In the second part of our interview with mergers and acquisitions expert Richard Parker, we delve deeper into the intricacies of buying and selling businesses.
Richard shares his invaluable insights on the current market opportunities, including how the favorable lending environment can benefit prospective business buyers. He also highlights common mistakes that both buyers and sellers make and provides strategies to avoid these pitfalls.
Key Takeaways
- 1:09: Market Opportunities: Leveraging the current lending environment.
- 1:50: Common Mistakes: Identifying the right business for your skill set.
- 5:38: The Importance of Preparation: Being well-informed and prepared.
- 6:15: Mindset: Balancing excitement and fear in the acquisition process.
- 10:45: Business Imperfections: Accepting and managing business flaws.
- 17:12: Ego and Insecurity: The importance of humility in business success.
Resources Mentioned:
- Richard Parker’s Website for free articles, reports, and resources on buying businesses.
Connect with Richard@:
Website: RichardParker.com
Linkedin: https://www.linkedin.com/in/richparker1/
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CORWYN:
Do you want something more? More meaningful moments, opportunities, deeper relationships, and memorable experiences? Do you want to make a difference? If you said yes to any of that, a career in real estate could be the opportunity you’re looking for. Guiding people through one of the most important decisions they ever made. The purchase or sale of their home can be both rewarding and lucrative. Exit Realty’s revolutionary compensation model, training, and technology provides you with the tools you need to start and build your successful real estate career. Call Exit Realty Lowcountry Group today at 843-619-3005, that’s 843-619-3005 or visit join.exitlowcountry.com and make your exit today.
You’ve watched this for this time. And you see a tremendous opportunity at this time now that opportunity, does it translate into being able to leverage financing better as well? Okay, so that means that not only do we have a greater opportunity, because many people have built businesses over the last 15, 20 or so years, they’re ready to get out. Yes. And now we have a more favorable lending environment for that if necessary, as well as the opportunity for us to get better terms, etc. So I’m liking that man, I’m liking that, Richard. So what are some of the common mistakes that people make in this arena, there’s
RICHARD:
a couple of things that are pervasive. So I’m going to address individuals that are looking to acquire businesses. And then we should spend a little time talking on the sell side business owners because there’s a huge number of businesses that are going to come to market over the next few years from Baby Boomers and things that sellers that I’ve seen over and over again, that they do wrong. So there’s because there’s really some terrible mistakes that are made on both sides of the equation that are really easy to solve for. So on the buy side, individuals that are looking to buy businesses, the first thing they do they start smoking crack, meaning, okay, they stick, you know, delusional about what it is that they need to do, or, you know, they think, Well, you know, I always love, I love pets, so I’m gonna buy a pet store well, or I love cooking. So I’m gonna open up a restaurant, where I’m very interested in healthcare, so I’m going to buy a durable medical equipment company. And that’s all sounds wonderful. But the big mistake they make is, there’s nothing, if you don’t have the right skill set to operate that type of business, it doesn’t matter how much love you have for that particular type of product or service, you’re going to fail. So the number one thing that individual business buyers have to look at is they have to get really in contact, you will tell people to talk to your money, I tell people to talk to yourself and say what you’ve got to identify your number one skill set. And that skill set has to marry perfectly with the business. Where a business needs that particular skill set to drive the revenue and profits of the business, you’re typically buying an owner operated business. So the mantra that I’ve been telling people for decades is the following. Whatever it is that you do best, must be the single most important driving factor of any of the revenue and profits of any business you consider purchasing. Because for everything else you can hire. So what are the biggest mistakes people make the single biggest mistake people make by far is they don’t get in touch with what is the right business for them. Because once you know what business is right for you, it’s easy to find and buy. So they immediately start looking at all kinds of businesses going on business for sale websites, they start going all over the place trying to figure out which if any was right for them. And that’s asked backwards, the way you’re supposed to be doing this for supposed to figure out what type of business is right for you, then it’s easy to find and buy it, then that I could guarantee people it’s a really big mistake. The second part is the mistake is related to knowledge. Because most people if you buy a home, and you’re involved in the real estate business, if you buy a property, multifamily property as example, and you overpay a little bit for it, as long as you– Time heals every real estate error. So as long as you have the time to be able to service the debt, even if you overpay a little bit in time, you’re going to sell in your walk out even though your walk out ahead, because the building will still be standing. If you buy a business that’s wrong for you, you’re going out of business. Now the flip side of that is unlike real estate, because businesses are sold at multiples of profit. For every dollar of value that you add, you typically are going to get three four and $5 back so there is an enormous upside compared to buying bricks, right? But you got to make sure you buy the right one.
