Ep 334: M&A Talk On Why Sellers Won’t Sell & Buyers Won’t Buy with Matt Frisca

You need to be very careful when you're either buying a business or selling a business because the reality of what you're going to achieve may not actually be what's happening in the real world and the market. Hi, I'm Jaryd Krause, host of the Buying Online Businesses podcast, and today I'm speaking with Matt Frisco, who runs and owns the Transworld Business Advisory of the Grange and Tinley Park with his team of nine agents and one administrative assistant, focusing on Main Street and lower mid-market businesses.

We're talking businesses from the one to five mil range. Their office typically sells about 20 businesses a year. They're working on 50 to 60 listings at the moment, and before joining Transworld, Matt worked in media for 15 years, 10 of those years with the Disney company and then ESPN, ABC, Radio Disney brands, and he's bought his first online business as a franchise and then moved on to helping people sell their businesses.

His passion is in helping small business owners with their exits and getting them set up for a great exit. And in this podcast episode, Matt and I talk about the intricacies of selling a business and why some sellers don't get what they want, and where their expectations may not be met, and what they need to do to understand where the market is actually at, and why sellers fail to sell their business.

We also talk about why buyers fail to buy an online business. We talk about why they may not be actually attractive as a buyer, what their expectations may be if they're too high, and what reality looks like in the business market today. And then we also talk about SBA financing, and can you buy a business with no money down? What does that look like? What does the SBA look like in terms of this today?

Today's date and moving forwards based on some of the changes that happened through COVID and reverting to how we're buying businesses using financing through the SBA now and what you need to be aware of if you're a seller or if you're a buyer and can you be doing this with no money down and what are the different ways and structures you can structure that.

So there's a lot of value in this podcast episode. We talk about due diligence. If you haven't got my due diligence framework, it's what I use and my clients use to take the guesswork out of buying a business. Get it. There'll be a link in the description. It's free.

Let's dive into the pod.

Matt, welcome. Thanks for your time.

Thanks for having me.

Yeah, absolutely. So your first business acquisition was a franchise. What determined why you wanted to purchase a franchise?

Yes, I was in corporate America for 15 years, nd I'm a good rule follower, so to speak. I was good at sales, nd it was, I kind of said, okay, if I knew how to do this one thing, I needed all the back office stuff. Need all the marketing. Needed everything else that was involved. And this was kind of like, gave you a box, and they're like, just kind of stay in the box and go do what you do to go do sales stuff.

So for me, I didn't have a bad experience inwitht, but I know some people are very black and white on it. But for me, it worked perfectly. And I think to be honest, it works for people who are in corporate settings that kind of have rules regularly, but need some of that admin office. At least for me, it worked out that way.

Yeah, well, congrats. Mean, I agree. Some people just are so entrepreneurial and so free and want space and creativity, and openness. And that can be difficult with a franchise when you've got to be within certain parameters, perform a certain way, and do certain things. What was the franchise that you purchased, and why did you choose that particular franchise?

Great question. I was in home senior care, it was called Always Best Care, and two things. My mom's a nurse, and I was kinda like, hey, I'm gonna buy this, and I bade every mistake in the book in the first year and a half because it was, was trying to do that whole semi-absentee thing, trying to still get my corporate check and hired somebody to run it.

Didn't work out, but we did figure it out, and the part I liked about it as well was that u didn't need 1,200 orders, 1,200 clients to make money. You needed like 50, right? 30 to 50 clients and I was like, okay, and it was helping people, nd you know, it's all that other fun stuff. I mean, you find out about all these other things with it later, but for whatever it's worth, that's specifically why I like helping people. You can't dodge aging, right? I mean, it's not going to go away. agAgainit was something that I could do with my mom. She did some of the backend stuff for us as well.

Cool. Awesome. Awesome. And now you are a business broker. Yeah. And you've been doing that for quite a while, and you set up your own company, and what made you decide to leap into that?

Yes, yes.

To be honest, I sold my business with Transworld Business Advisors, nd I went through that process, nd I was like, listen, I had a decent broker that helped me out actually. Going through that process, there were things that I was like, hmm, maybe I might do this a little bit differently.

Maybe there was more information that I wanted to get through it. But then I also thought, like I'm the poster child for this now, right? Like I bought a business, I sold the business, I got an SBA loan, and paid off an SBA loan.

