E93: CEO Robert Nance Shares Tips On Acquisition Entrepreneurship And Business Buying - How2Exit

[00:00:00] Ron Skelton: Hello and welcome to the How to Exit Podcast Today I'm here with Robert Nance. Thank you for being on the show. He's the CEO of, is it Malu Investment Group, did I pronounce that right? 

[00:00:10] Robert Nance: That's the private equity firm, but small biz acquisitions is what is the, the little acquisition firm that we're 

[00:00:16] Ron Skelton: Okay.

[00:00:16] Robert Nance: Partnering, partnering with people right now. 

[00:00:18] Ron Skelton: Small business acquisitions group. Okay, cool. So let's talk, let's just kind of start, start off in your origin story. How did you get into investment and leading up to, the skillset you have now and what you're up to, kinda how did you get started?

[00:00:31] Robert Nance: Many years ago I used to build companies, a couple of restaurants, little manufacturing company, and this was back in the nineties, so '93, '94. Built a little manufacturing company and sold it for some real estate in Dallas, Texas, and some cash and two free and clear pieces of real estate.

[00:00:53] Quickly realized that the actual value of the real estate was greater then the perceptual value. And [00:01:00] as you buy on perceptual value and you can get loans on actual value. And the reason is the area was, was an area in transition. And so over the next year and a half, two years, about, actually about two and a half years, I bought 125 pieces of property.

[00:01:15] And this led up to 1999 when I bought my 125th piece. That included, it was a 20,000 square foot building downtown Dallas, but it included a Mexican meat distributor doing $6 million a year in sales. What the hell you gonna do with the Mexican meat distributors? I don't know. I have no idea.

[00:01:35] But it was free because the building in, in, in effect, it was free because the building was, paid 1.2 million, I think for the building. And that was the building and the business. And the building was, a little bit over 1.2 for us. So we got in and I had about a hundred people, about between 80 and a hundred people working.

[00:01:54] The mainly in the real estate division. Some pretty smart people helped me decide [00:02:00] what we were gonna do with the business and just made a lot of money in the business, just turning it around, doing, just learning what to do with it. And since 1999, I think we're got 23 businesses now. That's how I got into buying businesses over that timeframe.

[00:02:16] We put together a little private equity firm. I've been buying hotels in South America and I'm sitting at my house in Mexico right now looking to buy real estate here. One of my biggest businesses is partnering, is this new business of partnering with individuals in buying companies in the US.

[00:02:35] The markets come back since Covid. It's turned around 180 degrees and we're back in interested in buying businesses in, in the US. Lost my story. 

[00:02:45] Ron Skelton: So when we, before we turned on the mic earlier, we were chatting a little bit. We talked about why you're getting into this space, helping other people, buying business, needing operators, needing partners, needing successful people.

[00:02:56] Because you just can't be everywhere at once. Can you tell us a little bit [00:03:00] about what you're looking for in the individual or what you're looking for as far as somebody that wants to get into this space as acquisition entrepreneurship? 

[00:03:06] Robert Nance: Sure. Typically it's, I've identified a target market as between 35, 45, maybe 35 to 50, someone who's been in the working in, management for five plus years ready to step out on their own. And I find that there's a lot of people that are interested in that since Covid hit. And I don't know why. And it may have been before, I wasn't in this market of bringing on partners.

[00:03:32] We were buying ourselves, but there are a lot of very experienced individual. Who are ready to buy their business, they just don't know how.

[00:03:42] Ron Skelton: There are a lot of people running a lot of ads too for it. So it's kind of getting notified. It reminds me a little bit in that real estate space, cause I was, you come from real estate.

[00:03:50] I come from real estate at the, a residential level, but, if you remember about 15 years ago or more, there were ads constantly. People are traveling than all these cities. [00:04:00] These guys were trying to teach wholesaling and getting, make your living, make a living, getting into real estate. That same phenomenon's going on right now with the, don't build a business, buy a business.

[00:04:10] There's a huge number of people travel around trying to teach it. That's both good and bad. It gets, notoriety, gets the word out, but not everybody that, is going around teaching. It maybe should be so. 

[00:04:20] Robert Nance: You think? You think. 

[00:04:22] Ron Skelton: So one of the reasons we talked, you and I talked a few weeks ago before I took my, my, I'm a little hiatus I take with the kids when they're off.

[00:04:30] One of the reasons I wanted to have you on here is cause I like your model of partnering. I know, I've done a few of the courses just because I like meeting the, it's like going to college. You can learn everything you wanna learn by going into the library, checking out the books, and learning.

[00:04:43] What you go to college for is the networks and the people. So when I take somebody's course, I look at like, who has the big networks, who has people and resources and stuff. So that I like, but I also notice out of all those people, it's the standard. Same way with real estate. 98% of the people that ever pay three, four, or five grand, 10 grand for a course, [00:05:00] never do a deal.

[00:05:01] So with your model, I see that there's a potential for something different there. So talk about your model and what you guys do that differentiates yourself from your standard. Take a course, you can go buy your own business. 

