Host: Chelsea Wood has worked with over 250 people that have paid good money to learn how to buy a business and she has observed from so many students what some of the most common challenges or mistakes are that interfere with people actually doing it. Actually searching for and acquiring a business. As you'll hear, many of these are internal. They're emotions or mindsets. Common mindsets that hobble searchers we, which is good news because that means they're within your control. So a slight shift in mindset can unlock your success in buying a business. So as you listen, be spot checking yourself to ask whether you too are falling victim to some of these mindsets as you go about your search. Here is Chelsea Wood, Managing Director of the Acquisition Lab. Welcome to Acquiring Minds, a podcast about buying businesses. My name is Will Smith. Acquiring an existing business is an awesome opportunity for many entrepreneurs and on this podcast I talk to the people who do it. August Felker is a two time successful searcher, first with a traditional search fund. The second time around he did a self funded search. Today, August runs Oberly Risk Strategies, an insurance firm with a dedicated practice group for searchers and acquisition entrepreneurs like you. If you've got a business under Loi, Oberle will provide complimentary due diligence on that business's insurance and benefits program. A great no risk way to get to know August and team. They love helping searchers. They've worked with hundreds. Oberle is a specialty insurance brokerage for searchers by a former searcher. Check out oberle-risk.com O B E R L E- risk.com, link in the show notes Chelsea Wood, thank you for joining me today on Acquiring Minds.

Guest: No, thank you for having me.

Host: Chelsea. You run the Acquisition Lab, which is a cohort based intensive program and community for acquisition entrepreneurs. It was founded by Walker Deibel, author of Buy Then Build. People will recognize that name. It's the book that nearly every acquisition entrepreneur that I interview has read. We're going to hear more in a sec about what the Lab actually does. But the bottom line is that you have come on today to share some of the key reasons that searchers fail to acquire a business. Through running the Acquisition Lab, you've seen a wide cross section of searchers. Dozens and dozens. I think 250 plus is what you told me. So who better than you to identify some of these patterns, some of these challenges that routinely trip people up as they embark on their search to buy business? So I'm excited for this. I think today's conversation will Help listeners get out of their own way. Before we dive in, before we dive into that, tell us a little bit about your history and yourself, Chelsea.

[3:09] Guest: I am the managing director of the lab. I joined Walker at the end of February of 2020. I am also an M and A advisor. Just the other side of the spectrum from Walker. Right. So he's done everything in the main street to middle market space. He's bought, sold, owned, operated, probably worked at, whereas I did corporate development. That's how I got into transactions. And so I managed transactions for a large healthcare system for a number of years. We grew from 3 billion to 6 billion through transactions, bringing over about 18,000 employees. That was awesome. Very early in my career, it stopped being awesome once I got married and had a child that I never saw. And so I resigned. I am an industrial organizational psychologist by training and so consulting is what I'm kind of groomed to do now. And so I figured I could go back into consulting and if I did that I would see my child more. And so I did that because even if I traveled 80%, I would still work from home when I wasn't traveling. And so I did that for five years. But right away I was consulting with small and medium sized companies and often after a transaction had kind of gone off the rails. And what I realized was my understanding of transactions and what they had done was not the same. And so my understanding of transactions was very institutional, very complex. And so what I needed to do was I needed to understand the transactions that my clients had gone through so that I could adapt my methodologies and kind of rethink my structures in my head. And so the firm that I worked for had a professional development budget. So the first year I was there, I took it and went to this program through the alliance of M and A Advisors. I was the very odd one out as it was mostly men, or almost all men. I think it was the theme.

Host: The theme continues.

Guest: It was lawyers, investment bankers, accountants, and then me and Walker. And so that is how I met Walker about seven years ago. And so went through this program, got certified as an M and A Advis advisor. Don't ask me tax questions. That section I failed. The rest of them were golden. And so I did that for consulted for five years, had my second child and didn't want to travel anymore because I wasn't seeing my second tiny human. You'll see a theme here. I create these things and I want to be around them. And so I had resigned again. I had taken a local position here in St. Louis, that would lessen the travel. But I had one conference left to speak at, and that was January of 2020, and Walker just happened to be there accepting an award. And I saw him in the hallway. I hadn't really talked to him much, honestly, since the certification program. I did buy his book. I did send him a congrats when I saw his book come out. And so I saw him in the hallway. I was like, hey, any chance you've heard of this company? I have this opportunity to potentially take an executive offer. Just curious if you've heard of the company. We run in very different circles, but we're both from St. Louis. And so he's like, oh, I didn't know you were looking. Don't do anything. I have an idea. I'm like, no, no, no, no, no, no, no. I'm not looking. I've already accepted one job. This is another option. Don't need more options. I'm a little confused as it is. And so he's like, just let me call you tomorrow. And so he calls me the next day and he's like, people are following me around at conferences. They're finding me on LinkedIn, they're messaging me on Facebook. They really want somebody to help them buy a business. He said, and I can't do that. I don't have the bandwidth. But you could do it.