And I just thought it was fascinating because I also was in B2B sales for years in corporate America. I mean, I worked at the Disney company for 10 of those 15 years. I was at ESPN, my last stop before I got into my first business.

That was kind of all the stars aligned, you know, the B2B business thing having done it. And I just think it's fascinating to see anybody who runs a business and can do that. I mean, seeing all these different types of businesses as a generalist to some degree is super fascinating to me to see how people make money.

It is fascinating. I was just going through a recruit's site, then it's like, wow, there are so many different, like, I've been doing this for a long time. I've been buying a lot of businesses, but I still get surprised, like, wow, I never thought a business would look like that. So now you help people on the sales side. What other businesses do you typically sell?

Right.

Yeah, so we do a lot of M &A, actually, sorry, Main Street, I should say. So a lot of businesses under $5 million, where you can still use the SBA, actually, to buy those businesses. Yeah. In addition to that, we do stuff where you can use an SBA loan in the States to buy the business. We do some lower middle market deals where five to 10 million or 10 million plus that tie into that as well. But we're starting to see some verticals that are popular right now.

Small manufacturing is like white hot right now. In healthcarepeople buying med spas like crazy. Education, daycare seem to be very popular right now as well. There's a lot of licensure that's involved in that.

And service-based businesses, plumbing, HVAC, I all the stuff that people are going to right now as well. Fire suppression business that we have. Those seem to be, I wouldn't say we 100 % specialize in those, but I would say those are ones that we're seeing a lot of action right now today.

Yeah, agreed. What do you do with many online businesses at all? Do you help people sell many online businesses, and what sort of online businesses, like we talk about in Ecom, FBA, we talk in apps, SaaS, and media businesses? What's that?

Good question. So we've done some e-commerce, nd it looks like we're going to get another round of e-commerce as well. I know SaaS, a lot of people are very interested in that vertical, right? Right. And I would say we know a couple of experts who are very specific to just that vertical. They do a ton of tech businesses.

And it's not to say we wouldn't take 20 of them tomorrow if they came in front of us. It's just a matter of it's a little bit of a different nuance sale, and it's high demand. It's a high demand. Know, and I know there are some of these sites that specifically list online businesses, and I've seen a mixed bag with these, to be honest, specifically on the e-commerce side, right?

There were these people that were kind of, they'll just kind of put up a site and they're like, it's generating money and it's like, yeah, but it's been up there for like two minutes, right? So, you know, it's kind of weird. We sold one that we liked; it was in the wedding industry, and these ladies had done a great job.

They got great press and everything and they just kind of were done. Some of their Facebook advertising wasn't working and they really, I it wasn't a huge sale, but it was the person who took it over, I think, who knew what they were doing to be successful.

Yeah, I mean, that's my wheelhouse. These types of online businesses, and if you're buying an online business for seven figures, you want it to be older than at least one year, probably like maybe at least two years. And if you're wanting to accrue with SBA up to five mil, now you're going to want a three-year, typically two to three years of tax returns. So for a seven-figure business, you don't want to buy something that's been up there for not very long.

And it's typically if the owner holds onto that type of online business, say it's an e-commerce brand, it's been around for a year. If they hold onto it for another year and a half, typically the multiple is going to be higher. It's a bit more established.

They're going to get a better valuation of the business. So rather than just try and like, just start something and just pour a bunch of cash into it, then try cashing out too fast, then the longer they hold it with forming, the better valuation they get. Right.

Yeah, we, I forget, we do have an online, it's kind of like a lead generator, and it's specifically in the restoration category. And that's a unique business. They've been doing that for multiple years. Actually. I like it. I like it a lot. Although I know that what we find is the other part of selling his business. What we find is he has an advertising agency, right?

So he knows what he's doing. He knows the Google algorithms as they change. He can move pretty quickly. He's got a team that can make stuff happen. But if you don't know what you're doing or you don't have the right back end, that could be a disaster, right? Because that can change very quickly on a dime.

So we've had 150 people check in on that business, right? But the stumbling block is the like, well, tell me how exactly you're managing it versus me managing it versus like just being a smart person versus really understanding the nuances of all that.

This is in my due diligence framework that I give out to people and we use is one of the big questions for e-commerce business is that do you, if the business is ran like an econ business and it's ran by the owner where the owner is doing the digital marketing and they've got experience doing the digital marketing, do you have the expertise and the confidence to provide the same results from the digital marketing as them? Or do you know somebody that you could hire who could provide the same results or better?