[00:05:13] Robert Nance: Well, I'm a buyer. I don't teach courses. I don't have courses I've been buying for, I guess 23 years now, since 1999. The only thing that we can't physically do at this point is feed on the ground operations. I still have all the backend CEOs, CFOs, Director of sales. They're ready, they're outsourced. We use, we have them to support the partners. And I've aligned myself with the partner, not against them.

[00:05:40] I don't sell any courses. If we don't buy a company, nobody makes money. And so as simple as that, we come in, I'm able, luckily at this point I'm able to cherry pick my partners because of the Facebook group. People come into the Facebook group, they reach out to me, we talk and we either, I either decide to partner with them, or they may decide not to partner with me, but [00:06:00] we, if we decide to partner together, we just move forward.

[00:06:02] We start from the beginning. The everybody has skillsets. Typically when you come into a new industry, they're all soft. I help convert those over to hard skill sets and we, regardless of what your history is, your skillsets are, we start from the beginning. Who are you, we create a roadmap to the first acquisition industries geography.

[00:06:23] Are you gonna be local? Are you gonna be national? We just create the roadmap and then we move forward before we even contact a broker. It takes about a month to create this roadmap to figure out who you are, to get your family involved, to understand that this is gonna be a life change, a life-changing event, because we're buying companies here.

[00:06:42] There's, nobody, I can say that because it's fairly new. Nobody that's come into my program, to my partnerships that's not bought a company yet, or that's not on their way to buy a company. We've got, because I do it, I'm there with every single person. I negotiate every single [00:07:00] deal. You're on the phone with me, but I'm negotiating these deals.

[00:07:03] I'm teaching you how to create a pipeline, how to create a pipeline of companies that once you, that we're able to actually buy companies. We're able to have leverage in negotiations. There's tens of thousands of companies for selling the US right now in the industries that we target.

[00:07:18] We're just needing people to help run 'em once we buy 'em. And once you go through this whole course, you've got the skillset, for free to buy a company for the rest of your life. Anytime you want. Now you have the skillset because you went through this with me and we bought a company together. It's yours. It's your skillset. 

[00:07:39] Ron Skelton: So you talked about the, the skillset coming into the picture was some, with some industry experience, knowledge management knowledge and stuff. What other requirements are like, are there, is there a capital requirement? Somebody needs to have X number of dollars down. Okay. 

[00:07:53] Robert Nance: No, no. We bring all the money. We bring all the skillset. We, it's a perfect model. We bring the down payment, we bring [00:08:00] everything. We've got the skillsets to buy the company.

[00:08:02] We've got the skillsets to help operate the company after the fact. We've got the money for the down payment. We are just looking for real partners who want to run bus, who want to own businesses. And we typically split 60 40. Them 60, us 40. So it's a you own a business for literally nothing because we're putting the money down.

[00:08:22] We're giving you the skillsets. It's gonna take time. It's gonna take 60 to 90. To start really negotiating these deals to get into the, to the negotiation. It may take 120 days to buy it. It may take 90 days depending on you if you're working full-time. We do this once, twice a week. I teach you how to create the pipeline, work the pipeline, and it takes an hour and a half a day. To really work the pipeline correctly. 

[00:08:48] Ron Skelton: I heard you briefly say industries, you guys are buying. Is there a particular set of industries or a particular, set of industries you would avoid or? 

[00:08:58] Robert Nance: Yeah. There is, [00:09:00] yes to both. We look at boring asset, heavy industries. Baby boomers retiring ready to go. We don't focus on any type of high growth, high margin industries. It's just not there. We do LBOs. We use a lot of the assets of the company to buy the company. And there's just so many of these asset laden companies out there that the sellers are just stagnant. They've been stagnant for years because they're just ready to retire.

[00:09:29] They're, they're now. They're ready to retire. And the leverage is all we have all the leverage. Buyers right now have all the leverage because there's more supply than demand. Even though there's a lot of demand in this industry, there's more supply than demand. 

[00:09:47] Ron Skelton: Yeah, a lot of the supply is kind of unrecognized supply too. In that, they're not listed with the broker. They're hitting that age where they need to sell.

[00:09:54] They know they need to sell, they just haven't pulled the trigger. So there's a lot of opportunity there. So you guys [00:10:00] do your sourcing of deals strictly through the brokers? Or do you do outreach once you've identified a target or something, or a industry that is a match for an individual? Do you guys, do you know outreach other than just reaching out to the brokers? 

[00:10:14] Robert Nance: No. 100% through brokers. Brokers bring a phenomenal skillset to the table, if you think about it. And when I'm, when we're building the pipeline, we have 15 to 20 companies at all time in the pipeline.

[00:10:25] Between stages one through 20, there's about 20 stages in each pipeline that I've created. And you just work it. There's no way to do that without using, utilizing brokers. If you think about that, the skillset that the broker brings to the table, it's phenomenal. Now you can get some bad brokers, but still even a bad broker's going to connect you with the seller, and I can get rid of the broker quick, just move him, remove him, and start talking directly to the seller.

[00:10:51] But without the broker doing the preliminary work, it would be prohibitive of a first time buyer, and that's what we [00:11:00] focus on first time small business buyers. It would be prohibitive for, really for anyone, except for someone with a larger firm who have people out there sourcing deals. You can't do two, two full-time jobs.

