10 Steps To Buying Your First Small Business

So today we're going to go over the 10 steps, 10 steps people to buying your first business. James, welcome to the show. Let's ready to rock, man. Very happy to be here and this set up is very cool today. I like it a lot. Yeah, this is going to be awesome, man. For people that aren't familiar, let's do a quick five second background. And then we'll just jump right into it. Sure. So I had a background in accounting and finance. So I worked for one of the world's largest financial services companies. And I did that for 12 and a half years and I eventually had the courage to leave the beginning of 2022 to do what I'd always wanted to do, which was buy small businesses. I saw this wave as well, documented in the media, but retirees selling their businesses, this huge tsunami of businesses coming up for sale. And I wanted to be a part of it. So I've been doing that year and a half so far and I bought a retaining wall company, a roofing company and a concrete pay for business. Instead of the three main operating businesses and a few extra are kind of smaller holdings as well in addition to that. So having a great time in order to do this, I've achieved financial freedom in that I've replaced my salary that I was making previously. And I've got all my timebacks and now it's great. I'm having a great time and it's fun doing things like this. Yeah, it's super interesting because once you get one and you understand the different parts about business, then you can continue going on and on using the same principles, the same application. Business is a skill set that people need to learn that once they learn it, they can use it for the rest of their lives. Just a varying different calmers and zeros in the acquisition price, correct? Yeah, so my background was doing deals, but it wasn't deals for myself. So there was a learning doing it for myself and holding some of that weight. But then this deal, it's the same process over and over again. And hopefully from this point on, the companies get larger and larger. But yeah, it's the same process, like you said, cool, perfect. And as we're doing this, what I'm realizing is when it comes to real estate, when it comes to business buying, when you're buying businesses, you're buying cash flow. And a lot of people right now in the market, we're filming this in 2023 and in the market, it's very difficult to have cash flow through real estate, especially if you're starting out because you need to buy the real estate first to boot up the equity to start leveraging that to hopefully get cash flow down the line. So you're buying business, you're buying literally years of cash flow. That's what you're buying. So today, I'm excited to break this process down. You've done it multiple times, both professionally and now personally as well. So you've got a 10 step process that we can go through today. So let's rock and roll, man, walk us through. What do we need to buy our first small business? Yeah. And so what we should do, I can run through the 10 steps. And then if you want to jump in at any point, I'd love to have some dialogue. Just whatever you feel like the audience might want to dive more into, just let me know. I'll think about it. The first point you made just a second ago was about being a cash flow buyer because we are all cash flow buyers when we buy businesses. Because we're doing it to make money from it, but in the world of private equity, like if you're buying slightly larger businesses, sometimes you'll be competing against strategic buyers. That would be people that weren't necessarily be buying for the cash flow like you and I. And they may have other reasons, which when you get into bidding war with a strategic buyer, it's often bad news for cash flow buyers. So yeah, they're willing to pay more for certain territories or whatever it is, a platform in a new segment of the market, something like that. Yeah, and before we get started, I actually want to hit on this really quickly because this is a video that I created as well. What I was talking about different forms of leverage in business is the best form of leverage. So it's like, when it comes to cash, you have $100 in your balance sheet. When it comes to real estate, you can do all this wonky stuff to manufacture equity out of thin air. That's called like the Burr process. You buy a house for $100,000, you fix it up. After a pair of value is $215,000, you just created $115,000 out of equity out of thin air. And then when it comes to enterprise value for a business, like you're saying with the strategic buyers, so you have people that are buying for cash flow, but then also if you're buying, like for instance, I had Chris Burgon here that buys car washes at a 10X multiple because it's the commercial, it's the real estate along with the business together. So the way he views it is every $1,000 that he increases the net profitability at the business is $10,000 on his balance sheet by increasing the enterprise value of the business. So that's a whole other can of words that's from what I'm seeing, the millionaires are through real estate investing. The deck of millionaires and the billionaires are through business and enterprise value. So that's so interesting. Can you explain a little bit more about how enterprise value works before