And so if anybody's buying any sort of size business, we need to be asking that question of like, well, can I produce the same results? If you're not an expert like the seller is, then do you know somebody who can produce that result? Now, sometimes there are those businesses typically in the seven-figure range where they've got an agency running the ads for them.

That's the same owner can take over that business and have the same agency run the business. Lessisk in that, but specifically the risk of single-source dependency of the owner. That's a big one. Where do you start to see that play in, in terms of like, do you say after the five-figure range, like six-figure range, see fewer owners doing the digital marketing? Yeah.

That's fair. I think that's a good assessment of it. Then it's because there's a part of this where they say, well, you can use our back-end office, right? You can use our folks if you want to for a certain period. But obviously, that erodes the net cash flow to some degree. I mean, wouldn't be. But it's not the end of the world, right? It's just a matter of pinpointing to say, you know, he has some of these folks that are outsourced, right, that are doing some of this work. And it's a little hard to pinpoint.

Okay, how many hours exactly, and who exactly and how many people are going to be needed to run the backend of this, right? If you're not doing it, and you're using some other services. I think because it's baked into a digital advertising agency, it's kind of like they're using these people for everything.

So it's tougher to say this particular asset has this amount of hours, this amount of people. Mean, there's a good, there's a vague semblance of what it is, but I think it's tough for the seller to drill it down a little bit.

Yeah. Also, want to highlight the risk of like, say, even if the seller is doing the digital marketing or they've got a marketing agency doing the marketing that they own, there is risk in getting a new digital marketing agency to come in. If you don't know that digital marketing agency, you haven't worked with them before, and you don't know the performance they get, because it can be difficult to find a good marketing agency for the specific business that you have, that's going to provide a result.

Like I've spent time with many digital marketing agencies to find the right people, and it can cost you money. It can cost you more money at the start to get that digital marketing agency dialed in to be able to understand the campaigns and run them, and grow the marketing budget from there. Yeah. So if it's the online businesses that you're selling, which is probably just a portion of the businesses that you're doing through your brokerage, there.

What is it mostly, Econ?

It's mostly ecom or lead generation actually is what we're, the other one that we have right now.

Can you give us some examples of some of the lead generation businesses? They're getting most of their traffic through organic, or is it, yeah, what does that look like?

They do get a decent amount through organic, and they do a pretty good job with that, and they're across the country, and I think this particular operator, this seller, is really good because they don't want to oversaturate it, right?

If they're truly committing to somebody that's paying this fee or paying for lead instead of a base fee, and then they pay for lead on top of that, I think he's a good person and that he's not trying to put like six people in one geographic area, right?

He seems to kind of know what he's doing to space that out enough to make sure that it's efficient enough for the person that's acying to be part of that as a client. And I think that's important. I think it's important for somebody to realize that. And he's had some good franchisors that have bought in on this, too.

And that's kind of how it started. It was a franchisor that was using this particular person. He was getting a lot of leads, and then the franchisor is like, I'm going to try to create my own, right? And then there are still franchisees that are like, yeah, but that's not working. So I still want to work with you, right? I still want to buy your leads.

Yeah, proof that that's a good quality lead. What kind of franchise ease are they working with? What sort of leads are they generating? itIt'sike a lawnmower, like lawn care and?

This one's tied to the remediation business. So restoration, disaster repair, anything where if something happens and you're going to get that first lead where somebody's calling you, that's the one that this is tied to.

All right, cool. Interesting. Yeah. And do they run, are they running ads for that to get leads as well? Or are they just content like you're doing content marketing?

The majority content. If anything, they're going a little bit. obObviouslyou're seeing now with, and again, I will be the first one to claim that I have no master whatsoever and thinking online businesses whatsoever. But you're seeing that you could, mean, that's almost the thing of a feast already. Right?

I mean, the way the results come up now, nd that they don't want you to go away from Google whatsoever. That of the pay-per-click or the AdWords stuff is quite two or three times more expensive now, right? To run those ads based on how those search results are coming up now.

Yeah, advertising costs keep going up because competitors, the competition keeps going up. That's how it works, the supply and demand with everything. I want to ask you about the complexities of like on the sell side, what are some of the things that cause businesses li not to sell? Yeah, so this- Or acquisition to just fail?

