1 00:00:00,960 --> 00:00:03,060 Robert Plank: Hey everyone, and welcome back to the marketer of 2 00:00:03,060 --> 00:00:06,180 the day podcast. We are here with return guest after about 3 00:00:06,180 --> 00:00:10,140 five years, David Barnett and he has a book out called Smarter 4 00:00:10,140 --> 00:00:13,800 Than a startup, where he's going to tell us all about how we can 5 00:00:14,040 --> 00:00:17,760 buy a business, manage a business, run a business. So the 6 00:00:17,760 --> 00:00:21,860 book is called Smarter Than a startup, the risk reduced way to 7 00:00:21,860 --> 00:00:24,740 get the business of your dreams up and running. We're going to 8 00:00:24,740 --> 00:00:28,760 hear all about what to do, what not to do, mistakes made along 9 00:00:28,760 --> 00:00:31,100 the way, and lots of fun. So David, glad to be talking to 10 00:00:31,100 --> 00:00:32,000 you. Hey, 11 00:00:32,060 --> 00:00:34,340 Unknown: Robert, it's awesome to be back. It's been too long, 12 00:00:34,340 --> 00:00:34,700 buddy. 13 00:00:35,360 --> 00:00:37,580 Robert Plank: It has been too long, and you're one of my first 14 00:00:37,580 --> 00:00:40,280 guests. I think you were like, like my sixth or seventh guest. 15 00:00:40,280 --> 00:00:44,500 So it's a little bit of a blast from the past, plus, last time 16 00:00:44,500 --> 00:00:47,380 we didn't really have the technology or the bandwidth to 17 00:00:47,380 --> 00:00:50,500 be on video, so it was just like talking on the phone. So it's 18 00:00:50,500 --> 00:00:53,020 like, I know you, but I don't know you, and probably the same 19 00:00:53,020 --> 00:00:55,000 for you. Well, 20 00:00:55,000 --> 00:00:57,520 David Barnett: things certainly have been changing quickly. You 21 00:00:57,520 --> 00:01:00,840 know, since I was on your show last a lot of new things have 22 00:01:00,840 --> 00:01:03,120 happened. But like you mentioned, one of the new things 23 00:01:03,120 --> 00:01:06,240 that happened was I published that new book smarter than a 24 00:01:06,240 --> 00:01:10,920 startup. And basically the reason I put it out is because 25 00:01:10,920 --> 00:01:13,920 my main business is helping people buy and sell businesses. 26 00:01:14,160 --> 00:01:19,680 And people would come to me after this long roundabout route 27 00:01:19,680 --> 00:01:23,180 of wanting to be in business. And when most people decide they 28 00:01:23,180 --> 00:01:25,400 want to be in business, the first thing they think about is 29 00:01:25,400 --> 00:01:27,920 starting a business. And then eventually, as people explore 30 00:01:27,920 --> 00:01:29,960 that idea, they realize, hey, wait a minute, there's risk 31 00:01:29,960 --> 00:01:32,840 here. You know, there's all kinds of stats out there about 32 00:01:32,840 --> 00:01:36,980 how 90% of businesses end up failing new startups. And so 33 00:01:36,980 --> 00:01:39,560 people eventually come to the idea, maybe I should buy one. 34 00:01:39,560 --> 00:01:42,760 That's when I usually meet them. And I was thinking, how can I 35 00:01:42,760 --> 00:01:47,140 find a way to meet these people sooner and show them that even 36 00:01:47,140 --> 00:01:50,500 if they want to start something completely new, buying a 37 00:01:50,500 --> 00:01:54,520 business may still be the path to help them create their new 38 00:01:54,520 --> 00:01:58,180 business while reducing risk in a tremendous way. 39 00:01:59,440 --> 00:02:01,560 Robert Plank: And you know, as you're explaining it, the 40 00:02:01,560 --> 00:02:05,280 metaphor that comes to mind is people always think, well, I'll 41 00:02:05,280 --> 00:02:09,300 buy a house and flip it and but if you said, Well, I'll buy a 42 00:02:09,360 --> 00:02:13,740 blank piece of dirt and I'll hook up all the power and the 43 00:02:13,740 --> 00:02:16,860 utility and get all the permits and get get a sidewalk and a 44 00:02:16,860 --> 00:02:19,620 driveway put in and erect all this. It just it sounds like 45 00:02:19,620 --> 00:02:22,940 something that's about 25 times more complex than taking 46 00:02:22,940 --> 00:02:25,340 something that's already existing and then doing 47 00:02:25,340 --> 00:02:28,580 something with it. And like you hear all the time about how 48 00:02:28,640 --> 00:02:32,000 someone will buy this business, or even like this website, for 49 00:02:32,000 --> 00:02:35,300 like 30 grand and then build it up to like 300 grand really 50 00:02:35,300 --> 00:02:38,840 quickly, as opposed to starting from zero. And what I really 51 00:02:38,840 --> 00:02:42,100 liked about what you said in there is that even if you buy a 52 00:02:42,100 --> 00:02:45,760 business, you're not stuck with what the business has been doing 53 00:02:45,760 --> 00:02:49,240 all this time. It sounds like you can change it to suit your 54 00:02:49,240 --> 