we dive into the 10 steps? Yeah, for sure. And that's a great point. Your millionaires often made through real estate, but the value that you can add by making a company more profitable is you start to see this kind of exponential curve. Because businesses are generally valued on a multiple of cash flow. And so when you get to a small business like maybe under the reach of a typical private equity transaction, you probably pay let's just say ballpark three times earnings for that business. But if you can double that business, not only do you get that additional million dollars of cash flow, but then it's no longer valued at three times that cash flow that you've added, it's now valued at five times because as a business gets larger, it gets more attractive to the more kind of institutional buyers and private equity people like that. And so they're willing to as a business gets larger, it's de-risked. And so it's worth more. So you're right, if you can find a business, this isn't my strategy, by the way, I'm more of a buy and hold guy for the small businesses. But if you can buy a small business and double it in size and then sell it, you will be set probably for life. Yeah, sweet. So let's go into the 10 steps now. Yeah, for sure. The first one is acquiring leads. So you can acquire leads online or offline. Biz by cell is very popular. That's a kind of online marketplace. That's often where people start. And there's several other sites like Biz by cell where you can find leads. So I often tell people to go there first and get familiar with what a listing looks like. Maybe what, you can start to pick out the good listings and the bad listings. If you've got missing numbers or round number, overly round numbers and things like that, like you can start to pick up what the red flags are. So that's a great starting point. But what I really advocate for my students to do is to push on the offline channels. And that can mean several things. I had a business mentor tell me once that this is when I was back doing real estate investing. He was like, look for the opportunity that's right in front of you. Don't chase the science shiny object. Look at your spheres and the kind of unique connections that you've got. You will have stuff that's right there staring you in the face. You just may not know it yet. And that's so true when it comes to business buying in my opinion. And I know that's true because I've done it. And my challenge to people is I'm foreign. So I didn't even have a home network so to speak in this country. But I've been able to move to a city and do this. And so this is where you need to start to build up a strategy. Who are the small business owners that you know? And maybe it's not a family member. It could be a friend's dad or mom, uncle auntie, something like that. But it could just be people that you are somehow connected with. Maybe people that service your house for whatever service. Small business owners that you know are somehow connected to. You should make a list of those people and you should be speaking to those people. It's not just jumping in and being like, hey, I want to buy a business, but be genuinely interested in what's going on in their life and their business. And you never know what opportunity might come at some point in the future. Start to talk to people about if this is some of you're interested in start learning about business, learning what's going in their life, what's their day to day like. Maybe there's a way that you could add value to them and really help them out. That's a great thing to do. Also, a lot of people have CPAs, attorney contacts, maybe wealth managers, just third party professionals that they know that are connected to small business owners as well. If you're serious about looking at a business, these people in your sphere need to know that you are interested in buying small businesses and go to networking events. I know you do a bunch of kind of events and things like that. Those are perfect. Go to these things, be super active, be intentional and tell people what you want and what you want to do. From there, you'd be amazed how quickly things can snowball. If I take a step back and just look how the leads of my business acquisitions have come about, first one came through a friend who is a small business owner here in national Tennessee. The next one came through my CPA and the third one came through someone I met at a networking event. I just went, I hardly knew anyone there, but if someone brand new, we swapped details, talked a bit and six to eight weeks later, got a phone call, hey, I know someone in my hometown selling a business, would you be interested? Yes. That's the exact playbook that I tell other people to do and I know it works because I've done that playbook. That is the starting point is getting some leads and sometimes things take up many years to convert and sometimes all you end up with is a new friend and some good conversations. That's fine too, but I think people would be surprised if they actually did the thing, what would come their way. Yeah, and I want to add some color to that too. With a real-world example, from my friend Sean Aide, he's one of my best friends, and he during COVID was coming to the same realization we all are, which is like buying a property per year is not going