How to Buy a Business

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Richard Parker – Become a Business Buying Expert

Podcast Overview:

00:00 Author helps business buyers through book and experience.
06:36 Embracing the Internet’s potential for global influence.
15:06 Match your skill set to drive business.
19:57 Avoid buying distressed or turnaround businesses for entrepreneurs.
24:06 Consider business performance, customers, competition for evaluation.
26:23 Invest in business for high returns, control.
35:02 Business brokers often sell unprepared businesses for sale. This results in 75% of businesses not being sold. Sellers should prepare their businesses for sale by addressing key buyer concerns. Good books and records are essential.
38:09 Start small, reinvest, don’t turn stagnant.
44:44 Lack of trust can hinder employee performance.
53:01 Hiring process requires multiple interviews and delegation.
54:11 Immerse in business, no absentee-run beliefs.
01:01:27 Prepare for financing when selling a business.
01:05:41 Great conversation, check out richardparker.com.

Podcast Transcription:

James [00:00:01]:
You have found Authentic Business Adventures, the business program that brings you the struggle stories and triumph and successes of business owners across the land. We’re locally in a written by the Bank of Sun Prairie. If you are listening or would love to listen to some audio episodes that you can download at no cost, you can always go to drawincustomerscom, and hit the podcast link. We are excited because selling businesses is always a good time. Right? That’s, It’s just like a boat. Right? The 2 good days, I think, when you buy

Richard Parker [00:00:31]:
2 good days, buy it and sell it.

James [00:00:32]:
Right? Start it and then when you sell it. Right? So today we’re welcoming slash preparing to learn from Richard Parker of Diomo Corporation, the business buyer resource center. So Richard, You are helping businesses get bought and sold, I imagine.

Richard Parker [00:00:48]:
Yeah. That’s, spot on. I I’ve been in this, It’s a game for over 30 years on all sides of the, m and a world. You you you look shocking because maybe you figured I look even older than that.

James [00:00:58]:
Did I just start when you were 4? What’s going on here?

Richard Parker [00:01:01]:
Yeah. No. I’m an old fart. I I I’m 62 years old right now, and, so I started really when I was 29. And in February February 1st, it’s gonna be 34 years that I’ve been doing this. And, when I say doing this, start up buying businesses And then evolved into, helping some people, acquire some business. Started to get a bit of a reputation where I grew up in Montreal, And did that more on a in a on a casual basis, and then started acquiring more and more companies. And, to date, I’ve acquired them plus one co investment and a huge range of sizes from, like, $50,000 businesses up to over 200,000,000.

Richard Parker [00:01:39]:
And, along the way, I was involved in a transaction shortly after I relocated to Florida in 1996. And as I was digging into the business, the business I was looking to acquire, it wasn’t a huge, Acquisition was a little over $1,000,000, which I guess is large enough, and certainly was significant at the time for me. And, as I was going through a price and deal terms, you know, all set and embarked upon the due diligence, And, I found the there was just a lot of shenanigans going on. I’m I’m not suggesting that there was fraudulent activity, but There was multiple companies and they’re moving money from 1 company to the other and paying bills from 1 that were incurred expenses from the other. It was really like, I like to describe it, like a whole plate of spaghetti, and, it it really, incentivized me and and My curiosity peaked as far as, you know, what does the average person do who’s looking to buy a business? What do they do to go about it? I I’m not a a smart guy. I just happen to been doing it for a long time, so I was able to identify the problems. And I when I told the owner that I was wasn’t buying the business and walked out of his I remember, like, it was yesterday standing in the parking lot saying, you know, the average schmuck would have bought this business, and that really motivated me to find out what’s out there. It was the Start of the Internet, really, and I spent a year doing research related to this whole subject matter.

Richard Parker [00:03:02]:
And After interviewing hundreds of perspective business buyers, others who had bought businesses, some had turned out good, some had turned out poorly, business brokers, Accountants attorneys realized that there was really no good resources for buyers. And I had looked at a 100 plus businesses at that point and decided that, you know what? I I really wanted to provide Something valuable to people that are looking to change their lives, realize their dreams of business ownership, and really memorialize all my files. I kept Unbelievable files of every transaction, everything I did, what happened, the outcome, good, bad, and otherwise, and said, you know what? I wanna put it, I wanna put it to paper To show people how to walk through this whole process, tell them what they need to do, what they need to know, what they need to do, and how to do it. And I had no aspirations for This turning into a business, I I really wanted to just help 1 person. I mean, that was that was my goal. It was never done for money. And, lo and behold, here we are, You know, a bunch of years later, I’ve sold over a 100,000 copies of this program and helped thousands and thousands of people. And, and I stayed in the world of m and a, buying and selling and helping people and representing sellers in in the lower market, you know, What’s considered businesses about a 1,000,000 to $10,000,000 of EBITDA, but my true love has really been on the buy side of helping Smaller main street USA type business buyers or or, aspiring entrepreneurs and And dreaming business owners to help them get to the finish line, and I spend most of my days doing that answering calls and emails.

Richard Parker [00:04:31]:
I never charge people. I just really enjoy it. I’m not motivated by the money, so it’s, that provides a real nice umbrella of of help to everything, and it’s it’s It’s worked out unbelievably, and then it’s like I said, I’m just incredibly proud of how many people we’ve been able to help.

James [00:04:49]:
Nice. Richard, I’m listening, you know, 30 years of doing anything seems like a long time.

Richard Parker [00:04:56]:
And I can imagine long time if you love it.

James [00:04:58]:
No. Fair. Totally fair. I’m just thinking 30 years of deal making, and especially when I’m thinking the Internet was way infancy 30 years ago.

Richard Parker [00:05:07]:
Oh, was it ever? I mean, it when I started when I this the the deal that I was looking at that I referred to happened in 1999. So that was the Internet bubble. Yeah. When I started looking into this and really educating myself about resources, So you had, you know, like, local score chapters of the SBA and and the library. Right? And then you have the yeah. Yeah. I remember those, and then he had the Internet. But the Internet at that point and just pre bubble bubble bursting was everything was free.

Richard Parker [00:05:42]:
And despite the fact that I never went into this for the financial aspect of things, my thinking at that point was As long as all this information no one was really selling a lot of merchants. You had Amazon, but, you know, their stock, I think, was at, like, $67 at that point or something.

James [00:05:58]:
Yeah. 99. That’s

Richard Parker [00:05:59]:
Yes. Something like that. Yeah. Yeah. Right. Books. They were selling books. But my feeling was As long as all this information was gonna be free, it probably wasn’t gonna have a whole lot of value Because it cost nothing.

Richard Parker [00:06:16]:
The if you’re gonna give it away from free, how much time were people We’re really going to invest, or quality people going to invest to provide information that was really valuable versus Someone who has nothing to gain, nothing to lose, just putting a shit on the Internet. Excuse my French. Right?

James [00:06:34]:
No. You’re good.

Richard Parker [00:06:36]:
And and so That thinking was, well, if if I’m going to do this and take you know, leverage the Internet because I was really fascinated by it, I think I’ve gotta wait till this evolves because it’s either gonna turn into something where it’s gonna be this great marketplace of of value, Or it’s just gonna disappear. I mean, that’s what I was thinking, especially because you had this bubble. And shortly thereafter within a couple years, it started to make this shift Towards, you know, people monetizing information and products and services, and that’s why I felt That going down the road of the Internet versus publishing a a traditional book would make a whole lot more sense because The Internet would ultimately reach, you know, global proportions. I mean, it was still in its infancy. So I think about how much has evolved over 20 years, you raise a good point. But that was my thinking and and and I’m not smart. It just happened to evolve that way and and, I mean, I could have never dreamed. I don’t think anyone would dream about What it would have turned into, but that was how I went down the road of self publishing and and and trying this thing on the Internet because I thought I can get the word out, maybe write some good articles and help, you know, provide some information, not misinformation, but factual real world, information that’s practical and do it in a way aligned with websites that were, formidable And and, reputable, and and that’s how it ultimately evolved.

James [00:08:07]:
That is cool. Oh, I just wanna reiterate this for the people that are sub 40 years old to help them understand. Paint a picture here. Google wasn’t a search engine back then. I don’t even know No, sir. Me back then.

Richard Parker [00:08:19]:
Are you

James [00:08:19]:
talking Netscape or something like that.

Richard Parker [00:08:22]:
There was net Overture was one. Oh, sure. There there was Ask Jeeves. Oh, yeah. Ask Jeeves. And Google’s shortly thereafter, if you call, Google didn’t have ads. Google was just a search engine. There was, oh my god, Lycos.