I'd say it's three things, always. And I can't remember where I heard this from, but I just thought it was perfect. So you have to have a motivated seller, right? That's number one. Somebody who actually is like, yes, I do want to sell my business. And they're not saying like every five minutes, well, it should be more, or I don't know, or I'm having a good quarter right now. So I'm going to price it better. Two is financials, right? Messy financials are always a, they're tough.

It sounds so simple, but there are so many people that do businesses, nd maybe it's because I kind of super served the underserved, right? And I'm tone with that. But some people like, they were good at something, but they just aren't good at managing the books and everything tied in with it. You're a good plumber. So you, oh, you should start a plumbing business, right?

But you've never looked at your PNP&Ln monthly basis. You're not breaking it down. You're not asking questions, you kind of, Hey, there's money in the bank, nd that's all you care about. Right. That's like, I must be making money. And then the last part of that, I think, is price. Right. I mean, this is where we go. This is like day in and day out. If you're using somebody like me, I can tell you where you should be in the marketplace right now, or what we're seeing in the marketplace right now.

And there's a lot of like, again, goes back to that motivated crowd. How motivated are you to listen to somebody telling you, Hey, this is where your business should be. Because there's this, I put so many years into this thing, so it's I should get X or I need to retire from it because I didn't save, and nobody cares about any of that.

It's like this is what it's worth so either you buy into that you don't and we can you can price it's like your house right you can price it whatever you want but bottom line is like do is it a listing or are we acing to sell a business right so that's we go through that like quite a bit right you want that motivated seller to be open to the price and where the markets at not just stuck with a certain figure in their head and they're not being realistic because the market's not there and the business is not worth it, what they perceive it to be. That can be very frustrating. Talking of frustration, what's the difference between selling a business to somebody acquiring with SBA versus not?

The reason I asked this is from the lens of like, what's important for somebody that's acquiring a business through SBA to know for the sell side, to just understand what they're going through.

Yeah, absolutely. So we do refer to it as the colonoscopy because that is what you are getting when you go through the SBA process. So when we always do a SIEM, it's always three years of tax returns, three years of P&L, and a recent balance sheet, right? So those all have to match, right? So can't be, I know some of these businesses with cash and,d like the tax returns to look like this and the P &L to look like this. Like, you want to see that nonsense right away.

Exactly.

And if your top line number works, well, that's a good start, right? It's that if there's a lot of wacky expenses that don't show up on the tax return, but they're on the P &L, and I get it, small businesses, they want to minimize their taxes as much as they can. I'm not the IRS. I'm making no judgment call on anybody right now.

But if the business paid you for all these years, you can't have your cake and eat it too, right? You can't avoid taxes, nd then all of a sudden, now you're gonna duke the government one more time when you get to your business, right? So I think that's important that everything matches, right?

Your P&L, your tax return, matches, and your matches, your trailing 12. So you're trailing 12 months of like, where does that look exactly, right? Does it cashflow? Because what the SBA is requiring is the debt service. They want to make sure they can make those payments, nd they want to make sure that they can pay themselves whatever they're supposed to pay themselves, right?

Because I could be a really good buyer where I have other income sources, and maybe the business doesn't even have to cash flow, but it does have to cover the debt service that ties in with it, right? So I think that's important for people to understand that because after the debt service, there's maybe not, maybe you ran it and you didn't have any debt at all, right?

But they need to know that they can cover that. And the 10 % down is getting a little bit different, right? So, typically, you need 10 % down. Sometimes they'll ask the seller for a 10 % seller note on top of that.

Some sellers will do that, some sellers won't. So then they try to like roll in seller equity for this five. So maybe they're doing 5%, you're doing 5%. Now starting June 1st, they have these new rules where if the seller's got equity, they have to guarantee part of that loan for two years, which wasn't even happening before. So there are all these new things, we could go down a rabbit hole and have a whole podcast about SBA, but some things are changing that were, they kind of let off because of COVID, where they said, okay, we're not going to do X, Y, and Z.

And now they're kind of coming back on it again, because I think the SBA and the states, it's like, it is an entity that is supposed to fund itself. You could tell that enough loans go bad, and it's not funding itself anymore. So they're kind of tacking some of these fees and things back on that were not there prior.

I think it's worth mentioning. ObTheeposit is, and seller notes are not, I'll let you go through the list, but what are the top five changes that you've seen now coming back in that were not a thing through COVID?

So there was a 3 % processing fee for loans that went away for loans under a million dollars. And that 3 % processing fee is coming back, nd it's only based on the loan amount that you're borrowing, right? And there is some other wacky calculation. Again, I'm not an SBA expert, hat I talk to a lot of lenders a lot.