to replace six-figure cash flow anymore. He was really looking for cash flow, as always, from our conversation, we're talking about cash flow buyers, correct? He started with, what do I really enjoy? What's a business that I would enjoy running? That's something that's within my ballpark, within my zone of genius that I already know about. He found a terrarium store. Have you ever heard of a terrarium? No. Yeah, nobody has. So a terrarium is this glass, these glass vases where you grow ecosystems within. He puts soil, you put plants, you put moss, and all these different rocks and pebbles and stuff in there, and then you put water and then it's its own self-sustaining ecosystem, which is super weird and niche, and nobody would have any idea about that. Until he started being like, I love plants in Portland. He lived in Portland. I love plants. I want to find a plant store. And so he started just going on Facebook groups, local plant, Facebook groups, local Portland groups, saying, hey, I want to buy business of someone that's in plant store. And then this one that was a popular terrarium store locally, profitable for years was about to shut down because of COVID. He was able to go through and then essentially buy that with $10,000 down to buy this business, that was running on like a 50% margin. Oh wow. And so he bought the business. And so just to go, it goes to show, he was just posting on Facebook. And he was like, this is what I'm interested in, let's do it. That's a great example. Some people have certain hobbies or interests where they really just want to go deep. And then for other people, if you're not sure, if you don't have a passion like that, it's okay to be a generalist and to be broad because you'll be surprised at the type of businesses that pop up just by asking people, it really, again, multiple strategies can work, just like real estate investing. There's not one size fits all. If you're super passionate, then go deep like your friend, that sounds awesome. And if not, don't be ashamed of it. Just start to do the process and start to have those conversations. What do you think about the franchise model? Because my buddy Brian Beers does franchising, which is basically buying a business in a box. I'm not against franchises at all. I would be open to doing a franchise at some point in the future. What I don't think I would be interested in is buying a territory for an existing franchise. And then it's basically like a startup. And that's not my model. I don't do startups, but I would be interested in buying an existing company that is a successful franchisee for sure. I'm okay with that. I don't, people fall quite strongly to either side the fence, I think, on franchises, but I'm pretty agnostic. Cool. So right now we're acquiring the lead flow. So we're going out to our network. We're saying we're casting out the net. We're saying, okay, this is what I'm looking for. Mom, dad, person I want to church with before like, this is what I'm looking for. So what's the next step once we start acquiring this lead flow? So I like to break out those these first few steps slowly just to make sure people don't get overwhelmed with the whole idea of buying a business. It seems like quite a big deal. First of all, you got to then think about having that initial phone conversation or meet up with the seller. That is a time when people can freak out like, what am I doing? You got to remember in those moments that the person you're meeting probably has never sold a business before. So you're not really a disadvantage. In fact, if you've trained yourself on how a business purchase works, you're probably more trained and prepared than the person you're meeting for the coffee. Huge. Yeah. So I just try and encourage people to not freak out. It's okay. And actually, don't forget, you're here as a human being to get to know another human being. So rapport comes first above everything, relationship first. Of course, in that conversation, you're going to talk about business history, products, mix, how it's done through COVID and maybe the '08 or '09 financial crisis. You want to build up a picture of how the business is doing, strength, weaknesses, challenges, the people in the business. That's huge. But all of that stuff will actually come again later in diligence. So you don't need to beat yourself up if you forget something. Just connect with the seller and find out what the seller wants. Every seller wants something slightly different. So you might just go in and assume they want to sell 100%. They may not. They may want to keep a piece and take some chips off the table, transition to someone slightly younger, but still want to be involved because the idea of doing nothing drives them crazy and they couldn't possibly retire. So rapport and relationship first and then find out what they want. But then just make notes on the business as you go. That's what I say to people. Yeah. And you got to dig really deep on this because I had a friend that was it's funny because I have two friends that were within two weeks of each other that did the same asset class and one was successful and one wasn't. So it's funny when you think about it because one of them is named Chris and he buys car washes. So he buys self-service car washes and so he loves them. That's his niche. And then