Host: Clint Fiore runs a business brokerage in Texas and he works with lots of searchers, acquisition entrepreneurs like you who are searching for a good business to buy. He loves searchers and he's actually been one himself. This interview was awesome. Clint explains the questions to ask and the signals to send to make yourself a more attractive candidate for his good deals. He shares the most important characteristic that he looks for when speaking to a new, eager searcher. Can you guess what that is as well as what some of his pet peeves are? Things that we as searchers do that can be off putting and counterproductive in our interactions with brokers? You'll also learn about all the work that a good broker is doing behind the scenes, especially to bring sellers to the table. This is important because it's the same work that you should expect to do if instead of looking for a broker deal, you plan to do proprietary unbrokered search. There is so much work, delicate coaxing work, to not only find a willing seller in the lower middle market, but then to explain to them the real value of their business that you need to see their financials, that you're going to be asking probing questions and so on. Great brokers play such an important role in the world of search and have lots to teach. Clint Fiore of Texas Business Buyers is no exception. Enjoy. 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 Oberle 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 Clint Fiore. Thank you for joining me today on Acquiring Minds.

Guest: Will. Thank you for having me man. Appreciate it.

Host: You are the president and founder of Texas Business Buyers, a business brokerage. So you are a broker and a founder of a brokerage. We are going to spend the first part of our conversation today educating searchers and business buyers on the perspective of buying a small business, on your perspective on us, basically brokers. Brokers are frankly, as you know, complained about a lot among the searcher community. But as I understand it, searchers are complained about by brokers. So if we can, we can help the audience understand how to, how to cultivate better relationships with brokers. I think they'll get a lot of value from this episode. So before we get into that, Clint, why don't you just tell us a little bit about yourself and Texas business buyers.

[3:25] Guest: Sure. I live in Central Texas and my company is called Texas Business Buyers. We help people buy and sell companies all over the state. Since I joined Twitter, we've been thinking of expanding some buy side services outside of the state as well. So we've got things in store for that. But just generally encourage everyone to follow along the journey as the company evolves on Twitter and just stay up to speed with what we're doing because we are starting some other programs I'll talk to you about later with like the newsletter and other things. Yeah, we do Main street to lower middle market. So for us it's generally quality, profitable deals. We don't do turnarounds, distressed situations or anything like that. Our average deal is usually in the 1 to $5 million range, but a small one for us would be a half million and a large one would be 15 million. And so we're usually kind of in that ballpark, which is really, I think, where a lot of your searchers or listeners are going to be looking. We feel like there's a soft spot kind of between Main street where you have business brokers that would take on pretty much anything, any type of business, they'll take it on. And then there's like Boutique M and a space which has they just want the 7 and 8 figure EBITDA and above deals. And we really like these ones that are making half a million and sell for a couple million. Those, those size deals are bread and butter. Really like those. And you know, generally we just work as a small team. We tend to have about 10 projects we're doing at any given time. So when we're feeling a good rhythm, we're closing about a deal every month as a group. And that's what we like to see. Our claim to fame is just kind of quality over quantity and we try to do a good job. When we take on a project, we try to get it done every time. And historically our success rate is over 90%. That's in terms of closings versus listings so if we take on a deal, the odds of us closing it are very high.

Host: And I don't have any metric to compare that to in brokerage. Overall, do you have what the average is? The industry average is?

Guest: 20 to 30% is the industry average. Yeah. Great, great.

Host: And so part of that is just you filter out deals that you don't think that you can aren't going to work for. You guys are going to be more challenged to sell.

[6:00] Guest: Yeah. You know, I want to say it's because we're, we're awesome and we're really good and we are good, but there's a lot of good brokers out there that don't have that high of a success rate. And I think that's because they're just not as picky. We turn away probably three quarters of folks that come to us wanting to help, help them sell their business just because they don't meet our minimum requirements.

Host: And are those requirements usually around like EBITDA size or what other quality criteria are you looking at?

Guest: The criteria that usually kicks them out. And this may dovetail well with our conversation later, Will, is if you're as doing this as a searcher with a proprietary search, like, you'll probably have similar criteria to us, but the most common things that make us say no to a deal are it's too small, it's too wrapped around the owner, or we just can't get to a realistic valuation where the, where the owner is willing to go to market with realistic expectations. And a lot of times we do a good job of educating them on the value. And it's not that they are unwilling to sell for a realistic price, it's just that when it bursts their bubble a big part of the time, they wanted a lot more. We tell them it's worth X, but that's just not the magic number they needed to retire. Or, or, and they just decide, you know, I need to work for a few more years or I need to get my business built up a little bit better before I take it to the market. And if we do a good job kind of gently educating them on the true value of their business and how the, how buyers are going to look at it, then they'll come back to us in one, two, three or four years later. And then we'll end up putting it on the market either for a higher price once they've improved the business, or for the same price once they've socked away a few more dollars, you know, from running it for a few more years. And So a lot of our time isn't just turning people away, it's just saying, hey, you're not ready yet, or you got to do this or that to get it there. And because we're an Evergreen institution that's always working a pipeline of deals, we just say, hey, we're not in a hurry. If you need 3 million bucks and we think it's worth a million and a half and come back to us when it's worth 3 million, here's what it needs to look like. Or we can get you a million and a half whenever you're ready, but we just gently educate and send them back and then bring them back when they're realistic and ready to go to market.

Host: Well, I'm sure that earns you tons of credibility with these sellers because brokers, I think, in any industry are notorious for overselling and under delivering, telling people that promising them the world and that it often doesn't pan out that way. So that's a great approach. Okay, Clint, let's talk about, as I said at the top, let's talk about flip the script here. So searchers maybe don't always, you know, somebody who wants to buy business. There are a lot of tire kickers, is the most common phrase. You'll hear people who think that they're interested in doing that but really are just going to be a big waste of time. Talk to me about what your community how you guys react to people who are looking to buy businesses and what we as business buyers can do to differentiate ourselves and project ourselves as the serious business buyers that we are. What are the Just talk me through all this.