[00:11:16] Buying a company is a skillset you don't, that you don't know. I'm giving you that skillset, but over a time, there's no possible way you can also be learning how to be a business broker as well. It's just impossible. 

[00:11:29] Ron Skelton: I get it. So what is the, kind of, walk us through the process.

[00:11:34] Somebody, they reach out to you, they join your Facebook group, it sounds like you do some form of calls or some form of surveys or something to learn who they are, and what they're about. Walk us through the process a little bit of, identifying what's, I guess I'm making an assumption here.

[00:11:52] How do you know what in which individuals are the right for which industries and stuff. You're looking for key really good operators, right? You're not gonna [00:12:00] stick somebody that's been in manufacturing or all their life, out and try to get 'em to run a service company or a pest control company. They just don't it's a shift, right? 

[00:12:08] Robert Nance: I'll answer the first question first. I strictly get my partners from our Facebook group. When you join our Facebook group, you're asked a couple of questions, email address, I think name, and then would you like for those small biz buyer, would you like Robert Nance to reach out to you?

[00:12:25] You have questions? Oh, and what's your biggest problem about buying your first business? And if you would like me to reach out to him, you just leave your phone number and I'll reach out to you. And we have a phone call. And regardless of what happens on the phone call, the Facebook group has a lot of material.

[00:12:40] My goal is to put everything that I have for free in the Facebook group. Now, it's taken a little time to put it out there, and I've got hundreds and hundreds of hours of live calls with my partners and, but I don't wanna overwhelm everybody, so we're putting the information out as we can.

[00:12:54] And so everything in the Facebook group is free. You can go in there, you can learn exactly what [00:13:00] the first month is in the one-on-one partnership. The difficulty is actually doing it. As you, just as you said earlier, most people who buy the courses just don't go through with it. And I could probably create the best course there is based on what I, based on my knowledge, based on what I've done and still, I would be in that nine, 90 to 95 percentile that the people who go through it just don't buy it. There's just too many permutations that people go through and buy in a company. There's no possible way. Even a mentor that you call you contact once a week or once a month can truly help you because his interests aren't really aligned with yours.

[00:13:39] And even though he's a great guy, there's no way that he's going to be able to spend, enough time with you to answer all the questions. There's just too many issues in buying companies. Real estate's simple, right? You could create a course, you could go buy it. People just, either they do or they don't.

[00:13:59] But in [00:14:00] businesses, acquisitions, it's very, very, very difficult, to foresee all the potential issues. 

[00:14:08] Ron Skelton: I can get that cause I, inside of the real estate space for a little while I was coaching individuals and stuff. I'd done, a few hundred deals myself and, over the years. And so I've started assisting people, answering questions and got asked to coach people.

[00:14:22] And it's interesting is you can give somebody a step-by-step plan, but even in real estate, things, there's just so many variables that pop up. People will follow those steps until there's a slight variable that doesn't align with what what they thought that, what their interpretation of what that step's supposed to be.

[00:14:39] And then they throw up their hands and go, well, that didn't work out. So like inside of, there's so many more, things that can come up, go sideways, go different, questions you should ask because of something, something was said a certain way inside of the business, buying a business that I can see where, and I've seen, even myself, it's one of the reasons I started the podcast to be honest. 

[00:14:59] I [00:15:00] jumped out of real estate. I hired a performance coach, right? I was doing a real estate. I decided I was kind of burned out on that. Wanted to figure out what to do next. So I hired a performance coach. One of the things he said was, you should be playing a bigger game. It's like, all right, what's a bigger game?

[00:15:12] I was already doing some commercial negotiations for some friends and stuff. I'd already actually, convinced a lot of people. At that time, I owned part of, or all of the, or was running the local real estate investment association. And so I had been encouraging a lot of my good friends to go into like apartments and multi-family.

[00:15:33] And where I was living, it was a very small community, Tulsa, Oklahoma, of all places, right? I started thinking, well, if I go into that, like I have a marketing master's degree and the last company I went, I dominated the marketing. If I go into the apartment complex, I'm gonna send every apartment complex within a 500 mile radius. A letter every freaking month, and I'm a copywriter by trade.

[00:15:54] All these people I've told to go into this space, they're gonna have our time cuz I'm gonna be bidding against them on everything. So I thought, I [00:16:00] don't really wanna do that. Plus there's, it's just not my, I just didn't wanna go into that space. So when I started looking what's next, I started looking at real, buying his own businesses instead.

[00:16:09] I'm an entrepreneur at hard. I've started a few, I've sold a couple and. So I started looking at this. So instead of going back and getting yet like a fifth or sixth to college degree, I've like, who can teach me this in a hurry? So I did pay for a couple of those guys out there. Mainly cuz I can pick up things and do it myself.

[00:16:27] Robert Nance: Yes. Some people can, some people can't. Some people can't and run with it, but the majority only outliers. There's only two, 3% of the people can do this. 

[00:16:37] Ron Skelton: That's the same way with real estate. Only two or 3% of the people that ever pay a course get one deal done because they don't have anybody to lean on when things go differently than the book said.