another guy had was under contract on a self-service car wash and then he kept pressing on the guy and kept pressing on the guy to figure out. Why is he selling? Why is he selling? And it turns out like there was like four new automatic car washes being built like in that because he went and asked the city like the zoning ordinance to see what was coming up. So that was the real reason that the guy was selling and then that guy was out of business. He passed on it in diligence and then that guy ended up being out of business four months later. The one that did close. Yeah. Because all these new ones were coming up, which is why he was selling. But he wasn't disclosing it. So there's always you don't want to assume the worst, but also you hope for the best and you prepare for the worst. So it's really get to the bottom of like why are they wanting to sell? What is the reason was the reasoning and rationale behind it because I trust them verify basically exactly with everything that said. Yeah, that's a good point. Yes, focus on relationship first, but you need to take note of what the answers are and if there's things like that potentially are coming down the pipeline like a tunnel car wash or express car wash. That that whole area is interesting because I hear that sometimes when those go into those towns that people move from the self serve to the tunnels, but actually a lot of people don't like the tunnels stand up going back to just depends. I think that was the other end of the niche that other guy was like that I served the people that don't want to do the tunnels. It's there's so much new watch to this, but I think an important point to note before we move on to the next step is don't come at it like an M&A lawyer, right? Because these sellers, I think that was an excellent point that you brought up. They've never sold a business before. They started this thing and it ended up working out. You come and you're like, all right, cool. I want to sell or finance your business on a three-year note. This percent, the interest only, they may not be willing. So it's meet up human to human first. I love that. So what I can do the next couple steps. So let's just assume you get on with the seller. So then the next thing is you have to explain what the process is. I actually need to take some, get some financial information from you to see if it's even possible for me to buy this business. I need to know that with a structure that makes sense for me that I can buy it and I can service the debt. So because of that, I need some financial information. In order to do that, again, most people know this, but a lot of people don't. I will give you an NDA, non-disclosure agreement. And the reason that you, as me as a person, I want to control that process because sellers often are super busy in their business. So if you leave that first meeting and the sellers are sending you an NDA, that might take two months to arrive. So that's number one. Number two, what actually arrives might be very lengthy. An NDA really should just say, here are the two parties involved and you're going to send me confidential information and I will not share with anyone. That's it. Not, I've seen some really lengthy NDAs where you're signing up for stuff you do not want to sign up for and it's actually not fair to sign up for as well in my opinion. So it should be a simple document. Yeah. So that's the next step and I like to control that process. Once you've got the financial information, you essentially need to do some sort of initial viability test. Do I know if I could buy this business or not? People sellers often have an inflated view of what their business is worth. It happens time and time again. Shocking. I know. It makes sense. It's their baby. They've worked on it for several decades. The sellers I'm working with. And so you have to put on a basic capital structure, which by that I just mean what's the debt I'm going to use to buy the business and then make it cash flow. So once I layer that on, I like to look at the debt service coverage ratio. So I'm trying to work out to break this down. Essentially, you got to work out, first of all, once you've got the financial information, the business, you've got to work out what your P&L will go down to net income. You have to get to an approximate cash generation number, which is often known as EBITDA, earnings before interest tax depreciation and amortization. That's a little higher than your net income because you're adding some things back from the P&L like depreciation, which is non cash and interest and tax interest is dependent on capital structure. So you're changing that so you need to add that back. Taxes is very jurisdiction dependent again. So we take off those bottom taxes, those income taxes at the bottom of the P&L. So you add all that back to get to approximate earnings. But then what you need to do is you need to factor in a few additional things. So you need to think about what are my capital expenditure requirements going to be in this business. And you do a few simple calculations in that space to get down to a cash generation number. It's, I call it free cash flow. That's pretty much standard what it is. It's EBITDA or less CAPEX. So it's your free cash flow before tax. Sure. Then you work out what your debt service is going