[9:24] Guest: Yeah, sure. So I guess I could almost phrase it as what are my pet peeves with buyers or searchers coming in? And that if you can understand that, then you can kind of figure out what the antidote is. Right. And so what size of business should you buy?

Host: What can you afford? How much STE or EBITDA does the business you acquire need to generate to pay off your loan, pay you the income you need and reinvest in the business? Of course, the answer varies from person to person, so you need to answer this question for yourself. Chelsea Wood runs the acquisition lab and did a great interview on Acquiring Minds just a couple weeks ago. The lab is a Do it with youh Buy side advisory service founded by one Walker Deibel, author of Buy Then Build. Chelsea's running a live session on this question. What size of business should you buy? She's worked with over 250 searchers who've gone through the lab and this question comes up constantly. So at the live session she'll explain how to arrive at the answer. Acquiring Minds is co hosting it. So I'll be there as well playing MC and taking notes. It's Wednesday, June 22nd at 10am Pacific, 1pm Eastern. Register in the show notes I think

Guest: the most common thing is just laziness by the searcher of you know we are a small shop. Every one of our deals is on our website. So if, if you go to texasbusinessbuyers.com right now there's a button at the top that says marketplace, there's all the businesses that are for sale and then we have if it's under contract, we have a section that says under contract and then we have the section of closed. And what I find is that a lot of searchers just default to email and they don't bother to open up their web browser. Click on a website and just see what's going on on the marketplace. So you may send me a form template and you got to understand my email box is times. It's like crazy. Yeah, it's just hundreds of hundreds a day. I'm hit up by dozens of searchers every day. And if it's just a form letter saying hey Mr. Broker, wanted to see if you've got anything a million EBITDA Manufacturing or just a wide range of industries and send and it's the same one, I've got 20 others every day in my inbox. And if I have that exact listing on my website, I'm probably more inclined to talk to the people that reach out about that listing. And so just when you have good brokers out there. So my advice would be to know kind of who the players are that are moving volume of businesses in your marketplace, in your industry or geography and then hit their websites up and look for stuff that's on the market, you're going to have a way more successful response rate. If you're inquiring about a specific deal versus just saying hey, here's my criteria and will you do my job for me of looking for stuff. When you're a brand new broker that doesn't have buyers or sellers and are hungry and you don't have much deal flow, you may have time to jump on those intro calls and say yeah, let's get to know each other and all this. But when you're a volume shop, I think that's what searchers complain about is they'll say well you know, I feel like this is a Great brokerage but they never get back to me. And it might just be because you're being lazy and you're just sending a form email instead of looking out what's actually happening. And you have to look at their deals and jump in when you see one. And then also our shop and a lot of others are starting to follow our lead on this. We have an early, an early notice program. And so if you go to texasbusiness buyers.com we have what's called the VIP list. And this is a way that you can sign up to get a notice before we put it on Axial or Bizbuy or these other marketplaces for sale. We send it out to people that already have relationship with us and give them about a week head start. And that was kind of the, the seed of the idea that led to the national probably a good deal newsletter which we can talk about. But in Texas, if you want a Texas deal from our shop, it's no charge to get on our VIP notification list. And the more you can tell us about yourself and the quicker you can open our emails, look at our marketplaces and get to us about about specific deals, the more success you're going to have versus just the canvassing your your template form letter criteria.

[14:07] Host: So Clint, my impression is that many business brokerages have a sign up list and right. And so you're put on the list and so you see all the new listings. Whenever new listings are published are those typically like yours and that they're a sneak peek and that the list will get access to a look see at these deals before they're published publicly on the website or on Biz by sell or distributed other places.

Guest: I can't speak for other brokerages for sure but in general you're going to see it either early or at the exact same same time that it hits the marketplaces. And so for me I view it like biz by sell in my opinion is kind of like Craigslist. It's, it's just wild. Like anything can be on there. It's for sale by owner, it's for sale by broker. There's good brokers, there's bad brokers, there's good for sale by owners, there's bad for sale by owners. There's really nice businesses that are priced insanely high. There's really good businesses priced right. There's really bad businesses that look like they're priced right but they're really bad. Once you get under the hood and it's just this bizarre of a grab bag of Random opportunities.

[15:27] Host: But it's so fun, Clint. It's so fun to browse.

Guest: Yeah. And so, yeah, one of my favorite Twitter activities I did about a month ago was we did that. Post any deal from Biz, Buy, Sell and I'll give you lightning feedback in one tweet. And I spent like a whole day doing that. And that just reminded me how wild that marketplace is. It's truly the wild west.

Host: And so brilliant marketing on your part, by the way. What a good idea for a tweet. Go ahead.

Guest: Yeah. And so I would say when it comes to working with brokers, find who's doing volume, find who takes our philosophy, which is only work the ones that have standards, that work with quality stuff, make sure it's priced right, that educate sellers on valuations and then we can be your best friend because then when you see one. What I've always tried to educate the marketplace is if you see the star from Texas business buyers, then it's very high chance. It's what you see is what you get. If you see the ad, it is on the market and live. We don't, as soon as it's under contract, we let everyone know it's under contract. So that was another frustration of mine when I was a buyer's, I would see one I loved and then I would get all excited about it and find out it's already under contract. And so, you know, I've been a buyer, I've been a searcher before I started my brokerage. And I just, all the frustrations I had with brokers, I tried to, I try to build into my brokerage to be the kind of broker I wish existed when I was a buyer. But that said, you know, as much as I love buyers and as much as I love searchers and the searchers out there listening, you're probably my favorite people. Like, you're my people. I get you. I love talking. We have very similar backgrounds. A lot of times they're just young, cool people that are ambitious and wanting to take over the world. And in a lot of ways I relate to those people more than a baby boomer seller. The buyers are very like minded. I could spend all day talking to you, but I just don't have the time. That's what we and every other broker runs into is we'd love to just get on the get to know you calls, but we're limited in bandwidth because we're working a bunch of deals at the same time and we're always working closest to closing backwards. And once we're under contract, we still have a lot of work to do to get to the finish line and get it done. And then whenever you inquire about a deal, always ask, hey, do you have anything else in the pipeline coming out that, that I need to know about? Because usually there's, you know, three or four week period where for us it takes about three weeks before we engage from engagement to on the market where there's this window of time where we have a deal and it's good, but it's not on our website yet and it's not out to our members yet. But if you're talking to me and we're on the phone and I have that, then I'll start talking to you about it right now. And so just getting on the phone and inquiring about specific deals and then asking that follow up question, is there anything else coming? And then, and then there's a whole other batch of deals that are kind of hip pocket ones where I'm talking to them but they haven't engaged yet or they, they're one that I sent off into the wilderness. That sounds perfect, but they were a little bit, you know, not ready yet. If you, if I could high level talk to you about it and you sound like the perfect buyer, then sometimes I'll use you as the buyer to go retrieve a seller I sent off into the wilderness. Does that make sense?