[00:16:46] You can't write a hundred page book or even a thousand page book on a complex transaction because 

[00:16:50] Robert Nance: you can't. 

[00:16:51] Ron Skelton: You're doing, you're dealing with human psychology, you're dealing with mathematics of the financials. Everybody that owns, an accounting software program, whether it's QuickBooks or one of the [00:17:00] higher end ones, they all do it differently.

[00:17:02] Like most of these business owners are not CPAs. They've, if you've got this SBA or this small, Or the, smb, the small business level. Most of them are never, even the only accounting work they've ever had done is just enough to get their taxes done. Yeah. So every set of books you get, that's one of the things that I would agree on the broker side. At least you get some standard set of, look at what financials look like. One of the biggest jobs a broker does for the first four or five months, they start talking to client is make the financials look readable. Right? 

[00:17:29] Robert Nance: Yep. That ain't give you the volume necessary to truly have the, the supply you need in order to negotiate the way I negotiate. Because I negotiate.

[00:17:40] Be tough. You're gonna carry 50 to 70% of the deal. Seller never, you never bring an SBA financing on the first deal. Sellers always lie. And if you do bring in third party financing, you're just stuck with it. You always do the seller financing, carry the paper. The rest of it can be done in the down payment or done in the [00:18:00] LBO, the assets, but never bring in third party financing on the, you just don't have the, first of all, you don't have the skillset.

[00:18:05] You don't have a skillset to do it, to do a true due diligence process. You don't have the money to do it and yeah, always seller financing. 

[00:18:16] Ron Skelton: Yeah. We were participating in the, I was participating, I was a chief marketing officer in a big marketing roll up, and I was shocked that the legal due diligence fees were for every one of those deals, right?

[00:18:26] Just because we were buying both nationally and a couple of them internationally. We were using good attorneys, but we were, we went through four, three or four that, I think the cheapest. And you never, never, never go with the cheapest attorney, I think the cheapest was like 25, 30 grand for the small marketing firms we were looking at.

[00:18:41] So $5 million and under and it went up from there. You say they don't have the money for the due diligence. That's one element. That's not financial due diligence, that's not the cultural side of it. It's not operational due diligence that's looking. Is there any legal liabilities that previously exist? 

[00:18:54] Robert Nance: A lot of liabilities, lot of issues. The contract takes care of a lot of that though. Especially when there's [00:19:00] the majority, he's on our financing 50 plus percent. You just pay the bill and subtract it from the note. It's already agreed to. 

[00:19:08] Ron Skelton: So you guys, you already have the LOIs and the purchase and sales?

[00:19:11] Robert Nance: Everything. 

[00:19:12] Ron Skelton: Contracts. You have all the contracts in place. I keep circling back this, but so at this stage of the conversation, somebody's met with you. You know who they are, you know what they, what their skillset is, and you start talking to brokers, right? The sellers, your-

[00:19:25] Robert Nance: After about a month. After about a month. First of all, we have the story together, who you are. We put the financials together. We also pledge money to the financials. And so we're not gonna have issues with the financials. We understand exactly the industries we're going for, the SDEs, we're looking at, sellers discretion earnings, basically the net income, but it's a different net income.

[00:19:44] We look at SDE, there's a little ebook in the group as well that, that explains all this. If your, the listeners don't really understand it. And it takes about a month before we even begin to contact a broker. Before everything. When we get on that phone call that first broker, [00:20:00] it's about a 45 second elevator pitch.

[00:20:01] And when we get finished, the objective is for the broker not to have any questions. And so it answers every question. The worst thing you can do is have the broker start asking you a bunch of questions and especially as a first time buyer. So the pitch must be perfect. It answers all the questions broker is going to ask, and the objective is at the end say, Hey, just send me the NDA. I got my financials ready to send to you. Focus that sound great. And that's it. 

[00:20:26] Ron Skelton: So you mentioned foot on the ground and having people are, one of the cool things about having feet on the ground in the local, it's interesting is people that see you every day treat you differently once you leave, right? When you say feet on the ground, are you wanting the individuals that reach out to you, you're interface, group. They're in your program, they're working with you, your partners, you call 'em partners? They're not catching lights or something. They're partners. 

[00:20:48] Robert Nance: No, they're my partners. 

[00:20:49] Ron Skelton: So your partners, you want them to be looking in their local market cuz they're feet on their ground, or are they gonna have to move to a particular location? What's your game plan on about where they're physically [00:21:00] located?

[00:21:00] Robert Nance: That's part of that month criteria to the first acquisition. It's part of the roadmap and one of 'em is geography. So we sit down and figured this out. Are you gonna be local or are you gonna, or are you gonna be moving? What does your wife think? What everybody's involved here?

[00:21:16] This is a life changing event, but we're buying companies that are making 500 plus a year. It's worth it, right? If everybody, if, but everybody has to be on board. If it's a national search, if we're looking national, okay? So what cities? What cities do you wanna move to? What cities do you wanna be in?

[00:21:32] This is part of that month long process that we go through. These conversations that you have with your wife as my partner. Because the last thing I want is outside influences not understanding what we're doing and wrecking this deal two or three months into it. Cause I've spent a lot of time and a lot of money in this deal.

