14):
there have been even you know, even four six months ago,
because of all the turmoil in the market. And you know,
I talked to a searcher a while back and she said, well,
I said, I think this company is going to go
in this range and the one we're representing, and I'm
not going to give you a price. We don't give
a price because that would not be fair to our client.

(43:37):
Or a buyer. If we give a price and you know,
say the buyer thinks, well, I was going to offer more,
So I'll offer that price and someone else didn't ask
and they offer more. She goes. So that's a lot
more than a three multiple. Viva got and I said,
you're not going to get a manufacturing company at that
size for a three multiple.

Speaker 2 (43:55):
Oh.

Speaker 1 (43:56):
You know. They get in these groups and convince each
other that you know, you should you can buy low,
and you can if it's not a good business.

Speaker 2 (44:05):
Yeah, there's a there's a generalization out there that says
if a company's SBA loanable, that it should be at
three multiple or lower. They're out there. I've seen people
get them done.

Speaker 1 (44:17):
Yeah. Well, construction is one, and that you know it's
going to be lower in construction than is in if
you're manufacturing, especially if you have a proprietary product. But
if these days, again the point is if you're a
buyer and you find a good company, forget sharpening the pencil.
If we have a buyer client, then he's in due diligence,

(44:37):
going to close in about a month. It's going well.
A few weeks ago, he said, he called me and
he said that, well, you told me the other day.
It was the most important piece of advice that you've
given me all the time we're working together. I had
said basically what I'm saying. No, I said, you like
this business, you think you can grow it, you have
you know you can financially, it's at your upper end.

(44:59):
He said, if you want it, go get it. He
made a call. He said, what does it take for
me to get this company? They told him. He said done.
Heading that, well, l I say in the next day,
didn't quibble. Can I knock off three percent? Nothing like that?
Get it done.

Speaker 2 (45:15):
The time and energy you're going to spend finding another
one when they say no, because you're trying to say
for three percent, const you more from that three percent?

Speaker 1 (45:21):
Oh yeah.

Speaker 2 (45:22):
And if you find a cultural fit and you know
it's the right industry, it's in the right location, and
you know, the only thing that's holding you back to
numbers slightly off, you know, is don't you can overpay
and get yourself in trouble too, especially if you're using leverage, right,
if you're using banks and and you're paying interest on

(45:42):
that money. That's one of the big mistakes I see
people all the time, and I used to get onto
people all the time, and I run a real estate
business where people do this on houses. They buy the
most expensive house they can barely afford, and then the
littlest thing changes and then they can no longer afford it.
So I always want people quit trying to buy the

(46:04):
most expensive business you can buy with the loan that
you can get unless you see some low hanging fruit
where you can improve those profit margins. You need to
give yourself a room. Right, what if one of those
tariffs does hit you, What if one of your clients
doesn't like the new owner, Right, you have to you
need some margin for oh no, like the uh you know,
the oh nos that this happened, or you know, you know,

(46:28):
one of your biggest clients decides that they're not going
to sell, they're going to retire because they were a
retirement age of as the same retirement agent that your
guy was, and they shut theirs down. Right, This stuff happens,
and I see it all the time. They're reluctant to
come on the show. So I don't get a lot
of shows where, you know, somebody buys a company and
then it fells pretty quickly within the first two years.

(46:48):
But uh, I've talked to at least five or six
in the last two months. One came on last week
that said it was because things changed, right. They they
bought the company and they made some changes which people
had resistance too, and then the market changed on them
a little bit. In the combination is they bought a

(47:10):
company that had a you know, twelve percent margin and
they changed twenty five percent of the company, right, and
then they you know, the next thing they know, they're
not being able to cover the debt coverage ratio or
the debt coverage that they have on their loans.