Right? Yeah. There is another fee that was just not there that would tie it into it. The other thing is being a US citizen or having a green card or some sort of permanent residency in the States, because before they were allowing international buyers to ththinkatter, that could come up as well.

And again, that whole, the biggest thing that was about that equity, right? Because before you were able to roll in some of the seller's equity into it, nd it was like no big deal, right? But now they're making it a little bit more interesting for the seller. Now, seller note is something different than equity, right?

So as long as there's that determination with that, you can still, and I would say for anybody, when you have a seller note, are you on standby for two years, or are you on standby for the whole, full standby as they call it, full 1010-year of the loan?

Most people don't want to do that. I mean, if you're 70, you're selling your business. You don't want to be on 10 10-year standby. You don't even know if you're going to be around in 10 years. So a lot of things to think about for folks, depending on where you're at in your business.

Exactly.

Do you just want to explain the seller equity rollover into the loan, so people?

Yeah. So basically, if they're saying you need to put 10 % down on a business, and let's say you only have 5%. So there are circumstances where the seller is putting a certain amount of the purchase price equity into the loan. Right. So they're a partial owner with you. Okay. So they're kind of in much bigger and A deals, right?

They were just, it's almost like a rollover, right? So it's like, okay, we're going to give l,ike, you're believing in the next owner to get a small amount of equity in the business. Right. So you're going to still going to own a small portion of the company, and it helps get past that 10 % down part, nd it also frees up some cash flow, maybe for working capital or whatever else is needed for that as well.

So in that regard, that's kind of what we're talking about in regards to the owner equity, so to speak, for that additional 5%. It could be whatever you want it to be, but again, before it was no harm, no foul, okay, you own less than 50 % like that's perfect, but now it's getting a little bit more strenuous. For the first two years of that, I do believe there's a personal guarantee even for the seller, too, because the seller is getting to the buyer, of course, but there was no personal guarantee for the seller that is now happening. So that could be a deal breaker for some folks.

Absolutely. When you think about it, if you're buying something that's like six figures or low seven figures, a mil or something like that, the business might not be that aged. And for a seller to roll equity into it when they've got other things to move on to, they're not going to want to do that anyway. And then add them being liable for the loan with a portion of equity.

It's not really an attractive thing. But to make larger deals happen, five million plus, you can see why it would be to get the business sold, the seller, or the company that's selling the business, would roll a small piece of equity in. Because the business is more established, there's less risk for them, and there might be fewer buyers at that price range for that particular type of business. It makes more sense.

But I think it's worth us really highlighting that and exaggerating that for people buying businesses in the six and low-seven-figure range to not have the expectancy that I can pay a smaller deposit now. I've got 50K and I can go buy a business because somebody else is going to put 50K in equity and we're going to make it work. Or I've heard where people say, Oh, I can buy businesses for no money down.

And I put like a couple of dollars in a, nd then with it, the seller equity is rolled over, and you're like, dude, think about the position that the seller's in. If they're going to do that, they're selling their business in a desperate state. What type of business are you buying there? Like, do you want to buy this liability?

Even though you're putting a couple of dollars down, you've still got a lot of liability there, as do they. So as this can be a recipe for disaster. And I just want people to be a bit more realistic around acquiring businesses with finance or without finance, compared to what sort of media is out there selling you the dream that might not exist. Right? Have you seen that? You had people approach you trying to buy business for no money, and you're like, what do you think this is, man?

Yeah, well the other part so the other part is time. It's like, well, how much time do you have to run this? Well, I just want something absentee. It's like well if we can all do something absentee we would all we bought everybody would buy a business every day You don't mean to say you don't have to run it now I get it that if you want a mature business that has management in place or some of them but then it's gonna be a bigger business to begin with right and I just the other part that makes me chuckle outside of the yeah the no money down is like the evil internet talking at you right and Correct.

But also, have you run anything? Have you managed anything before? I'm not saying you guys start somewhere. geGethat. Right. Correct. Yeah. Start with something that isn't as crazy. I just see these people that are like, literally, I see it in school or they pay money to go out and get these searchers that are like, oh, it's got to be a million anibata or else I'm not interested.

I'm like, okay, well that's a strategy. But I'm like, have you run anything at all? And now you're going to buy a $5 million business, and you've never run anything, and you're $5 million on the hook right now? Like that's terrifying.