James [00:08:39]:
Oh, wow. L y c o s. Yeah.

Richard Parker [00:08:41]:
Yeah. L y c o s, Lycos. I think EarthLink might have been one of them. Oh, yeah. So there was the none of those even exist anymore, but even Google when it started For not for quite a while, had no ads. Like, if you go and search on Google now, you have all those sponsored links and advertisers, and that’s where they generate, like, gobs of money. But Remember early on, they said, no. We’re not gonna allow any advertising on this website.

Richard Parker [00:09:04]:
You know? We’re Yeah. Like We’re we’re really pure to the search or whatever. Yeah. See how long that lasted. Right?

James [00:09:09]:
It changed from Do no evil or something like that? Yes. Something else. Yeah.

Richard Parker [00:09:15]:
To to to do as much evil as possible. Right? We had pay per clicks When we launched the website, and this was April 23, 2001.

James [00:09:26]:
Okay. So right at the bubble. Yeah. Yeah.

Richard Parker [00:09:28]:
Right at the bubble. I had someone design the website. And when I that down to write this material. Part of my research went into, speaking with a lot of people who had written books and what have you and and and or Or conversations with individuals, and it was amazing to me how many people that came across and said, oh, yeah. Like, I’m writing a book and said, how long you’ve been writing? And they tell me 17 years. You know, they never got it published or Others that, you know, just, you know, never got around to doing it. And when I sat down to write it, I said, I I put together There are unbelievable notes and and and a framework which I call this, you know, thinking tree of all the subject matter and all the situations. And said, you know what? There’s no way I’m not gonna get this published.

Richard Parker [00:10:10]:
And I said, I gave I sat down to write it on January 1, 2001. It was my mother’s 70th birthday on March 31st that year. And I said, I’m getting it written to complete before her birthday. So I wrote everything in 90 days. Wow. But I had an incredible outline, right, of of every single component of the business line processes. They say the thinking tree like the trunk was, you know, valuing a business and a branch was, you know, asset valuations and a and a leaf off of that was The drop downs to to that and and had probably 50 pages of that type of outline then wrote it up and, managed to get it. I didn’t wanna do self publishing.

Richard Parker [00:10:47]:
We’re just starting. So, when I when we went live with the website, the ad pay per clicks, the guy who did my website. Oh, we’re gonna use paper clips. What the hell is that? He said, oh, no. You go into these websites and you could design a little ad and you pay, like, a dollar. And if someone clicks on it and they buy your course but either way, you pay for them to click and come to your website. So, okay. Yeah.

Richard Parker [00:11:06]:
Let’s try it. I gave them $1,000 and said, You know, run a bunch of ads, and I’m sitting home at night, that night. I mean, it’s April 23, 2001, and I get an email and I see order receipt. And I said, I didn’t buy anything. Like, people were people were afraid to even put their credit card into into a website at that point. I remember that. They said they said, Order receipt. I didn’t buy anything.

Richard Parker [00:11:24]:
What the heck is that? And I opened it up, and I see how to buy a good business at a great price in someone’s name in Miami, Florida of all james, like, 40 miles down the road from me. And he said, oh my god. I can’t believe I got an order. And that was Overture was the name of that website. You did the pay per clicks with Overture. Wow.

James [00:11:41]:
Is that nuts? That is cool. That is cool. So tell me, let’s dig into this business buying and selling and all that jazz. When you first were starting out, how did you know where to even look?

Richard Parker [00:11:53]:
I did.

James [00:11:54]:
To figure out what business to buy, to like, now you just there’s hundreds of websites go on to find businesses that are for sale. But, I mean, are you knocking on doors? What are you doing?

Richard Parker [00:12:05]:
Yeah. What you way back when it was, you know, at businesses for sale were listed typically in the Sunday newspaper in the classified Section been in business opportunity section where you had these little ads, but they were they’re really poor ads. I mean, there were 3 lines because advertising was very expensive at that point. So any business owner or business broker would would put up their what they thought were their best listings, but only a limited amount because it used Cost them, like, I think about $27 to do that little box kademan it’ll just say, you know, something like pizza parlor for sale in in, you You know, in Broward County, that you know, asking 4.95. Right? It was nothing more than that. They’d give you a phone number, and they had no information. You couldn’t get the financials. And businesses, whether they be in retail or other ones, I mean, they have tons of unreported income.

Richard Parker [00:12:50]:
It was it was just like every business was almost a mess. But it was networking, because networking really hasn’t changed. You become more sophisticated with technology, but you went out, you knocked on doors, and you spoke to accountants and attorneys and and, individuals that And business owners and my tactic, my first business, I happened to acquire something that was in an area, that I was familiar with in a Consumer products business. And so that was a little easier because I bought a company from, I I basically become the Eastern Canadian distribution rights For a company that was owned by Hasbro, the toy business at that point, there was a company that I was, affiliated with beforehand. But subsequent to that, it was just, You know, it was through chance encounters. You know, I built my businesses after that. You know, I I was looking for additional, acquisitions to build my business. And as As I started thinking, hey.

Richard Parker [00:13:36]:
This type of thing would make sense for my business. You just did it the old fashioned way. You just went out and spoke to as many people as possible. Do you know someone in this business? Or do you if you speak to an attorney, do you know someone who may be doing work for this type of business? And it was an an unbelievable amount of of digging. However, that grunt work proved to be terrific training ground. So, you know, But in answer to your your part of the earlier question was I didn’t know what the hell I was doing. You know? And most people today still don’t know what the hell they’re doing, and that’s What got that’s what gets them into trouble.

James [00:14:10]:
Totally fair. Totally fair. So when you were looking to buy your 1st business, did you have an idea of what type of business, or you’re just looking for anything that caught your eye.

Richard Parker [00:14:20]:
My first feelings were I I you know, my strengths are sales and marketing at that point. It’s I was, more in the sales and marketing end of a company where I was working and felt that to be sales and marketing driven. I would I wanted to be in the consumer products business, because I was dealing with retailers And, felt that that would be helpful, but was definitely sales and marketing focused. Like, as the years went on, I’ve really learned that where People run into trouble. And where I ran into trouble because I you know, it’s it’s very to tell great to tell you about a bunch of successes, but, you know, I had plenty that that crapped out too. And and what what I what I see is and I try to explain to people is very often people confuse experience with expertise. Meaning

James [00:15:04]:
All the time.

Richard Parker [00:15:06]:
Meaning, you’re in the health care business or you’re in the commercial landscaping business or whatever it may be, and you believe you’re gonna go you wanna buy a business or start a business. I’m not a big proponent of starting businesses, but you wanna go and buy a business and you believe, well, been in the health care field, I gotta look for something health care. And that’s wrong, wrong, wrong. Because that’s ex that’s experience. It’s not expertise. It’s what did you do specifically in the health care World or in the landscaping world or in the retail world, that is your single biggest skill set. And so And I made some mistakes along the way thinking that, you know, you know, that it might be experienced in in a certain type of industry, but it was whatever it You need to match your greatest skill set with a business that needs that to drive the revenue and profits of the business. That’s the that’s the ultimate marriage Because you can acquire good business, but if you’re the wrong owner for and it’s going south in a hurry, and similarly, if you could find a A decent business that may not be doing, exceptionally well, but you’re the right person for it, you can grow that business exponentially.

Richard Parker [00:16:09]:
And so The mantra that I always use is whatever it is that you do best has to be the single most important driving factor of the revenues and profits of any business you consider purchasing. Because for everything else you can hire or outsource, and especially today. And so digging into that skill set, because everybody has that one golden skill set. It could be james. It could be marketing. It could be logistics. It could be putting a plan together. It could be operational.

Richard Parker [00:16:31]:
It could be manufacturing know how. So that’s where the focus has to be. But at the beginning, I mean, I I I I I, you know, I it took me a while to get there and Mistakes are made along the way. I mean, it’s it’s it’s just inevitable. But if you learn from them, they’re good mistakes. You you just don’t wanna make big mistakes. It’s okay to make small ones. You just don’t wanna make monumental ones.

James [00:16:51]:
Right. Right. Very yeah. Mistakes are gonna happen regardless. So Right. Yeah. It’s the quality of the mistake rather than

Richard Parker [00:16:58]:
the

James [00:16:58]:
the terrible ones. Tell me. So was or is the idea or was the idea, I guess, over the course of 30 years, I imagine it likely changed. Was the idea to buy a business, build it up, and sell it, kinda like flipping a house kinda thing? Or is that idea to buy a business and, hey. This is I’m gonna retire with this thing? What was the initial goal?