Speaker 1 (47:26):
Yeah, and it's you know a lot of times, especially
first time buyers get buyer fever. Yeah, I can do anything.
You know, I'm so good. You know, whether they have
twenty years experience or twenty months experience, they think they
are so you talked about home buying. There's a I
don't know if you've seen it, but Progressive Insurance as
a commercial and it's about these people by the buy

(47:46):
the new house and you know, they someone comes up
and says, oh, I just I'm replacing the hot water
heaterd it's not good. And the next one is, you know,
here's your your supply of fertilizer to keep your own
lawn green. And then and then Progressive says, well, you
won't have to do that with us, but points in
back in there's a line of about fifteen people with
all the things the house needs, and if you do

(48:08):
your due diligence, you're not in that trap of here's
what's needed. And if you're smart enough to say, I'm
going to do exactly what the seller has been doing
till I figure it out.

Speaker 2 (48:20):
That's been a recurring conversation here on the show, is
especially for new buyers and stuff. They said, well, how
fast should I make changes? Like you shouldn't first sixty days.
You should just set there and observe everything the way
it was running. As a matter of fact, for sixteen
to ninety days. I highly recommend you just try to
run it is exactly how the other guy ran it,
and get that down and figure out how he ran

(48:42):
it that way. Sometimes figure out why they run it
that way. And then the first group of changes you
should make is you should interview every single employee there
and said, if you can change one or two things
that make this company better, what would you change? And
you compare that list to your list, and wherever they match,
you can start to tackle some of those things because
you have employee buy in. That's how you build rapport

(49:03):
those guys, right, That's how you build rapport with consisting
in employees is you start making some of the changes
they've been wanting for years, and then then you can
once you get that done, you can start making the suggestions. Well,
it looks like I think I need these done too.
But I've seen so many times where we interviewed a
guy I think this show's this has come up on
the show a few times. We interviewed a guy who

(49:24):
bought a software company in South Africa had twenty twenty
one employees. He goes and starts making changes. Within the
first three three weeks, one hundred percent of his employees quit,
all twenty one, right, And I was like, what do
you mean all twenty one? And so how is the
company run before? Well, the other owner had been gone
and been sick for four or five years, battling cancer,
and the employees were just left or run it on
their own, and they were just maintaining clients, and they

(49:46):
weren't making improvements, and they had no quality control. They
had no change control as a software company, and I
was like, how much did you change? Like right away,
we put change control in, We did x Y. You know,
they put a QA officer in like these you just
disrupted everybody on that team's work. Old, it's really easy
in most worlds for good software engineers to find other work.

Speaker 1 (50:07):
Yeah. You know you mentioned about talking to the employees
and all that, and they want to be listened to.
And a lot of times the seller who's on his
his or her way out isn't listening to him because
they've got ideas. And the seller saying, look, I'm making
good money. Why would I Why would I want to
take the risk of hiring more people, getting a new machine,
doing this, doing that. Uh, my best story on that

(50:29):
is goes back quite a few years. But the buyer
went in and he said he gave the he gave
a short survey to the four person senior management team
and the one question was, you know, what's the company's
biggest weakness? And to a person, they answered with the
one answer he shared with me with someone said the

(50:49):
biggest weakness just walked out the door. And you know,
but they all got it out and they he had
rapport then because they they listened, he was asking for
their input. They know what's going on a lot of
times more than the owner who's who's coasting because they're
doing well.

Speaker 2 (51:09):
I manage everything I do, and I've done this for
years and sometimes somehow I've oversimplified it with four questions.
Three I ask it every meeting and one I had
later on. And it's done really well every time. I've
been doing this since I ran huge divisions at tech
companies all the way to run at my own thing.
And it always starts with a pad on the back,
what are we doing really well? Right? So if I

(51:31):
if I tell and I tell this to every person,
mind a company asked, ask everybody on their company, what
are we doing really well? What are we what do
we specialize in? What? What? What are we the leader in?

Speaker 1 (51:41):
Right?

Speaker 2 (51:42):
And then the second question is what can we do better?
What can we improve upon? So it's always what are
we doing better? What are we doing better than anybody else? Work? Work?
We work? Can we fix a few things? And then
the third question is what are we totally missing?

Speaker 1 (51:56):
Right?

