E136: Roman Beylin Discusses DueDilio And The Importance Of Due Diligence In M&A

[00:00:00] Ronald Skelton: And welcome to the How2Exit Podcast. Today I'm here with Roman Beylin. He is the founder and CEO of DueDilio. Thank you for being on the show today, Roman. 

[00:00:07] Roman Beylin: Thanks for having me. Awesome to be here. 

[00:00:09] Ronald Skelton: I was just telling somebody, we were at a event this morning and I told him who I was gonna interview is, and he is like, you haven't interviewed him yet? 

[00:00:15] Like yeah, I know. So, sorry, I haven't had you on the show sooner. You've been in the, in those space. You got some cool newsletters, you got DueDilio, and when you popped up on the screen, I was like, I had to go back and like, is this a re-interview? Like, did I forget I've interviewed the guy? Like, wow, how did I miss that in the first round? Because I lined up the people I really wanted to get in front of in the first round. And we did a bunch of, Walker Deibel and a bunch of the, the guys out there who got books out and the guy's putting content out.

[00:00:38] And I know I've, we've actually, featured some of your content and stuff and, as the people to follow in our, the Hub, newsletter. So you've been featured a couple times. Like, Hey, you should probably follow this guy. He's got great content. I know you've been in that realm, but I was like, I can't believe I haven't interviewed yet. So apologies. And here we are. 

[00:00:52] Roman Beylin: All good. No, it's great to be here. Better late than never. And I know there's a lot, there's a long line of people before me, so I get it. I get it. 

[00:00:59] Ronald Skelton: It wasn't intentional. It was like, it's like you slip through the cracks somehow. The source of great knowledge that, isn't necessarily, I guess it's a good thing.

[00:01:06] 'Cause some of the guys that are constantly in your face, the content's not as good. Anyway, they're more trying to sell something they are than they are producing that great stuff, so. Let's start off with your origin story, man. How did you get involved in mergers and acquisitions? My running joke, if you listen to the show is, you were born and now you ended up on a, show about mergers and acquisitions. Can you fill out the gap in between? 

[00:01:26] Roman Beylin: Yeah. I'd say strictly by accident. I started my career, traditional finance. I was an investment analyst, of 10 years and investment banking for one year.

[00:01:36] And then, then I started, my own business, selling alternative data to hedge funds and ran that business for a couple of years. Sold it. And, I think that's the thing that really got me interested in small business m and a, because, kind of in the investment world, you're certainly exposed to the bigger mergers, right? When Pfizer buys some company or Coca-Cola does a, billion dollar merger. But I didn't really have exposure to like the smaller deals and I think having my own, little exit and it was, nothing life changing. Anything like that, but just having that small exit got me interested in, small business m and a. 

[00:02:18] And, the best way to learn about something is, A, go do it yourself, B, write about it. So that's what I did. After I sold my business, I was kind of trying to figure out, well, what do I wanna do next? And, really wanted to dive into it and learn more about the space. And so, I bought like a personal, small personal branding business. Ran it for a little bit, sold it, and started the newsletter, The Business Inquirer. I've been doing it for three years now. If you go back to like the first issue, it's gonna look nothing like today.

[00:02:54] But, it's a great creative outlet. It's a great chance to view a lot of deals and kind of, interact with a lot of people. So, started doing that. And through the newsletter, I had people ping me, asking me, Hey, do you know anyone that can help me analyze this deal or do tech due diligence on software acquisition? And, that's kind of where the light bulb went off. And I thought, well, I'm getting enough of these, pings from folks. Why isn't there an easy resource and easy marketplace for this? And that's where the idea for DueDilio came from. So, yeah. It's kind of a, an accidental journey.

[00:03:32] Ronald Skelton: I get it. That's kind of how I ended up. Like the show has sponsors, but the way I monetize it, and just in full disclosure, the way I monetize the show is like, people reach out to me all the time and go, Hey, do you know a guy? So, I actually have, jokingly I have a database called Know A Guy Database.

[00:03:45] It's kind of a CRM where I match, like people who I know that I trust would give great service. Maybe I've interviewed him, maybe I've worked with them in the past or something like that. Or I've worked with somebody that worked with them, and I'm fairly confident, they got this down. And then, the people who need stuff and I match 'em up on there. Most of the money's done from a referral, so it's, I don't do like a lead generation where they pay me for the lead. So it's not like a, what do they call it, those guys that bug me. Angie's list or those type of things. I own a pest control company still in Oklahoma, where I still have interest in one and they constantly bug me, call me. Try to sell me leads.

[00:04:23] So it sounds like you've got a bigger network. So tell us what DueDilio is. Like kind of the, give us the definition of what it is, and what it's become. 

[00:04:32] Roman Beylin: Yeah. So, super high level, it's a marketplace. It's a marketplace or a network however you wanna call it. Of highly vetted due diligence service providers. 