And the third thing that I would say related to buyers where they make a horrible mistake is understand no such thing as a perfect business. Every business has warts, blemishes and pimples. And so you’re chuckling, you’ve probably been involved with a few of them. So you know, I mean, there’s no such thing as perfect, you got to get as close to that as possible. But it’s never going to be perfect. Because if you start looking for perfect, you’re just going to be it’s the old proverbial analysis to paralysis. So understanding those three things, identifying what type of business right for the individual, number one knowledge, getting your self really ramped up, related to knowledge to going into this process, because you’ve got to buy the right one and be well equipped for this process. And the third part is businesses that are understanding that no, business is perfect, there’s going to be some blemishes, you just got to make sure that you don’t confuse incidence with catastrophes.
CORWYN:
So one other point and Richard, we’re quickly approaching it in today’s show. But I want to make sure we talk about this because this kind of continues long this thing, this vein, if you will, a mindset because that is something we talk about a tremendous amount on our show, you know, oftentimes, we are limited in our belief, so actions are limited, and our potential isn’t hindered. Our results are hindered because we have the potential, but we just don’t have the right mindset. So why do people hesitate? Like what is a typical reason or reasons that people hesitate from taking a leap into this space?
RICHARD:
If you do this the right way, it’s never a leap of faith. Okay, I’ll let that sink in for a second. If you do this the right way. It is never a leap of faith, nor should it ever be a leap of faith, they’ll always be an element of risk. That’s unavoidable, you want to mitigate the risk and have deal terms that solve for that. Why people don’t take the leap is the following. They go through the process. And they get to a certain point, and they’re uncertain. They don’t either have don’t have the knowledge, the expertise, the track record, to know what is normal, what is good, what makes sense, what doesn’t make sense, they come across situations, they’re not prepared enough to answer for or sell for. And so there’s an element of uncertainty. When you go through the process of buying a business, the two emotions that you want to have at play are excitement and fear. Because excitement will keep you going, fear will keep you diligent. And I tell people the night before the closing, if you sleep, well, you probably shouldn’t lie to business. You’ll be a little bit worried that you didn’t complete something. But the people jump off jump ship, because they haven’t done a flawless job of investigating the business and all the issues related to the business to have a high level of comfort that they can take over the business and operate it well. That’s why they abort the project. Because when you do this the right way you should be buying an existing business, you should be able to get the keys on Monday, you should be able to take a paycheck on Friday. Really, that’s the God’s honest truth. That’s when you do it the right way. So if you get well informed, you align yourself with the right people with believable parties, you’re equipped with the knowledge and expertise. So you go into this, like a business buying expert even though you’ve never bought one, then you can go through all the various steps and feel very comfortable. Hey, this is the right decision. Because if you do this the right way, by the time it comes near to closing, it’s almost anticlimactic. Because it just makes sense. It’s like anything else. If you’re buying a new car, and you look at 100 different models, and you get to certain time, you have no doubt that this is the right one to buy cuz you’ve looked at 100 of them, right, you don’t have certainty, you’ve done your homework, you’ve done your preparation, it’s the same thing with buying a business, it’s being properly prepared, being knowledgeable, being well informed, so that you could navigate all of the steps in a very good way. And on the other side of the closing, if that business is right for me, and it makes sense to close this deal and just start running my business.