[00:21:47] So you can't just, and two months figuring out, well, my wife says this. We figured this out in the beginning and then we move forward. 

[00:21:55] Ron Skelton: You see me laughing cuz I promise you, if it wasn't for my wife, I would've never moved back to California.[00:22:00] I love the scenery here.

[00:22:01] It's absolutely beautiful. I'm sitting in a redwood forest. I drive to the ocean on a daily basis if I want to. I was telling you before this show, I'm in a tiny home. I might actually buy like a mobile podcast unit and I'll just go sit at the damn motion and run my podcast and look out the water.

[00:22:14] The coolness is with that. That's cool. It's a bad environment for acquiring businesses and being like, the taxes here are absolutely insane. So if you had to ask me if we were doing a search, you and I were working together and you said where you want to go? I would probably list a bunch of places I wouldn't go.

[00:22:29] So I could see where that's important. There's some places where my wife would list it, she wouldn't go. One of the reasons we're doing what we're doing is cuz, we wanna be able to move around. That's why we bought the tiny house. That's why we sold our little five acre farm. We wanna be able to pack up and move when something sounds cool somewhere else.

[00:22:44] When I'm talking to business sellers. I was like, well, what does your wife think about this? What does your wife do in the business? That's a good question to ask a lot too. 

[00:22:50] Robert Nance: That's one of the first things we do. Typically a seller, the wife is on that paper. Everything has to be done and we do it in the beginning.

[00:22:58] I've been through so many [00:23:00] situations over the 23 years. That it's very difficult to get something past me. It's very difficult for me to forget something. Because it's typically, it's on paper. The questions are on paper. That's in the first conversation with the broker and for sure with the seller.

[00:23:14] We just talk to 'em and figure out what they're doing, what their objectives are. I do the same thing with my partners because really we're partnering with these sellers. These sellers are the bankers. These sellers are gonna be in our lives for the next five to, hopefully 10 years if I can negotiate that.

[00:23:27] They're our partners too. Everybody's our partner. Everybody has to win in this situation, and we have to understand all the parameters, all everything that's going on in everyone's life, even though it changes. I have to structure a deal, that's a win-win for everybody. And that's how we're successful.

[00:23:42] I listen. I'm good at listening and I understand that even though sometimes sellers say one thing, they really mean something else. And I, I can flesh that out during the negotiations. 

[00:23:53] Ron Skelton: I've been through a few of 'em so far where it just takes one person to be outta sync. I've brought up on the show a bunch of times. There's a [00:24:00] little soap company in Oklahoma. I'd say little, let's do a few million a year. It's an organic type of soap company. They make a few other products, but if you look at everybody involved in the transaction, the wife really wants him to sell.

[00:24:12] He's in his seventies, close to eighties. His son doesn't wanna run anymore. He is a sales guy. His best friend, his one of his best friends is used to be a broker and bought a business from him. They're still good friends. He's the one that called me and says, Hey, you really oughta talk to the guy.

[00:24:26] I know him cuz he wanted to be an investor in my real estate. So I knew him, he knew me. Okay, I'll talk to him. He doesn't want to, he is like in his mind, all his friends that have sold recently. Passed away with one or two years. Like, I'm not ready to die, I'm not selling. This is what keeps me moving and keeps me outta my, gets me outta bed in the morning.

[00:24:43] So I get it. In his case, everybody around him says, Hey, you just built a 750,000, which is a lot of money in Oklahoma, the lake house. Your wife wants to go to the lake house and retire and enjoy life, and she's tired of going to work every day. And your son's kind of liking to, use his degrees and do something differently.

[00:24:58] The seller's the one that's reluctant in [00:25:00] that case, but it takes one cog in the will, right? One person that's outta sync. If the wife's like, nah, I really don't think we should sell to that guy. Or even the son's like, Hey, I really think after, I'm really thinking about this.

[00:25:11] I've been working here for 15 years. I'd like you shot it, running it. You gotta know that whole environment.

[00:25:15] Robert Nance: Everything. Everything. And in one conversation, I can usually figure that out. Who's on board, who's not on board? Who's the external influence that's gonna, that's gonna kill this deal.

[00:25:24] That's another reason why you use brokers, because I've got 15 others behind. Okay, great. I'll put you on hold. We're here. No problem. Next. That's why you've gotta have these 15, 20 companies in the pipeline.

[00:25:36] Ron Skelton: That's what I told him. I said, look, everything changes the time and circumstances. If it ever comes up to the point where you're ready to do something different, I'm here, man. Probably gonna be interested then, too. That's just kind of where I left him, cuz I'm not gonna push somebody or try to negotiate somebody to do what they want. Cuz chances is you'll spend all that time at the last second, they won't sign the doc.

[00:25:52] Robert Nance: No, you can't. You can't push em. 

[00:25:54] Ron Skelton: So what, I'm trying to follow a timeline here. So somebody's come with you, you've already spent the month. You know what they're [00:26:00] looking for. You've made that first call with a broker. They're listening in with you on this conversation, right?