Richard Parker [00:17:17]:
I never buy them with the idea of selling them, but I always buy them with the idea of building them like I have to sell them so that I’ll put proper procedures and systems and and people into place So that if the time comes that I wanna sell it, I make it very easy for the buyer because it’s a it’s it’s it’s good structure And good people in place. And, but I’ve never went into the idea with flipping it. And and I understand that philosophy. There’s, you know, the private equity firms, that’s their business. Right? They go in. They they, you know, put some money into business. They they they, fund it. They provide growth capital, And they’ve gotta exit it.

Richard Parker [00:17:52]:
I mean, that’s their their plan. It was never my plan. It’s still not my plan. Everybody has their differences. You could do both. I mean, one is do not, you know, that you can’t it’s not like you you can only do 1 at the expense of the other. I mean, you you grow your business and, you know, if it’s a good business and, You know, business is the average business sells every 5 years, so it’s probably gonna happen. But I never went into them with that idea.

Richard Parker [00:18:12]:
I I, you know, I love business and I find, especially if it’s something that I haven’t done before or it’s a new industry, I find that intellectually stimulating, learning about a new business and even if it has a reasonably Steep learning curve as long as I my skill set is what it needs to grow, but I’ve typically my ID philosophy is always, you know, been going. I wanna Learn about that business. I get very involved operationally for a short period of time and then bring in people.

James [00:18:38]:
Alright. You know, it’s interesting because I keep in my head relating this to buying and selling cars. So I I used to be a mechanic way back when, and I buy and sell cars for fun. You fix them up. And Some you buy because they’re toys, but eventually they go away. You sell them. And others, I buy just to fix up with the intention of getting rid of it. But I always make sure that I buy a vehicle when I buy a car or motorcycle, whatever, one that I would not be afraid to keep.

James [00:19:06]:
Like, if I can’t sell it, It’s alright. I’m okay keeping it. And I keep coming back to this with the business thing. It’s so interesting because you’re like, buying that with the intention of selling it, but eventually, You can’t take care of this many businesses, so something’s gotta go just as, like, you can’t store all the cars that you want, so some of them have to go kinda thing. It’s Yeah.

Richard Parker [00:19:25]:
Well Interesting. It’s well, it’s it’s very interesting because there’s a direct correlation between those 2. I mean, it’s a perfect analogy. The the fundamental thing that you said was, If you buy it and you have to keep it, you’re not buying a piece of crap to start with. It may need some mechanical work. It may need some tender loving care and some cosmetics, But you’re not buying a piece of garbage. Right? Because the piece of garbage is just gonna continually be a piece of garbage. And that’s why I fundamentally believe I mean, there’s no Persuading me on this, I like buying good solid businesses.

Richard Parker [00:19:57]:
I don’t believe in buying distressed businesses. I don’t believe in buying garbage businesses. I don’t believe in buying turnarounds. For some people, they work, but if, You know, especially for an individual who’s looking to get into entrepreneurship, or business owner ownership often for the first time, you’d There’s gonna be enough heartburn. You don’t and if and if you don’t have experience with turnarounds, don’t be buying in a distressed business because there’s a reason why the word Dress is in the middle of that james. Right? Because that’s what it’s gonna cost. So it’s very similar because, you know, I acquire business or the way I teach people to buy business. You want a good business with Solid, fundamentals in place that could become, terrific and great with you as the new owner, but you won those fundamentals because you, At the beginning, you don’t even have you don’t even know what like, in the in the motorcycle case, you don’t even know what has to be changed.

Richard Parker [00:20:43]:
Right? You don’t know what to even fix. So at the beginning, you have to learn the business. So that’s why you wanna buy something that’s that’s solid, that’s gonna transition well to you, that the learning curve is not too steep. You’re gonna have an opportunity over 6 to 12 months to learn the business, get the guts business in your belly because if you well, you may keep it, you may not, you may sell it down the road, but you don’t want it to be an endless headache. You wanna you know, if you do this right, You get the keys to the business on Monday. You should be able to take a paycheck on Friday.

James [00:21:12]:
Nice. Okay.

Richard Parker [00:21:14]:
So that’s like the motorcycle where you buy it on a Monday, but you could still drive it out of the the guy’s place or drive it around. But a couple you might need an oil change or something minor, but you could Driving on the weekend versus saying, I’ve gotta put it up on the, on the rack and and fix it for the next year. That’s not the way I see This being the best way to acquire businesses. That has proven itself repeatedly.

James [00:21:35]:
Alright. So tell me, the big deal when it comes to buying and selling businesses is valuation. So let’s go down the road and just talk about how you feel is the best way to value businesses because that’s a huge Gray area, and I suppose it’s just like buying or selling a car. Right? People always are thinking, I know what I got. It’s worth 1,000,000, and You’re looking at it saying,

Richard Parker [00:22:00]:
Not so much. Feels

James [00:22:01]:
to a match. Right?

Richard Parker [00:22:03]:
Well, valuation is very important. Terms are more important. Oh, okay. So valuations, a few things, and it’ll provide some, not industry jargon, but just some some ideas to Set the stage, if you will. So valuation is more of an art than it is a science. And, after doing this for as many decades as I As they have been, one thing that’s been a common denominator throughout is that what a business owner thinks their business is worth rarely has anything to do with the value because they poured a whole lot of blood, sweat, and beers and tears into it.

James [00:22:39]:
Mhmm.

Richard Parker [00:22:39]:
And so being able to compile evaluation For a small business is really is an art. There is a component of science to it. So what’s very important is that the The valuation that you compile has to be defensible because seller an individual let’s just take some rough terms. Seller’s asking $1,000,000 for business. I mean, I don’t pay any I don’t pay any attention to the asking price whatsoever. I mean, to me, it’s just like that’s that’s just numbers on a page. But they believe that their business should sell for $1,000,000, And, you come up with a number that’s far less than that. Well, your number has to be defensible.

Richard Parker [00:23:18]:
And it has to be defensible, to to this against the seller’s argument, their accountant’s argument, and their spouse’s argument for whatever reason, and also be asked to be defensible to the point that At some point, the return on the investment won’t make sense if you go past a a certain number. And so what I’ve done over the years is, actually, I developed a evaluation program that takes the 50 fundamentals related to the business because it’s not just numbers. It’s, you know, you may have 2 businesses, Two similar businesses, similar industry, repair shop, an auto mechanic repair shop next door to each other. They’re both doing $1,000,000 in revenue, and they both make $150,000 in profit. And they’re similar location, repairs, similar type of cars, and you look at them and say, well, Makes sense. They’re probably both worth a similar amount. Right? I mean, James, that makes sense. Right?

James [00:24:05]:
On paper. Sure.

Richard Parker [00:24:06]:
Yeah. However, what if one of the businesses Made $300,000 2 years ago, $200,000 last year, and this year made $150,000, and the business next to it last 2 years ago Made $50,000, then 100,000, now 150. Well, you know, sure as God create a little green apples, I I certainly wanna buy a business that’s on its way up, not on the way down. That’s the way I look at it. So you have to take into account issues related to, the the business, the customers, their Concentration issues. How long it’s been in business? The conditions of the books and records? How easy you know, what are the barriers to entry for someone else to come in as competition? What licenses are required to operate the business? What type of financing is in place? What is the condition of the inventory? Is it good and resellable? So there’s 50 Pieces to the valuation that actually the software that I developed has become an industry standard where people take the numbers. You take the numbers because the numbers are the numbers. That’s That’s the easiest part because numbers don’t lie.

Richard Parker [00:25:04]:
People lie. The numbers are the numbers. Okay? So you you take the numbers, you plug in the numbers, and then you address These 50 individual points related to the business, they each one gets different weights. And so that’s like the artistic point part of it. The numbers are the science part of it, and you marry it together and be able to come up with a valuation. And it’s also gotta give you a good return because you have options in your life what to do with your money. Right? Which is on on the far side of things is you can take it and put it on 17 black at a casino And get the hopefully get the and hope for the best, give it a rip, and get 35 to 1 return. Or you can well, One step above keeping it in your mattress, you could put it in a certificate of deposit or a savings account and get a piddly amount to return.

Richard Parker [00:25:48]:
And somewhere in that, Scale from, you know, savings accounts to Las Vegas, you also have the stock market. And the stock market will traditionally return 11% Oh, historically, over time, some years down, some years up, but historically so that’s at 11%, and it’s very liquid. So if you don’t like the investment, it’s not doing well, or it’s doing very well, get out of it. It’s a press of a button, you’re out of stock. Buying a business is not liquid. You wanna sell a business. In the best case scenario, it’s gonna take 9 months to sell your business. I mean, those are industry numbers.