00:02:52,060 needs or pivot or things like that. So can you unpack that a 55 00:02:52,060 --> 00:02:55,060 little bit? Because, like, just the, like you said, the you want 56 00:02:55,060 --> 00:02:58,360 to get to these people sooner than before they make all these 57 00:02:58,360 --> 00:03:02,100 mistakes. And the feeling at first is, oh, yeah, I don't want 58 00:03:02,100 --> 00:03:04,620 to be a owner of someone else's business, but it sounds like you 59 00:03:04,620 --> 00:03:05,700 can make it your own. 60 00:03:05,999 --> 00:03:10,439 Unknown: Yeah. No. Great, great point and apt analogy about the 61 00:03:10,439 --> 00:03:14,279 house. You know, the reason why most people think about starting 62 00:03:14,279 --> 00:03:16,499 a business from scratch is because, number one, we have 63 00:03:16,499 --> 00:03:19,379 this startup culture. If you go to the bookstore, there are 64 00:03:19,379 --> 00:03:22,219 hundreds of books about starting different businesses, you would 65 00:03:22,219 --> 00:03:24,979 be hard pressed to find one or two about buying an existing 66 00:03:24,979 --> 00:03:28,039 business. So it's just culturally, we're more aware of 67 00:03:28,039 --> 00:03:30,559 this idea of starting a business. The second thing is 68 00:03:30,559 --> 00:03:33,619 that people think that buying a business will cost a lot of 69 00:03:33,619 --> 00:03:37,099 money, whereas starting a business might not cost as much. 70 00:03:37,399 --> 00:03:41,199 I can tell you that if you have money set aside to be sort of 71 00:03:41,199 --> 00:03:45,159 your initial nest egg to start a business, you probably can 72 00:03:45,159 --> 00:03:47,859 parlay that money into an acquisition. The big difference 73 00:03:47,859 --> 00:03:50,979 is, an existing business that already has profits and cash 74 00:03:50,979 --> 00:03:54,819 flow is going to be a suitable candidate for borrowing, whereas 75 00:03:54,879 --> 00:03:57,759 a new startup is not, because you don't have that track 76 00:03:57,759 --> 00:04:01,979 record. So number one, when you buy a business, you get 77 00:04:01,979 --> 00:04:05,399 something that already has customers, sales, profits, etc. 78 00:04:05,819 --> 00:04:10,139 Your door is open to bankers and other lenders, because they can 79 00:04:10,139 --> 00:04:14,279 see how you can afford to pay them back, even if you're the 80 00:04:14,279 --> 00:04:17,699 business you buy isn't directly in line with what your dream is 81 00:04:17,699 --> 00:04:21,559 as far as something new you go looking for. And this is what I 82 00:04:21,559 --> 00:04:24,319 explained in the book, is you can go looking for a business 83 00:04:24,319 --> 00:04:26,839 that's already successful but has some of the resources you 84 00:04:26,839 --> 00:04:30,499 would normally need for your new startup idea, and then you can 85 00:04:30,559 --> 00:04:33,979 so you buy this business that's already making money, it can pay 86 00:04:33,979 --> 00:04:37,459 for itself over time, but you can then use the business's 87 00:04:37,459 --> 00:04:40,659 resources in order to execute this dream or plan that you 88 00:04:40,659 --> 00:04:44,499 have, and if your dream or plan doesn't work out, you still have 89 00:04:44,499 --> 00:04:48,339 that basic the basis of the successful business that you 90 00:04:48,339 --> 00:04:52,359 started with. So the whole point of the idea is to figure out how 91 00:04:52,359 --> 00:04:54,399 you're going to get into business without risking 92 00:04:54,399 --> 00:04:57,819 everything. Because, of course, what happens when people get 93 00:04:57,819 --> 00:05:00,719 into something that's new? Things don't work. Work out. 94 00:05:00,839 --> 00:05:03,719 They, you know, they're not sure what's wrong. They try to pivot. 95 00:05:03,719 --> 00:05:06,659 They try to adjust. Eventually they run out of money. And then 96 00:05:06,659 --> 00:05:09,299 there were then, you know, there's a certain point where 97 00:05:09,299 --> 00:05:12,779 they should probably quit, if they don't know where that point 98 00:05:12,779 --> 00:05:15,539 is, or they don't quit, you know, quickly enough and go do 99 00:05:15,539 --> 00:05:17,819 something that's going to be more prosperous for them. Well, 100 00:05:17,819 --> 00:05:20,299 then they end up in a position where they could end up losing 101 00:05:20,299 --> 00:05:22,639 stuff, you know? And this is where you hear about these 102 00:05:22,639 --> 00:05:26,779 stories of failure, financial failure, for individuals, when 103 00:05:26,779 --> 00:05:29,179 they get involved in some kind of new business 104 00:05:30,440 --> 00:05:33,080 Robert Plank: that's really heavy, and that's a lot to think 105 00:05:33,080 --> 00:05:35,540 about, and you're making me think about like when I was a 106 00:05:35,540 --> 