[00:04:43] So includes m and a attorneys, financial due diligence, technology due diligence, commercial operations, whatever you need. We've built this network over the last couple years. I think over 200. Maybe even 250 service providers at this point. And, the way the process works is, a business buyer would come to us, wants to have an LOI in place. So once they submited an LOI, the LOI is accepted, they're on to the due diligence phase. They would come to us, tell us about their transaction, what kind of business they're buying, tell us about their needs, their budget, things like that.

[00:05:20] If they don't know their needs or budget, they can just reach out and we'll help them figure it out as well. A lot of first time business buyers just don't have, kind of that experience or, that, understanding of exactly what's available and what they need. So, once we, finalize their project scope, for due diligence, we'll match their project against our database of service providers. And then collect proposals for their project. So, within about two business days, we'll collect all those proposals, share them with the client, and the client will, obviously answer any questions. But then the client will tell us who they would like us to connect them with. So typical, kind of marketplace, business model.

[00:06:01] Our services are free to use for clients. We'll get paid a referral fee if the client ends up hiring someone through us. Not a pay to play system. So the service providers in our network, they're the best of what they do. So they don't have to pay us a monthly fee. It's nothing like that. They get paid. We get paid. That's it. 

[00:06:23] Ronald Skelton: So that's cool. Is it primarily, you named it DueDilio, is it, primarily around the different elements of due diligence? 

[00:06:30] Roman Beylin: Primarily around due diligence, exactly. That's where I see the biggest need. And I know due diligence is a pretty, it's a pretty broad term. Certainly we connect people with m and a attorneys that are not necessarily due diligence. They'll help 'em draft an LOI, negotiate, closing, things like that. But where we really shine is due diligence. Yeah. 

[00:06:53] Ronald Skelton: So one of the newsletters I have was the Deeper and all it is, it's this show plus a deep dive.

[00:06:57] So it's this show written in story formats for the people who don't have a chance to sit here and listen to an hour. I converted into a story the best I can. My article writers and some tools I use. They listen to it and then, write a story about it. It used to be just kind of like a synopsis or a summary, but now it's like in story format. We're trying that out. And then there's a deep dive, and I think a lot of people misunderstand how broad due diligence truly is. My deep dives are typically, 2000 to 3000 words. So they're pretty in depth. It took a three part series of due diligence. Three different day or three different, it's a weekly newsletter, so three different weeks.

[00:07:34] We covered part one, part two, and part three. And a lot of people don't realize, like, when I started looking at it, there were 10 elements of it. It's not just the finances. It's not just the legal. There's human resource stuff. There's all kinds of stuff that needs to be looked at depending on the size of the deal.

[00:07:48] Roman Beylin: Yeah, I'm trying to think, I think on our website, I think we have over 25 different options. For what someone can select for different types of due diligence. Even something like a background check, that's part of due diligence. Yeah. 

[00:08:01] Ronald Skelton: But, so, somebody's out there, they're working on a deal, they get stuck or they like, okay, I need a team for this. This isn't a, one of these deals where they like, I got low money down. The owner's gonna carry all this. I'm putting personal guarantees. I've raised money, I've committed money to investors.

[00:08:16] I really gotta do my homework and make sure, everybody's covered. Let's build a team around this. You actually have the resources to say, okay, this is the team we should build. Do you give anybody any insights into like, how to select team members? Like what are, what questions they should, I know you do your pre-vetting. But there's questions they should ask, right? To make sure it's a right fit for them.

[00:08:36] Roman Beylin: Yeah. So first of all, we have a lot of content on our website, in our knowledge center. I think one of the articles is just, ton of questions you should be asking.

[00:08:43] And we always recommend speaking to at least two service providers before making a final hiring decision, because, there's a lot of service providers that look good on paper, but maybe you don't have a good rapport. Maybe the communication style is off. And it doesn't mean it's a bad thing, right? Just like certain deals are right for certain people and they're not gonna be right for others. And that's the same thing when you hire someone. They might have the right skillset, but listen, you wanna make sure they're on the same page as you. So that's why, for a typical project we would present maybe, 5 to 10 proposals.

[00:09:21] So if you need a quality of earnings, you'll get five proposals. If you need a m and a attorney, you'll get five. And I always recommend listen, talk to two or three people, out of those. Don't just pick someone. And we certainly help, clients kind of, fed that out. 

[00:09:38] Ronald Skelton: I was laughing when you said they, some people interview.

[00:09:41] Well, that used to be my saying when I, I was in the corporate world when I ran big divisions of companies. I was usually like senior director of operations type of roles. Or senior director of IT type of roles. Sometimes, I've had as many as like almost 200 employees. But when I go to HR and they're like, you only had him here for two weeks, why did you fire him already? It got to where I just, 'cause all I would've respond, I was like, well, he interviewed well. Okay, well what does that mean? Like he couldn't live up to his interview. And you can, it's better to get rid of somebody pretty quickly when you know they're not gonna work out, right?