Richard Parker [00:26:23]:
So you Return as you go down the scale has to be closer to Las Vegas. I’m not saying 35 to 1, but having done this for all these years, you I believe you gotta get about 25 to 33% return on your cash investment. So you’re gonna be financing part is whether it be with a seller or government programs like the SBA or what have you. But your cash investment, that’s the type of return you should get because that’s the only thing that makes sense, relative to other options that are available, You you you get out of a job that you hate because most people can’t stand their james, and you’re in control of your own destiny, and you’re building something of value that If if, let’s say, you pay a 4 times multiple for the business, for every dollar of profit you add, you’re gonna get $4 back when you sell it. So the upside is phenomenal. I’m not gonna try to make a great case for take your money and put in the stock market, because I believe infinitely more in buying a business and growing it, because it’s and the process is much more enjoyable. But even as you increase the profits, the multiples go up. Now I should also tell you that People, your listeners need to get rid of all the noise related to multiples, buyers and sellers.

Richard Parker [00:27:35]:
You know, you read Reports from Wall Street, and here’s company selling for 10 times earnings or 35 times projected earnings, whatever. That’s all gobbledygook. Right? It’s just it’s it’s it’s nonsense. It’s it it doesn’t happen in the real world of small businesses. Multiples have increased somewhat in small Main Street USA businesses, But there’s still, you know, a couple of times. They’re 1 to 3 times. You know, if you start earning

James [00:27:58]:
1 to 3.

Richard Parker [00:27:59]:
Yeah. Businesses earning over about half $1,000,000, that moves up a little bit. 2 to 4 businesses over a1000000 might be, you know, 3 to 5. But you take a, you know, smaller business, that that’s the range. So Even at 5 times, if you were to pay all cash, you would be getting a 20% return on your money. Yes. You’re working the business. I agree with that.

Richard Parker [00:28:17]:
You’re working the business. But you’re working it because you don’t wanna work for someone else anymore. Mhmm. Right? And you’re still getting the so if you buy a business at Five times it’s making $200,000 and you give them $1,000,000, which I would never suggest anybody does, and you’re getting back $200,000 every year, you got a 20% return on your investment. And if you build that up to 2.50, you could sell it for 1,000,250. So valuations, it you have to take a lot into account, But people should not get buyers especially can’t get too neurotic because if you get so hung up on a on on a number or Regiments rules are regimented, ideas of I’m not gonna pay more than this. Right? Well, you’re gonna miss some opportunities. Mhmm.

Richard Parker [00:29:00]:
Because I’ll tell you what. It’s nothing there’s nothing wrong with paying a premium for a good business Because a shit business is never cheap enough.

James [00:29:12]:
Sure. Could be a buck and it’s still terrible.

Richard Parker [00:29:15]:
It’s still terrible. So you have to look and say, hey. Okay. I’ve done all my math. I’ve done all the work. I’ve done all the formulas. I this business is worth $100,000, and they want 1.50. And I gotta say, how am I gonna do that? Why does it sense and as long as you can service the debt or what have you, you look at and say, hey, I’m I’m I’m gonna get into a a business something that I’m gonna Really enjoy.

Richard Parker [00:29:35]:
I get a chance to be my own boss. I could improve the life of other people, improve my own lifestyle. There’s no limit to how much I can earn. If I build this properly, when the time comes to sell, I’m gonna get all that money back plus more. And so you have to look and say, okay, I’m gonna take all these altruistic pieces, which can be realistic, and They these are all these phenomenal benefits that I stand to achieve by acquiring the best. So who the hell cares if I pay a little more? Big deal.

James [00:30:02]:
Alright. I like it. I love it.

Richard Parker [00:30:04]:
I like the way your answer. Alright. Yeah. Yeah. Alright. I’m just yes. McConaughey. Right?

James [00:30:09]:
Alright. Alright. Alright. It’s interesting because I’ve been involved in, 4 businesses being bought and sold. Mostly helping well, mostly helping buyers and sellers. I sold 1 of my own, and it was one of those I couldn’t get over with the job the business that I was selling, the first one. I had done I knew that I wanted to sell it, so I did everything I could to remove myself from the because I didn’t wanna sell a job.

Richard Parker [00:30:40]:
Oh, yeah. Right. Brilliant.

James [00:30:42]:
Well, it on paper, it was great. Yeah. But it was small, tiny business. We’re doing, I don’t know what we’re doing. Maybe 500, 600,000 a year, something like that in revenue. So tiny. It’s a tiny business. I had a couple employees, and I was talking to a buyer.

James [00:30:59]:
And over the course of 3 months, I lost those 2 employees. So then it was just down to me.

Richard Parker [00:31:05]:
Now did you lose those employees because they knew the business was for sale, or they you just lost them because they moved on to other things?

James [00:31:11]:
They moved on. They moved on. 1 guy quit, and another guy helped out the door.

Richard Parker [00:31:16]:
Yeah. Okay. Because some it’s a it’s a fear of sellers. Right? I mean, if people find out, my people will We’ll quit, which is which is not the case. It’s actually the complete opposite. But so in those in that case Mhmm. You when I say the complete opposite It is because a new owner needs the employees more than an old owner does. The new owner knows nothing about any they don’t even know how to turn on the coffee machine.

Richard Parker [00:31:35]:
So the employee’s job and they don’t know the flaws of the employees yet. And so the their jobs are pretty safe. But when you had those buyers go or those employees go away, and now you have a 1 man You’re a one man band. Mhmm. So you have to build the business back up again, or you just have to sell it substantially lower than what you thought you were gonna get? No.

James [00:31:53]:
No. No. No. I I was able to maintain revenue because With those employees, I had it set up where I wasn’t really needed in the business.

Richard Parker [00:31:59]:
Wonderful.

James [00:32:00]:
So it’s tough as I had to go back to work then, so then I was more motivated to sell it.

Richard Parker [00:32:04]:
Well, you’re more motivated and for someone coming into looking to buy it, it’s even more attractive because the learning curve for them to say, hey, they’ve got management in place or people in place, And, you know, that that reduces someone’s learning curve, which provides a high degree of comfort. And some people look for some absentee run businesses with a whole which is a whole different subject matter, but When you went back in and got involved, you so you immersed yourself back in the business?

James [00:32:28]:
Yeah. It was I’ve been doing it for years, so it was easy. Yeah.

Richard Parker [00:32:32]:
And what happened after that?

James [00:32:34]:
Then the buy in. It was a very, very, very long I wanna say it was 8 hour negotiation. One day, it was one of the most memorable, painful, and happy days of my life because, You know, you sell a business. I owned that business for 8 years or a month shy of 8 years. I started it from scratch, whatever. So it was interesting because we’re he had he, the buyer, He had 2 accountants, and he had 1 attorney that he was bouncing between plus his daughter trying to do all this stuff.

Richard Parker [00:33:03]:
Yeah.

James [00:33:04]:
And I just had me. I had an attorney that was essentially just waiting so that when they presented the buying documents, I can give it to him and say, hey. Is this legit? Move on with their life.

Richard Parker [00:33:17]:
Right.

James [00:33:17]:
But it was it was very interesting just to see the process and home. Like, I feel like neither one of us know what we’re doing. And I I feel like We got an okay deal, I think. I think it could have been better, but I didn’t really shop it, and they didn’t necessarily shop it.

Richard Parker [00:33:36]:
So And how did you find your buyer?

James [00:33:39]:
They were business they were similar business that I’d worked with. I used them before.

Richard Parker [00:33:43]:
Oh, okay. So it

James [00:33:44]:
was in the printer repair copier industry. They’re in the copier industry. I was more on the printer side, so it was a very easy they already had technicians that could absorb the business painlessly. Well, Semi painless.

Richard Parker [00:33:56]:
With a little pace. There’s always a little pace.

James [00:33:58]:
Yeah. Yeah. So it was it was, yeah, it wasn’t terrible or anything like that, but it was Very interesting just to see it because you read about it, and that’s the you know, it’s interesting when I first started that business. It was my 1st business real business that I ever started, and I didn’t think of an endgame. And I remember being into it maybe 3, 4 years and thinking, am I gonna do this until I die?

Richard Parker [00:34:24]:
Or what? Like, I gotta

James [00:34:25]:
figure out a plan here to get out of this. Whether that’s 20 years down the road or 2 years

Richard Parker [00:34:30]:
or whatever. Yeah. And it’s a it’s so important because most people don’t. Yeah. And you know what’s what I always find fascinating about all this when I oftentimes on the on the m and a side where I represent some sellers because I do I do some, as I mentioned earlier, some intermediary work. And very often my work takes me, you know, 3, 6, 12 months of advisory work with a business owner before the business is ready to market. I never believe in taking a business to market that’s not ready to sell. I’m not just Oh.