[00:26:05] You've already asked some questions, some like, you're starting to build rapport with that business seller. You've already built rapport with a broker, right? How do you know a deal's a good deal? How do you work with your partners, the people that you're in your Facebook group and you're buying businesses with. How do you show them, pick this company versus that company? You've got three deals on the table. What is your criteria? 

[00:26:26] Robert Nance: Good question. At this point, we're a month into, they're already my partner. We're a month into learning what to look for. One of the first, let's say, tasks, is to, once we finalize the roadmap, is to go out and find five companies you're interested in.

[00:26:43] And we get back together and we go over why these companies don't work at all typically, because you just don't know what to look for in the beginning. That's probably the first Aha. Okay. I get it. I get it. I [00:27:00] understand that's probably the first aha moment that they have because we really start targeting exactly like you said earlier, where I don't want to live and don't where I don't wanna buy.

[00:27:11] This is what you learn typically, the majority of things in life is what not to do. There's only a few things that you learn that this is what I do. And so our first lesson is what we learn, what not to do. What we're not looking for. And so I analyze each one of those deals and explain real quickly why it's not what we're looking for, why it doesn't fit our roadmap.

[00:27:33] It doesn't fit what you said. I see this in everybody regardless of the intelligence level. I see it in everybody cuz it's just a novel experience. You've never done anything like this, and you can bring all your intelligence levels, you can bring all your past history, and everybody's the same.

[00:27:52] They don't know what they're looking for. So regardless of what I put out on the site, regardless of what books you read, you just don't know until you go through [00:28:00] that first exercise. Then we go through the second one, and at that point their pinpoint, they know exactly what to look for, and they're out bringing companies into the pipeline.

[00:28:08] So inside the pipeline, I insert myself in at different levels. Typically in the beginning. It's at the level, of Analyzation. So they go out, they get the NDA signed, they get the company info packet, and then we start analyzing them. And that's why I'm inserting myself in the beginning.

[00:28:23] We're still, we're talking to brokers. This is the second month we're negotiating these deals. We're talking to brokers and we're analyzing the deals, based on what the criteria of the roadmap is, which is the important piece. We don't do anything that's outside that roadmap. That criteria for first acquisition. Unless we change it. If we change it, we never do anything outside the roadmap. We can change the roadmap because it's a living document. If it changes, if the criteria changes, if new knowledge causes you to have a epiphany and say, okay, I, I wanna do this, and we talk it through. And if we say, okay, let's do this, we change the roadmap and we look for companies that always [00:29:00] fit the roadmap.

[00:29:01] I'm negotiating the deals. So I'm reading, I can read financials pretty quickly, and so I'm teaching people how to read financials. I'm teaching you how to come in and look for these LBO type deals, these heavily laden companies. And what is, what constitutes a target company for us. What does constitute just by reading on Biz Buy Sell.

[00:29:26] That's typically where we start Biz Buy Sell and we have a roadmap. We know exactly what to look for, and now we know exactly what not to look for. So we start weeding down. You start learning exactly what to look for inside these, these businesses for sale. Thousands and thousands depending on where you are, depending on if you're local, if you're national. 

[00:29:44] That's how you learn. I remove myself from that analyzation. Once you learn how to analyze it, and I insert myself in a little bit further down in the pipeline. As you move through the pipeline, you're learning everybody. Each individual's learning exactly what company [00:30:00] is right for them based on their roadmap that we did for the first month.

[00:30:04] And again, if this new knowledge that you get changes that roadmap, we go change the roadmap. And so that's how you learn how to buy a business. At the end it's, we buy it. You've been through the whole process. You have the knowledge base to buy a business, and you just bought a business.

[00:30:19] Ron Skelton: So you've walked through that a little bit. Let's talk about some of the details inside of the middle there. We kinda covered up to the point now where we've talked about like, you're on the phone with them, you're helping negotiate. Let's just, let's kind of run the scenario.

[00:30:31] You got the business owners comes up with the price you got, you need to negotiate a price, and it's closing, it's time to do the due diligence. You've got your LOI signed, with the letter intent, is ready. And you're starting to look at due diligence.

[00:30:45] Because you're doing owner financing, it releases some of the pressure of needing a deep, expensive due diligence. But what level of due diligence do you and your team help that new partner with? 

[00:30:56] Robert Nance: All the due diligence because we're the partner. [00:31:00] We own 40% of this deal, and we do all the due diligence. You'll learn that process going through it with me. It's much lighter than what you would expect because of my knowledge. What I look for, what I've been through, what I know what to look for. Now, I do U CPAs. I do have 'em, but we have I have a, a CFO. He does most of the deeper work, but he's on staff.

[00:31:28] He works with me. And so it's not the well structure of the contracts. It's not necessary to spend 10 or $20,000 on due diligence. It's just not necessary. Because they pre-approve any outstanding liabilities, any, anything that's not disclosed in that contract and attached to that contract.

[00:31:51] And we close at a title company. Everything's done through the attorneys. It's just subtracted. It's just subtracted. If I have to pay it this month, that's just, [00:32:00] I'm just subtracting it from your note. If you got a problem with it. Okay now we can argue let's, or we can figure it out. But I'm subtracting it from the note this month.