[00:10:07] Same way with this. I had a guy, who called and he said, Hey, I wish I'd have went to you or somebody else and got a referral for an attorney. The attorney I have is not working out. I go, come tell him he's done. Well, I retained him. I paid him this, and I'm like, okay, tell him he is done. He'll have to return any time. Any other retainer he hasn't, utilized his hours for. Well, I'm worried he won't give the money back. I probably should continue. Like, no. If he's not working out, he is gonna make a mess out of this. Please tell him he is done.

[00:10:33] You may call him and tell him he is done. So, a lot of people have that, that fear of, like pulling the plug on somebody that's not working. 

[00:10:40] Roman Beylin: Yeah. And I think, when I started my entrepreneurial journey, I certainly had that. Yeah, I kept onto people too long. Kept contractors too long. And it takes some time, some at bats to kind of figure out, okay, hire quickly, but also, move on. 

[00:10:56] Ronald Skelton: I'm way over budget on the studio I'm in right now. 'Cause I didn't let the guy go. Anyway, he kept going over budget and over time, but he had legitimate reasons and like, the next thing I know we're $3,000 over budget on a project that's only, supposed to be 10k or 11k.

[00:11:10] It's like, okay, we're a third over budget, brother. It's time to, pull the plug here. That's the same thing with a lot of these guys too. If you're out there and you're toiling about firing somebody, they know they're skating by. Most people just know, they're just, they're showing up every day to collect a check. They know their numbers or their days are numbered. They know they're on borrowed time. 

[00:11:26] Roman Beylin: Yeah. It's just whether they care or not. That's the difference. Like it's one thing knowing, but it's another thing too. 

[00:11:32] Ronald Skelton: Well, that's the thing with mediocre. Especially professional services contractors, attorneys and stuff like that. They know they're mediocre too.

[00:11:39] They've been fired before, most likely. You're not the first person to do this. So they're gonna ride that check as far as they can. You're not doing them any favors and you're not doing yourself any favors. If everybody fired 'em, the first indication that they were not doing their job or not doing a, their job well, they would either get better or find another profession.

[00:11:55] So how do you guys go about vetting like, do you have a process people go through if they want to be in your data? Like say you're, I have a lot of brokers and lawyers and stuff that listen to the show. If somebody's like, man, I wanna be in this database. How does that look? What's the process for getting vetted to be, to gain referrals?

[00:12:11] Roman Beylin: Yeah. We have a vetting process. Like everything, it's not perfect, but it's worked pretty well. And, first someone goes to our website, fills out an application. Then we kind of, we have this face-to-face interview where, I really understand their background. What type of projects they've worked on, where the skillset truly is, what type of clients, they have experience working with.

[00:12:33] Because, we have a lot of people applying who maybe work with startups. Well, working with startups is very different than working with, an individual who's buying a $2 million landscaping business and you have to communicate with a seller. That's a very different skillset. 

[00:12:47] Ronald Skelton: And he doesn't have a cap table and all the other stuff. Rattling off terms and phrases they don't even have, right? 

[00:12:52] Roman Beylin: Yeah. Yeah. So we kind of try to get a sense of their, their skillset and kind of, the right projects for them. Then we review past works. So if someone is applying for, technology due diligence, let me see what the deliverable looks like. If you're applying for a quality of earnings, let me see your past quality of earnings. 

[00:13:11] What does that look like? What does Excel data book look like? What does the PDF look like? We do that. Then we, we ask to speak to one or two past clients, whenever possible. Sometimes due to NDAs and just the nature of the work, it's just not possible. There's nothing we can do about that. Then we do a basic, online background check. Just to make sure there's no red flags. We've had, it's actually happened twice already. Quote, unquote, CPA applied to be in our network and then when we go take a look at their, the designation, well, it's been like revoked for some reason.

[00:13:48] And then we also have a one strike policy. So if there is a legitimate and, emphasis on legitimate, client complaint, from a forest service provider, we'll remove them from the network. And unfortunately, we've had to do that a couple of times. But, couple of times in two years and, 400 projects, not too bad. Not every system's perfect. I'd be lying here if I said, yeah, it's, bulletproof. But it's worked well so far. 

[00:14:17] Ronald Skelton: So what is the, what's the most frequent thing you guys get asked for? 

[00:14:22] Roman Beylin: Definitely financial due diligence. So anything related to someone looking for a proof of cash or just to verify the financials or a quality of earnings, that seems to be the biggest black hole for people.

