Before You Buy or Sell a Business Jared W. Johnson

Welcome back to another episode of Before You Buy or Sell a Business. Today, I talk with Erik Fike as he shares his experience of buying a business while still working in his current role.
He discusses how he found the right business, the challenges he faced during the transaction, and the lessons he learned along the way. Erik provides valuable insights into the due diligence process, the importance of finding the right lender, and the need for mentorship and guidance in the acquisition process. He also highlights the significance of having experience in running a company and the motivation behind his decision to pursue business ownership.

Key Takeaways:
Finding the right business: Erik emphasizes the importance of defining specific criteria for the type of business you want to buy, such as remote operation, B2B services, and revenue margins.Negotiating the LOI: Erik shares his experience of going through multiple revisions of the LOI with the seller, ensuring that all key aspects of the deal were addressed and agreed upon.The challenges of bank financing: Erik discusses the difficulties he faced in securing bank financing and the importance of finding a lender who understands the business and can provide the necessary support.The value of working capital: Erik highlights the importance of having sufficient working capital to navigate unexpected challenges and maintain stability in the business.Lessons learned: Erik advises considering forgivable seller notes to mitigate risks and protect against potential contract pauses or cancellations.

Notable Quotes:
"You really should have a mentor. I definitely have, and I also recommend peer groups for that same kind of thing. It's been great too." - Erik Fike

"The best-case scenario with a bunch of recurring revenue is awesome. This is not one of those businesses. This is a big project-based business." - Erik Fike

Erik Fike's LinkedIn

IN THIS EPISODE
00:00:00:00 | Introduction, Erik Fike's Background
00:04:02:10 | Emerging ETA Space & Social Media
00:17:37:01 | LOI, 9 Revisions, and Addressing Key Issues Upfront
00:20:11:13 | Experienced Lender vs Unexperienced Lender
00:27:06:20 | Unexpected budgetary issue in California affecting contracts
00:31:03:08 | Seller Note Forgiveness and Customer concentration
00:36:04:12 | Stability and Experience with Project-based Revenue
00:38:05:04 | Erik Fike Answers: Do You Have a Mentor?
00:39:30:02 | Erik Fike Answers: What Motivates You?

In this episode, host Jared Johnson interviews Eric Pacifici, an attorney specializing in small and medium-sized business (SMB) mergers and acquisitions (M&A). 
Eric shares valuable insights and advice for buyers and sellers in the acquisition process. He emphasizes the importance of having legal representation and discusses key contractual terms such as indemnity and non-compete clauses. Eric also addresses the cost of legal services and the benefits of a fixed fee model. 
He highlights common challenges in SMB M&A deals, including issues with quality of earnings and seller disputes. Eric provides practical strategies for mitigating risks, such as addressing customer concentration and involving investors in the deal. Throughout the conversation, Eric's passion for SMB M&A shines through, as he offers valuable guidance for navigating the complexities of these transactions.
Key Takeaways:Treat your bank as an ally, not an adversary. Your interests are aligned, and the bank can help identify potential issues such as customer concentration.The three most important contractual terms in an SMB M&A deal are indemnity, non-compete, and a strong letter of intent.Quality of earnings is a crucial aspect of due diligence. Hiring a quality of earnings provider can help uncover potential issues and protect your investment.Customer concentration is a common challenge in SMB deals. Mitigate this risk by including contingent compensation in the purchase agreement or promissory note.When bringing in investors, consider their control rights, objectives for the business, and potential impact on governance.
Notable Quotes:"You're risking your financial life. You're taking multimillion-dollar personally guaranteed debt. You need to have a checklist of things that you need in your deal.""Don't be a jerk, but you don't need to walk on eggshells. You're risking your financial life, and you can always pull the plug and go do another deal.""Find smart money people who can serve as strategic advisors. It's better to have strategic alignment than just generic dollars."
Resources:SMB Law GroupEric Pacifici on TwitterEric Pacifici on LinkedIn

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If you have questions for Jared, visit JaredWJohnson.com

DISCLAIMER: The views and opinions expressed in this program are my own and/or those of my guests. They do not necessarily reflect the views or positions of my employer.

In this episode of Before You Buy or Sell a Business, host Jared Johnson welcomes back Tommy Speigner to share his journey and lessons learned from acquiring a business in an industry he had never explored before. Tommy discusses the process, challenges, and triumphs he experienced in finding and buying a company. The conversation dives into the nuances of engaging with investors and the strategic approaches for buying and growing a business successfully.
From the decision-making strategies to the realization of purchasing a forestry and vegetation management service company, this episode unpacks the details of identifying viable business opportunities and the role of investor relationships. Tommy's experience demonstrates the importance of adaptability and keen business acumen.
Key Takeaways
Tommy Speigner explains the differences between his initial solo venture and his recent team-backed approach.The episode delves into the intricacies of searching for and acquiring a business outside one's typical industry.Key discussions on leveraging relationships, networking, and utilizing different types of funds for business acquisition provide valuable insights.Tommy shares his firsthand experience with the SBA loan process, exposing both challenges and triumphs.
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If you have questions for Jared, visit JaredWJohnson.com

DISCLAIMER: The views and opinions expressed in this program are my own and/or those of my guests. They do not necessarily reflect the views or positions of my employer.