[19:05] Host: Yeah, yeah, it's fascinating. And so be the reason to talk that seller back to the selling table.

Guest: Right.

Host: Because you search or be the reason.

Guest: Yeah, it's kind of a we scratch each other's back situation. Because I don't like to just call a seller and be like, hey, we got lots of buyers, which is what anyone can say. But if you seem like the perfect fit and you have a background that matches and sellers usually love it when you've got something in your history that's similar to theirs. Because I think sellers overemphasize a match on backgrounds. And so I'll use you sometimes if you've got the right background that I think, oh, this is going to play really well with the seller. And I'm, I'm going to see if I can pull them back. Because in my experience when a seller says, okay, I'm going to call you back next year, they usually will call you back in three months if they say I need to, I need to own it another five years before I'm ready to retire. That's what their math said. But their heart says in a year or two, no I'm ready to sell.

Host: That sounds to me like what's happening is you've set their expectations about a little lower about what they can expect to sell their business for. And they end the conversation with you being like, okay, well it's going to take me three or five years to get the number I want. But in fact what happens is they just, over the next few months they get used to the number you told them and they get more open minded and then they come back to the table soon, come back to the market sooner than they said they would. Is that kind of the psychology do you think?

Guest: Yeah, it's almost universal that. Because what happens is they reach out and they're totally ready to sell. They just want a certain number that's usually not grounded in reality of what the business is worth. It's grounded in what they want to

[21:01] Host: retire, Doesn't care about.

Guest: Yeah, you as a buyer, you don't give a crap about how much their RV is going to cost them or whatever their plan is to retire. You just want to pay a fair price for what the business is worth. And so we educate them on what a fair price is worth, we give them pointers how to increase value and then we let them go stew on it. Well, a lot of times they realize, you know, they go back and talk to their spouse and they say, well you know, our house has appreciated a lot this year and, and you know, I got a friend that says they'll let me work with them part time and they start kind of reimagining their life a little bit because a lot of times a small business, I can't get them the sale off into the sunset money they really want, you know, because everybody wants the, whatever it is, 5 million, 10 million, whatever they think is going to be. I can't run out of money if I get this much in, in a chunk and if the company is not worth that, then what, and this is kind of universal with retirees, whether or not they're business owners. Is this kind of soft retirement where people are, are doing a sunset career and downsizing or right sizing and changing things around in their financial world. And, and once I've kind of educated on their business value and they start doing that math and having those hard conversations and building a new vision for what their retirement life could be like, then they'll often come back in less time than they originally said. So if they said three years, for example, they'll come back in one year because they figured it out and they've come to grips with the reality and how to make it happen with the number I told them that it was.

Host: This is all so reinforces to me the value of business brokers. And when you as a searcher do proprietary search and outreach, this is all the work that you're going to have to do. You, the searcher are going to have to do because the business broker hasn't done it for you. And we're going to get there. Another, another thing about your listings, Clinton and kind of their life cycle. Often it's said about biz buy sell, like aside from the fact that it can be a bizarre, as you put it, it's also just stuff that hasn't otherwise sold. So you're getting stuff that kind of nobody else wants. And this is a classic thing in business buying. It's like you always have to ask yourself like, why, why am I getting access to this deal? Why hasn't somebody who's more plugged in, more resourced than me jumped at this deal? Right. But so with that context, you know, you said you guys have deals that aren't even on the market yet, you're talking to them. Then a deal that is going public and it'll go out to your VIP list first, maybe a week in advance, then it hits your website. And I assume at that point when it hits your website, you also put it out on biz by sell and axial and other places. Is the logic not the same that like if I see, if I see a deal on your website, it means none of your VIPs were interested? Is that, is that a fair conclusion for me to make?

[24:19] Guest: No, not really. We get about half of our buyers from people we already have relationship with. So there's about a 50, 50 chance it's going to be someone that's already in our VIP list in that system versus somebody that just inquires via advertising on those major marketplaces. And so we never know. And there's times where it kind of baffles me as a broker because I hear buyers complaining about not finding good deals and how by the time they find it, 10 other people are already bidding for it and they're just behind the eight ball. But we have some really good stuff that just sits sometimes. And for me, I think it has to do a lot of times with geography. Industry of the numbers are great. We don't take a deal to market unless it pencils out really well. And so the ROI is usually always compelling on our deals. But I've got a deal right now that is a restaurant that does Chinese food, almost all delivery and they're set up. They were like the perfect restaurant for Covid because they were already just like on a busy night they'll have 14 delivery drivers just zooming all over the Central Texas. So it's like a fast growing Central Texas area. The SDE is like 562, I think on it. And it's priced at under 3x multiple. You know, it's maybe a two and a half. I think we've got it at 1.75. The website's great, the technology's great, the systems are great, the ROI is phenomenal. It's just a right down the fairway SBA financeable deal that it seems like buyers claim doesn't exist. It's priced right, ready to go, got a bow on it. And it's just been sitting there for six months. We've had a lot of looky loos and then people are like, oh, I just don't want a restaurant or I just don't want to be in that particular town. It's not, it's, it's in a, it's in one of the towns between San Antonio and Austin. So it's like, it's a very specific place. And, and so it's not always the numbers, it's not always the business. There's anything wrong with the business. You just have to find a buyer that wants the industry, the geography and you know, wants to live in proximity to it and, and likes the numbers and stuff. And so it's easier. It's not as easy as it sounds. These things don't sell themselves. They do take a lot of work to get done and even a really nice down the fairway deal, we'll often talk to 100 buyers before we get one or two offers on it. And so it's, it's that type of filtering we have to do to find the right match.