to be. The SBA in this country in United States offers the S, actually, side note, the SBA have changed their rules recently. So what I would say is if you're thinking about doing an SBA loan, which is the most common way to buy a business in this country, bring an SBA lender in sooner rather than later, especially now because the rules have changed and lenders are still figuring out what they're lending on and what they're not lending on based on the new SOP. You basically need to put together a simple Excel, which says like I'm going to finance say 90% in this business using an SBA loan from a local bank like this is my down payment. This is my interest rate and figure out that I can cash flow that debt appropriately and that's when I bring in debt service coverage ratio DSCR. Again, it's another acronym, but all it means is watch your coverage over the debt. So I like 1.5 or higher. Honestly, I like two or higher, which means for every one dollar of debt service, I have two dollars in cash flow to cover it. That's what I really like to or higher. I'll pause there because that's the bit where people sometimes glaze over here glaze over and maybe people need to rewind and listen to that again, but I'll pause and see what you want to ask for an easy kind of break down of this visual for people if you will. It's for every to put it into real estate speak for every $10,000 a month cash flow with doing this DSCR model that you're looking at for at 1.5 to a 2. It'd be like wanting the debt that you're paying back for that business because people when you're buying the business you're going to be paying back like the SBA or you're going to be paying back the seller on a 3 or 5 year note. So for you to cover like the debt on that business, if you're making $10,000 of net free cash flow, then you can't be more than 5 to $6,500 like $5,000 to $6,500 in that debt service. Correct? Per 10,000. So that you have coverage. Yeah, I thought you meant with for 10K of debt service. So for 10K of debt service, you'd want it to be, yeah, you'd want it to be at least $15,000 for 10,000 of debt service, you want to be $15,000 of free cash flow, but really $20,000. And I don't care if it's a seller note, don't care if it's SBA, don't care if it's bank financing, whatever your capital structure is, whatever your debt structure is. It just goes for that. Yeah, it always goes back to the same simple calculation, which is for 10,000 of debt payments. I want 20,000 of cash flow. So that's like a two to one ratio. Yeah, because guys, if you're not doing this, you're not getting paid either. You're just not. There's not enough cash flow to support it. There's some interesting data that shows that once someone has bought a business, it's quite common to see a downturn in results, just temporarily before the results start to trend up on the graph. And there's several reasons for that. A lot of these businesses have been running for several decades with the same owner. Customers have to adjust, suppliers have to adjust, employees have to adjust, you have to adjust, you have to learn this whole new business. I don't care how smart you are, you will not know a business 100% the day one you own it. Those first three months are really critical. You are continuing to learn picking up from what you've got up in diligence, but then continuing to learn as much as you possibly can for three plus months as a new owner. So yeah, I don't want to jump ahead too far. I've gotten excited to talk to a lot of business buyers now and a lot of get like a lot of coaching on this now. And so I hear a mixed bag of feedback and obviously there's new wants to it as well. The general feedback that I've gotten is when you go into a business, when you take over the business, say you have a successful acquisition, it meets the 1.5 to 2, a debt service coverage ratio, and then you're like, okay, cool, we can move forward with this. And you take over the business, now you are the owner of the business. Like feedback I've gotten is you don't want to change too much too fast. Like you want to simmer and observe before you come in and you try to change the SEO, change this, change that, change the marketing, change the advertising, change the brand colors and all this different stuff. So what's your opinion on that? Because I've heard some people that are like, oh, I immediately come in to implement this strategy and this strategy. Then I've heard others say, hey, first thing you want to do is you want to get that team settled or 30, 60, 90 days, and then you start making your calculator moves. Yeah, I largely agree that you should take it easy and learn as much as you possibly can. I think there's something about coming in and pretending like you know everything when you don't is not good. You shouldn't enter these situations with an ego. You want to come in and almost like humbly learn from someone that's done it for several decades, but you may, you probably will be younger than the person you're buying the business from. So you may have an advantage with certain types of technology and other things and other ideas that are whizzing around in your brain. We do change some things initially, but they're very minor. So we immediately implement a weekly level 10 meeting, which is part of the traction system. That's important. That's