[00:14:34] But it's also the area that it doesn't matter whether you're buying a SaaS or you're buying a landscaping business or an education company, you need financial due diligence of some kind. So that's what we see the most. Second, probably legal. So for m and a attorneys, I think there's a big gap. We get so many requests for, m and a attorneys who know, whatever you wanna call it, lower middle market, lower market, main street. A lot of different names for it, but they have experience, in that space and, charge appropriately.

[00:15:02] So I'd say those are the biggest two, background checks. We get a good amount of requests. Market research, so if someone's buying, main street business, landscaping company, uh, HVAC business. They wanna understand what's the competition, what's the TAM, what are different, competitor reviews, we have companies that do that. That's pretty popular. Yeah. 

[00:15:25] Ronald Skelton: Okay. So, what should be, what should people be, bringing in that they just all mostly miss, right? Like, you've seen enough deals go through there. Like, most people should actually have, financial due diligence, a lawyer and X, Y, Z and they just skip over on some of it. 

[00:15:42] Roman Beylin: Yeah. I mean, I think, to your point, legal and financial is table stakes. And then I think it depends on the individual and on the business. Because, I think it's a fair assumption to say that if you're buying, a software business, you probably have some software background.

[00:15:58] So, I think marketing is another, is another big one. Yeah, understanding, how the company is acquiring clients. What's the ad spend? What's the ROI? Because I think A, it's great due diligence. I think it'll, lead to some insights. And they'll also tell you if there's some, easy kind of quote, unquote easy wins there, right? Are there things that you can tweak easily, to get a higher kind of return on your ad spend? Because that's, ultimately, that's what drives most businesses. Can you put a dollar into the advertising machine and get a dollar 50 or, hopefully $4 back?

[00:16:35] Ronald Skelton: I think that's one of the biggest ones I see people are just missing out, is doing due diligence, is not collecting. What have they done in the past as far as marketing that works? What are the results? Who's doing that for 'em? And a lot of times they're outsourcing on, especially if they're doing online advertising. There's somebody else doing the AdSense and all the different, analytics and stuff they need to know to make that work. 

[00:16:56] And you did your financial due diligence and you did your legal due diligence and you get in there. Actually, I won't call his name on the show, but I actually have a person I know who we were on the phone two weeks ago and he's like, I bought this company. It was doing two and a half million dollars a year. I paid X dollars for it. And I have no idea how they get their clients. I'm like, what do you mean you don't have any idea to gets clients? And the owner's not responding to him anymore 'cause he bought the guy out. He has a business in that industry, but the stuff he's using in the other market, he's in another market, 120 miles away.

[00:17:28] And the stuff he's doing in that market doesn't seem to be working as well. He's like, what was he doing?

[00:17:32] Roman Beylin: That's the big worry is that you don't catch that. That it's all, it's all the seller kind of bringing in the clients. And once you remove that, well, your business goes to, zero. 

[00:17:44] Ronald Skelton: First thing I told him is go back through your finances and see who he's writing checks to and see if you can see, it looks like a marketing agency or a contractor of some sort. Because I was able to, dig around a little bit and see that there used to be some online ads in this space.

[00:17:57] And, before that, so he, he might've been online. It looks like he was online, but, I think the owner went on vacation. We'll be back in a few weeks, but he's gonna sweat it out until the guy gets back to calling him. It's not like it's dropping fast, but he's dropping, it's not growing the way he wants it to grow and it's not maintaining. So, he turned something off on accident and he didn't know he turned off. So what he did is what I think, I think he failed to stroke a check to somebody who needed to stroke a check to. 

[00:18:22] Roman Beylin: Yeah. I think something like this should be picked up also in like operations due diligence. Again, it's a broad term, but I think marketing's part of that. Functions figure out who does what. 

[00:18:32] Ronald Skelton: Another thing is like looking, a lot of people don't do that. I like taking a work chart and figure out, a generic work truck that like every business should have X, Y, and Z.

[00:18:39] So who's doing your sales? Who's doing your marketing? Who's doing the legal? Who's doing the finances? Who's doing the, the leadership, right? The CEO or general manager. And then looking at the payroll and figuring out if you can pair that up with your org chart. 'Cause somebody's doing those roles. I often find that the wife, especially small companies, a million dollars are left. The wife has a role there that they haven't told me about. So one of my favorite questions is, what does your wife do? And they're like, well, she's a, she owns this or she does that. Like, cool.

[00:19:04] What does she do for your company? Well, she comes in and does the books. Oh, can I talk to her? I'd like to see how many hours that takes. You didn't put that on. You didn't put that on the, the financials. But, you find out she's pulling her job. She's running her own business and she's pulling 20, 30 hours a week getting his finances straight.

[00:19:18] Roman Beylin: Yeah. Listen, I think that's why the work that, Elliot does. And a lot of, Q of E providers do. It's so important. 

[00:19:25] Ronald Skelton: So, what's next for DueDilio? Do you guys have, plans for expanding into other spaces? Or continuing to grow the space you're in? What's the.