[27:19] Host: That's fascinating. I want to also ask, before we get off this topic about searchers branding themselves. So oftentimes really serious searchers will have a website for themselves and call themselves a so and so investments or such and such fund or whatever. In short of that, they might not do that. They might have just a personal website and just kind of tell more of a narrative so that who they are personally might hopefully resonate with the seller. Any thoughts on any of those tactics?

Guest: I think branding yourself matters. If you're going to set up a holding company that's an evergreen buyer that you're going to do a bunch of deals under if you're just a searcher that's looking for your one off deal that you're going to own and operate and then potentially or one that you're going to buy as a platform to do bolt ons, I don't think it's actually that important to brand yourself. I think it is important to put your best foot forward. And so you know the websites that have your smiling face on it and your background and willsmith.com versus Yahoo email address. It plays well and looks good. I actually think I've seen it both ways where some sellers when they see Turning Leaf Capital Group is the one that wants to and sorry, if there's a Turning Leaf Capital Group that sounds

Host: so real, there probably is one out

Guest: there, somebody's gonna be like how did you know about me? Just made it up, sorry. I think sometimes it's a turn off because there's some sellers that in their mind they don't feel like they should be a target for a big private equity group. And it almost raises a red flag if they're like this owner operated business that's making a half million a year and the owners, they're high fiving their employees every day and is an in the trenches owner, operator, solid SBA kind of deal. If you look like you're an institution they're going to be like why isn't this doesn't. This is not what I was imagining. Because they're imagining a younger version of themselves is going to be the right buyer. And so sometimes you as a searcher just being yourself and saying like yeah, I had a normal job or I was in the military or this or that and then I went to school for this but I really want to do this. And that's kind of how they were probably because these sellers, they didn't come from an institutional background. Right. They just are or Joe Blow that started this business. And so there's a certain endearing quality to just being a quality individual that says hey, I'm just like you, but younger and I want to pay you a fair price and I've got a bank ready to loan me money and I'm all in committed to this. And that plays really well sometimes. And then I've had some times where I think it has impressed people to be stroke their ego a little bit

[30:30] Host: to say oh totally, private equity is interested in me.

Guest: Yeah, exactly. And so I don't think there's a universal right or wrong is what I'm saying is I've seen it work both ways and I have seen it, you know, for a naive buyer, I mean, a naive seller, occasionally they do feel impressed, like, but I don't think it gives you a big advantage. I think you just got to get, you got to sell yourself to the broker on a broker represented deal, and then I can sell you to the seller.

Host: And that's great. I was just going to ask that. Is there any way to sell ourselves to you that we haven't already touched on other than avoiding Clint's pet peeves? Like, you know, if I do get you on the phone or if I talk to one of your frontline folks, do I do. Should I have kind of a 60 second kind of narrative crafted about who I am, not overly selling myself, but just kind of like, be ready to present myself in the strongest possible way and have a story about who I am? Is there anything to be learned here?

Guest: Yeah, I can give some pointers here. So in general, if you just think, put yourself in the shoes of a broker like myself, what we want is the deal to close. And it sounds stupid to say that, but we're going to talk to so many people that we just don't know if, if this person's gonna be able to get it done. And we're looking for clues. So I'm wanting to see, you know, first off, do you have money? You know, where's the down payment coming from? Do you have this figured out or am I gonna have to. I don't want to tie up a deal with An LOI while you go scramble to fill it with investors. I don't want to tie up a deal under LOI where you go and say, okay, now who should I go for? A bank after this? And then now I've got to send you five SBA lenders. I would rather, if I've got, if I'm talking to two buyers, if you can make it clear that you've got the commitment of the funds. So you, you can tell me exactly where the source of down payment is. You can tell me the two bankers that you've already have a relationship with, and I know they're high volume SBA preferred lenders that are reliably able to close deals. So you've got kind of them, them behind you. You've got your down payment secured and you kind of, and then sign the stinking NDA. You know, that's another thing. It's just the little things of you start getting strikes against you as a buyer. If, like, we have our NDA just living on our website and it's one of the lightest weight, I think, easy to agree to things. And we have thousands of people sign it every year. But then sometimes a buyer gets it and they're like, oh, whoa, whoa, I can't sign it on your website. Can you send me an editable word document of that NDA? And then I'm going to send it to my council and then they want to go into this, get a high powered lawyer to redline the crap out of my NDA. Then I'm thinking as the broker, like, I may send it to you, but I'm already thinking this is gonna be a nightmare. You know, like every step of the way this is gonna be overkill with the lawyers and that sort of thing. And so just. And I know if my buddy Eric, SMB attorney, is listening to this, he's gonna say, don't listen to Clint. Read every NDA. And he's right. Like, you do need to read them. But to be savvy enough to know when you've got kind of just a normal NDA versus a crazy one, and if it looks normal ish, you need to have the stroke. I gotta feel like I'm talking to the decision maker. Can you sign this will? Or is every little thing you do gonna be decision by committee with a lawyer looking over a shoulder? And so I'm expecting you to bring lawyers in to review certain points of it. But if you can't get past an NDA, you know, it's getting to be strike. Yeah, that's.