Speaker 2 (51:56):
There's something we're not doing in this space, we're not
doing in this market, there's a piece of equipment, we're missing,
something's missing, right, there's a key employee missing, something's missing, right.
And then once a quarter, every once in a while,
I have to throw in the fourth question is what
are we totally what are we doing? What we should
totally stop doing? It's not working, it's causing problems, and
you know you you believe that we should probably just

(52:17):
quit doing this all together. If that those fourth questions,
I've been managed to manage all kinds of stuff, and
I don't think it has to be that difficult. I
think if you could stick with just at least those
four on a regular basis, what are we doing really
well so you don't the reason? You want to know
what you're doing really well so you don't accidentally mess
some of that stuff up? Right, Let's leave that stuff alone.
Everybody thinks we're doing well. Our customers love this stuff.

(52:39):
Let's leave that alone. Okay, What where can we improve? Right?
And what are the customers? And I ask the customers
too like that? This is this is I do the
same thing with the employees. I do the customers. What
are we doing really well? What can we improve? What
are you having to go get from other people? What
are we missing? What do you wish that we did right?
And then every once in a while, you know, you
got to ask them, was like, are we doing this?

(53:00):
We's probably just stop doing. Is there anything we do
that just totally annoys you? All Right, we're running out
of time and I love chatting with you. We could
probably chat all day. Like I told ya beforehand, I'm
one of those guys got the gift to get We'll
sit here for two hours and we're supposed to do one hour.
So that said, what are some of the takeaways you
want people to know after hearing what we spoke today?

Speaker 1 (53:18):
Well, you think, okay, go ahead of what you do.

Speaker 2 (53:22):
Of the market what we do want people to walk
away know in two or three takeaways.

Speaker 1 (53:27):
Okay, for the right person with that entrepreneurial spirit is
not a creator to start something from scratch. And again
they have those skills managing people, processes, money, and enthusiasm.
It's a great thing. It is. It is hard work
to find one, and it's hard work to get into
the business and operating it. And they you know, you
can't just say I'm going to work on the business

(53:48):
from day one because you don't know what that means
if you don't know what's going on in the business.
But in my latest book, Exit, Restal, Grass, and More Money,
there's a couple chapters that apply, well, most of it
applies to buyers also. But the second chapter is, maybe
it's not about it's there's more than just the numbers,
that kind of thing, and it's just concentrate on the customers,

(54:11):
the landlord, the lease situation, the suppliers, the it your
key employees, et cetera, et cetera. You know, are they
keeping good, great employees or is there a lot of
turnover kind of thing. But the third chapter is maybe
it is about the numbers, and everyone goes to their
numbers first. Those other things tell you where the numbers

(54:33):
are going. And if you're buying a small business, just
realize you are going to be facing small business accounting.
It is not gap, it is not consistent as a
lot of not nefarious, but just sloppiness creative. Yeah, the

(54:57):
accountants really a bookkeeper. The bookkeeper is really a data
and tree person, and the owner gives them instructions but
doesn't know a thing about debits and credits or anything else.
And get over that, sort it out and realize if
they're if if they're saying this business makes I don't
care if it's one hundred dollars or a million dollars

(55:17):
or anything else. But you know, half of it is
adding back things that are non essential personal expenses. You
might want to put your skeptical glasses on and say
I don't think so okay.

Speaker 2 (55:30):
And then how do people reach out to you? Where
do they find your books? How do they if they
want to work with you, if they got a business
in your market that they want to either buy or sell.
What's the best way for somebody to reach you.

Speaker 1 (55:40):
Yeah, Nicomasa Advisory dot com and Okyomisadvisory dot com. There's
a contact form. If you put in that you've found
us through this show, we'll send you whatever which one
of our books you want buying or selling? Books are
available on Amazon. Just put John Martinka in and that

(56:01):
you'll find him. And it's been a pleasure.

Speaker 2 (56:04):
Run cool, Well, thank you for being here hanging out
for a few minutes, and we'll call out a show

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