Richard Parker [00:35:02]:
You know, like typical, like, You know, most and I don’t wanna disparage well, let’s say I’m gonna disparage business brokers because I’m with in that fraternity, if you will, at a higher end, but what What typically happens, they just throw businesses for sale that aren’t ready for to be sold. And that’s why the majority like, if you go to these biz buy sell online databases of the world, 75% of those business never gets sold because they’re not ready to be sold. And what happens when a when I sit down with the sellers, say they’re you know, if you Put certain things into place. Right? You should run your business like you have to sell it. Not you may not sell it, but you should have to run it like you have to sell. What that means is The things that are concerned to you or things that are important to buyers should be addressed early on because it’s gonna make you a better business. For example, good books and records. Good books and records is just gonna give you a better pulse in your business.

Richard Parker [00:35:48]:
Mhmm. Number 1. And a buyer’s always good to look at it because most deals fall apart because the books and records, the the seller can’t validate what they’ve initially represented. The 2nd piece is related to issues in the business, like what Keeps you up at night about your business is gonna keep us a buyer up at night about buying it times the power of 10. So it could be customer concentration or recruiting good employees, retaining good employees, certain competitors, whatever those issues or issue are issue is, that’s gonna be magnified for a buyer. Right. Because you know the business. So if you have 1 customer represents 60% of your business, you may not be worth I’ve been dealing with Bob for, you know, for For 20 years, I mean, we’re buddies.

Richard Parker [00:36:31]:
I’m I’m not worried his business is not going away. Well, you know, Bob can get hit by Bob can get hit by a Pepsi truck tomorrow. So Mhmm. You know? But But it’s also concerned when you think about this realistically, that should be a concern for your business, and that’s gonna be a massive concern for someone coming in. So you wanna, You know, mitigate the mitigate that and and remove that that cut or reduce that customer concentration. And the And that’ll help your business. Another thing is, like you had in your in your business that you’re referring to easier earlier, if you have a 2nd tier of management in place, and they may not have to be at your level, but they could operate the business because the same question of, you know, well, what if James gets hit by the same Pepsi truck after Bob gets hit? Right. What happens to the what happens to the business? And if someone could knowing that that business can still operate, well, that brings comfort to a buyer knowing that the employees are in place.

Richard Parker [00:37:18]:
And the 3rd piece of this is, you know, the greater the buyer pool, meaning in numbers, the greater your chances of not only selling the business, but selling it for the highest price possible.

James [00:37:28]:
Mhmm. And

Richard Parker [00:37:28]:
so if you have these problems in your business that you may not even believe the problems, but certainly those first two areas of good books and records And what keeps you up at night are, you know, issues for the business. If you can solve for those, well, your buyer pool expands because more people will find that business attractive. And the greater the buyer pool, the larger your your purchase price more often than not, actually in a greater percentage of cases. So you you should run your business like you wanna sell it. Doesn’t mean you’re you have to or you’re ever going to. But if you put Processes, systems, procedures, and people into place, your business is going to do better. It’s like, for example, people steep taking out every penny from their business. Right.

Richard Parker [00:38:09]:
You’ve started off a busy you started you started your business and it started from nothing, and as it grew, most like, what happens to most people say, oh, wow. I can’t believe I’m able to take out a $100 now, and then business grows and you say, well, I could take out 1.50, and it keeps growing. So, jeez, look at that. I could take out 202.50, and then you got a boat and a Bike, get a motorcycle, and all these kinds of things, and you’re you keep adjusting your lifestyle for the business. Well, the reality is if you can keep living on the 150 And take the other 100,000 and plow it into marketing or whatever that may be or additional people. And if those people can return some profit, remember, for every dollar you You generate out of it, you’re gonna get 3, 4, 5 time $5 for it. And so running it like you have to sell it, meaning putting money back into the business Don’t let it turn into a lifestyle business because very often I see it every single day. People who have a biz a a business that, throwing off a lot of money.

Richard Parker [00:39:02]:
They have a terrific lifestyle, and they have no structure in place.

James [00:39:08]:
Oh, you’re kidding?

Richard Parker [00:39:09]:
Nope. Oh, oh, it’s hap it’s far more frequent than not. More no 2nd tier management, no process. They didn’t invest in Software like they should have. They didn’t bring in a manager. They, you know, they they just kept running the business and kept improving their own lifestyle, And they lead a beautiful life in a fancy car, nice house, and great vacations, but someone coming in to buy the business saying, hey. Wait a minute. There’s no structure in this place.

Richard Parker [00:39:33]:
Mhmm. You’re taking out all the money. You don’t even have a proper marketing plan. You don’t have, you know, the people that you have working for you are all they’re okay. They’re all nice, but they’re 2nd rate people. Whereas, instead of you could have taken a 100, $200 And hire a couple of people, really good people, and that would have made a substantial difference to your business and easier for someone to come in. So people You know, they the business grows and then they just keep putting more money into their pocket, which is, yes, it’s the idea of business, but if you take a step back and look at it and say, can I be better served by putting the business money back into the business and growing this thing?

James [00:40:10]:
Right. Yeah. It’s interesting. You know, I Laugh and say you’re crazy at first, but now that I’m thinking about it with my call answering service business, the majority of clients or even potential clients that we work with, When they first start with us, they don’t have systems for much, if any.

Richard Parker [00:40:30]:
That’s why they’re calling you.

James [00:40:31]:
Yeah. Yeah. Which is good. I mean, it’s great for us, and that’s

Richard Parker [00:40:34]:
Good for them.

James [00:40:35]:
It’s their job,

Richard Parker [00:40:35]:
but but look at this from a selling perspective. Right? And I think you find That, you know, you’re, you know, you you get business. I mean, you’ve been in it. You understand it. You ask great questions. I’m sure if you start, you know, tapping into Some scenarios that you’ve had exposure to businesses and realize ones that sold for more or ones that sold for less and what they had in common or Things that the ones that sold for less were missing are those components we just talked about. And it’s hard for you know, I get I get it. I’ve been there.

Richard Parker [00:41:03]:
Right? You’re a business owner Like hell at the beginning, and now the business is doing well. You wanna reap the words of it. And that’s part a big part of why you go into your own business and deal with the, You know, it’s not all, pixie dust and unicorns. You’re gonna have some, you know, you’re gonna

James [00:41:16]:
have some pixie dust.

Richard Parker [00:41:18]:
Yeah. Me too. And, you know, like, I was I was on a show, an interview earlier today, And do we were talking about challenges or whatever saying it, you know, people who who should get into these type of scenarios or thinking about buying a business. See, there’s always, you know, there’s heartburn and and and aggravation with running a business. It’s not all smooth sailing. So I can’t even tell you how many times I went to bed on Monday night, had no clue how I’m gonna make payroll on Friday. I mean, that’s just part of

James [00:41:42]:
it. I remember those days. Thankfully, they’re they’re well past, but Yes.

Richard Parker [00:41:46]:
Amen to

James [00:41:46]:
that. Definitely remember those days where I remember depositing money from my personal account into the business thinking this is the wrong direction for money to flow.

Richard Parker [00:41:59]:
100% the wrong way.

James [00:42:00]:
The pay is to keep my job.

Richard Parker [00:42:02]:
That’s what I was gonna You know, I remember doing it, and my accountant said you should never do it. Said, okay. So then you do it because I gotta pay people on Friday.

James [00:42:08]:
Yeah. Right? Like, payroll’s gotta be made. That’s about

Richard Parker [00:42:11]:
a month. I said, I yeah. Sometimes you, You know, sometimes it really takes just 1 nostril above the water, and you do what you have to do. Mhmm. That’s so

James [00:42:19]:
so so true. Yeah. The rule is systematize everything, and that’s, 1, I guess, from my perspective, so that the your employees know what to do and the business can run smoothly. But, also, if at any given time, you wanna you wanna sell it, that you actually have something to give the buyer to say, this is how we do things here, and it’s not just up here. It’s actually documented.

Richard Parker [00:42:41]:
That’s right. And that’s right. And that’s a great point. And, you know, when you say when you’re pointing up here, you know, you don’t want all the assets of the business between To be be to be between the ears of the owner and leave it Right. At 5 o’clock every day because those aren’t assets. Mm-mm. Right? Those are really not assets. So Being able to put those into systems and and make it, something so it could be either duplicated, expanded upon, Or handled by someone else.