[34:47] Host: This is great. This is really helpful, Clint. Hey, on the, on the psychology of Sellers, you know, one of the things that you hear a lot about in Search youh Land is, is like a lot of sellers don't even recognize that their business can be sold. They. And that's where, of course, where some of the opportunity really lies. It's like, you know, I as a searcher can say, no, your business has value and I'm willing to pay you a million or $2 million for it. And it's like they thought they weren't going to get anything for it. That said, do you find that to be true and maybe. Let me open up this question a little bit. What do you find is the sophistication or the awareness of retiring baby boomers about a younger generation of searchers who are eager to buy these businesses? Do they know that we're out here, like, looking for their business?

Guest: Yeah, they do. Most business owners that have a good business, especially the visible good businesses, they get hit up all the Time by searchers and by brokers and by random friends and other people. So everybody says, hey, when you want to sell, let me know. I want to buy it. And so they're getting hit up a lot. And they usually think, so your case, where I didn't even know it was valuable, I didn't know it was sellable. I've seen that every now and then. But for every time I see that, I see a hundred that are overconfident that it is valuable because they're hit up so much and they're overvaluing it. And so when you're a searcher out there, I think you're probably, I don't think I'm exaggerating. I think it really is probably 100 to one that you're going to find a hundred people that are overvaluating and overestimating how sexy their business is to the one that's like, well, I'm flattered that you would even want it. I didn't think it was worth anything. And if they are like that, they probably do have a sucky business that isn't worth anything. But, you know, every now and then you do have one that's like a really good business and they just didn't know its value. But that's exceedingly rare.

[36:58] Host: Good. That's really good to know because I would have thought it was a lot more than that. Clint, we've barely even started. We have so many things to talk about. Okay, I want to. You did these. You're great on Twitter. We'll give people your Twitter handle and I'll link to it, of course, in the show notes. You've had a few of my favorite threads in this whole space. And so two of them I want to touch on are. One was about identifying a great deal. So obviously who doesn't want to know what to look for in a great deal? And I'll link to this in the show notes because it's too long to go over everything here. But you give, I don't know, 15 or 20 things that people should. Should use as their criteria when, when gauging whether or not a small business is a good deal. But I do want to dive into a couple of these, some of which are just not the ones you always hear about. One is the ebitda or the SDE between 2, 2 and $800,000. You say 2, 8 between you say adjusted earnings or SDE or EBITDA between 2 and 800 grand is, I think, the sweet spot for maximizing ROI on both your Money and time. And you're, you're talking now to kind of a searcher audience. So just elaborate on that for me. That thought.

Guest: So I, I'm going to just speak in broad brush strokes with a caveat of varies wildly by industry and individual company. But once you're at a million in earnings, you are in a tremendous increase of competition. There are institutions and searchers and private equity and family offices that all draw their line at a million in ebitda. And they have a ton of money and they're well capitalized, they're aggressive. And once I start seeing a million in earnings, my mind as a broker starts thinking this is going to go for a five or more multiple turn and then there's going to be a lot of aggressive, well capitalized buyers wanting this deal. But there's this, I've done many that are making 700 that are probably going to be at a million in the next few years that you can have them now for a 3x or 4x and without as much competition. And when you just do the back of the napkin Math, you're under the 5 million enterprise value threshold where you can do an SBA loan. And so it's almost. I describe that as another thread, I think I did. I described it as a level up approach where you can kind of change leagues. And I view the under $5 million deal as kind of like the premium Main Street Little League or minor league play. And then when you get up to above 5 million you're kind of in that institutional and strategic space where multiples generally start at 5 and 4 or 5 and go up.

[40:08] Host: And

Guest: I think I see searchers making the mistake of holding out for that million EBITDA and taking a couple years of searching when they're competing and they don't even want to pay the multiple that someone else is going to pay when you could have just bought the one doing 700 for a lower multiple and giddy up, go to work and get it there. And so I think that that 2 to 800k there's a sweet spot of they are selling in that 2-4x range in many industries. And that is in my opinion one of the last great asset classes of the United States that is not at bubble prices. And there's trillions of enterprise value in that under 5 million range. Under a million EBITDA earnings that I think, hey, just consider it as a searcher. We do see over a million EBITDA and sometimes you can find good deals. But when you think about the marketplace you, it's a pyramid structure where the base of the pyramid is very, very wide. And those are the unsellable owner, operator, sole proprietorships that I'm just going to go from memory, but you got maybe 20, 30 million registered businesses in the United States and most of the.

Host: Clint, Clint, before you say, because you, you, you shared with this, with this, with me on our pre call, I want to set this up before you give the pyramid because you also gave this to me in answer to my question to you on the call. Like, you know, as, as you first get into small business acquisition, you read like, oh, the silver tsunami. 10,000 baby boomers retiring a day. And you know, this, this massive historic transfer of wealth. And it just makes it seem like it's going to be, you know, apples in a barrel. It's just going to be so easy to go out there and find all these great businesses to buy because there's so many of them for sale. And yet, you know, you start search, you become a searcher and you find that, you know, you learn that in fact, finding a deal takes time and is difficult. It's not impossible. You can probably do it in 12 months. Ish, give or take. But it ain't, it definitely ain't shooting apples in a barrel. Is that the expression, Apples in a barrel. Anyway, and so I, and I put this to you. I said, why, why, why is there this disconnect if in fact, if there's so many retiring baby boome every day, you know, with it. And they all own small businesses, not they all, but that's where the vast majority of small businesses ownership is. Why is it therefore so hard for us searchers to find good deals? And then you answered with go ahead.