00:05:39,140 kid, I knew some girl in my neighborhood whose dad had the 107 00:05:39,140 --> 00:05:41,980 garage filled up with all this weird machinery, and I had no 108 00:05:41,980 --> 00:05:47,140 idea what it was, but just her dad wanted to be, become some 109 00:05:47,140 --> 00:05:49,660 kind of a business owner and start some new business. And all 110 00:05:49,660 --> 00:05:53,020 I know about that whole fiasco was that it failed before it 111 00:05:53,020 --> 00:05:56,320 even started. There was a lot of like, just making dumb decisions 112 00:05:56,320 --> 00:05:59,800 and buying a lot of things. And so when there's this, this path 113 00:05:59,860 --> 00:06:02,160 of you're starting with something that's already 114 00:06:02,160 --> 00:06:05,400 established. I mean, it's a little bit mind blowing when you 115 00:06:05,400 --> 00:06:08,100 say that there's these advantages where it's already 116 00:06:08,340 --> 00:06:11,280 got cash flow, it's already making money, so you're just 117 00:06:11,280 --> 00:06:14,340 picking up something that has already been improving at work, 118 00:06:14,340 --> 00:06:17,820 as opposed to, I mean, who knows how many businesses you might 119 00:06:17,820 --> 00:06:20,820 try on your own where this fails, this fails, this fails. 120 00:06:20,820 --> 00:06:23,060 And then what's really cool, which I hadn't even thought of, 121 00:06:23,060 --> 00:06:27,320 was we, where you said that the banks are already open to this. 122 00:06:27,320 --> 00:06:31,820 They're not lending you money for an unproven idea. You're 123 00:06:31,820 --> 00:06:34,400 you're kind of, when you buy this business, you're inheriting 124 00:06:34,520 --> 00:06:38,060 all that, this history and just all these, you know, like 125 00:06:38,060 --> 00:06:41,080 financial records of look, this is working. This is making 126 00:06:41,080 --> 00:06:45,520 money. We just need to expand it. And so when you say that 127 00:06:45,580 --> 00:06:48,880 there are existing resources that we can then apply somewhere 128 00:06:48,880 --> 00:06:52,120 else to our real dream, do you have any like examples or cool 129 00:06:52,120 --> 00:06:55,900 stories of that? Because that is like, what really gets lipo 130 00:06:56,440 --> 00:06:58,240 turned on for me right now? Yeah, 131 00:06:58,240 --> 00:07:01,740 Unknown: sure. Well, I'll give you a real life example from 132 00:07:01,740 --> 00:07:04,560 back when I used to I used to be a full time business broker, 133 00:07:04,560 --> 00:07:07,080 helping people buy and sell businesses, and now I help 134 00:07:07,080 --> 00:07:10,380 people in the same way, but on a consulting basis. But back in my 135 00:07:10,380 --> 00:07:14,520 business broker days, I had a guy who bought a pizzeria. So 136 00:07:14,760 --> 00:07:18,000 the pizzeria made money. He was looking for an income. He had 137 00:07:18,000 --> 00:07:21,860 lost his position, had a rather high level position in a bigger 138 00:07:21,860 --> 00:07:26,060 company. So he was looking for an income for himself, and so he 139 00:07:26,060 --> 00:07:28,820 bought the pizzeria, and from that moment, he was able to 140 00:07:28,820 --> 00:07:32,600 enjoy the income the pizzeria provided. But if you think about 141 00:07:32,600 --> 00:07:35,540 most pizza shops, they do a little bit of business at lunch, 142 00:07:35,540 --> 00:07:38,240 sometimes the most of their business is in the evenings, and 143 00:07:38,240 --> 00:07:40,540 they're open late on the weekends, right when people want 144 00:07:40,540 --> 00:07:44,320 to have pizzas delivered to their home that oven sits idle 145 00:07:44,320 --> 00:07:50,140 all morning. This guy started a gourmet cookie brand. So he 146 00:07:50,140 --> 00:07:55,900 started to make and sell these cookies with almost no startup 147 00:07:56,080 --> 00:07:58,840 capital or investment required other than buying ingredients 148 00:07:58,840 --> 00:08:01,560 because he had a commercial kitchen already that was already 149 00:08:01,560 --> 00:08:04,440 licensed and certified. He had the ovens already, and he had 150 00:08:04,440 --> 00:08:08,400 several hours every morning that he was able to run that business 151 00:08:08,640 --> 00:08:12,240 before he had to start making pizzas. And so he was able to 152 00:08:12,240 --> 00:08:15,000 test out the viability of whether or not it made sense to 153 00:08:15,000 --> 00:08:18,000 get into the cookie business without really risking anything, 154 00:08:18,180 --> 00:08:21,440 just by investing in some flour and sugar and other ingredients. 