Richard Parker [00:43:08]:
That’s critical, and so many you know, you’ve heard the expression, well, you know, I looked at this business, you know, the owner is is the owner of the business. Yeah. Well, to a certain extent, they’re always going to be, but the more you can solve for that and reduce that, the greater the, You know, the the greater your chances for exiting, plus you’ll have a better business. And you’ll be able to have more time away from it. I can’t even tell you how many times I’ve been in meetings with business owners And, like, you can’t even have a meeting with them. Right? The employees

James [00:43:36]:
are the

Richard Parker [00:43:36]:
the fun the phone, the employees are coming in 12 different james, And I 1 question I always like to ask a business owner, is how much vacation do you take? And the auto and their first I know that their knee jerk reaction is to that question is, this guy hasn’t even Got the keys to the place yet. He’s looking to take time off. But it’s not that at all. It’s it’s an indication Of how good your business is run because if you could take all kinds of time I had a client recently took a 120 days a year vacation.

James [00:44:10]:
That’s impressive. Yep. That is extremely impressive. Kudos to them.

Richard Parker [00:44:14]:
Kudos to them. So that’s an extreme case, but you’ll have ones, You know, similarly, I had 1 client said, I haven’t taken a vacation in 14 years and was proud of it. I said he couldn’t Yeah. No. I said, you can’t even find a building large enough for me to jump from if that’s the way I have to work. So so so somewhere in between is, like, you you wanna know that because that could be an indication if someone could be a workaholic. I mean, that’s possible too. It could be a case of there’s there’s no systems in place and they they make all the decisions and that the only way the business could run is if they’re there.

Richard Parker [00:44:44]:
Or the third way is they don’t trust the employees. And trusting the employees doesn’t mean that they may not they may be trustworthy, but the owner hasn’t given the latitude To run their little area of what they’re responsible for. So they may be more than capable, but they’re just the wrong owner. And so they don’t believe, you know, when I say trust, it’s not just that they’re gonna it’s not a case of just saying they’re just gonna steal. It’s a case of trust them to do the job without their, You know, micromanaging. And you see that in a lot of small businesses, and, you know, the Again, I I I I think about it as we’re talking. I mean, just recent situation where the the you couldn’t even ask this guy questions. Like, sitting there for a 1 hour meeting, which which I when I think about it, it should have taken 15 minutes because phone was looking.

Richard Parker [00:45:31]:
Look at his text answering call. I just gotta get this. It’s a customer. I just like, If you can do that, that that’s just you just have not set yourself up well, and it’s so easy to come.

James [00:45:42]:
Was this a meeting that you were gonna buy or considering buying? Oh, yeah. No.

Richard Parker [00:45:45]:
And that was the last meeting. No. No. Good luck.

James [00:45:49]:
Sorry about the heart attack.

Richard Parker [00:45:51]:
Yeah. Yeah. Yeah. That’s that’s on its way. I I I have no interest in that. I mean, you can correct for some of that, but the culture that’s build been built into a business like Can you imagine if it is a case that the, you know, you dig in and you find those, hey, these are good employees, they just haven’t been trusted, to do their job well. Well, chances are they’ve been so micromanaged. They’ve been so beat up.

Richard Parker [00:46:13]:
They probably would have difficulty operating with autonomy.

James [00:46:18]:
True. True. Very true. You know, it’s interesting. The employees that I have, I’m thinking about this, like, where am I guilty here? And A lot of times, it’s very tough to judge certainly tough to judge in a job interview when you’re hiring someone. What are their skill sets? What do they know? Where’s the foundation that we’re starting from if we hire this person? Really quick example from earlier this week. We had a company meeting, and I asked the crew it was over Zoom. And I asked the crew I wrote down a word.

James [00:46:50]:
I had everybody mute their microphones because I didn’t want somebody to blurt it out. I said, I’m gonna write a word here, and I want you to let me know if you pronounce it with a long a or a short a.

Richard Parker [00:47:01]:
Okay.

James [00:47:01]:
Because this this particular the idea was that we had some we had a client that a lot of the crew was mispronouncing the name of the company they’re answering the phone for.

Richard Parker [00:47:11]:
And to me Okay. Okay. So you’re saying so you’re saying the the company itself, people that were answering the phone or the third party that was answering phone was mispronouncing the company’s name?

James [00:47:20]:
Correct.

Richard Parker [00:47:21]:
Yep. Got it.

James [00:47:22]:
So big deal because Big deal.

Richard Parker [00:47:24]:
Supposed to be Yeah.

James [00:47:25]:
A 100% here. Call answering 101. Right? So I said, hey. Here’s a word, Typical everyday word, short a or long a. And out of, we had 12 people. 7 of them ish, I mean, just ballparking, were fine. They’re, you know, long a. 2 people said, I don’t know what you’re asking.

James [00:47:44]:
What’s a long a and a short a? And that’s I did that. I was like, wait. Woah. No. That’s not Wow. I thought our foundation was up here for a couple years down here.

Richard Parker [00:47:57]:
Or lower.

James [00:47:58]:
Yeah. So I went to find a video to explain short a and long a. And all I could find is ones with, like, little ponies and hearts and stuff like that. And I didn’t wanna be insulting to the crew. So I was like, okay. I had to find an image on the on a website that didn’t look like it was built for a nursery school.

Richard Parker [00:48:17]:
Right. Or you actually, you may you may have been better served Showing them something that is This is all I could find. This is all you could find, and it’s probably it seems like it’s a little more appropriate at this point.

James [00:48:27]:
Yeah. So it’s interesting just trying to figure out. I am having a hard time or I guess have had a hard time finding out where’s the crew individually at so that I can say, hey, person, employee. You are super smart and doing really well, so I’m gonna give you some more responsibilities. It’s been challenging For me, I don’t know how it’s been for other people, but just trying to read into that.

Richard Parker [00:48:52]:
Well, employees, you’d there’s There’s it’s it’s an ongoing effort, and there’s certain things that you see successful companies have in place Where employees first. There’s always gonna be some employees that just are not the right people. Mhmm. Right? And you do yourself as a business owner and the employee A terrible disservice by keeping them on board. You’re doing both of you a favor by getting rid of them because they can go on to something where they can hopefully have an opportunity to flourish, And you can get the right person onto the bus and get the wrong and to get the wrong one off. The the training is critical, And and the ongoing training and the ongoing measurement is critical. Because my guess is in the business that you’re in, had you done that exercise Weekly over the years with all new employees, those statistics would have been the same on every single phone call. I’m willing to bet that.

Richard Parker [00:49:50]:
And it’s because some people well, to be the deeper thing is to the ones who mispronounced it is Where did you get this name from? Right? How did you arrive at that? Well, no one told me the company name. I used to have an answering service in my company, which is D. O. Motes, the abbreviation for doing it on my own. And I once called my own answering service. I I once once called my own answering service, and they answered the phone, Diomo Corporation.

James [00:50:17]:
Perfect example.

Richard Parker [00:50:19]:
That right. And and I always do it phonetically for people, and I grew up. I started this company originally in Canada and in Quebec where you have the language Issue French and English, so I wanted to name it something that worked in both languages, but it has to be a meaningful name then. And this was my 1st company. That’s where came up with doing it on my own, and it worked d o mode. It didn’t sound English, it didn’t sound French, sort of sounded Italian, but I had these people answering it the wrong way. But, You know, for for the situation that you just pointed out, if you were to do a Venn diagram of why these that happened is probably the intersection of that would be a lack of training And a lack of super lack of supervisor talking to them or listening in.

James [00:50:56]:
And it’s very hard to the top.

Richard Parker [00:50:58]:
You gotta you gotta blame the top, but it’s also Easy as time goes on, sometimes you make assumptions that, like, that was, like, the most basic thing that anybody in your company could do. Right? Is answer the phone properly. I mean, that like, you don’t even think about it. Like, of course, they know the company name. That’s what we do. Like, if you’re going to screw up anything, don’t be let it not be that. So There you go. It’s almost like you look at it and say you wouldn’t even think that you have to Invest time into finding out if that’s a problem because it’s you made the assumption it’s not.

Richard Parker [00:51:31]:
And so, you know, the the oversight And some people don’t care. So, I mean but you have a small percentage of those employees, and it is very difficult to your earlier question or point with during the interviews, you really don’t know. I mean, if I’ve hired some people that, like, I would’ve bet on would have been terrific. I hired 1 person that I I was sure that this guy was gonna be unbelievable. Unbelievable in a sales capacity. I mean, the interview, it could not have been better. On a scale of 1 to 10, it was like a 15. And this guy got hired.