[6:33] Host: And this is because his book at this point had become quite successful.

Guest: Correct.

Host: And when you met him that first time around at that training, he had not yet written the book. He was active doing buying businesses, but he had not written the book. Okay. So then you meet him a second time in the hall, and he's a celebrity. Okay.

Guest: And so he's like, you could come and build this company for me. And like you said, we're over 250 members now, inching closer to 300 this week.

Host: And so tell us a little bit exactly about what the lab does, Chelsea.

Guest: It's a live do it with you program where we hold your hand as you buy a business. So I am the day to day kind of contact. I do everything for the lab. I'm the one that does one on ones with our session or with our members. Like if they want to look at a deal and they want somebody to kind of tear it apart with them initially if they want to talk about marriage challenges. I keep getting calls about marriage challenges. Buying a business is stressful. I get it. So much so that I'm thinking about starting a spouse's support group. But it's right. I'M there as a thought partner. That's what I love to do and that's what I'm good at. And so the lab is really there to teach you how to buy a business and then to hold your hand and coach you through it as you do it. It's a structured four week onboarding process where we really focus solely on getting you ready to go to market. What Walker and I believe is, and this comes from my IOP psychology background, but like there's no sense in teaching you things that you don't need right now. And so all we focus on in our intensive is getting you ready to go to market. The rest of it will support in the moment. It's like on the job training. The worst thing in Walker, in my opinion is certification programs where you learn everything and then you apply nothing and then you lose it all. We wanted to focus on making sure that we could be there with you when you needed us. The four week program, it's a dual track program. The first track is all about getting you ready as a buyer. It's all live sessions really focusing on helping you define your target statement, defining your value proposition as a buyer, making sure that you understand what it means to get an SBA loan, and having the opportunity to ask all of the dumb questions, quote, unquote, right, that you're too scared to ask someone else. And then just giving you an opportunity to ask Walker any questions that haven't been answered through either the live sessions or the pre recorded course that drops, which is track two. And that's where we teach you how to get deal flow moving, which is week one. Week two is how to evaluate deals once they start flowing. And then the third one is how to analyze the deals. And that's like your three year forecasting, your breakeven analysis, your scenario planning tools, those kind of things. And that's all taught through a case study.

[9:14] Host: Right.

Guest: Again, the IO background, you need to be able to apply the things we're teaching you for it to really take hold in your mind. And so we give you that opportunity.

Host: Let's get into everything that you've learned about why searchers fail from, from working with so many of them. And oh, and as a, as a one more data point, what percentage of folks that go through the lab close actually acquire a business?

Guest: It's kind of hard for me to estimate honestly because there's so many people just now getting started. Right. And the average search has been about 8 to 10 months. If it's a pretty broad search, if it's specific then it's running more like a 12 month search. But we've had about 40 closings. I haven't counted lately. Every time I announce how much we have then people are like, hey, I forgot to tell you, I closed. So I think we're somewhere around 40, a little north of 40 probably. And we have probably 50 people that are new to the search. And so we always have about 20 to 25 deals live at different various stages. Whether that's like new prepping, loi in the loi in due diligence or falling apart, which every time they fall apart, no more. Come on. Every time I count it's like we almost always have 20 deals live.

Host: So that number, the 40 out of let's call it 200. 250. So let's call it 20% ish is actually a really strong number. So if you, if you think about it, it's like, oh, one in five doesn't seem like a lot, but in the world of search it's very high performance. But that's also an indication of how difficult the world of search is and how many people are attracted to it. But actually never consummate a deal. So why don't they consummate deals? Chelsea, give us, give us one of the reasons that, that, that this happens or doesn't happen as the case may be.

Guest: Well, I think there's a couple of like I'll say challenges because who knows, if they're not failing yet, they could still close. It could be a long search. Right?

Host: Yeah. Okay.

Guest: And so the challenges that they have, I would say the very first thing that I see pretty consistently and I don't know if this is symptomatic of first time buyers, but it could be is they, everybody comes and talks to me about joining the lab and they want to be an expert, expert in everything. And so they'll say like, are you going to teach me how to do due diligence? No, I can't teach you how to do due diligence. You could go to a four year college, get an accounting degree, go work in the workplace for 10 years and still not know how to do due diligence.

Host: Right.