not really changing. That's just saying, hey, when you own us and we like to get together once a week, yeah, for 90 minutes a week, just to go through this exact meeting agenda because it helps me stay informed with everything that's going on. But pretty much outside of that, I wait with IT providers and other kind of business services. I wait with changing the accounting software. I wait. Maybe there's a few things here and there you can tweak. So if you go into business and they're filing their payroll taxes with paper, like mailing it off, you could say, hey, you could use QuickBooks and this button does that for you and you've saved half an hour there. So like little tweaks are that sure, but like for the most part, wait and wait three months generally. Cool. So say that the business meets the DSER, which for people listening, everything comes back when you're analyzing the business. What is the debt service coverage ratio? Just know that term and be able to look at that versus your net free cash flow. If you hit that 1.5 and now you're like, this meets my criteria. What's the next step? I'm making sure that I don't miss anything for my business buying flow chart because I have I make sure I teach it in order to to make sure every piece is kept. I took you off a little bit there. No, you're fine. We're going back to we did the test with the DSER and that's exactly right to hammer that point DSER. The next thing you do before you go to an L.O.I. letter of intent or anything like that, the next thing you really want to do is do a site visit and that's a big deal. But when you go to a site visit again, you're still in the you can still exploring at this point, but you want to meet the seller in their environment. Generally, it's out of hours like weekend or evening, something like that because sellers will be understandably very protective of their employees and they don't want people to know about it too early in case the whole thing falls apart and the culture has changed permanently at that point. But when you go to site visit, I go arm to my notebook. I have I normally write out like two pages worth of questions that I've written down, especially to do with that particular business, but like lots of blank pages as well, and I just constantly writing like just let the day flow ask as many questions as you can get as much information. But the actual interesting thing is yes, you're there to get the answers, but you're there to pick up on the atmosphere of the place as well. You could get textbook answers on a ton of different things, but then something feels wrong or like you see a couple of them if it's during work hours, you see a couple of employees like I know shouting each other someone looks super stressed or there's lots of negativity in this place. There's so many different things that could be red flags. I like to think of it as like yeah, I'm like just picking up on the atmosphere and I'm looking for softer things qualitative that could be red flags about the businesses as a whole as well. Or people hiding things. At this point, yes, I understand the sensitivity around certain employees noticing or and the seller might want to introduce you as an accountant or something like that. I always just let them do what they want. It's their progative. It's totally up to them how they want to introduce me, but I'm just trying to constantly get a sense. The other thing is that you sometimes might start to see some opportunities there. You may go to a warehouse and find a fork lift. We're like, oh, what's that? Oh, yeah, it's ours. We've had it five years. You look at the balance sheet and there's no fork lift on there. You're like, okay, maybe there's some assets here that aren't actually represented that would be bonus in the transaction. So it's all of these different facets all coming to play in that site visit. But I really enjoy getting out there meeting people like I feel like I really thrive in that environment. It's one of the more enjoyable parts of the business buying process. Yeah. Is it becoming real? Yeah, it really does real. Actually, there's a lot of nerves at that point as well. So with my students as well, I know that when they, some of them are so smart, they get to this point, they've analyzed it makes so much sense. And then I've got a site visit next week. What do I do? But just relax into it and be fine. But it does become real at that point. Oh, man, I could be the owner of this business. Yeah. So cool. All right. Cool. So say that the site visit passes, the DSCR passes. What happens next? The next part is you leave. And with the current rate environment as well, like I was explaining that yes, SBA is a fantastic tool in this country. But it's generally priced at like prime plus two to 1/2 prime right now at the time of this recording is 8.5. So I think prime the rate on an SBA loans generally like 11% and it's variable. So you want to stress test that up to 12 or maybe even I don't know, 13% maybe to be safe. And so I explain to the seller that like I can put an offer together like that. However, because of this current environment, you may get the price you want if under a seller financing agreement. So before I leave the site visit, I make sure we've spoken a bit about self financing. I think that's important. Self financing has a