155 00:08:21,740 --> 00:08:25,820 And so, you know, I in the book, I point out the example of large 156 00:08:25,820 --> 00:08:29,300 companies. If you think about a really super big company like 157 00:08:29,300 --> 00:08:32,180 Procter and Gamble, you know, they're always coming up with 158 00:08:32,180 --> 00:08:35,120 new things, new products, new kinds of shampoo or food 159 00:08:35,120 --> 00:08:37,340 products, what have you. And they try them out, and they test 160 00:08:37,340 --> 00:08:40,240 them, and a lot of those things don't work, just like every just 161 00:08:40,240 --> 00:08:44,800 like in our startup example, but within the sort of realm of that 162 00:08:44,800 --> 00:08:47,800 big company, they've got all the resources and things they need, 163 00:08:48,040 --> 00:08:52,300 so it's not really a very big risk to go and try something, 164 00:08:52,480 --> 00:08:56,080 and if it fails, well then they try again. And this is part of 165 00:08:56,080 --> 00:08:59,620 their normal growth operation. There's no reason why people in 166 00:08:59,620 --> 00:09:02,700 the small business world. Can't, you know, sort of take that 167 00:09:02,700 --> 00:09:05,220 example and apply it in their own way. 168 00:09:06,360 --> 00:09:09,780 Robert Plank: And I have actually, in a way, applied that 169 00:09:09,780 --> 00:09:13,440 technique where of like saying, Well, I want to try out this 170 00:09:13,440 --> 00:09:18,480 experiment, and then for years, hesitating or delaying because I 171 00:09:18,540 --> 00:09:21,200 it's unproven. I don't know how much money it would cost. I'd 172 00:09:21,200 --> 00:09:24,500 have to hire a person for this and that. And over the years of 173 00:09:24,500 --> 00:09:27,980 doing this podcast, like probably the number one Aha, 174 00:09:27,980 --> 00:09:32,120 people have shared with me is not as taking too long to hire 175 00:09:32,120 --> 00:09:34,280 people, right? Saying I need to hire people. I need to have 176 00:09:34,280 --> 00:09:37,520 people run things. And for the longest time, I hesitated hiring 177 00:09:37,520 --> 00:09:41,200 someone for this or that idea. But then finally, once I did a 178 00:09:41,200 --> 00:09:44,620 little bit of the mindset where you're mentioning of just go at 179 00:09:44,620 --> 00:09:47,920 first with what's work, what works and what's established, 180 00:09:48,040 --> 00:09:52,300 and then go and play around later with the pie in the sky. 181 00:09:52,300 --> 00:09:56,140 And so I hired a team. I hired a few people to kind of get 182 00:09:56,140 --> 00:09:59,440 clients and do the boring, like, you know, mundane tasks. And 183 00:09:59,440 --> 00:10:02,640 then there's. Yes, there's always some free hours in the 184 00:10:02,640 --> 00:10:05,640 day or in the week to try out something else, like you said, 185 00:10:05,640 --> 00:10:09,540 with lower risk, or almost risk free, because you already have 186 00:10:09,540 --> 00:10:13,440 the established, proven what's making money and then. But then 187 00:10:13,440 --> 00:10:17,940 there's also time, in a way, for free, to pursue the kind of the 188 00:10:17,940 --> 00:10:20,960 fun projects, and whether that means it's a matter of, like 189 00:10:21,020 --> 00:10:26,180 employees, or like this, this oven equipment. I mean, it's no, 190 00:10:26,180 --> 00:10:29,300 no one talks about this right of, of having something making 191 00:10:29,300 --> 00:10:32,780 money, and then with the extra little bit of time, then do the 192 00:10:32,780 --> 00:10:36,200 fun things that that may pay off him or may not, if they pay off, 193 00:10:36,200 --> 00:10:38,960 great, if not, you didn't lose anything. I mean, it's a really 194 00:10:38,960 --> 00:10:39,620 cool idea. 195 00:10:39,980 --> 00:10:43,120 Unknown: Yeah. Well, you know, the internet is filled with 196 00:10:43,120 --> 00:10:46,600 people who are out there talking about how you need to, you know, 197 00:10:46,600 --> 00:10:50,200 give it your all. And, you know, sort of burn the burn the ships 198 00:10:50,200 --> 00:10:54,160 and, like, go forward. And, you know, if you really want it hard 199 00:10:54,160 --> 00:10:57,460 enough, you're going to succeed. But the reality is, is most new 200 00:10:57,460 --> 00:11:01,560 things fail. And so my, you know, approach to 201 00:11:01,560 --> 00:11:04,860 entrepreneurship has always been, you know, what is the 202 00:11:04,860 --> 00:11:08,760 possible upside, what are all the downsides? And how can we 203 00:11:08,760 --> 00:11:11,340 explore if this is really going to work for us, while limiting 204 00:11:11,340 --> 00:11:17,520 those downsides? And, you know, gamble it all entrepreneurship, 205 00:11:17,520 --> 00:11:19,980 I think might be okay for people that are quite young and maybe 206 00:11:19,980 --> 00:11:21,920 don't have children and mortgage and all those other 207 00:11:21,920 --> 00:11:25,760 responsibilities. But, you know, as we get older and we get sort 208 00:11:25,760 --> 00:11:30,200 of into middle age, we have a lot of responsibilities, and we 209 00:11:30,200 --> 00:11:33,920 need to figure out how we can do these types of things in a way 210 00:11:33,920 --> 00:11:38,720 that that makes sense and so that we're not, you know, taking 211 00:11:38,720 --> 00:11:42,220 crazy risks. It's just, it's just my opinion and my way of 212 00:11:42,220 --> 00:11:43,120 looking at the world. 