[00:32:07] Cause I just paid your bill that you didn't tell me about. You can't do that with any type of other third party lending. You pay the bill and you pay the note. That's just one of the reasons you don't bring in third party financing. There's many other reasons.

[00:32:18] At least in the beginning. You can convert it out after, and I'll do this sometimes after a year, let's say. After 18 months, everything about the business. At that point, I don't have any issues bringing in third party financing at that point. It's just that you cannot afford due diligence on a small business. As a first time buyer, not knowing what you're doing. You just can't do it. There's just too many issues. 

[00:32:47] Ron Skelton: I got it. You're talking about not bringing outside and financing. Do you guys do anything like, you said you're looking for asset rich companies. Is that just because if something goes wrong, you have the assets to sell, or do you guys do things like, sell these back on the [00:33:00] assets and other ways to fund the deal?

[00:33:02] Robert Nance: No. I'm using the assets to buy the part of the company. Once that company's purchased, the day after it's liened. The seller has a first lien against everything. That's what, that's one of the issues. I hear even last night I was reading some, I was reading one of the blogs and this poor guy, he said, well, I've got a 50% seller financing and the, and, uh SBAs coming in. I said, well, who's gonna be the first lien holder? 

[00:33:27] Ron Skelton: SBA, they wanna prove it. 

[00:33:28] Robert Nance: And I said, and I promise you, the seller's not gonna be the second. Nobody. This isn't real estate. If something goes wrong in a business, it's done. It's imploded. The first is lucky. Lucky to get his money out.

[00:33:40] Real estate's real estate. You got a million dollar piece of real estate. You got a first lien of 600 and a second lien of 200. No issues. You can't really mess up a piece of real estate. You can break out windows and do things, but that the value's not going down. A business that's dead. If they have to come in and foreclose, the business is dead. They're not even going to get their 65 LTV, whatever the [00:34:00] SBA is. And so a seller is not gonna take it second. So I tried to nicely explain. I said, you need to think this through a little bit better because this isn't gonna happen.

[00:34:09] And that's one of the structural issues. Back when you said earlier, how do you know if it's gonna go through? And that's one of the issues I looked for. Okay, what is this structural issue that, that we have to, is there something we have to lien around? Is there some outside financing that we have to take care of?

[00:34:26] With seller financing only, they're gonna get a, they're gonna get a hundred percent of the company as collateral. So if I put down 30%, they're gonna get, they're gonna be collateralized 130%, a 30% I put down, plus a hundred percent of the company.

[00:34:40] So there's, when you're negotiating, it's very difficult for a seller to, to say, No, it's not. I'm not gonna take 130%, collateral. Well, alright. What's wrong with the deal? Well, nothing's wrong with the deal. You're a hundred percent collateralized. I'm giving you 300,000.

[00:34:56] That's a million dollar deal. I'm giving you $300,000 down at closing. [00:35:00] That's a 1.3 on a million dollar. You're collateralized 1.3 on million dollar deal. Tell me what's wrong here. So you just, it's just part of negotiation. You back 'em into a corner and they say, then they start thinking, you just change perspective in negotiations and kind of that's how we, that's what we're pretty good at. 

[00:35:16] Ron Skelton: The reason I was asking that is, like I was saying, I was gonna head down the path. I was like, what about debt care, debt coverage ratios and stuff like that because of the, where you pull the LBO money from. But if it's your fund and you are investing money into the company and you're not taking other liens, cuz you're giving these people that 1.3 equity or, sorry, collateralized. Then that kind of takes away the concern I would have is, a company, one of the things I see is new buyers who go out and they'll go buy a company and yeah, it's been running for the last 20 years, but they didn't have to cover the debt cover ratio.

[00:35:48] Especially a lot of companies are cyclical, right? I own a little pest control company and pretty much November by December, we get, our business drops way down when it starts getting cold there. Cuz only other than mice, everything else [00:36:00] runs and hides from the freezing cold in that market.

[00:36:02] Mice and bedbugs. Cockroaches I guess still, but like the ants and the termites and all the other things that go on. A lot of businesses are cyclical, but if you look at, if you buy the thing in the spring, you're looking like, man, this thing's making good money. And you kind of, people average things out through, over the year.

[00:36:15] So they look at the yearly financials and you don't plan ahead far enough, you could get yourself in trouble if you got a big O SBA loan and all of a sudden you're in the middle. 

[00:36:24] Robert Nance: Well, you get yourself in trouble with any loan. SBA or seller financing. It's the same thing. It's the same thing, except there's no, personal guarantee and seller financing. But yeah, you take that into consideration. You have to. The debt service has to be taken into consideration. 

[00:36:38] Ron Skelton: Okay. Let's talk about the operations of it, cuz let's, we've already kind of talked about what it looks like to go and negotiate, help, buy, help close your close ended closing company. They own it right. What are the day-to-day operations look like? 

[00:36:51] Robert Nance: We own it. 

[00:36:51] Ron Skelton: Yeah, we own it. Sorry. Yeah. You and the partner own the company together. 