number of key benefits. The seller as well. It's not all in favor of the buyer. And actually, I know people that prefer not to use self financing on the buy side. They may just want to use debt or a tool like an SBA. I do mention that before I leave. But then I go home and I think a lot at that point, I know I want it. And so I put together a structure. And that takes a bit of time because you've got to think about all the different facets. Does the seller want to stay on? Does the seller need health insurance paying out for another 12 months? Does what's happening with this truck? Does Johnny need to keep that truck like all of these random things? What's happening with the real estate is at least is owned like all of these things come together. And I try and put together a structure that makes sense. The key component and the key tenant in the structure is one of my paying for it and doesn't make sense. And all of the rest is like a secondary issue. Again, once I've, this is predilegent still. So this is still based on what I see in the financials, but predilegence where you generally pay for someone to do a deeper dive. Based on what I think the earnings are, what can I pay for the business? And then I'll tweak it based on conversations I've had. So like, maybe the seller has a price expectation that I think is too high, but maybe I can come up through it with a lot of seller financing put into the deal. Like all of these things into my packaged offer and you put that into an L.O.I. letter of intent. So again, that will be familiar to some people listening, but be completely new to others. A letter of intent is a simple document. Really, it's just a word document. Couple pages is all it needs to be. It's non-binding, but it says I work with you, seller, in good faith to work towards a transaction. And that's it. And then what I really recommend people to do is put as much detail as they possibly can into L.O.I. So anything that would eventually form part of the purchase agreement, put in the L.O.I. just get it out at the beginning. Don't negotiate about that stuff later on. Have the whole deal fall apart. So just get it all in there. And then ideally you'd both sign it, then you'd move into the diligence phase. Okay, cool. So now let's go a little bit through diligence to take in of the keys over. Okay. At that point, you have essentially signed the L.O.I. hopefully. And you want to start to involve professionals at the stage, by the way. Most people should hire a local CPA to do some financial diligence. It's not sensible. And I say this as a trained charter accountant myself. I now outsource that to accountants to do it for me. It's helpful to get extra set of eyes. You want to do financial diligence, legal diligence. There are other types of diligence you can do as well. But really financial legal and insurance are the three key ones as far as I'm concerned. Insurance, you want a trusted local insurance agency to review all of the policies that exist. Provide recommendations of where you could increase your coverage and save money at the same time. Ideally, you get both win. Legal, you need a good local in-state attorney to then start to put together documents for the transaction. What documents actually go into that closing packet depend slightly because you can do an equity purchase, you can do an asset purchase. There are some things we don't have time to talk about today, but there are different ways to structure it. But you need a good attorney on your side. And then like I said, a good CPA to do some financial diligence. Sometimes financial diligence is called a quality of earnings, which is fine terminology. Sometimes that's more than is almost needed. It just depends on the size of the business you're buying. You want someone on your team to do that. You basically then work that into a set of closing documents. And then you've got to remember when you actually buy that business, that diligence period, by the way, should be under an SBA. It's going to be 90 days easy. It takes time to do it. I don't recommend anyone. Let's say you can do a hundred percent set of financing. I don't recommend anyone does diligence in less than 30 days. This is a big deal. It's a big transaction. If you mess it up, there's a lot of financial weight on your shoulders. Well, you want to take up time. So somewhere between 13, 90 days for diligence. And that closing day, it's weird, honestly, because you've done all this work. It's finally there. You're at the lawyer's office, probably closing, signing the paperwork. And then you actually, the new owner of a business, you've got to run. So it doesn't stop there. You've then got to really think about that first hundred days plus. And that's a big deal too. There's a whole strategy around that to make sure that worked. We did touch on it slightly, which is don't change that much initially. You're only new ones to learn as much as you can. Speak to existing employees. Existing employees are often the best source of ideas. Hey, I love working here. I love the old owner. He or she is awesome. But in the last five years, they didn't want to mix things up too much. So I think we should do this. Wow, they're amazing ideas. We should definitely do those. Those kind of things can come from existing employees. Make sure you learn. Meet