213 00:11:43,780 --> 00:11:46,600 Robert Plank: Well, it's not sustainable. After a while, it's 214 00:11:46,600 --> 00:11:50,500 time to grow up. I mean, one time I was maybe, like, like, 22 215 00:11:50,620 --> 00:11:54,400 years old, and I won a jackpot in a slot machine, and I had 216 00:11:54,400 --> 00:11:57,580 like, 1200 bucks, and the first thing my dad said was, well, you 217 00:11:57,580 --> 00:12:00,480 can't do that every week. You can't, you can't take that to 218 00:12:00,480 --> 00:12:02,580 the bank every week. Like, there's a difference between, 219 00:12:02,700 --> 00:12:06,000 like, having having a stroke of luck and then being able to 220 00:12:06,000 --> 00:12:09,000 repeat that. And like you said, like there's the different 221 00:12:09,000 --> 00:12:12,120 mindsets. And maybe early on, you're having fun, you're taking 222 00:12:12,120 --> 00:12:15,060 risks that. But after a while, once you have expenses, 223 00:12:15,060 --> 00:12:19,140 responsibilities, then maybe, maybe you put those, those life 224 00:12:19,140 --> 00:12:21,680 lessons of success and failure to work, instead of just 225 00:12:21,680 --> 00:12:25,220 repeating the same old failure mistakes. Or like we're talking 226 00:12:25,220 --> 00:12:29,900 about here is kind of do the thing that that logically makes 227 00:12:29,900 --> 00:12:33,260 sense when you risk the pros and cons, and then you can still fit 228 00:12:33,260 --> 00:12:37,700 in the the risks, or like that the moon shots, but with the 229 00:12:37,760 --> 00:12:41,620 like, the calculated risks on a smaller scale, and when you also 230 00:12:41,620 --> 00:12:44,680 have something to fall back on. And so since we're talking about 231 00:12:44,680 --> 00:12:48,220 maybe the the downsides of this, like, what do people need to 232 00:12:48,220 --> 00:12:50,920 know? Like, what are the con mistakes? Or what are the things 233 00:12:50,920 --> 00:12:54,760 that just people are just doing again and again without you and 234 00:12:54,760 --> 00:12:56,740 without having this guidance that they need? 235 00:12:57,100 --> 00:12:58,900 Unknown: Yeah, sure. I mean, when it comes to buying a 236 00:12:58,900 --> 00:13:01,500 business there, there's a whole bunch of things that I see over 237 00:13:01,500 --> 00:13:04,620 and over again. So small businesses are typically 238 00:13:04,620 --> 00:13:08,220 presented with a cash flow figure that's called seller's 239 00:13:08,220 --> 00:13:11,340 discretionary earnings, and it's the total amount of money 240 00:13:11,340 --> 00:13:14,640 available to an owner operator that works full time. And so 241 00:13:14,700 --> 00:13:17,460 some of the key things that are often missing for most buyers 242 00:13:17,460 --> 00:13:20,360 who've never gone through this kind of process before is they 243 00:13:20,360 --> 00:13:24,380 will forget to back out some figure out of that number for 244 00:13:24,380 --> 00:13:27,080 what their time is actually worth, the money that they need 245 00:13:27,080 --> 00:13:30,080 to represent, the day to day time they're going to spend in 246 00:13:30,080 --> 00:13:32,180 the business. The other thing that's usually not in that 247 00:13:32,180 --> 00:13:35,720 figure is your finance costs. So what's your debt service going 248 00:13:35,720 --> 00:13:38,840 to be? What's that going to cost you? And then you know, things 249 00:13:38,840 --> 00:13:42,940 like taxes are not in that number, or capital expenditures, 250 00:13:43,060 --> 00:13:45,640 because they usually back out depreciation when they're when 251 00:13:45,640 --> 00:13:48,100 they're looking at that seller's discretionary earnings number. 252 00:13:48,460 --> 00:13:51,700 So I've seen a lot of people who will get excited when they go 253 00:13:51,700 --> 00:13:53,740 out and start looking at the world of buying a small 254 00:13:53,740 --> 00:13:55,900 business, and they'll say, here's a business that's going 255 00:13:55,900 --> 00:13:59,140 to earn me 300 grand. And I'll correct them, I'll say, No, the 256 00:13:59,140 --> 00:14:02,400 seller's discretionary earnings is 300 grand. That's the money 257 00:14:02,400 --> 00:14:04,560 that you're going to have. And then out of there you got to pay 258 00:14:04,560 --> 00:14:07,620 your debts, pay your taxes, you have to take money home to feed 259 00:14:07,620 --> 00:14:09,960 your family, and you got to take care of any, you