[42:53] Guest: Right. And so I had to learn this the hard way. I thought, studying the demographics and how many businesses are owned by baby boomers. I was like, there's not going to be enough buyers. You know, it's going to be this tsunami of sellers. And that's kind of why I put buyers in the name of my company and Texas business buyers was, I was like, I'm going to kiss the butt of all the buyers because all these other brokers are trying to get sellers. But I'm like, man, if you have the buyers in this tsunami of sellers, then you're going to be better positioned. And then you get into it a few years and it seems like every year that never materializes and there always seems to be 100 buyers for every seller. And it just took it dawning on me that it's because of my criteria and my minimums and being picky, like I said earlier is that we're only doing kind of the larger size deals is the tsunami of sellers. Most of it's not even you don't even see the wave because it's under the surface of stuff that you would even consider Most people that own businesses own a job. They do not own a transferable asset with proven historical earnings that you can come into, pay yourself well, service debt and have cushion for growth and all that. Like once you get into that multiple six figures and into seven figures of earnings, you're climbing up that pyramid of deal size into rarer, rarer air each level you go to. And so if you just imagine most small businesses don't even do 100k of earnings and if your minimum is 500k, you know, 90% are just under you, you never want, you're not even going to look at them. And so when you have all the searchers focusing on above a certain level of earnings, that's where the least amount of firms are then you get that that silver wave never shows up because it's all underneath the size criteria of everyone. And so that's why I think you could use that to your advantage by reaching down a little bit. The further you look down, the more deals there are. And I think that the master skill right now if you're just an individual or a small institution that wants to play in this space learning how to bolt them together and roll, you know, do the miniature roll ups and play underneath the radar screen of the private equity that's got the million threshold. You're going to be able to get lots more deal flow and create a, you know, more value for yourself and or your investors.

[45:39] Host: One of the other criteria in your, in your thread about identifying a great deal is that is you, the searcher, you having something in your background or experience that the company will benefit from. And I want you to elaborate that. But on that. But I also want to you elaborate on that in light of the fact that a few minutes ago you said that sometimes you think sellers over index on this, that sellers like really want to see somebody who know is from their industry by their business and you actually think that they it's not as it might. But I assume what you were saying is it's not as important maybe as sellers think. So I assume there's kind of, there's, there's some sort of sweet spot here. So go ahead please.

Guest: Yeah, so the stereotypical baby boomer they identify around their industry. So they were raised in a generation that says if they did. Like, my family is nurserymen, so we do plants. And, and that's kind of who. That's who they are. My mom and uncles, like, that's what they are. And that makes them over index on. They think that the buyer needs to be someone that knows plants because they've wrapped their identity around I know plants and I know this industry. I am a millennial. I'm an old end of the millennial thing. And I'm, I've switched careers three or four times and don't bat an eye about it. And I don't associate who I am with what I do. I'm Clint and this is what I'm all about. And I'm about my kids and my dog and my hobbies and this or that. Oh, and by the way, I own a business that does this or that is how I think, but it's not who I am. Right. So a business is an asset to me and I love it and I care about it, but it's not who I am. Then it's a different mindset. And so if you can just realize that if you're in those different generations, if you're a millennial trying to buy from a boomer, you have to find some common ground and respect that. They identify more often than not with what they do. And they're going to favor buyers that seem more like them that, oh, I want to, I am imagining a nurseryman to come up and take over the nursery. And you came out of your cpa. What do you know about plants, you know, or whatever. And so you have to get, get over that hurdle. Brokers can certainly help you do that because we can explain again, all the misconceptions they don't understand is most buyers are learning a new industry. It's pretty rare that you have that perfect match, but it's just something to be aware of. That's the mindset of sellers of that older generation. But if they're in the Gen X or millennial, they're much more. They hold their business with more of an open hand and they're more open minded because they've probably jumped careers a few times and they know anyone can learn this thing. And if you've got good business chops and you're responsible and you can learn the technical stuff and we have technical people on staff that can help you and you're good to go.

[48:57] Host: That's such a good insight about the difference in culture between the generations. Well, Clint. But now tell me about your. At the same time, you did say that good criteria in a deal would be something that it's the puzzle piece B to your puzzle piece A. So, yeah, so elaborate on.

Guest: I wasn't really meaning that in the sales pitch to owner. I'm just talking about you internally. When you're looking at a deal, if you can find a deal that pencils out well, so it's a reasonable multiple, good historical earnings, solid business. But they just don't know how to do the thing that you know how to do, then that's where your gold mine is. And so for me, I'm good on digital and on marketing and social media. And when I see that company that is on, they have a Facebook page, no Twitter, no Instagram, their Facebook doesn't even have their logo on it. And they've posted a couple times, but they're still making a half million a year. And you ask them, hey, what do you do with social? And they're like, well, it just seems like a big waste of time to me. I'm not. Our phones are always ringing. We get all our stuff, word of mouth, and we haven't felt the need for it. And so I don't have time and I don't want to waste money on it. I tried, I spent, you know, they did some ad spend thing with somebody and it fell flat. And so they wrote it off. But they don't have my experience in that. And they don't know the power of, well, if you get it right, you might be able to double this business, you know. And so that, that is just kind of a self awareness thing of you as the buyer. I think a big mistake people make is they view buying a business like you're buying a house or you're buying a thing and you've got to realize you're buying like you're betting on yourself more than anything else. This business, once you become the owner, the operator, it's on you. Now, whatever the historical P. Ls that you're basing your evaluation off of, they're gone. They're in the rearview mirror. And the only way you make money is you get out. You get in there on the playing field and you go play and you go win and don't come to me if you don't make it because of the past or whatever. You're betting on yourself. And you have to realize that. And so I look for those things where I can just add instant value for the things I'm strong at. But I Also know what I'm not good at. And I want a business that's strong in those areas already where I don't bring value and I want one that's weak where I do. And to me that's where you can kind of have an instant equity kind of situation or instant win is just kind of filling that missing puzzle piece.

[52:12] Host: One of the other criteria was not having an over reliance on the seller owner. And in fact you devote. And then so in, in listing that criteria, you linked to your other whole thread about how to suss out if a business is just too reliant on the seller owner. And I want to ask just about that conceptual and I'll link to that thread and people should go read it because there's all these awesome. Yeah, all these awesome kind of like little tips and tricks to figure it. To figure out. To figure this out. Out this question. Because the seller and the broker representing the seller are, are very likely trying. Gonna try to obfuscate how involved the seller is, particularly if the seller is heavily involved in the business. Right? Because that's a, that's a negative, a strike against the business. I will say, like it does seem that is there, is there any world in which a business is attractive because the seller is so involved and maybe that, that presents the opportunity.