your customers. Supplies if needed. As part of the structuring, you've obviously had to think about your company manager situation. Are you the CEO or are you a company if you hired a company manager? All of that comes into again, a big cocktail of decisions you've got to make. And then, yeah, you've got to look forward for the first hundred days. And about the a hundred day mark is when I start making changes on, I like to move things to a certain type of quick books. I like to move things to our IT provider. I've got a whole playbook of how I do things now. But again, you build this up over time. It's okay to make mistakes. It really is. Everyone is just trying their best. And over time, you just get better and better at this stuff. Yeah. And then once you build a skill set, and build the muscle. So for people that are listening that may feel a little bit overwhelmed, or maybe feel a little bit like you're taking some breaths right now. And you're like, whoa, this is a lot. Okay. Here's the thing. Everything in life worth having is on the other side of fear and difficult stuff. Okay. Everything. So whether you're buying real estate or you're building up the skill of buying the business, if you build the skill, you will never want for money again in your life. We talk about income producing skills. Sales skills are one of these skills. If you put time and energy and effort into that, you'll learn, you'll make money for the rest of your life by businesses. This is one of the skills. Buy in real estate. That's one of the skills going through all of this once you build the skill and you do it. Maybe it's not your first deal. That's the game changer. Maybe it's not your second, but you get better and you get better and you get better as time goes on to where this becomes easier for you. This is something that you learn. You're going to be bad at in the beginning, but you learn it over time. Now, people may be asking, okay, cool. Now you're talking about getting lawyers. You're talking about getting accountants like, where do I find these people? Circle all the way back to what you said in the beginning. The networking point. When you're talking to these business owners, instead of just saying, hey, I want to buy your business. Hey, I'm looking to buy a business. I would like your help. What CPAs are you using? What lawyers and what accountants are you using? That's when you're building your book of business. When it comes time to have those negotiations with maybe a different seller, you're building these relationships. Maybe go to a couple of SBA lenders, go to a couple of these lawyers, say, hey, what are you seeing in the market? Because they're seeing businesses coming up for sale too. I think buying businesses is one of the best ways to build financial freedom. In closing, why do you think buying businesses is the best opportunity in the next three to five years here for financial freedom? I think I was always interested in businesses because of my background with my W2 is doing this business consulting. I had a natural proclivity towards that. That said, when I had my W2 I was buying real estate the whole time because I was entrepreneurial minded and the amount of profit you make per month per rental is not very high. It's not. You can engineer as much as you possibly can maybe. I think the last deal I looked at scraped up to 19% cash from cash, something like that. The amount of money or the cash from cash returns in business world is much higher. You can do infinite, like the birth strategy reference. You could do that with businesses as well by bringing money partners or there's various ways to structure it. But the opportunity is huge. There's so many businesses I'm seeing day and day out now of people that want looking to retire. If you listen to someone that says the opportunity is not there, they're wrong. It is I'm seeing it with my own eyes and I've now walked this path and bought several businesses. The opportunity is there, the financial upside there. It's really satisfying for me as well to work with people. I do like properties in real estate, but the end of the day it's just like a hard asset that doesn't really go anywhere. Whereas I'm hopefully this is like what I want my company to do. I'm directly impacting families, helping people provide for their families, give them good jobs, career progression. All of this stuff excites me, creating good culture in my company. I find that really motivating and I'm excited what the future looks like. That's awesome, man. Thank you so much for coming on. This has been great as always. Everyone, if you're listening to us on Action Academy, subscribe to the YouTube channel, Action Academy podcast, subscribe to BizBuyAndBrit and then you have a podcast as well, correct? Yeah, I've just launched the BizBuyAndBrit podcast. If you have bought a business, then I'd love to interview you. I'm just telling the stories of other people who have changed their lives through buying businesses on my podcast. Perfect. Where else can people find you? Honestly, the best place is Instagram @BizBuyAndBrit. I'm on the other platforms as well. YouTube, TikTok, things like that, but Instagram is the center. Beautiful. Thanks. Everybody for tuning in to another episode of the Action Academy podcast with the BizBuyAndBrit. Talk soon.