Guest: And so I do think that there's a desire from buyers to know everything. And the key to actually executing well is just picking your team really well, making sure that you're getting people that are skilled and experienced in your deal type and the deal size in your market and make sure that you're bringing the right people in to support you. Anytime somebody Asks on these strategy calls, are you going to teach us how to do due diligence? We will teach you what red flags are. We will teach you what the due diligence process looks like and what operational due diligence is and all that stuff. But you're not going to be conducting due diligence yourself unless it's a very, very, very small, very, very, very, very simple deal. You should not be doing your own due diligence. That's how mistakes get made, right? So you just want to make sure that you're picking really strong partners that you can trust with their results.

[12:30] Host: And when you say not doing any of the due diligence, obviously the searcher is going to be looking at the numbers of the business and looking at all of this information. So there, it's not like it's just going to all remain opaque. So where is the line between the information that the should be looking at and what falls on the other side of that line, which is the due diligence that they should basically outsource to their team?

Guest: The thing that people talk to me most about is financial statements. Everybody's major concern is that they can't read financial statements or they can't read, which just means that they don't feel proficient enough. Right. And so when I say due diligence, I should be more specific to say financial due diligence. Like you really want to rely on an accountant or someone with a financial due diligence background. Because even again, we have guest speakers every Thursday, either an interview or a guest speaker. And we've had due diligence experts come in and say things are confusing. This is not something you can learn in a book because there's so much nuance in small business accounting that it makes due diligence really hard. And so you'll need to do your cursory reviews and make sure you understand the financials. But the actual financial due diligence should probably be done by a due diligence expert. Unless you yourself have some, you know, skills and then you're not suffering from this problem.

Host: Chances are one of my recent guests definitely followed this format where he really had a team. Actually he worked with a buy side advisory, which is not something that I see very often, but he did. And so part of that large fee that he paid was due diligence. So from the outset he had all of that outsourced. But what he then did was he spent that much more time with the owners, the sellers. So he just, you know, just like all of that Time just went toward that. And that struck me. And after the fact, he said that that really paid dividends. And that struck me as. As a great point because it's like that's the one thing that you, the searcher, buyer of the business, that you uniquely can do. Nobody. You can't outsource that even if you wanted to. And it's just so. It's so valuable to build that trust and to build that credibility and rapport. So maybe it's like, you know, if you're. If you're tempted to pour over the, you know, the finances one more time, think instead about maybe picking up the phone or whatever, you know, getting coffee with your seller one more time and investing that hour there rather than, you know, looking into the finances, which you should be kind of outsourcing anyway now. Analysis paralysis. I know, I know. This is another big one. I mean, it's really. Analysis paralysis afflicts many people during any big decision in life. Not just buying a business, but talk to me about how it plays to in the members of the lab.

[15:09] Guest: I think what I see here most is like, the incessant need for information. And I understand that it's kind of. It's a safety mechanism, I think, of sorts. Someone feels like if they look for more and more and more information, that they won't make a mistake. There's not enough information out there for you to look at that's going to prevent a mistake from being made. That is always going to be a risk. If you analyze and analyze for two years, the risk is still there because the greatest risk is actually in yourself. And you're looking externally for all this information, when in essence, it's whether or not you are the right person to build this business and make it grow. Right? Or to buy this business and make it grow. And so I think that our members will get into this cycle of needing more and more and more information before even putting in an loi. Our members. So I have conversations with people that haven't closed yet because they'll start spinning and wondering why they haven't closed yet. And I asked the question, well, how many LOIS have you put in? And it's always zero. And I'm like, okay, why? And they're treating the LOIS as if it's like this very prestigious step that can't, like, you can't do an LOI until you're absolutely sure you should buy the business. I'm like, no, no, no, no. Let's chill. Because then they also burn their brand with the brokers and the sellers because they're asking for gobs of information that's really inappropriate for the stage that they're at. That's one of the lists on my or items on my to do list is I really want to give our members a phased like information request list so that they can understand like you should do this at this stage because it's not really appropriate and it's going to hurt your brand. And so I think that they run into that issue and it's like they just want more and more information. And when the essence is they haven't solved the internal issue. Right. It's the clarity that they're the right person to buy the business that's missing. And they're just trying to answer that question with external information.

Host: And is this, are you talking specifically about folks who ask for all this information pre loi or does this phenomenon also occur post loi?

Guest: Oh, it's a super, super post loi too. My favorite saying was a broker reached out and said, are they looking to buy a business? Are they looking for reasons not to buy a business?

Host: Yeah.