know, sort of 260 00:14:09,960 --> 00:14:12,540 new equipment that has to be replaced, and stuff like that. 261 00:14:12,540 --> 00:14:19,560 And so people will tend to over commit from that money to their 262 00:14:19,560 --> 00:14:22,460 debt service. For example, they'll, they'll think, you 263 00:14:22,460 --> 00:14:26,960 know, well, if I, you know, if I've got this 300 grand of Ste 264 00:14:26,960 --> 00:14:29,540 then it's okay for me to agree to make loan payments of 200 265 00:14:29,840 --> 00:14:33,620 grand a year. Well, it's not. And so people get excited. They 266 00:14:33,620 --> 00:14:36,140 fall into what we call buyer fever, where they start to 267 00:14:36,140 --> 00:14:38,420 daydream about what it's going to be like once they own the 268 00:14:38,420 --> 00:14:41,680 business. And they can make these little missteps that can 269 00:14:41,680 --> 00:14:45,400 really set them up for a problem. Because here's the 270 00:14:45,400 --> 00:14:48,880 other thing about small business is that depending on what kind 271 00:14:48,880 --> 00:14:53,920 of industry you're in, a very small decline in sales can be a 272 00:14:53,920 --> 00:14:57,220 large decline in profits. Businesses are what we call an 273 00:14:57,220 --> 00:15:00,660 asymmetrical system. So if you have a large. Large overhead 274 00:15:00,660 --> 00:15:04,320 component in your business. I mean, sometimes a 10% decline in 275 00:15:04,320 --> 00:15:07,800 sales could be a 30% decline in your profits. And so if you've 276 00:15:07,800 --> 00:15:10,740 over committed that cash flow to debt service, and you have a 277 00:15:10,740 --> 00:15:14,700 rather small decline in sales, then all of a sudden you're in a 278 00:15:14,700 --> 00:15:17,880 position where maybe you can't take that paycheck anymore. And 279 00:15:17,880 --> 00:15:20,840 so this is why, you know, a lot of people will go out, and 280 00:15:20,840 --> 00:15:23,360 they'll find resources like my YouTube channel, where I talk 281 00:15:23,360 --> 00:15:25,880 about this kind of stuff all the time, and they'll hire someone 282 00:15:25,880 --> 00:15:28,760 like me to help them go through this and make sure that they're 283 00:15:28,760 --> 00:15:32,240 not setting themselves up for a mistake. Even though they're 284 00:15:32,240 --> 00:15:35,000 buying a business that's already successful, if you don't buy it 285 00:15:35,000 --> 00:15:39,080 in the correct fashion, you can put yourself in danger even 286 00:15:39,080 --> 00:15:39,440 still, 287 00:15:40,460 --> 00:15:43,060 Robert Plank: and I think we've all dealt with that in one way 288 00:15:43,060 --> 00:15:46,060 or another, like the issue of, first of all, there's like a 289 00:15:46,060 --> 00:15:50,680 whole map, basically, of things to be aware of or account for. 290 00:15:50,680 --> 00:15:53,800 And if someone is missing some pieces of the map, there might 291 00:15:53,800 --> 00:15:56,680 be this whole, this whole factor that you're missing, right? Or 292 00:15:56,680 --> 00:16:01,860 this whole expensive of it. And there's also the, I don't know 293 00:16:01,860 --> 00:16:04,560 even how to how to phrase it, but it's like, the not looking 294 00:16:04,560 --> 00:16:07,380 out for the wiggle room, right? Like, yeah, you're saying, Well, 295 00:16:07,440 --> 00:16:10,740 if there's this little bit of a decline, it'll, it'll cause 296 00:16:10,740 --> 00:16:14,700 this. And the tendency, like you said, with the buyer fever, is 297 00:16:14,700 --> 00:16:18,960 to want to be so optimistic that all the numbers match up 298 00:16:18,960 --> 00:16:22,280 perfectly and everything's at 100% and if there's, like you 299 00:16:22,280 --> 00:16:25,160 said, if there's 300 grand left over, then I'm I'm putting 200 300 00:16:25,460 --> 00:16:28,760 grand into into the debt. And just like on paper, all the 301 00:16:28,760 --> 00:16:32,900 numbers work out just fine without accounting for things 302 00:16:32,900 --> 00:16:35,840 that are unexpected. And so it's, it's, it's almost a little 303 00:16:35,840 --> 00:16:40,040 bit scary going at it alone. I mean, it's like, imagine trying 304 00:16:40,040 --> 00:16:43,480 to, like, go to court and represent yourself in court 305 00:16:43,480 --> 00:16:46,300 without an attorney, you'd be like, Where do I even start? 