Guest: I think as long as it's not misrepresented and as long as it's priced right, then you can deal with it either way. Like it's not a, you know, whether the owner's working two or three hours a week or 70 hours a week, as long as I know it, I can plan accordingly the deal. I just sent down my newsletter last week. This screen company in Florida, the broker representing it said that the owner is only working two to three hours a week and he's a musician. And we walked through, okay, so he doesn't do. So who's making the sales? And he had a salesman that makes the sales. And I'm like, all right, who's making the installs? Because it's a simple business. He's selling screen doors and windows that go on houses in Florida, like hurricane screens and stuff. And it's a relatively simple sale, five to seven grand each deal. And yeah, you go, you sell it, you install it and you're done. And he's got a team, team members that do all that. And he feels guilty if he's not going to the office at least once a week and showing up and, and making busy like he's got something to do there. But, but You've got to just understand what are the roles and who's serving them. And sometimes if you have an overworking owner that is, that's working 70 hours a week, that can be to your advantage, because there's something that they're doing that is keeping the lid on the growth because they haven't learned how to delegate. They haven't learned. A lot of times if somebody's working 70 hours a week, it's because they're just stubborn and they're just refusing to hire someone to do the 50 hours of that that anyone, literally any idiot can do. And they're just being perfectionist or stubborn, and it's preventing it from scaling because that doesn't scale. The owner trying to just do everything and be this. The hub and spoke structure where every question and answer flows through them and no one's empowered to make a decision and the owner's overworked. As long as you're aware of that, and as long as it's not presented inaccurately or overpriced, then sometimes that's the very thing that you can get into and fix that, start empowering people and delegating and hiring better, then that kind of takes the lid off the growth and lets you accelerate that business. And I hear the cynicism from buyers always thinking like, oh, yeah, the owner is doing way more than they're letting on, and we just don't know it. But I've seen the opposite sometimes, too. So you just never know, like, read that thread, because I kind of go into those things. But look for the vacation time of the owner, really get a detailed schedule of what they do and suss out, you know, if. If they're. They know where their time's going or not. And. But like, I had a Korean owner of a business, and in Korea, it's a very. I learned this is like, they're the honor of their culture says, if you're a man and you're not working, like, long hours, then you are a loser. Like, men work hard. Men work long hours. And so when I asked this Korean owner, like, how much do you work? He would tell me, oh, I work 70 hours a week, you know, And I would go by his business. Every time I went by there, he's never there. And I'm like, where is this guy? Like, he's 70 hours a week. He's supposed to be here. And so I, I had budgeted in the cbr, in the presentation, I'm like, okay, you're going to need another 50 grand to just hire an assistant to do what half of this guy does because he's working the hours of two humans. But then it wasn't playing out. And then finally I just pinned him down and I was like, Mr. Kim, why are you never there if you're working 70 hours a week? You know? And he fessed up and he said, well, in my culture, it's what you're supposed to say when people ask you that. And I'm like, dude, that makes your business worse. Like it makes you less valuable. And it turns out he's only there 10 hours a week or so, and he was just trying to save face. And so, like, it can work both ways, but the important thing is you gotta just get to know that owner and get to know the truth and figure out what they're actually doing and look at a common sense approach. Are all the things that need to be done here accounted for and what is the owner accounting for? And can I do that or am I going to have to hire someone to do that? Build that into your financial model. Pencil it out and see how it looks.

[57:51] Host: So interesting. I love that story. Now, next question for you. Clint is going to push up against some obvious bias for you, and we've touched on it a little bit already, but a lot of searchers go try to do some proprietary outreach. Certainly when they're looking for bigger businesses, they almost exclusively do proprietary outreach or they expect their deal to come via proprietary outreach. I assume that's how you guys find business. I mean, you're essentially doing the same thing as proprietary outreach. I mean, you're outreach.

Guest: You're.

Host: You're building lists and emailing potential sellers and owners to say, hey, let's have a conversation about the value of your business. And maybe Texas business buyers is the right place for you anyway. What do you think about that approach to finding. Finding a business? If I'm a searcher trying to scare up my own deals, so they come

Guest: to us more often than not. So I don't have a lot of direct experience with this. We don't do cold outreach much to sellers, so we have referrals from past deals and also from professional people. So CPAs, lawyers, commercial real estate agents, wealth managers, we're kind of like the go to from a bunch of professionals that refer to our firm and then we rank well on search engines. So when people in Texas are, are saying, sell my business in Texas, stuff like that, then they find our website and we get most of our stuff as either a referral or an organic search SEO thing or social media inquiry. But that said, I've observed and talked to enough searchers that I do have a little bit of advice on this. And I think there is an overemphasis on email, on just blasting out to 5,000 people. I think their hit rate's gonna be crappy. I think the very few that will respond are going to be the bottom of the barrel or turning leaf. Capital looks so appealing to them that they're spoken crack about their value and they're just gonna go and be like, oh, you know what, everything's for sale. If you got 10 million, we can talk. But they don't have a business that's worth that. And if I were you, and I'm going to reach out cold outreach and I don't have the deal flow that our firm enjoys from our position in the marketplace, I would create a shorter list. I would spend more time. Was it Abraham Lincoln that said I'd sharpen my axe for hours before I try to chop down the tree? So I would sharpen your axe better and get a shorter list. And then I would do a 10 reach out to that list instead of 10 times the quantity with 1 reach out or just only email. And I've heard some tricks over the years. And so if it's me, I would do an email. I would do LinkedIn message, Twitter, Facebook, I would do DMs to the owners, I would try to call, I would text, I would try to get cell phones. And then I would, if there was ones I really liked, I would even do a FedEx envelope. This is like an ultimate hack that I've heard of when you're looking at larger deals is if you want to 100% get to a CEO doing a FedEx overnight something. And yeah, it's expensive, but you're trying to get a big deal, you know, you're trying to get a CEO's attention at a short list of targets. If you sent them a handwritten note and a FedEx envelope and you spent 40 bucks on it or something like that, like the gatekeepers deliver those to the people, to the decision maker, you know. And so for me, I would, Instead of blasting 5,000 people, you know, a few template emails with a robot, you know, or whatever people are doing, I would, I would make a list of 50 to 100 and I would hit them 100, I would hit them 10 times in personalized ways through every method of communication possible. And I think that that's going to yield you better results on your search than the massive email campaign that springs predominate. And then I would also say get in front of people in person with old fashioned networking. And you want to get to basically anybody that's regularly contacting those types of business owners. So that's lawyers, CPAs, wealth managers, the same people that refer stuff to us. Go educate them because now you're going to be on the top of their minds and they might have 30 relationships in your target area. And then one of them might have confided in them recently that they want to sell. And if they warm referral you in, your odds of success are 10 times better than if you reached out to them yourself.