Richard Parker [00:52:01]:
And after 3 months, like, he was a disaster. Oh, no. Absolute disaster. And and it took me a long time to get good at hiring because I really wasn’t good. I used to have a tendency to, hire people that I really, really got on with and and liked versus Really double clicking on their their qualifications for the job. So I try to get a little better over the years. And when I brought this guy in after the, like, 90 days maybe was a little longer to say. I don’t even know.

Richard Parker [00:52:27]:
I won’t say his name because he’ll know who he is. He said, like, I don’t understand. I thought you were, like, perfect for the job, Like, based on, you know, when walking through some of the things and how I came up with my evaluation. And his answer to me was, he said, I interview very well.

James [00:52:43]:
I’ve been told that at least 3 times.

Richard Parker [00:52:45]:
And I and I said to him, yeah. It’s like but you screwed up everything after that. Right. Right? So but I blame myself. I mean Mhmm. Because I I had the tendency to he did interview well. It was and and and I liked him. And and he’s what he said was good.

Richard Parker [00:53:01]:
And I’m not so sure how in every case you you quantify everything. Very often, I think you need 2nd 3rd interviews. What I did because I was never good at at interviewing people. I mean, again, for that particular reason, maybe just from a personality side. If I like someone who got a good vibe from them and thought they were good, and Resumes seem to measure up. I wanna give them a shot. But for me anyways, it really took saying, okay, you know what, mister Parker, you’re not very good at this, And so you’ve gotta bring in someone else to do the hiring and sometimes 2 or 3 people to do the interviewing, and you gotta the people that you That you trust their opinion, and even if it’s against what you think, you I have a track record of not hiring the right people. And so I’ve got to remove that responsibility because I’m just no damn good at it.

James [00:53:44]:
Fair. Totally fair. Totally fair. I know we don’t have a ton of time left, so I wanna dig into this last point. You buy a business, figure out pricing and all that jazz. Now you are, are you treating yourself as the manager, boss, CEO person. Are you keeping that original owner on for a little time? Or tell me about the transition from the employee standpoint, the seller standpoint, and your standpoint.

Richard Parker [00:54:11]:
So I’ve done I do I do both cases. I do like to get immersed in the business even if I’m I’m I’m investing in might be buying a majority control, but keeping the owner in place like mini version of private equity because I like to be able to I I wanna learn the business Because if that individual leaves or is the wrong person, I have to know what that business is about and who would be the right person even though I’m not good at hiring. Make sure I can get the right person into place. And I’d like to know about the business, especially because we’re gonna make some investments in technology or people or expand the business. I got I I’ve gotta get the guts of the business in my belly, and it takes a little bit of time, But I do get immersed and sometimes I’ll you know, I’m I’m not involved at all day to day and that’s fine too when they’re capable people. I do not believe in absentee run businesses. Like, this Delusion of you’re gonna buy a business and and happens more in the smaller side, and you see these alleged, quote, gurus, unquote, you know, selling these programs, buying businesses This is for no money down and it’s gonna be an absentee run business. Well, generally speaking, absentee run businesses equal absentee run profits.

Richard Parker [00:55:09]:
Right? And so You have to learn the business because even if you have a manager in place, if that manager quits after 3 months and you don’t know the business, who the hell are you supposed to hire? You don’t even know who to hire. So I’ve done I do both scenarios, But I where I from my perspective, especially on the smaller side, you’ve got to get involved in the business. So I like to change shares with the owners more often than not. I learn the business. There’s a transition period. Once I feel comfortable, I wanna get them the hell out. It’s my business. I don’t need them there.

Richard Parker [00:55:35]:
They usually cause more harm than good. And so, but in other cases where buying a majority controller just investing in the business, they stay on board where you’re, you know, you’re you’re betting on them to with your With My Capital that can can grow the business, but whittling it down to the lower level of small businesses, Main Street USA, more individuals that are typically gonna buy businesses As long as the numbers are thrown off that allow them to leave their present job, then I say, you know, you’ve gotta get go in there Get involved because that’s the only way to learn it. And the truth is it’s really the only way to grow it. And once you get to a certain stage, then you can Start adding more people or, you know, removing yourself somewhat from the equation, but you can’t make decisions about the business until you know the business.

James [00:56:19]:
Fair. Totally fair. Totally fair. One last thing I wanna ask about is financing. Are you giving owners a bag of money? Are you talking to the bank and saying, hey. Give give that owner a bag of money, or how are you how are you moving the cash? Or maybe it’s even seller finance or something like that. What is typical? What do you like to see?

Richard Parker [00:56:39]:
91% of our clients’ deals include seller financing. I always buy a belt a business with a component of seller financing. It may it it varies greatly, And it could be as high as 90% or as low as 10 or 50 or 20. It depends on the business and depends on, you know, what can be negotiated. I like to keep an owner on the hook because is the only way to truly validate everything that they’ve represented. When they have skin in the game, they have to have skin in the game. I wouldn’t buy a business without seller financing. Regardless of what a component, there’s gotta be a piece of it or else I wouldn’t buy the business.

Richard Parker [00:57:10]:
But there are right now, there’s tremendous government programs for smaller businesses, SBA BA programs that will end up to $5,000,000, and and their criteria has become very buyer favorable, so it encourage people. And if anybody’s thinking about that, they Feel free to send me an email, and I could put them on to someone who could prop who could more than likely help them. I I don’t get a fee for any of that, so I don’t want them to think this is self serving, But there are some great resources. So I do a combination. I I have to have seller financing in place and often go to the bank. And other times they do earn outs where it’s a business that’s either, you know, right now you could do terrific performance based deals because of what’s happened in the marketplace over the last few years, so I like to have an earn out component where it makes sense That the, you know, seller gets x as long as y happens within a certain period of time, and so there’s a combination all of the above. But financing a business Is is is is doable. Right? You’re not gonna walk into a local an individual who’s never bought a business before is not looking walk into your local Bank of America branch and they’re writing and they’re gonna finance their business.

Richard Parker [00:58:06]:
It just doesn’t happen. It’s not like those ads on TV. You think the the ads on TV, it’s a whole different story. It doesn’t happen. If you don’t have a 100% collateral, they’re not lending you the money. But there’s Many other ways to do it, and it is doable. But the big the one of the big points on this topic is if you’re looking to acquire business. You gotta get busy with the financing early.

Richard Parker [00:58:25]:
Like, you don’t wanna look at this business done in a little investigation, initial due diligence, agreed upon price and terms, And then, try to figure out where you’re gonna get the money. You’ve gotta organize that in advance, and especially if it’s coming from friends and family or or an investor to make sure When they need to write the check that they’re gonna be there to write the check. So I would say on the small end, you know, as a, it’s a couple of bullet points. I absolutely wanna see seller financing place. Deals are financed often through, third party lenders, but you need a track record. The SBA is a is is a good vehicle, And if that’s not available to you, then I go down the road of absolutely financing it with with the seller. And are you putting a down payment on the business because you’re not gonna buy anything meaningful for no money down. It just doesn’t exist despite all the raw raw wonderful things you see on YouTube and Instagram.

Richard Parker [00:59:11]:
It just it just when you when you start breathing air from this planet, tell you that’s just not you know, that’s not the way it goes, but seller financing is a, a huge piece of the traditional, you know, banks or SBA programs are not available to you. Because very often, that’s the only way the seller’s gonna get the business sold. And as a buyer, you want to you you you want them to have skin in the game.

James [00:59:31]:
Fair. Totally fair. Yeah. As a seller, I wanna pull the chute as fast as possible because I

Richard Parker [00:59:36]:
got I

James [00:59:37]:
I wanna move to Florida

Richard Parker [00:59:39]:
or whatever. Come on. I got room here. It’s, it’s, it’s it it sounds great as a seller. Yes. You you’d like to sell a business for all cash, but it just doesn’t happen often, and you’re gonna take a real haircut if if if you’re going to try to sell it for all cash. And if you take a look at me here, I can’t afford to take a haircut. And, so but it’s not that’s why you gotta operate in the real world.

Richard Parker [01:00:02]:
Seller financing in the lower end of the market is Always has been, always will be a big piece of it, and more often than not, that’s what it takes to get the deal to the finish line. And so a seller, you wanna make sure that the buyer is, the right person to buy the business. And keep in mind, if you think you’re selling if you’re selling someone a garbage business and you think you’re a great price, well, they’re gonna have garbage too, and you’re not gonna get paid. Mhmm. Mhmm.

James [01:00:26]:
I yeah. That one deal that I had where I sold my own business, I financed it. I didn’t like it,

Richard Parker [01:00:32]:
but it was also

James [01:00:33]:
one of the what’s that?

Richard Parker [01:00:34]:
But you did

James [01:00:35]:
it. I did it. I, yeah, I I knew the guy, and I’ve known him for years. So it was one of those There’s trust on both ends.