[00:19:33] Roman Beylin: Yeah. I think we're still relatively young. So I launched DueDilio two years ago. I think the first year you kind of try to figure out, does anyone actually need the stuff? I think we're, figured out that people need it. Then you try to figure out, okay, well, how do I spread the word?

[00:19:49] How do I scale it? How do I automate it? I think that's kind of where we are. I think there's a lot of opportunity in the space. I think, I'm sure a lot of your guests, probably mentioned this, we're probably away like first or second inning of the game. I'm just seeing m and a activity, continue to pick up.

[00:20:07] Ronald Skelton: It's getting more popular and more popular. It's a little scary though. So, in the real estate world, I wish I came from when I used to warn everybody like, you gotta quit teaching advanced strategies to beginners. Because what happens is, I always used to say they're one senator, son or daughter away from passing a law not to allow it.

[00:20:25] So one of the beginner strategies that they let people would, get involved in was what was called wholesaling. And, problem is like a lot of these guys don't have money to get the deal done. They're finding deals, negotiating 'em, and trying to sell 'em to somebody else. And there's people doing that in this space. And you're one per, you hurt one senator, someone, senator's daughter, financially or emotionally or anything 'cause you didn't get the deal done. And all of a sudden there's a state law that says you can't do it without a license.

[00:20:50] So it's the same thing in this. I think the more people that get into it, I get constantly have people that show up to the business networking things I host and everything else. I'm like are there acquisition entrepreneurs? Great. So what have you owned? What have you built in the past? Well, I've been an employee all my life. That's my first one. I was like, cool. Are you a general manager? You have management experience? Nope. Never managed a soul in my life. I'm like, interesting. There's a reason why search, like, everybody's like, well there, there's search funders doing this straight outta college.

[00:21:17] Like, yeah, if you know how search funds really work. He like, what do you mean? I said, well, usually what's going on is they're funded, through other advisories press search funders and the search takes one to two, three years. And there's some training that goes along with it if you, I've interviewed a few of these guys who fund searches. They don't want the guy to buy a business in the first six months. Because he's not CEO ready. They wanna mentor them and grow them and train them and spend time with them and build leadership and build some tough skin from negotiating deals and, before they're ready to be that CEO.

[00:21:51] And, you don't get that. If you think you're gonna jump in this space and go from flipping burgers at McDonald's and buying a $2 million company and run it yourself. There's some skills here, right? Well, I'll just put a general operator in like, okay, you need to buy a bigger company because the one you're, I'm gonna buy a $300,000 a year business and have somebody else operate, don't play that way. 

[00:22:10] Roman Beylin: Yeah. And you have to know how to manage them too. You put in the operator well, now what? It's great to see, the education that's being introduced in this space. 

[00:22:19] I think everything from M B A programs are focusing on it. Walkers, Acquisition Lab, Cody's, conventional acquisitions and so on. I think there's, it's probably others. It's great to see the ecosystem grow. Yeah. 

[00:22:33] Ronald Skelton: Some of those actually prepare, like Walker's probably the best one to prepare you to be an operator. He's fairly thorough. Understanding your own skillset and stuff. A lot of these guys like, I've seen Carl Allen's, Roland Frasier, Jeremy Harbour, I've seen 'em all, and most of 'em kind of expect you're an operator.

[00:22:49] Ready to go and you just don't know how to do acquisitions and mergers. They don't give you the, I say that, Roland gives you so many videos. I bet the fundamentals are in there. Same way with, Jeremy. You get 60 or 80 videos before day one of class. So if you wanna sit there and watch hours and hours of videos, you could learn through visual learning and listen, but you won't have the hands-on experience that I think it's required.

[00:23:11] Let's go back into this like, What are the deal flow look like right now inside of, I mean, people coming to you, they're getting done, is it just as much as last year? 2023, looking like 2022? I know it's hard to tell 'cause your marketing's growing. So as you get better at marketing, it looks like there's more deals going on. 

[00:23:27] Roman Beylin: 100%. Yeah. Yeah. Yeah, I was looking at these numbers the other day. And so, I think we're, relative to last year, we're probably up maybe, 15, 20% in terms of the deal flow we're seeing. But certainly saw a dip, once interest rates started going up.

[00:23:46] We saw a little bit of a dip. I think there was a little hesitation. Still a little bit of price discovery, if you will, between buyers and sellers. To some extent I think that's still going on. But over the last like two months, I'd say deal flow is definitely picked up. I'm seeing more broken deals than last year. So even though volume is the same, but more, once you get into diligence, the deal falls apart for one reason or another. So that, that's definitely picked up. 

[00:24:20] Ronald Skelton: I know that the, all the people I've interviewed, I know that the private equity guys are being a lot more selective.