Guest: And it made sense and it clicked and I was like, they are looking to buy a business. But their anxiety is driving them to keep asking for more information and keep digging and to overcomplicate deal structure. Oh heavens, does that happen where suddenly they're like trying to. They've got the most complicated deal structure possible and it's because they're trying to mitigate all these little risks without really stepping back and realizing that none of them are material. The greater risk that they haven't mitigated is their own that they're still not sure if they should be buying a company.

[18:00] Host: Okay, on the imposter syndrome that you just alluded to, I know that is also something that afflicts searchers. Talk to me about imposter syndrome.

Guest: It's that right? Everybody that I talk to isn't sure if they've got the right background to buy a business. Very few people are super confident and know that they can figure it out no matter what. That's the confidence that it requires for you to take that leap of faith at the end of the day. Because no matter. You could spend a million dollars in due diligence on a million dollar deal and not be confident enough. Not be 100% sure you should buy a business. It's always going to require a leap of faith in yourself that no matter what didn't get uncovered, you'll figure it out. Because you always do that leap of faith is required. And so, in my opinion, what I've heard, anyway, the lab does is it helps battle that imposter syndrome, because you start to see other people that have executed, and you realize that they're just like you, and they have a similar background to you, or they've done similar things to you, or they're just as basic and simple as you are. I've had members. I have a member. I love him. He's a wonderful human. And he told me he was just a dumb grunt when we were building his value proposition buyer profile, that he didn't really do anything significant. That is not true at all. I talked to him for two and a half hours and basically just had him talk to me about everything he's done in his life. And he's done tremendous things. And so then our buyer branding advisor worked with him to build a value proposition buyer profile. He's actually extremely impressive. People tend to downplay their accomplishments because they don't see them as that big of a deal. But in the grand scheme of being a business owner, something that seems rote to you might actually be significant as an operator. And so the work that we do for the first four weeks, those live workshops, in my opinion, it builds clarity, it builds confidence, and that's really the work that drives execution. The people that are challenged, I always come back to, well, what's your value proposition? And that's where they start to get a little challenged, where they're not entirely sure what their value proposition is. And I kind of talk about it like the business is a puzzle. Every time you look at a listing, you need to be able to see the missing piece and whether or not you fit into that puzzle. So you need to know what you look like as a buyer and what your unique value proposition is. I was on a sales call yesterday, and a gentleman was like, I just don't know if I have a value prop. It's possible that you don't. It's possible that you shouldn't buy a business. Right. But you should do the work to figure that out, because I truly feel like everybody has a value proposition now. Does it mean you should buy a business? Maybe not. Right? And we always say our goal isn't that everyone buys a business in the lab. Our goal is that you feel more educated and prepared and comfortable with whatever decision you make, whether that's buying a business or not. We've had multiple members decide that this isn't for them, and that's okay. I would much rather you do that than sign a personal guarantee for millions of dollars and be trapped in a business you don't want to be doing.

Host: I want to selfishly raise my hand here for acquiring minds. This phenomenon of just like me or just like you and seeing other people that have done it. I really think that's part of the whole mission of this podcast, is to just show case after case after case of people who have actually gone down this, what seems like a really daunting road to many people and have done it and have done it really successfully, some of them wildly, spectacularly successfully. So yeah, and I, I'm no different. The more people I interview and interacting with people in the lab, the more attainable it all it all seems, the more normal it seems like this isn't weird. People are buying businesses all day long. Not weird.

[21:35] Guest: It's because to anyone else, what the lab does, aside from holding your hand as you buy a business, it gives you a community of like minded folks. Right? If you mention to like Bob, your neighbor, that you're buying a business, he's going to look at you like you're nuts. We all know that because everybody gets that reaction. I tell people what I do and they're like, wait, you do what? Which has always been my whole career. So that's nothing new. But it's beautiful to have a community of people that don't think you're crazy when that's all you're facing externally in your world. So yeah, hands down, Chelsea, before we

Host: move on to the next one, I just want to. This might be splitting hairs, but imposter syndrome is one thing. Is there a cold feet phenomenon where at the last minute somebody just can't pull the trigger? Which is slightly different than, you know, imposter syndrome is kind of like this longer standing thing. Cold feet is like I'm about to walk down the aisle and I can't bring myself to do it. So slightly different there. Does that ever happen?

Guest: It hasn't for the lab from a buyer. It has happened from sellers. Like sellers have shut down the deal immediately. Like the week of close. We've had three in one week happen that way. Wow. But not the buyers. But I think it's different because our members. And maybe I'm wrong, maybe I'm giving the program too much credit, but our members are in it and doing so much work to get there that I feel like they fall out before they would get to the finish line. What you see is the people that get cold feet don't put in Lois. They get cold feet before doing the Loi. And so I feel like if you made it all the way through due diligence and all that stuff, you're pretty much in it right now. I will tell you. They all feel like they're gonna throw up. They all say, oh, fucking shit, what am I doing? My whole life is over. I've gotten more than one call from them right after closing, where they're in the fetal position and they're panicking. And so it's not easy.