Richard Parker [01:00:44]:
Right.

James [01:00:44]:
I had a little bit of worry that, that he would flake, and I thought, well, then what do I do? Because then the business essentially goes away, and there wasn’t any I mean, they’re assets, but we’re talking a few $1,000 of assets. There wasn’t

Richard Parker [01:00:57]:
Right.

James [01:00:57]:
A business was not assets. So I had a little bit of concern, but on the other end, I wanted out.

Richard Parker [01:01:05]:
And that’s what it took to right. And that’s what it took to get to the finish line. And sometimes sellers have to look in and say, okay. You know, you gotta develop that trust. I mean, if you, you know, if you try trust and like each other and the seller wants to sell and the buyer wants to buy, You can’t stop them from getting a deal done. They’ll figure out how to get it done, but sometimes it’s a case of Mhmm. Hey. You know, I need you to come in here and work here for For 3 months or maybe buy a smaller piece and

James [01:01:27]:
Mhmm.

Richard Parker [01:01:27]:
Maybe make sure you’re the right person to, sell the business to. But if you’re getting a a meaningful down payment And you’re gonna have to finance it in order to get the finish line because that’s what it takes. I mean, there’s just there’s there’s no of there there’s no getting around that. And if if there’s not a third party lender that that gonna finance that business, so you better be prepared because that’s that’s part of small business transactions. I’m even seeing it on the higher side involved in a transaction recently. It’s well over $20,000,000 and was a private equity firm And it was one of the first deals where they because the banks are lending less money as a percentage or a ratio, because they do it based on a multiple of earnings. Right. If a business makes $1,000,000, they used to lend 3, 4, 5 times that number as part of the total purchase price.

Richard Parker [01:02:11]:
Now they’re down to 1 to 2. So someone has to bridge that gap, meaning The the buyers have to put in more cash, which is a good thing.

James [01:02:18]:
Mhmm.

Richard Parker [01:02:19]:
But they’re looking at sellers to provide some financing, which I never used to see in the larger deals. Wow. And now it’s now it’s part of it. I mean, it’s the only way to get it to the finish line. So it’s it’s it’s accepted. It’s common. It’s normal. And at the end of the day, you wanna get a deal done, better be prepared to finance.

Richard Parker [01:02:37]:
So make sure you’re the right buyer.

James [01:02:40]:
Tell me just really quick about, oh my gosh, the point. I have known recently a couple companies actually Coincidentally, we’re in the construction ish business electrician, roofer, and the guy’s just retired, closed up shop. And these were businesses that had to be doing high sixes, low 7 figures, had employees and stuff like that. And I asked buddies. I’m like, why wouldn’t they even try to sell? Even if they’re gonna be like, hey. Here’s a business. It’s doing $1,020,002 and it’s yours. There’s some dirt number.

James [01:03:16]:
Right?

Richard Parker [01:03:17]:
Right.

James [01:03:17]:
Instead of just closing it up and selling the trucks and being like an inventor now.

Richard Parker [01:03:22]:
And I and I must tell you, James, the the, those industries are exploding Mhmm. With valuation. The valuation have gone out of control in home services, business services, HVAC, plumbing, electric electrical. Crazy. The multiples have gone bonkers because there’s some roll ups going on. But, yes, I agree with all wholeheartedly. If you have a business and for whatever Asinine reason, you don’t wanna go through the process of selling. Right? And sometimes it could be you don’t have a choice.

Richard Parker [01:03:52]:
It could be, you know, health reasons or whatever need. I I get that, but let’s assume you don’t wanna go through the process at all. I mean, to your point, if you have employees, hey, I’ll tell you what guys. I’m go and you’re, you know, they’re they’re doing $1,000,000 a year and the owners taking out a $150 or whatever the number is. Say, hey, guys. I’ll tell you what. I’m gonna give you the business. You just pay me $50 a year for the next 10 years.

Richard Parker [01:04:15]:
And if you run into any difficulty, I just want access to the year end statements or the ability to audit. But if not, the business is yours. Right? 1 employee, 2 employees, all the employees, whatever the case may be. I mean, to just shut the doors on a business, Unless it’s a, again, a health reason or something along those lines, even if you don’t need the money, Right. Let’s say you don’t need the money. To me, it’s like, what better gift can you give your employees?

James [01:04:41]:
Right. Agreed. Agreed.

Richard Parker [01:04:44]:
What what what nicer way to say thank you for all your years of service? If you don’t want the money, well, that’s fine. Good for you. But you don’t get I I mean, it’s It’s mind boggling to me that someone would do that.

James [01:04:55]:
Mhmm. Yeah. I’ve heard it recently a few times, and I’ve heard of it. Another company is a roofing company that had to be, I would say they had to be multiple Two digit $1,000,000. I don’t know. What does that make in 8 gig?

Richard Parker [01:05:09]:
If you find another one like that, I’ll buy it with you.

James [01:05:11]:
I’ll send it. I heard I heard about that particular one, I think, 3 months after the fact. And I was like, well, I would have bought a truck. Get the website going, and let’s

Richard Parker [01:05:22]:
No problem. You have I you don’t even have to call me. If you find 1 like that and they’re profitable and they have employees in place Yeah. Let’s I’m in with you.

James [01:05:32]:
Alright. You got it, Richard. You got it. Perfect. Richard, I appreciate you being on the show. Can you tell us website or how people can find you.

Richard Parker [01:05:41]:
Okay. Thank you again, and I appreciate you having me. It was a great conversation. The easiest website, if people go to richardparker.com, I have hundreds and hundreds Free articles and reports related to buying businesses that I’m sure people find very, very helpful. We have our guide that I that we sell that’s I guess mentions Sold, over a 100,000 copies of this thing. If people looking to buy business, wanna get right to that, that’s all you could find it through richardparker.com, but it’s also on d o mode, Doing it on my own, diom0.com. And it’s under $200. And the nice thing about that is I let people, I’m happy to have them call me or email me, and I get on the phone.

Richard Parker [01:06:14]:
I spend Outside of having these wonderful conversations with people such as yourself, I spend my days on the phone and email answering buyer questions, and I never charge them. I mean, this is how I get my My my jolly’s at this stage in my life, and so, they could find it either way. But if they’re just looking for good information and think trying to figure out if this may or may not be for them, Go to richard parka.com. You get more a lot more articles and free information in there that they have time to even digest.

James [01:06:39]:
That is awesome. I love it. I love the name. I didn’t even think to ask you about the name, but doing it on my

Richard Parker [01:06:44]:
own Yes.

James [01:06:45]:
It’s pure genius.

Richard Parker [01:06:47]:
Pure genius. And I’ve sold a number of companies. I’ve never sold that name. Yeah. I’ve gotten into I’ve gotten into a couple of battles with people because other I had a couple of companies that had derivatives of it and say, I’m not selling that thing. I mean, it will at one point where someone walks in with a big enough bag of cash, but, I mean, it’s really meaningful to me because when I I went into my own business, You know, to start, that would that that name was it it it holds a, a lot of value to me.

James [01:07:12]:
I get it. I get it. Right there. Right? I love it.

Richard Parker [01:07:15]:
Right there is right. Thanks, man.

James [01:07:17]:
Thank you. This has been Authentic Business Adventures, the business program that brings you the struggle stories and triumphs and successes of business owners across the land. We are locally underwritten by the Bank of Sun Prairie. If you are listening or watching this on the web, if you could do us a huge favor, Subscribe. Give it a big old thumbs up, comment, and best of all, share it with your entrepreneurial friends, especially those that may be looking to either sell or even to buy a business. Richard is the man to chat with here. Richard, can you tell us that website one more time?

Richard Parker [01:07:47]:
Richardparker.com. Perfect. My name

James [01:07:50]:
is James Kademan, and Authentic Business Adventures is brought to you by Callsoncall.com, offering call answering and receptionist services for service businesses across the country, on the web at callsoncall.com, as well as the Bold Business Book, A book for the entrepreneur in all of us available wherever fine books are sold. We’d like to thank you, our wonderful listeners, as well as our guest, Richard Parker From Diomo Corporation, the Business Buyer Resource Center. Richard, I’m in love with that name. That’s amazing.

Richard Parker [01:08:20]:
Beautiful. I appreciate it, and thank you for having me. I enjoyed our conversation.

James [01:08:24]:
Yeah. This is good times. Past episodes really quick. Can be fun morning, noon, and night podcast link found at draw in customers.com. Thank you for listening. We will see you next week. I want you to stay awesome. And if you do nothing else, enjoy your business.