In this episode of, host Jared Johnson interviews Daniel Cox, a serial entrepreneur who recently purchased a restaurant.
Daniel shares his background and journey from construction to law enforcement to the mental and behavioral health industry. He discusses how he found the listing for the restaurant and the due diligence process he went through before making the purchase. Daniel also provides insights into the challenges and opportunities he faced during the transition and the importance of having working capital.
He emphasizes the value of mentors and the need for careful planning and preparation when applying for an SBA loan. The episode concludes with Daniel discussing his plans for the future, including growing the restaurant and continuing his coaching work.
Key Takeaways:Daniel Cox emphasizes the importance of having working capital when buying a business, as unexpected expenses and regulatory requirements can arise during the transition phase.Conducting thorough due diligence, including spending time at the physical location and talking to staff members, is crucial to understanding the business and identifying any potential red flags.The SBA loan process requires careful planning, understanding the eligibility criteria, and preparing comprehensive financial statements. Having a mentor and organizing personal finances can also facilitate the loan application process.Daniel highlights the significance of an operating system and technology in managing and growing a business. Implementing efficient systems and staying adaptable are key to success.Holistic success, including personal fulfillment, the well-being of the team, positive community impact, and innovation, motivates Daniel in his entrepreneurial journey.

Daniel Cox's TED Talk: Elevating Expertise - How Skill Synergy Shapes Success

Listen to the full episode to gain valuable insights from Daniel Cox's entrepreneurial journey and learn about the challenges and opportunities of buying and growing a business. Stay tuned for more enlightening content from the Before You Buy or Sell the Business podcast.

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If you have questions for Jared, visit JaredWJohnson.com

DISCLAIMER: The views and opinions expressed in this program are my own and/or those of my guests. They do not necessarily reflect the views or positions of my employer.

In this episode of Before You Buy or Sell a Business, host Jared Johnson interviews August Felker, an entrepreneur with experience in buying and selling businesses, particularly insurance brokerages.
August shares his journey from starting a search fund to acquiring his first business, the challenges he faced during the negotiation process, and the emotions he experienced as a seller.
He also discusses his transition into supporting others in the acquisition process and provides insights into the importance of insurance diligence when buying a business.

Key Takeaways:
🔹Starting a search fund allows aspiring entrepreneurs to buy an existing business and become an entrepreneur without starting from scratch.
🔹The negotiation process when buying a business can be emotional, and it's important to be prepared for the different waves of emotions that come with it.
🔹Building a relationship with the seller is crucial, both during the negotiation process and after the sale, to ensure a smooth transition and ongoing success.
🔹Conducting insurance diligence before buying a business is essential to identify any coverage problems or surprises that may arise after the acquisition.
🔹Cold calling and building relationships with potential sellers can be an effective way to find proprietary deals and stand out from competitors.

In this episode:
00:00:00 | Introduction
00:01:10 | August Felker discusses his background and experience in buying businesses
00:03:04 | What is a Search Fund?
00:06:05 | August Felker on finding and acquiring his first business
00:14:07 | Deciding to sell
00:16:38 | Advice for sellers
00:20:11 | Transition from a traditional search fund model to a self-funded model
00:25:10 | Consider the seller's needs to stand out as a buyer
00:31:08 | Insurance is often at the bottom of the client's list, but they still have to deal with it
00:37:04 | August Felker on what motivates him
00:39:09:02 Closing remarks
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If you have questions for Jared, visit JaredWJohnson.com

DISCLAIMER: The views and opinions expressed in this program are my own and/or those of my guests. They do not necessarily reflect the views or positions of my employer.

In this episode, Jared Johnson interviews Ryan Hutchins, the founder of Peak Business Valuations. They discuss Ryan's background and journey into the world of business valuation, as well as the services provided by his firm. Ryan explains the different approaches used to value a business, including the asset approach, market approach, and income approach. 
He also shares insights on the importance of accurate financials, the role of inventory and equipment in valuation, and the challenges of valuing small businesses.

Key Takeaways:
Valuing a business involves assessing its cash flow, perceived risk, and comparable transactions in the market.The asset approach is typically used for businesses with significant tangible assets, while the market approach looks at comparable transactions in the industry.The income approach focuses on the cash flow generated by the business and uses a cap rate to determine its value.Accurate financials are crucial in valuing a business, and hiring a bookkeeper can help ensure that the financials are in order.Personal expenses and inventory should be carefully considered in the valuation process.

Notable Quotes:
"The value of any business is what a willing buyer and a willing seller hypothetically transact at, known as fair market value." - Ryan Hutchins"Your financials will impact not only the value of your business but also how long the process takes to sell your business." - Ryan Hutchins

Resources:
Peak Business ValuationsRyan’s LinkedInLoopNetBizBuySell



______________________________________________________________________
If you have questions for Jared, visit JaredWJohnson.com

DISCLAIMER: The views and opinions expressed in this program are my own and/or those of my guests. They do not necessarily reflect the views or positions of my employer.