Host: I shouldn't be laughing.

Guest: But it's a tortured moment because we all know that they'll come out of it. So much so that I brought in a psychologist to talk about the change management process, because I recognize, because I'm trained in it as a psychologist, I recognize that they're just on a change journey that everyone goes through, and you just have to write it out and you'll come back out on the other side. But nobody knows that if you're not trained in this method, Right? And so I realized that. So that's when I brought somebody in to do a workshop around change so that they could be like, okay, yes, I'm in the fetal position now,

[24:04] Host: but

Guest: in just a few short weeks, I'll be out of it. It's fine.

Host: I'll be walking again. Yeah. You referred to the guy who sees himself as a dumb grunt and helping him develop and everybody in the lab developing their value proposition and their brand. You've actually referred to this a few times now. And as somebody who's gone through the lab, I know that this is really core to the philosophy of your entire approach. So talk to us about that. I found that so interesting. And, yeah, in retrospect, now that I've learned it from you all, it seems like such an obvious and important step in this process.

Guest: And it is. When I first joined Walker and Karen, who is our buyer branding advisor, they were using resumes like everyone uses. And we all talked about how a resume doesn't really show who you are as a buyer. It shows the various roles that you've played as an employee, but it doesn't really show the value that you would bring to a company that you're buying. And the whole thing about all of everything, in case you haven't learned in lab yet, is messaging. Right. And so it's all about the messaging of how it's how the loan works. It's how your interactions with the sellers work. It's your brand is all about messaging. And so we decided to kind of create what we call the value proposition buyer Profile, which does meet a resume requirement. It's just a different form called a functional resume. And so what it does is it positions you as a buyer and a very specific buyer. I get questions all the time from people about competition. Is there competition among members? If there's that many members, they're going to be competing for deals. I can honestly say we've never had competing people because typically their value proposition is different. Even if they're both looking for home care companies or SaaS companies, one is going to be looking for something that looks different than the other. One might have a background in sales and marketing, and the other one might have a background in operations. And so this one's going to be looking for a company that needs operations, but they don't have any sales and marketing experience, so they can't add value there. Whereas this one's going to be looking for something that needs sales and marketing because that's their value. And so they can't both buy the same company because it doesn't need them. Right. If this person bought this company, they would fail because they can't add value to sales and marketing. They're an operations person. And so because everyone's kind of looking for a very distinct business, not just a type of business. It's the business that needs the skills and value that they've honed over their career in their lifetime. We don't really have conflict. There's been a few situations where people are bidding for the same business, but they don't know it. I know it because I'm looking at the listings with them, but they don't know it. The value proposition is really just taking the time to figure out what you've done, what you don't want to do anymore, what you would like to do, and what all of those achievements and accomplishments are that you could then introduce to a business, right? Whether that's digital marketing or operations or process improvement or new product lines, everybody has a different flavor. If you do not figure that out hands down, that is almost always the reason someone is not moving on their search. Because when they look at a listing, they don't see how they fit in,

[27:22] Host: how exactly they fit in, what value they'll add.

Guest: And so I always tell people, I just had this conversation actually with a member from Cohort 8. So we're about to launch Cohort 20. And so Cohort 8, he's like, I've talked to 19 of our closers and I've talked to blah, blah, blah. And this man is, oh, he's so brilliant. But he just loves information. And so I asked him, I said, okay, so you've had all these conversations with all these people. I haven't even talked to our closers that much about post close. Right. And so how many, Lois, have you put in? And he said, zero. And I said, okay, so you have now researched the living daylights out of acquisition entrepreneurship. But when we talked, it all came down to he doesn't know what his value proposition is. And so when he looks at listings, he can't pull the trigger because he can't see it clearly how he's going to grow the business. And it all comes back to the value proposition. So much so that we just kind of, for your cohort, kind of tweaked it so that we could spend even more time diving into the value proposition because it is the hardest thing for people to develop. And I already offer a monthly workshop on refining your target statement, because your value proposition is based in your target statement. But even that wasn't enough. And so it is the hardest. There's a lot of work, as you know, that goes into reflecting on who you are and what type of role you should be playing in a business and what you enjoy doing and the successes that you've had. And so it takes a lot of work. But hands down, I have been told repeatedly that it's the key to closing quickly.