[00:24:26] They're being more interested in things that, I'll call the current economic status as uncertainty. I don't think anybody knows if it's almost over, or just getting started or whatever. But we're definitely in a state of financial uncertainty. That said, the big guys are looking at things that do well during uncertain times. So they're looking at everything from, anything that like the love passions, right? Health, pets, pet health, things that we're gonna do, whether the economy's good or bad, right? Veterinarian services, dental roll-ups, all those are hot. The current thing, other thing that's still hot is like, leading technology, like AI type of stuff still. Burning up. 

[00:25:07] Roman Beylin: Yeah, I think strategics, I think they're pretty active. Yeah. I don't deal with too many, of those, but just talking to others in the ecosystem strategics are pretty, pretty active in this space. 

[00:25:22] Ronald Skelton: Well, they have a higher tolerance, right? They don't need you to be a good operator.

[00:25:25] They don't need to hire a good operator. They just put your customer list and your product and your ip. Your intellectual property. The reason I think a lot of these deals are gonna bust is one, deals just have to be better now. Like the cost of money is a lot more expensive. A year and a half, two years ago, you could get into a deal and go, it's good enough. I can turn this around. I can do better than the last guy. And now with the money being so expensive and your debt coverage, being there, you have to really look at going, Hey, this thing's a really solid business.

[00:25:52] And it's not, it's not that I can't fix it, it's mine to screw up. 'Cause that's what you're looking for. He is like looking for something that, even if I run this 90% as good as the last guy, it covers the debt. It's not gonna be in trouble. I've seen the spreadsheets change. I've seen people that are doing deal analysis spreadsheets last year, the year before, and they didn't have a thing in there for down economy where they're like, okay, can you do the debt service at 60%? 60%, of your current, profit or revenue, can you still service debt? People are building in that stuff.

[00:26:23] And some of 'em tear it off after a few years. They'll do like 60% of their first year. Like 75% the second year. And they look like, they're like, okay, we're pretty safe by third, year three. But, they're building in things into their math models I'd never seen before. So tell me about, like just the process that, so we talked about somebody coming in as a advisor. If I'm coming in as I've got a deal, I think it's good. I just signed the LOI. I just fill out a form with you guys and tell you what I want. Do you guys give me just what I want?

[00:26:55] Or you go, Hey, by the way, you probably should look at these type of things. You guys look at the deal and.

[00:26:58] Roman Beylin: Yeah. I mean, we kind of try to, tailor our services to the client. A lot of clients even come to us before an LOI and they're just saying, Hey, I'm trying to build my deal team.

[00:27:10] How much should I budget for due diligence? Or, Hey, I'm buying an e-commerce business. What type of due diligence do I need? What's available? So we kind of help them figure that out. But typically the work really starts after they have submitted and accepted LOI. So they would go to the website and click a new project. They would tell us about their transaction. So tell us, Hey, it's a manufacturing business. $3 million revenue, so on. They would tell us about the type of services they need. So they'll say, Hey, I need an m and a attorney. I also need three background checks. I need someone to take a look at the, logistics, due diligence, marketing due diligence, so on.

[00:27:55] And then we'll ask some pretty specific questions. Which is one of the reasons that we suggest starting working with us after the LOI, because if someone wants a quality of earnings report, we'll ask 'em, okay, well, how many business accounts are there? Checking accounts. Does the business use cash or accrual accounting? Does the business use QuickBooks or Xero or, so we'll ask some pretty detailed questions depending on what they need. The reason we do this is because we have to provide enough information to the service providers for them to write an accurate proposal. Because with this process, it's garbage in, garbage out.

[00:28:33] Right? It's like calling a painter, Hey, I need a house painted. Okay, well how many rooms? How many windows? How's the square foot? Yeah. So we try to get, as much information as possible, to provide to the service providers for them to write an accurate proposal. Because that's the whole point here. Otherwise it doesn't, it doesn't help anyone. So the client will fill out that questionnaire, takes maybe five minutes.

[00:29:00] Click submit. We get it. We look it over. We'll email the client saying, Hey, we got the questionnaire. This is our understanding of the project and what you're looking for. Does this make sense? Do you agree with this? So just to make sure that what they fed in the questionnaire lines up with what we got. Probably 80% of the time it doesn't. So we try to kind of massage that a little bit. After the project is confirmed, we will match the parameters of the project against our database of service providers. We do that based on the type of project, and the budget because, we have independent professionals, we have boutique firms, we have mid-size firms.

[00:29:41] Obviously the costs are going to be different. Independent professionals typically are gonna be a little bit cheaper, mid-size firms, are gonna be more expensive. So depending on the budget and what's required, one service provider may be more appropriate than others. So we'll kind of match those up and we'll send, the project over to them so they can write a proposal. And a proposal's pretty simple. A proposal is just, one or two paragraphs. Background about them, relevant experience, proposed deliverable, timeline, and estimated fee. About two days goes by, we'll collect all those proposals, organize them and send them to the client.