306 00:16:46,300 --> 00:16:49,180 Like, I don't even know what I'm supposed to know, let alone what 307 00:16:49,180 --> 00:16:52,000 I'm not supposed to know. And so it's, it sounds like this is a 308 00:16:52,000 --> 00:16:54,880 thing where just, just like, we're buying the business, we 309 00:16:54,880 --> 00:16:57,520 need to let go of our ego, and maybe we need to let go of the 310 00:16:57,520 --> 00:17:01,080 ego of of thinking we can figure out this whole strategy 311 00:17:01,140 --> 00:17:04,860 ourselves, and so that's why people need your book and your 312 00:17:04,860 --> 00:17:07,980 podcast. So can you tell us a little bit more about, like, 313 00:17:08,040 --> 00:17:10,440 what we didn't have time to cover in your book and tell us 314 00:17:10,440 --> 00:17:12,960 about your podcast? Because it all sounds it all sounds like 315 00:17:12,960 --> 00:17:17,100 things that when I was in my 20s I didn't care about, but now, 316 00:17:17,220 --> 00:17:19,320 even, like, when you're mentioning some of these terms, 317 00:17:19,320 --> 00:17:21,860 I'm like, Huh? Like, that's something I want to, like, know 318 00:17:21,860 --> 00:17:24,740 a little bit more about. Maybe I'm getting old or something 319 00:17:24,740 --> 00:17:27,680 like that, but it feels like as we get older, we want to know a 320 00:17:27,680 --> 00:17:30,320 little bit more about the ski key stuff, because maybe we 321 00:17:30,320 --> 00:17:33,020 missed out about four so, yeah, tell me about this book and 322 00:17:33,020 --> 00:17:34,100 podcast. Yeah, 323 00:17:34,099 --> 00:17:37,459 Unknown: sure. So you know, if people are interested in 324 00:17:37,459 --> 00:17:41,019 learning about small business and making deals, I would 325 00:17:41,019 --> 00:17:44,259 recommend that you find my YouTube channel or my podcast. 326 00:17:44,259 --> 00:17:47,559 It's called David Barnett on YouTube, Small Business and deal 327 00:17:47,559 --> 00:17:50,979 making is what the podcast feed is called. And you can find 328 00:17:50,979 --> 00:17:55,239 those easily by going to my blog site at David C barnett.com I've 329 00:17:55,239 --> 00:17:58,059 got a bunch of books on Amazon. They're all about small and 330 00:17:58,059 --> 00:18:01,139 medium sized businesses and doing transactions, and they're 331 00:18:01,139 --> 00:18:04,559 all available on Kindle and audiobook. But really, if people 332 00:18:04,559 --> 00:18:07,259 are curious to learn more, head over to David C barnett.com 333 00:18:07,679 --> 00:18:10,799 you'll find links to those YouTube videos and other things 334 00:18:10,799 --> 00:18:14,339 that I've created, consume away. I mean, there's literally, you 335 00:18:14,339 --> 00:18:16,919 can spend weeks looking at that stuff, and there's no cost at 336 00:18:16,919 --> 00:18:19,859 all. And then if you want to learn more, I've got, like I 337 00:18:19,859 --> 00:18:23,359 said, some books, some online courses, and if people are about 338 00:18:23,359 --> 00:18:28,219 to get into a deal, that's when people, you know, they hit the 339 00:18:28,219 --> 00:18:31,399 hit the button, and they contact me, and they engage me for some 340 00:18:31,399 --> 00:18:34,459 consulting work, and I help them actually look at the deal that 341 00:18:34,459 --> 00:18:37,879 they're working on and give them some guidance and advice to make 342 00:18:37,879 --> 00:18:42,519 sure that they don't do something silly, or that they 343 00:18:42,519 --> 00:18:46,359 simply do their deal in a risk reduced fashion. I'll give you 344 00:18:46,359 --> 00:18:50,499 one quick example about that. Robert, so for example, you can 345 00:18:50,499 --> 00:18:54,279 have a deal and you can have a price, and the price might make 346 00:18:54,279 --> 00:18:56,439 sense, but if you're worried that the sales might be going 347 00:18:56,439 --> 00:19:00,599 down, for example, we can build things into the deal that help 348 00:19:00,599 --> 00:19:04,439 give you wiggle room into the future. So with this pandemic 349 00:19:04,439 --> 00:19:07,559 going on and all of the uncertainty around government 350 00:19:07,559 --> 00:19:11,339 rules about business closures and stuff like that, I've helped 351 00:19:11,339 --> 00:19:14,699 more and more my clients build in these clauses into the 352 00:19:14,699 --> 00:19:18,119 financing that allow them to make interest only payments if 353 00:19:18,119 --> 00:19:22,399 sales go to a certain level, for example, what that can do is it 354 00:19:22,399 --> 00:19:24,679 means that when you get into a tight spot because the 355 00:19:24,679 --> 00:19:27,019 government just made you close your dining room, if you're a 356 00:19:27,019 --> 00:19:30,559 restaurant, for example, it means that you know that you've 357 00:19:30,559 --> 00:19:34,579 got this flexibility in your payments without having to go 358 00:19:34,579 --> 00:19:38,539 and talk to the lender and ask them to make a special 359 00:19:38,659 --> 00:19:43,059 consideration for you. It's so we can actually foresee what are 360 00:19:43,059 --> 00:19:46,419 the possible risks to cash flow going into the future, and we 361 00:19:46,419 --> 00:19:49,539 can build components into the deal that will help us smooth 362 00:19:49,539 --> 00:19:52,719 out those bumps so that we don't have to go begging for those 363 00:19:52,719 --> 00:19:53,559 changes later. 