Host: And just to make this feel a little bit more concrete. It is a very kind of internal, psychological, frankly, process. But at the end of it, at least in the lab, you also have something concrete, which is this target statement. And that's what you lead with when you're reaching out to brokers for more information about a listing. So it does take, take a, you know, a tangible form after you've gone through this work and talk to me about how, you know, when, when brokers, you hear back from brokers that they can tell when they're, when they're interacting with one of the lab members because of how you know this, how kind of professional and what's the word, just self directed. This target statement comes across well.

Guest: And the whole point of what we do week two and week three is to give you a branding packet, right? So this is a very saturated market. There are so many people out there kicking the tires on the idea of buying a business that brokers are having a hard time figuring out who's serious and who's not.

[30:00] Host: Right?

Guest: And so our goal was that we would give you guys something that you could reach out to brokers and sellers with it would give them a really strong first impression. And so that's your buyer profile and that's your pre approval letter. And so when you reach out to a broker and you're like, hey, here's who I am and the buyer profile is top of it is your target statement. And then below that is all the things that you've done that's going to make you the right buyer for this business that you're trying to buy. Hands down. We've gotten emails from brokers telling us, I mean you've heard it because Karen shared one of them, but about how serious they can take you because you've done all of this work that no one else that they're talking to is doing. And so hands down, our members are being accepted over private equity offers. They're getting chosen not being the most expensive offer. It's because they're focused so heavily on their brand and making sure all the things that we talk about in the lab, making sure that they're building the strong relationships, that's how they get pocket listings. So we've had a handful of members not get listings that they initially look at with a broker, but they'll get a call from the broker because they're top of mind. As a serious investor that's going to close. The biggest thing you want to lead with as a first time buyer is that you are. There's a certainty to close for you. That's all the broker cares about. That's why they're asking you about financials. That's why they want to know. The questions they're asking is just gauging whether or not you're actually going to close or not. And that's where gender, in my opinion comes in a little bit. I think women are presumed not to close a lot more than men are. And so I think that the buyer profile is just a very strong way to come across as a buyer. It backs up who you say you are and it paints a very clear picture of why the business needs you. It's great for lenders too, right? It tells a great story as to why they should lend to you. It's all about storytelling.

Host: Great. Well, we're getting tight on time here, Chelsea, so I want to make sure we get to the remaining three reasons that searchers fail in their search. So next I have overly rigid with their search criteria. Talk to me about that.

Guest: The target statement is like a North Star, but what I found is people will be so rigid, like if something has 780,000 in SDE and they're looking for 800,000. They're not even going to look at it. It's like, okay, so yes, it has 780,000. That's not quite 800,000, but there might be things there that you're going to easily add 20,000 back in and give you the SD you're looking for. And so I feel like there's a little bit of a lack of flexibility when people, some people will just anchor in real tight on their target statement, and then we have the opposite, where they won't anchor in at all on their target statement and they're looking at deals that are not going to address their goals. At the end of the day, you have some goals, right? And so I just think that you're going to have a target statement, but you should have like a plus or minus, right? As far as if you have an 800 as the base, but you can actually live with 750, then put 750 as your base and use 750. Right.

[33:09] Host: In your own mind or actually in the target statement, in the message you're communicating to brokers as well.

Guest: I would put it in the target statement, right? So that they're not excluding ones that actually give you what you're looking for. Or if you want to use it as your own internal criteria and leave it 800, that's fine. Just make sure that you're not eliminating things that could actually. And again, I'm not saying request information and spend two days on something that isn't going to meet your needs, but just give it a quick once over, right? If you see a way that you might be able to streamline expenses with that type of business, then look through it a little bit more. Right?

Host: And Chelsea, are people on this point of being overly rigid in their criteria, Is it almost always the financial criteria or are there other ways people can be too picky? Is it. Or is it all just coming down to the ebitda, their EBITDA target? Pretty much.

Guest: No. I mean, there are other ways, right? Like, for example, we get a lot. We have. I would. I think it's crazy. I think I'd be safe to say 50% of our members are engineer degrees or in the engineering profession, which I think is hilarious. But there's a little bit of rigidity to target statement industry, right? Or like, type of business you're looking for. Like, we'll get people coming in wanting to do SaaS businesses. There are a lot of opportunities out there that aren't SaaS, because SaaS is a whole different market. They value things differently. Their multiples are significantly higher for the buy then build method to work in the SaaS world, you're going to fall below a million in sales and then it's like you're kind of buying a startup in the SaaS world. So it's a little tricky, right? However, if you have an IT background, being able to pivot and think about how to use that SaaS background to develop proprietary software for a different company that then you can sell to everyone is a much smarter way to leverage that background. And I feel like there's not always an openness to kind of consider that. As soon as they hear it then it's like, oh yeah. And so I would just challenge people to kind of broaden what you're looking for and think of unique ways that you can leverage your experience.