[00:30:23] Typical project gets anywhere between five and 10 proposals. That's generally what we, aim for. And, the clients will look over the proposals. They'll ask us some questions. We try to be an impartial, party in this as a marketplace. But of course if they ask some specific questions, we're happy to answer that. And then the client will tell us who they would like to speak to. And, we'll make an introduction, email introduction to those service providers. So, everything, the whole process takes about two business days, so it's all very quick. Which is another reason why I recommend starting once you have an LOI in place, 'cause a lot of people kind of try to do this, month or two in advance.

[00:31:03] Yes. Before DueDilio you would have to research who are the service providers that do this. Call each one and get a price. Here well, and vet them too. Right? We've done all that. So the whole process, instead of taking weeks, just takes, two days or less. 

[00:31:22] Ronald Skelton: Okay. Now they've got the list of, people that you've, they reached out and they touched bases with them.

[00:31:28] What's the price points that you see right now? I know, I mean, where I'm at in the market, like financial due diligence can run anywhere from, like the cheapest I've seen anybody willing to do, basic, financial due diligence was, up above 10 K. On average, I think I see about 25 k is where the, like, the normal thing is for your normal, mom and pop business that's doing, an SBA loan. $5 million purchase price. But, what are you seeing right now? 

[00:31:58] Roman Beylin: Certainly lower. I would say, it depends on what's needed. Whether you need, hey, just someone to, line up the financials with the tax returns and just make sure there's no red flags. Or if you need a light scope quality of earnings, full scope.

[00:32:11] Do you need a data book? Do you need a P D F presentation? And how those things look. But, if we go from the very basic, Hey, here's a, two, $3 million business. QuickBooks, one bank account. I just wanna make sure there's no skeletons here. Yeah, something like that can be, between two and 5k.

[00:32:34] Ronald Skelton: I get websites done that way. Like I can get a website, full tech stack, crawl through all that. And it's about two to 4k. Two to 3k. 

[00:32:41] Roman Beylin: I agree. Yeah. Yeah. Code review will be two to four. Two to five. Yeah. If you're buying a tech. Then if you go one step further, if you need a proof of cash something like that, generally four to six.

[00:32:51] And then light scope, quality of earnings, maybe six to 15, something like that. And then full scope would be maybe 13 to 25. That's generally what we see for financial due diligence. Code review, like you mentioned, two to five. Background checks between $400 and $1,200 per subject, depending on, how deep you wanna go. Legal costs harder to predict, but for basic transaction, that's, not in a regulated industry, just, landscaping business, something like that. Two, $3 million deal. You're probably looking at 13 to 18 k. That's what I've seen. Again, these are very broad.

[00:33:31] I hope, listeners understand that it depends on the individual deal. But, I think that's, that's the beauty of, our marketplace. We have, I should mention we have domestic service providers, but then we also have providers overseas. If, we have a lot of clients who are simply looking for someone to crunch the numbers, and they, really don't need that many insights. They just want someone to crunch the numbers, just to highlight any discrepancies. And something like that can certainly be done, overseas for a lower cost.

[00:34:01] Ronald Skelton: Anybody that can actually build the books. I've seen so many small businesses that all they have is tax returns and bank statements. And they really don't have a QuickBooks. They really don't have, their accounts receivable is an Excel spreadsheet. Their accounts payable is an Excel Spreadsheet.

[00:34:15] Roman Beylin: That's cost a little bit.

[00:34:16] Ronald Skelton: So what's the craziest thing? So now story time, man. What's the craziest thing you've ever had to do, work with and help somebody do?

[00:34:24] Roman Beylin: Oh man. The craziest, we had one, not a client. I don't think they went through the transaction, but the kind of, the craziest business I think I saw was, someone trying to buy an Eastern European grocery store in New York. And they were, the buyer was American.

[00:34:42] And, they're telling me about this business, how they get the product from various, from Russia, from Ukraine. And I was born in Russia. 

[00:34:52] Ronald Skelton: Are this the places we have embargoes on? 

[00:34:55] Roman Beylin: Yeah. Yeah. That kind of, I kind of understand the embargo a little bit.

[00:34:59] I'm like, listen, like why? Like why do you wanna get involved with that? And the person, I think the person's background was, I think also real estate. Like, listen, like it's, he's telling me about these kind of payments that are not on the books. And I'm like, listen, like this doesn't sound like something you really want to be involved with. 

[00:35:20] Ronald Skelton: I've seen it. I've seen, we were doing a walkthrough of a business one day and, I count employees when I'm walking around for some reason. I'm just a nerd like that. And, when we finally got to look at his stuff, I was like, your number's off. 