That's terrifying based on the fact that if you've tried your craft at something, or like, hey, I've had a little success over here. And that's what I say is like, there are a lot of good businesses that maybe don't spit off a million in the Nibbida, right? Those are great businesses. And I just think sometimes they get overlooked, and even private equity is swooping down to our level. Yeah, they are. Knoww what I mean? So it's like something's working.

Yeah, well, I mean, I'm not like in the eight, nine range advising people to buy those sorts of businesses yet. But you can see that once those larger businesses and private equity have purchased maybe one or two great businesses, it can be worth them buying very profitable businesses for a couple of mil under the five mil range because they're lean and they don't have these massive organizations and they don't have a large team, lot of expenses.

They can tack these businesses on and run them parallel, which props up their 30, 40, 50, $100 million business because they can buy five of these things that are running parallel and buying out market cap, which is a different strategy for most people listening to this podcast. itIt'snteresting to understand that that's what some buyers are up against when they're bidding on something for a couple of mil.

You can be up against these guys that can come in like, look, I'll put 50 % down and then do 50 % financing with SBA. And we can get it done pretty fast because we've got these other SPVs that's, so we can put that on the line there and that can showcase our creditworthiness. And then you've got these people coming in with like, I've got like 50 grand or a hundred grand. Like, can I buy a $3 million business with that? You're like, dude, like, do you know who is out there in the market?

Exactly. Well, you've got to figure out good businesses with good financials. So quick, right? So it's the, I know some people lead these whole things against brokers and don't work with a broker and all that, you know, brokers are the devil and all this stuff.

Like I got it, but I will say I've taken the time to put all of this together and a nice, pretty package to make sure that makes sense for you, for the buyer, right? To be like, I've done the math already. You know what I mean?

I agree. It's crazy. On the buy side, for me, I prefer working with brokers because it makes it easier, and I'm not paying the bill.

Yes, right.

Why would a broker not want to purchase through, I mean, why would a buyer not want to purchase through a broker? That's crazy. Yes, maybe there's a little bit more competition, but you've got the data room ready. You've got the financials set up.

You've got the seller ready. Buying an off-market deal, I mean, it can sound great because everyone's like, you should buy off-market, and you can get cheaper deals. It's not easier. It's typically a lot more education through the SBA process to get the seller ready for that.

This is wacky stuff lately. We had a company that just spent, I mean, it was like a million-dollar transaction, right? But they had spent, I mean, they must have spent a hundred grand on Q of E for a million-dollar company because they were private equity back.

I mean, they did Q of E, they did insurance due diligence, tax due diligence, all this stuff. I was, and it was crazy, right? So that also is what you're up against, where it's a good category, good vertical. And these people just throw money at this to check all the boxes here to make sure it matches what they're looking for.

Yeah, absolutely. So,o in regards to that, say somebody buying a business under five mil, what other things they need to consider and think about that they're up against like, or be ready for?

Like be a good buyer, like have your... Yeah, like just get your prequels. I prequal every deal we can, right? I go to the bank, I get three or four or five prequels from them, and I'm like, look, so the buyer's like, okay, look, call one of these banks.

They'll all do the deal. All of them will do the deal if you want to do this thing, right? But you yourself should understand with your financial sheet, like when you give it to the bank, hey, I'm looking to buy something in this range. Can I do that? And does this make sense for me, right? Having your prequal from the bank ready to go is an attractive feature as well.

Having your, I love when they put like a little PDF together that's like, hey, here's our strategy, here's our background, here's, I have a website. Like we, I'm very serious about doing this, right? Yeah. I think that's really, that's like music to a broker's ears when they see that, you know, cause it's like, okay, this person's taking it seriously. They're not shooting from the hip. They've done their research a little bit. It's like, that's probably a good buyer. Let's work with that person.

Yeah, absolutely. Now, we've kind of touched on a little bit, but I want to jump back to it on the sell side. People who are looking to sell it's financials and not being attached to a certain preparation of sale, not being attached to a certain price.

Where do these businesses fail? Through a transaction that's going on, what's the biggest thing that causes them to fail? Through the transaction, when you've got two people that have a high intent of a buy and a sell, where does it go wrong and why? And what do people need to be aware of there?

Where do we start? Some of the trans wealth folks say a deal dies three times before it gets across. And I would say a lot of it's, there's always something that comes up in due diligence that is weird or wacky. A customer concentration, right?