Host: So that's people being overly rigid in their search. Number six would be the opposite. People get desperate and they get loose. How does that work?

Guest: Without fail, I kid you not, without fail. At the three month mark, somewhat. Three weeks and then again at three months, but definitely at the three month mark I will start getting calls like, what am I doing wrong? I haven't found a business yet. I'm like, what cohort were you in? And they'll tell me. And I'm like, so you've been searching for three months? And they're like, yeah. And I'm like, okay, so a chill. The Average search takes eight to 10 months in the lab. 18 if you're looking at Stanford research. Right. And I think current research is actually like 19.3, I think I read a couple days ago. And so what happens? And I literally had this happen. Somebody was coming in to buy a SaaS company. They called me. It was maybe five or six months in their defense, still too soon. And they wanted to buy the Napa auto parts store down the street. And I'm like, okay, so are we now very passionate about Napa auto parts? And the SDE was wrong, right? It was like throwing off 125,000 SDE, I think. And this person was wanting 400,000 SDE or something like that. And what it boiled down to, they were desperate. Well, and what it boils down to is desperation. Is that they just wanted to buy a business. And I don't blame them. Nobody wants to search. Searching sucks. Let's be real here, right? It's a lot of work. You can go down different rabbit holes and spend a lot of time and not see the rewards. But the biggest mistake you can possibly make, in my opinion, just Chelsea's opinion, is changing your target out of desperation. The lab, every meeting starts with we're all here to buy a business, but not at the expense of making a mistake. Right? These are expensive decisions you're making with large implications. And so if you know what you want and you know what you need, don't change it out of desperation. You can change it out of clarity. I 100% will support you changing it out of clarity. Meaning you've done your due diligence in like the non MA term. Like you've done the work to understand that what you were originally looking for isn't actually what you want. Like, we had a member buy the fitness equipment company I was telling you about. He came in as a SaaS buyer, self funded. He found a company. I think he did four lois. And by the fourth one, he realized he didn't actually want SaaS at all. He doesn't like SaaS. What he liked was SaaS as a product. And so when he stripped that away, what he actually likes is products. And so he ended up buying a product company and he bought a huge product company and ended up being an independent sponsor and buying with investors. And so that entire target statement changed. But I support it because it changed because of clarity, not desperation. He did the work and he realized that what he was originally looking for wasn't actually what was going to make him happy. And to me, that's 100% support that. What I don't support is you calling me, tell me you want to buy Kentucky Fried Chicken down the street because you just want to own a business.

[38:13] Host: It sounds like part of the problem here is that people have unrealistic expectations of how long this should take. So if you're getting calls at month three, people being like, why haven't I found a business yet? They just, they obviously haven't. Haven't done their homework in terms of how long this what the average numbers are.

Guest: I don't think so. I think it's an emo. Everything about buying a business is emotional. And I think at the three month mark, when you haven't found a business, it starts creating doubt. And that doubt triggers into impatience because it's like, well, if I haven't found a business yet, I'm doing something wrong or I shouldn't be buying a business or. And it's more just like, chill out. It's the change curve again. The damn change curve comes up every time you start doubting that what you're doing is the right decision, if you just wait it out, it kind of works itself out. And it does. The last person to do this to me is under LOI and working through due diligence. He just got his term sheet from the bank and he sent me a meme about how as soon as he got the LOI signed. But it is about being patient, right? And you just have to. It's like dating. Like, I know that I'm not going to meet my husband super fast, right? Doesn't mean I don't get impatient about it.

[39:22] Host: Right?

Guest: But I waited after my first husband. I waited and I found the right guy. But you just have to be patient, right?

Host: Great. Last one. Not doing the work required for deal flow.