[00:35:30] He says, why? It's like, I've been there three times and every time I've seen at least three more people than you say is on your staff. And all those are contract laborers. The guys that come in here, it's like, well, where are they on your payroll? I pay 'em outta the cash register every day. I was like, okay. Where do you show that in your finances? Oh, I don't. I just, you don't see the cash that day. Like he just, at the end of the day, he just counts the cash register. Like, he doesn't look at his receipts. Like, you know what he's paying out on that register.

[00:35:54] Whatever's in the cash, the intake, that's what he sold for the day. And I'm like, and he had invoices for, for the projects done or whatever the, It's 'cause they did service work, install work, and they sold some stuff. But, yeah. I was like, no, that's not how that's done.

[00:36:07] Roman Beylin: Yeah, we had one client. Deal just fell through, in due diligence. It was a healthcare business where they discovered that 20% of the revenue was coming from an illegal kind of healthcare referral scheme. I don't know, $5 million transaction, something like that.

[00:36:23] Ronald Skelton: Oh wow. 

[00:36:24] Roman Beylin: But you know, because we don't do the actual due diligences. I probably don't have as many of these good stories as I'd like.

[00:36:30] Ronald Skelton: But I'm sure you get people submitting stuff too. You're like, yeah, I don't know anybody's gonna do that for you. 

[00:36:34] Roman Beylin: Oh, yeah. Yeah. A lot of overseas stuff where someone's looking for, I think once we had, looking for a cybersecurity consultant but has to speak German. Those are hard for us. We're actually able to find someone for them, but it's not, it's not the easiest project. 

[00:36:51] Ronald Skelton: So you do domestic and international. Mostly English speaking international, but you've had some cool projects that are not.

[00:36:56] So tell us about the newsletter real quick, because I want people to, I know that we're here talking about DueDilio today. You got one heck of a newsletter and you put out some good content and like, you could even do deal reviews. It comes out twice a week, right?

[00:37:08] Roman Beylin: It comes out twice a week. Yeah, exactly. On, Tuesdays and Fridays. Thinking of expanding it, but right now it's just twice a week on Tuesdays. Every week I just go through, broker websites and see if anything catches my eye. And usually highlight, three to five interesting deals and it's used in newsletter.

[00:37:25] Provide for each one, just high level analysis. What I like, what I don't like. Some of the due diligence questions I would ask. Easy growth levers. For me, it's a good creative kind of outlet. It's, keeps the brain sharp. And on the Friday newsletter, it's a curated kind of collection of articles, Twitter threads from that week. It's fun. 

[00:37:50] Ronald Skelton: Yeah. Cool. So, what is the, we're getting close to the end here. What are some cool things that people need to know about, you and the companies you have? What's behind it? I mean, like why be in this particular business? Do you have a service mindset?

[00:38:03] Roman Beylin: Yeah, certainly a service mindset. I love talking to the clients. I love talking to the person who's, maybe leaving a corporate job or coming out of the MBA and wants to, take over a business. I find it, inspiring myself.

[00:38:17] And just like being part of the ecosystem. I think it's growing especially over the last, couple of years. And, from a business perspective, I also think there's a lot of opportunity. There's a lot of opportunity to help people. So I think for me, that's really what it's, what it's all about. I think being part of a good community, having clients you actually enjoy working with and trying to offer some value. 

[00:38:38] Ronald Skelton: Awesome. So if somebody could remember, one or two things, from today's show, what would you want 'em to remember about what you talked about today? What do you want 'em to remember about DueDilio and what you guys do?

[00:38:48] Roman Beylin: Yeah, listen, if you're just starting out first, subscribe to the Newsletter to Business Acquire. It's on Substack. Free to subscribe. DueDilio if you need any kind of help. Even if you're just starting out and, you don't know where to start. Reach out. Say hello, email saying, Hey, this is a business I'm looking at.

[00:39:04] Well, what type of due diligence would you suggest? How much is this gonna cost me? I've been doing this for a couple of years, so, just like my Rolodex is probably infinitely smaller than yours. But, if anyone just wants to get connected to, educational resources or things like that, we have a live templates on the website. Reach out. So I'd say don't be shy. 

[00:39:25] Ronald Skelton: Awesome. If somebody wants to chat with you or, like, put you on their show or something, is there a good way for people to reach out to you? I see you're on LinkedIn.

[00:39:32] Roman Beylin: Yeah, LinkedIn. I'm on Twitter. Look up my name. You can Google my name. Roman@duedilio.com is a good email to reach me or just reach me through the website. So, yeah, I think I'm pretty easy to find. 

[00:39:45] Ronald Skelton: Cool. Well, is there anything else you'd like to add? And if not, we'll call that a show. 

[00:39:49] Roman Beylin: No, I think we're good. Yeah. No, this has been great. I really appreciate you. Having me on and, thank you for everything you do for the community. I think it's great. 

[00:39:56] Ronald Skelton: Awesome. Well, hang out for a second after this and we'll call that a show.