[1:02:45] Host: We're wrapping up here, Clint, but tell me about your probably a Good deal newsletter and how it's gone since you've tried to monetize it.

Guest: Yeah, it's going great. Probably a good deal.com is where you can check it out. It's just a review newsletter. It's integrated with my Twitter account. So if you go to my Twitter clintfiore, it's right on the top there. But basically when I asked searchers, I asked my Twitter audience, hey, would y' all pay 20 bucks a month if I just sent you a bunch of deals before they hit the market from brokers around the country and other off market stuff just to kind of help you with deal flow? And then I would help kind of serve as quality control on that to make sure that it's stuff that sounds like it's probably good. You know, that's the shtick. The universal response I got when I polled the audience was we would rather pay more to have it more of an exclusive group and then have it be 20 bucks a month, charge us a couple hundred a month, but make it a small list and elite thing. And I was like, done deal, let's go. And so what I did was I created a list that's got 250 hard cap, it's $100 a month right now. There's only about 60 members on it. So we just launched it I guess about a month ago as we turned on the pay gate. But I'm using my network of brokers so I'm in best practices groups with brokers around the country. And that golden window I talked to you about earlier, between listing a good engagement and bringing it to market, there's like this three week window where if you're a buyer, if you can get in right then you're going to be so much higher odds of success of getting the deal versus waiting till you happen to Refresh biz buy or whatever and hit it once it's already been on the market for a few weeks and there's 50 other people ahead of you competing for that deal. And so would you pay a little bit of money if you're a serious searcher to get first access to good deals? And so what I'm doing is it's like our firm and then firms all around the country if we get the bigger, better deals, so the ones that are like half a million and up, those ones that as long as I can look at it and say this is a reasonable expectation on the valuation, this is from a trusted source, this looks like it's probably a good deal. And no one knows about this yet. This isn't on any marketplace. Would you want to know about that? If you're in that group that says heck yeah, I want to know about that. You just go to probably a good deal, click the members tab and you sign up. It's 100 bucks a month. It's no obligation, cancel any time. But the goal is to put two to five deals every month down that list. Sometimes it'll be off market, unrepresented stuff and the majority of time it's just going to be from a quality brokerage shop like Texas Business Buyers or, or our equivalent all over the country in that window of pre market. And so I'm charging for it because I do serve a function there as quality control. And I am going to make sure that we don't send overpriced stuff or anything that I think is not probably a good deal. And then I'm also because of how many members sign up, I've hired the first hire and we're going to start conducting our own in house search like the methods I'm talking about to try to find off market stuff that we can send down the list as exclusives as well. So if we get enough members here, the thought is if we can fund this national evergreen search for quality deals and we can help a lot of searchers find a good deal without them having to just dredge the marketplace, just have a pipeline direct to the quality people. So that's what the project's all about. It's relatively new, but if you're interested in participating or learning about it, just check it out. Probably a good deal dot com.

[1:06:48] Host: Can you give me an example of a deal or two that you've blasted to the list?

Guest: Yeah, yeah, yeah, we just did one. It was a precision farming equipment. They help small farmers increase the yield of their prop of their crops with like GPS and micro like precision guidance systems for tractors and things like that. Really cool niche business without a lot of competition. Doing a little over a million in ebitda. That the Lauren Drummond from one of my broker friends out of Biloxi, Mississippi, she had the deal and then she's got another one similar to that coming down her pipeline. So if somebody wants to do a roll up strategy, that's a good opportunity. But she was kind of, she had the listing but she was waiting till after the IBBA conference in May to put it out there on the market. But she knew a ton about it because she's been working on this partners for years to list and so she knows this thing down cold. And I'm like, hey, I know it's a month before you're going to take it to market, but can I just show it to these people so they can call you if they're a fit here? Can we see? And she got six really quality people to sign NDAs and she's got two that look like they could be really good suitors just from that list. And so it was a win for her to kind of like introduce herself to that serious buyer group and not have to wade through hundreds of tire kickers and stuff. And you know, even before she's got her presentations ready, she's got a couple good candidates on the hook.

Host: That's pretty cool, Clint. It's a great concept and obviously in the searcher space deal flow and exclusive deal flow is the name of the game. So it'll be cool to see how it unfolds over the next year. Well, we are a half an hour over. Thanks for the extra time, Clint. There's more we could have done, as always, but I gotta call it. So give us your Twitter handle one more time and is that the best place for people to get in touch with you?

[1:09:05] Guest: Yeah, yeah. ECTXASBusinessBuyers.com is the website but my Twitter handle is Clint Fiore C L I N T F as in Foxtrot I O R E and happy to see you on there in the Twitter jungle. Just having fun and just trying to educate. But do it in a light hearted fun, just let's not take ourselves all too seriously kind of way. And that seems to be we're all having a lot of fun on there.

Host: Well I think you did just perfectly describe how you come off. Lots of education but also not heavy lighthearted fun. So you highly recommended follow Clint Fiore sir, thank you for. Thank you for all the time today. Really appreciate it.

Guest: Thank you for having me. Well, Sam,