Guest: Yeah. So like I said, searching sucks. There is no, there's no silver bullet. Like there are services out there that are deal origination services and they'll find deals off market for you. There's challenges that come with off market deals though, that we won't get into here. If you want a deal that has a higher likelihood of closing, then you want to look at listed deals, right? The challenge is that the listed deals are. There's a gazillion brokers out there and they're all on their websites. And if you go to aggregators, the aggregators don't seem to clean up their website. So who knows if the deal is actually live or not. And so what you have to be doing is doing the tedious work of going on the brokers pages, looking at the listings, requesting information, talking to the broker, saying, like the deal, don't like the deal, building that rapport. And there's no fast way of doing it, in my opinion, and giving you the, the strong branding, building your brand with brokers other than you doing it. And so what I find is when people are struggling, either they haven't been able to do an LOI or they're not closing as fast as they think they should. When I ask them, well, how many brokers have you signed up with their mailing lists? How many deals have you searched, looked into? Seriously? It all boils back to they're not doing enough of the daily activities to get the deal flow. It's all a numbers game. Like we give you a scorecard in week one to kind of track your daily activities. Because it really is a numbers game. You just have to keep. We don't really joke, but we reference it as a flywheel, right? You do these daily activities and it gets the flywheel moving. And as soon as the flywheel starts Spinning it will not stop. Our closers are sending deals to our members because they're still getting action. Right. And so, but if you don't do it, you're not going to get the deal flow and the numbers are going to decrease. It's like job applications. Right. You always hear like it's a numbers game. You just have to keep putting them out there until one hits. Kind of like dating.

Host: Yeah. Chelsea, before I let you go, you did mention women and how they're received a little bit differently in the market. You have a hunch that they're perceived a little bit differently in the market than men. Obviously, acquiring a business is heavily male dominated. All you have to do is look at, look at the guests on Acquiring minds to realize that the acquisition lab, you see it there as well. But for women listeners, or really anybody who might be interested in this topic, just talk to me about what your observations are about women who might want to buy a business.

[42:17] Guest: I do think that there's a level of. What's the word? I feel like they're more easily dismissed by sellers, by brokers, so they're not taken as seriously. I was just talking to. So we once a month, on the second Tuesday, I think of the month the women of the lab meet and talk about what it is to be a woman in the search process or just in general, just have sounding boards for one another. Right. We have had sellers just blindly say, no, I'm not talking to you because it was a manufacturing company and it's a woman trying to buy the manufacturing company. The number one advice that we've kind of talked to is that you need to lead with money. They need to know that you have money and that you are the decision maker. Not to get into the socialization of it, but I've noticed I've always been the primary breadwinner in my family. The house was in my name, our cars were in my name. Until we're starting to pivot now that my husband's been in the work world for a while. But I still like, the house is in my name and the deed is made out to him. And so it's like, I think that the way that we're socialized, women just come across different challenges, just like our minority members come across different challenges than the majority white male. At least in my experience. Again, it's not statistically significant, so I can't speak to it, but I can just say the things that I'm hearing from our members are different. Like they do the same things, but they're perceived differently. So, like, when a woman does something and one of our male members does the same damn thing because they're all using the same advice, they're perceived very differently. And so we have about 29 women, I think, now. So right around 10% of our base seems to always be women. We don't get many female applicants. So if anyone's listening and you're considering buying a business, please, please consider joining the lab, if for nothing more, just to get the female support. And then we haven't had any female closers yet. We have one that's set to close in two weeks, and I'm really excited about that. We've had one. Her deal fell apart the week of closing. The other thing is the women that are able to succeed a little bit easier have worked at very large companies. And so I don't know if that helps a little bit, but they've all worked for very large names or are currently working for very large names. The other ones seem to have a little bit more of a challenge.

Host: Okay.

Guest: And that's to say they're not qualified, because they're just as qualified.

Host: Yeah, yeah. It probably just adds to the perception thing. If they have a big name on their resume, maybe that it just helps that penetrate the bias a little bit.

[45:04] Guest: I think so.

Host: Chelsea, let's leave it there. This has been very valuable. How can people get in touch with you if they want to learn more about the lab? Is it directly to you, or why don't you give us your contact information for you yourself, personally, and then for the lab generally?

Guest: Yeah. So you can reach out to me at any point. Elsee c h e l s e a@buythenbuild.com you can find us in our free Facebook group. I'm active there, so you can always reach out to me on Facebook because I run that free group.

Host: And what's that free group, Chelsea? What do I search in Facebook to find? The free group?

Guest: Buy, then build.

Host: Buy, then build. Okay. Awesome.

Guest: Yeah, there's about 5,000 people in there. It's not vetted, but it's a very active community. Then to look into the lab, you can go to acquisitionlab.com for a summary. You can go to acquisitionlab.com overview. Our homepage is very wordy, so if you want to cut through the words and just see the basics, go to overview. You can also read about our team of advisors on there and you can apply directly on our website. We have a couple seats left, but we're not running a cohort over the summer. We'll only have one in July, and then we'll have one in September. Okay.

Host: And you can also ask me personally what it's like to be a member, and you'll hear my resounding endorsement of it. It's been awesome. Chelsea, thank you so much for coming on and sharing with these. These. These things that searchers need to watch out for in their own psychology.

Guest: I appreciate the opportunity. Thank you for having me.