So that's a big one where, whoa, 60 % of your business is two clients. Like what's that going to look like? You know, there's no reassurance there. You don't have a contract, right? All of a sudden, oh, that's great. No, we've known them forever. Like, okay, well, you've known them forever.

I haven't known him forever. So how's that going to work? Right. So there are ways around that. Maybe there's escrow. Maybe there's something specifically that we could do. There's even somebody that I heard of, like an insurance provider, that even helps with some of that, which is crazy. I mean, there seems there's a solution for everything. Right.

So that could be something like that. Could maybe usually, we're not introducing anybody to the staff until we know it's a deal. Right. And sometimes I see that these buyers are so hell bent on meeting somebody, and it's like, well, I mean, you can meet them, are they going to love you in five minutes or 10 minutes and be like, yeah, he's my guy, man.

This is going to be great. So I think that's kind of, you know, you got to be, got to understand that that's like, can't put the genie back in the bottle again, right? Once the genie's out, it's like, well,l now this person knows the company's for sale, right? So there are things like that. And then also, if you can't explain your ad backs and you can't give documentation of your own ad backs that you told me, which I should have caught the first time around.

So I'll take responsibility if we didn't, then that is a major issue, a hundred grand in expenses. What? Like personal expenses? You're paying your mortgage? Like, what did you do exactly, right? If you can't back that up with documentation, then it's just poof. It doesn't exist anymore.

Yeah, it's just like bumping up the price of the business when you're like, what am I paying for here? Am I paying for a part of your expenses and your mortgage? Likewise, I don't get it. I don't understand it. Think here, a lot of people go wrong in deals is like just, you've got to verify everything, but also like you've got to have some level of trust too. Like, you've got to have some level of trust in the seller.

That's what they're selling is accurate because there might be things that you do miss, but over the whole course of due diligence, you want to build a relationship and sort of have little tests and test their trust along the way. And each time they can't explain something that makes logical sense, have they dropped the ball by miscommunication, or just all these little things that compound, like less trust or equal more trust.

And that's the thing, that's what I find the biggest thing throughout a transaction is that it's just being very conscious and very aware of how the seller or the buyer behaves and work out how much I can trust this person on how they have behaved throughout the relationship in the short period that we've had.

And does that equate to a lot of trust, not much trust, or no trust at all? And that's, I feel, is with the gut instinct based on a lot of small interactions, is it worth buying this business or not? And that's, I think, where most people decide, yes, the numbers need to make sense. Yes, the business model needs to make sense.

Yes, it needs to be something that is going to be a great investment, but at the end of the day, can I trust that this person who's built this business has done the right thing for the last three years since owning it? And can I trust that things are going if something comes up in the transaction that none of us were able to understand, what we're going to have to address, how is that going to be handled between us both? Is it going to be a massive frustration? And that's a huge, huge part, right?

I'm very glad you're touching on this because we can go over the numbers all day, and that's math, right? That's just math, really fuzzy math, but the part that you're talking about is So I'm part of an organization of business brokers in the Midwest.

And so I'm in Chicago. So I'm part of MBBI Midwest business brokers, you know, intermediaries. See these buyers come, and they're like, for a year, and they're searching. And then I see them at the next meeting and the next meeting, and like a year later, I'm like, Hey, did you find anything, man? It was like, no, still looking.

And it's like at a certain point it's like paralysis by analysis, right? Like the water is warm. You've got to jump in and start flashing around and jump in at some point. It's not perfect. If it were perfect, it wouldn't be for sale right now exactly, right? Or I get it, if somebody's retiring, maybe it is or was perfect, but there's gonna be hair on everything. There's gonna be warts and hair on everything.

Right. Exactly. I love that. That's a great way to wrap that up and finish that up because it's an investment. Everything we invest in, everything we do in life has a risk, and it's just like, what are we willing to take on or not? So yeah, Matt, thanks so much for your time. Where can we send people to check out more about what you're up to?

So you can find us at tworld.com forward slash LaGrange. That's my specific office. So it is a town world, tworld.com forward slash LaGrange. LaGrange at tworld.com. If you just want to email us. I don't think people ever give out phone numbers anymore.

It's the internet, it's now, 2025. So that would be the easiest one to just find us there. We've got 60-plus listings, 10 people on our team. So there are a lot of different types of categories that are covered on there as well.

Awesome. Matt, thanks so much for your time. Appreciate you coming on, a nd everybody listening.

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