CORWYN:
So I like what you just said there a moment ago about looking at if you can go to sleep the night before, then you ain’t just literally internally, mentally, physically bouncing off the walls down, turn off the walls, if you ain’t doing that, then that might not be the business to buy. But if you’ve got a tremendous amount of anxiety is such a trigger word now, but if you don’t have some angst and excitement or otherwise, you know, in regards to doing this, then this may not be the route for you to take. So that isn’t that I like that, Richard, because I tell people all the time where I am now. And even the things I’ve transitioned my business into over the years each step while I was committed, but I have this thing of Richard I’m gonna give this to you feel free to use it. But when I say to people committed I taught whole hog committed. Now I’m from the south. But we talk about when people say pigs, we are sorry, we say homes. Yeah, hold off me. If I say that about people that are whole hog committed breakfast time, you got the chicken and you got the hog. And the chicken had to make a contribution and then go on about their business. They chickened out so to speak, but our hog had to give up something important to be there. Otherwise, and at breakfast, you don’t say anything, they don’t play. They might be sitting there might be advantageous. Whole hog committed so you literally have to be hog committed which means that you got to be willing to give up a part of you in order to be successful in any business in Deborah, and most people want to be chickens, they just want to give a contribution. They don’t want to be a hog and have to give up something. So I take that I received that because you’re exactly right about that. That is one of the things that troubles people and hinders people, if you will, and being successful in this arena that we’re talking about. And on business ownership, let alone the acquisition and resale of businesses. So for our listeners, guys, I want to make sure you guys are catching this, and we’ll catch up with Richard, you quote unquote, you’re picking up what he putting down, what he’s putting down is, hey, there’s opportunities for you guys to buy businesses, for you to make improvements to end running those businesses, increase the revenues and then sell it. And people buy businesses while Richard for the potential revenue, right?
RICHARD:
Yep, to generate a replacement income, pretty much all those are the two reasons why they do it.
CORWYN:
So you built you buy it that’s already built. So you ain’t so start with a foundation law. And don’t start with a foundation,
RICHARD:
Oh, you don’t want that, you want a running start, you know
CORWYN:
You wait to the building, then you say, Hold on, I got it from here. And then, and you’ve been trying to get it operate like it needs to be and growing. And then you sell it off to someone else for a profit. But you’ve also made money in the process. That’s a no brainer, mind blown here,
RICHARD:
It’s a no brainer. And the other thing to really consider is how you feel about yourself during this process, because the money is one piece. But the reality is when you get into a good business, yeah, you know what you have, you’re giving yourself the opportunity with no upside to really thrive financially, to improve the financial lives of your your family, etc. But you also get enormous gratification from building something, you also get enormous gratification, from empowering employees, you also get an enormous gratification, giving people an opportunity to do something within your company that they may not had some before. And you also give yourself the opportunity to exit down the road for a lot more money than you put into the business. So it goes way beyond just that immediate financial, you have to look at this from a philosophical point as well. And it’s not just about the money, because if you focus solely on the money, you’re not going to do that well. But if you focus on doing something great, and building a great business, and if you’re in a business where there’s an economic component to it, the money is going to happen by default. And if you get into I’ve always built my businesses on helping people and said, You know, I don’t give a shit part of my friendship, but the money, I care about helping people. And I know that no matter what business I’ve been in, that’s always been the mission, whether they be my customers and my employees, what have you. Because if there’s an economic if money is flowing, money is going to follow. So focus on doing something good, because the benefits of business ownership go way beyond the dollars. So
CORWYN:
Richard, I’m loving the conversation. And the reason I’m loving the conversations, because it echoes, so many of the mantras and the premises that and principals are gonna hold dear, we should be uncertain and service to people. And when you own a business, it is a greater responsibility. But it should be service at the forefront. Because if you’re not serving people, then you’re not benefiting. You’re not helping, and how can you expect to have benefit yourself? If you’re not benefiting someone else is better to quote unquote, worse is better to give than to receive and all these things, but you should lead with what can I get? What can I help you with? And you in turn will be helped. I mean, Zig Ziglar has principles on this. The Dalai Lama has principles on this. I mean it it’s in faith, it’s in our work. It’s everywhere. The present general premise, but it’s incredible to me how many people think the other way they think, Well, how much money I want to make? No, how can I serve people because the money will call, the opportunities will abound, they will chase you down in this. So when you’re buying a business, if the business has employees, how can you benefit and grow the employees. If you benefiting grow the employees, your business will thrive, and you can help and serve more people and grow and serve and help more people as far as employing more people. It’s a revolving, it’s just, it’s revolving doors, so to speak. So I appreciate you sharing that, because so many times we lose sight of that. And to be blunt, as business owners, we lose sight of that because this thing is heavy man, it’s heavy to own a business at times, we always focus on the rate of reward, always the people that we’re serving, and a difference that we’re able to make. So Richard, I have this question I asked most of our guests or nearly all of our guests. And that question comes back and requires you to be able to look back and you know what they say about hindsight, hindsight is always 2020. It is always you always can look back and see what you could have done or should have done differently. So I might ask you, if you’re able to look back over everything that you’ve done, what would you do differently? Or what could you have done differently that would have catapulted you to where you are that would have happened a long time ago, or otherwise would have you far much further down the road now?