364 00:19:54,580 --> 00:19:56,920 Robert Plank: Amazing. So you can, you can get the building 365 00:19:56,920 --> 00:20:00,480 blocks in place to present you've seen all. These things 366 00:20:00,480 --> 00:20:05,100 that could happen might happen, then you can kind of build these 367 00:20:05,160 --> 00:20:08,760 wigs act at least. What Ifs in place in case things go bad. 368 00:20:09,000 --> 00:20:13,440 That's pretty cool. And so, so David C barnett.com, is the 369 00:20:13,440 --> 00:20:17,040 place to go to check out that website, that blog, that 370 00:20:17,040 --> 00:20:20,060 podcast. And like David said, most importantly, if you are 371 00:20:20,060 --> 00:20:23,840 about to pull the trigger on on something, make sure you have an 372 00:20:23,840 --> 00:20:27,020 expert. You can at least run these ideas by because it's it's 373 00:20:27,020 --> 00:20:31,640 so hard sometimes to know what's real or what's not. If you 374 00:20:31,640 --> 00:20:34,760 yourself are a little bit scared about this deal, and maybe 375 00:20:34,760 --> 00:20:37,460 you're giving yourself roadblocks that aren't there, or 376 00:20:37,460 --> 00:20:40,480 maybe you're so excited that you're ignoring the things that 377 00:20:40,840 --> 00:20:43,840 the big red flags or things that David can help you put in place. 378 00:20:43,840 --> 00:20:47,680 So David C barnett.com, and as we're wrapping up winding down, 379 00:20:48,280 --> 00:20:51,580 is there anything that's a little bit on the fringe or on 380 00:20:51,580 --> 00:20:54,880 the cutting edge? Another we said that the boring is better 381 00:20:54,940 --> 00:20:58,300 many times. But is there anything that is coming up on 382 00:20:58,300 --> 00:21:01,380 the horizon for you that has you really excited? Well, 383 00:21:01,380 --> 00:21:04,200 Unknown: I think if we just have a last minute left, what I'd 384 00:21:04,200 --> 00:21:07,140 like to do is I'd like to just give a big warning. You know, 385 00:21:07,200 --> 00:21:10,140 there are a lot of industries have been really impacted in a 386 00:21:10,140 --> 00:21:13,320 negative way by the pandemic and everything that's happened as a 387 00:21:13,320 --> 00:21:16,380 result of it. And people out there may be tempted by this 388 00:21:16,380 --> 00:21:19,980 idea to buy a business that's been negatively impacted because 389 00:21:19,980 --> 00:21:23,120 they can get a good deal on it. And I would just warn people 390 00:21:23,120 --> 00:21:25,820 that if you buy a distressed business, one that's not making 391 00:21:25,820 --> 00:21:29,120 money, not only are you making whatever deal it is you're 392 00:21:29,120 --> 00:21:32,240 making today to buy that business, but you're also 393 00:21:32,240 --> 00:21:36,800 signing yourself up, in many cases, to to cover losses for an 394 00:21:36,800 --> 00:21:41,140 undetermined period of time until things recover. And what 395 00:21:41,140 --> 00:21:43,900 we don't know is exactly how long it's going to be before 396 00:21:43,900 --> 00:21:48,940 things recover, or even if some industries could be impacted for 397 00:21:48,940 --> 00:21:52,900 the long haul, as people's habits have changed as a result 398 00:21:52,900 --> 00:21:57,340 of this pandemic. You know, there's all kinds of unknowns. 399 00:21:57,580 --> 00:22:01,140 And you know, there's a difference between buying a cash 400 00:22:01,140 --> 00:22:04,620 flow and spending money on something you think might go up 401 00:22:04,620 --> 00:22:07,260 in value, and that difference is called investing versus 402 00:22:07,260 --> 00:22:10,500 speculating, and one is inherently more risky than the 403 00:22:10,500 --> 00:22:14,100 other. And that's one of the big messages I try to get across to 404 00:22:14,100 --> 00:22:17,400 people, is that if you're going to be an investor, it means 405 00:22:17,400 --> 00:22:20,720 putting your money down and knowing with a certain degree of 406 00:22:20,900 --> 00:22:24,440 reality, what flow of money is going to be coming back into 407 00:22:24,440 --> 00:22:26,840 your pocket from having made that investment? 408 00:22:28,099 --> 00:22:30,139 Robert Plank: Thank you very much for the warning. Very well 409 00:22:30,139 --> 00:22:35,239 put Thank you. David Barnett, davidcarnett.com to find out 410 00:22:35,239 --> 00:22:39,079 about the upside and the downside of buying a business 411 00:22:39,079 --> 00:22:42,939 and growing it and pursuing your dreams. David C barnett.com, is 412 00:22:42,939 --> 00:22:45,279 the place to go. Thanks, David for stopping by. 413 00:22:45,760 --> 00:22:47,920 Unknown: Awesome. Robert, thanks for having me. It's good to see 414 00:22:47,920 --> 00:22:48,880 you again. Yeah.