RICHARD:
Heavy duty question, easy answer. I would have learned to park my ego and insecurity at the door. cheerleading my life. I was a young business owner and I was no doubt I had a big ego and I probably insecure but being a young business owner and being in the room with people that were older than me, but somebody’s ego and insecurity when I finally let go of that, and realize that it’s not about being right, it’s about getting it right or doing right. And not about being the smartest one in the room. When I got past all those things, which are really all tied into ego, I believe, you really change your life. And so when you embrace being wrong, because you learn from it. And now for many years, I’ve loved the fact I want to be the dumbest guy in the room, if I’m the smartest guy in the room, I’m in the wrong room. So all those things filtered down from ego. And that really hindered me early on in my career for many years. And then I’m not sure exactly what the awakening was more from starting to hire people that were bigger, better faster than me. And when I was able to do that ego and insecurity went by the wayside. But had I been able to let go of those two things early on, and specifically the ego because I think it all flight falls down from that, if I could have let go of my ego much early on and park it at the door, kick it in the ass, I would have leapfrog to success much quicker.
CORWYN:
Wow. That is profound. Richard, I’ve asked that question of a number of guests, and no one has hit it from that angle. People have talked about doing something sooner or otherwise, obviously similar vein that you’re talking about doing something sooner, but basically humbling yourself. So that you can receive is basically let me dump all this trash out my cup, so I can get my cup filled up. That’s what I just heard you say that. Look here, that’s what I just heard you say, let me don’t this junk out my cup, so I can better receive what it is. That’s for me is profound. Thank you for that insight to Richard. So while we’ve been on, I have been up on your website. So I want you to tell our listeners where they can get connected to you. I don’t want to miss that opportunity. And number two, for our listeners, go to the website. It is well put together, you can get connected in very easily. And most importantly, you can get some education and information. So Richard, where can people find you and get connected to you out?
RICHARD:
Thank you for your comments, by the way. And again, thank you, I appreciate you having me on the show. And I’ve loved this conversation. This is great. And I like that you dig into a deeper layer, which is great. And so anyone wants to get in touch with us, please go to richardparker.com. Pretty simple on there. That website has tons of resources, free articles, free reports, all kinds of resources where people could learn about buying businesses and what’s involved in the various stages. If anybody has any interest of acquiring the course or whatever, there’s a link on there, they can go to my sister site to buy the course. But richardparker.com. And similarly, if anybody has a question for me, I’m happy to answer them. I’m happy to get on the phone with anybody. Just go to the contact page, send in a standard message, just let them know to send that to my attention. I promise you, I will get in touch with you quickly. I’d love to have a conversation with any of your listeners.
CORWYN:
Awesome, awesome. Richard, again, thank you so much. This has been an amazing show. For our listeners, you may have caught this as a part one and part two. So please, if you’re catching quote unquote, part two, today, I want you to go back and look for part one, that would add roughly a week ago, because guys, this is some significant and impactful information, this is an opportunity for you to level up for you to quote unquote, get it on down the road, so to speak. And we can tie all this stuff into other means one thing we didn’t touch on today, Richard is how you can leverage this, you can do– use your IRA, you can set up an IRA and do some of these business purchases, and defer taxes and all this other stuff, and help really solidify and build wealth. So in the future, I’d love to have you back on because I know that’s one of the strategies. If you just saying talk about it today. I love it. I love it. So that’s one of the things guys that when you get in a room and you’re around people, and Richard, thank you so much for that comment about oftentimes, we want to be the smart person in the room, we always got something to say. But if we humble ourselves, and instead, don’t worry about saying anything worry about listening, you’ll learn so much more. And you’ll do so much better, and get so much further in life and in business. So again, thank you, Richard, for being on the show with us today.
RICHARD:
Thank you, I appreciate you having me again, and happy to join you again in the future. And I don’t have any secrets. So I’m happy to share anything that you think would be find useful for listeners in the future. And again, I really appreciate your time. Thanks again.
CORWYN:
Awesome. Awesome, awesome. Awesome. So for our listeners, guys, look, y’all no one we had a great show. We got some great information out. But most importantly, guys, we’re here to help and serve you. Y’all know how I feel. Y’all know when I say y’all know always put the two of those things together. And I lay it out to you this way, which is I love I love you. I love you. And we got to see you guys out there in those streets.