[00:36:55] Robert Nance: Yeah. We're partners in this deal. We're running this business together. They're operations and they own, they [00:37:00] own controlling interest. But we're there to support you. We're there. That's, just bottom line is that's how we make our money. We don't make any money unless we close and we run these successful operations. We increase sales, decrease liabilities, decrease costs. That's what we're, that's what our objectives. 

[00:37:15] Ron Skelton: So they're the owner operator. Are they like, at a CEO role with a, you have a fractional CEO they can lean on there. There's something like you or somebody that can, Hey, I'm in a situation. I've never been in this situation before. How do they help me? Let's, so the operations is supported by your team also. You have a accounting team, it sounds like you have at least a CFO level person, even if it's fractional for each of the businesses that they can lean on and get more in-depth questions if they have that type of stuff. Sounds like you probably have a tax plan around like, tax reduction and make, tax liabilities and stuff. What about for growth and stuff? Do you have like a marketing team and other people? 

[00:37:48] Robert Nance: Director of sales. Director of sales I've worked with for years and years and years. He's semi-retired. He's the best salesman. I've ever come across, ever. In my life just comes in [00:38:00] and he's, he's very interested and he's coming on board with outsourced the sales team.

[00:38:04] He's leading the sales team. Putting everything necessary in place. And that's a key. Sales are key. Increasing sales, increasing the volume, decreasing, decreasing cost. And that's what we, those are the two main focuses. We look at after the acquisition to increase value.

[00:38:20] Now, another big piece is taking a company from a, I call it the absenteeism scale. And everybody wants to have a absentee run company. I'll say fully absentee is a number 10, and a guy who comes in every morning opens the door and shuts it in. In the evening, it's a zero. So he's running the business every day.

[00:38:40] We look for about a two. About employees that have, about companies that have about 10 or 15 employees, about 15, 20 years old. And these employees have been oppressed or repressed over the past years because the sellers just don't wanna grow. They don't wanna do anything. And these [00:39:00] guys have aspirations.

[00:39:01] And I found this in every company I've ever bought. Every one of them. There's always someone has been there, or two people that have been there since the beginning that are just, that just hate this guy. They just hate this guy. But they're good friends. But at the same time, this good friend's holding him down and not letting him grow.

[00:39:15] And we come in and we identify those people and we just immediately give 'em the raises. We give 'em the titles and they have the skillsets to run these businesses. So yeah, I'm looking for partners on the ground and you're gonna have to be on the ground to be up. I mean, you've gotta commit to that because we can't do this conversion without a partner of ours being there. Typically six to nine months we can convert that over. 

[00:39:38] Ron Skelton: So in six to nine months you take 'em from two where they're, I keep remembering the old Dunkin Donuts commercials. It's time to make the donuts. He's the first one in, just made the donut. Comes in like every day.

[00:39:47] Robert Nance: That's a one. 

[00:39:48] Ron Skelton: That's a one. And then he's there, you're trying to get 'em up to 6, 7, 8, nine. 

[00:39:53] Robert Nance: Exactly. And it's easy to do if you know how to do it, because the people are there. They've got the skills. They've got the ambition. [00:40:00] They've got the motivation. They just don't have that ability because the seller's keeping them down because the seller wants to retire. He's done. 

[00:40:07] Ron Skelton: So okay, they're out there now. You've had the company. I don't know what your typical holding period is. You've had the company partner with the partner for, let's say, 1, 3, 2, 3. He's running it a seven or eight. What's the next step? Are you gonna do growth or acquisition by other companies? Tuck 'em in. You're gonna look into helping exit. What's the launch here? 

[00:40:27] Robert Nance: Everybody, every partner's different. Every partner is different. Now again, taking it from a two to an eight automatically doubles the value. Think about it. It doubles the value of that company takes it from a, it puts it in a whole different spectrum.

[00:40:41] You're an owner operator or you're an absentee owner. That's a completely different spectrum. And so that right there at least doubles the value of that company. That's a pretty big hit. That's a pretty big, win when we can do that.

[00:40:53] And that's pretty simple. But go back to your question. Every partnership's different. What is your objective? I don't [00:41:00] talk about Rollups ever inside this group because, there's just, everybody in my group wants to buy their first company, but you've asked the question, so I'll tell you.

[00:41:11] I'm a buyer. I buy companies. That's what I do, that's what I've done, and that's what I love to do. So if I have a partner that wants to continue with me, this first piece is just require one company and then you're on your own. Unless you want to partner with me. So there's no long-term commitments.

[00:41:26] It's just the first deal I'm gonna teach you. We're gonna buy a company together. At the end, you're gonna have the skillset to go buy whatever you want. Whatever company you want. And you can do it with me or you, you don't have to. If you do want to, I'm absolutely interested in rollups. That's really how you make money.

[00:41:44] That's how you make a lot of money. But again, we're just getting started with this model and I don't like to talk about, too many, stages out, but yeah, absolutely I would. 

[00:41:53] Ron Skelton: So I had, the reason I was asking is like, do you classify yourself as a holding company? Do you classify yourself as kind of an, intermit, [00:42:00] not like you do a mix usually, like, you'll hold when the partner wants to hold, you'll help 'em exit when they want to exit.

[00:42:05] So if somebody wanted to go in, like there's some good people out there that're really good at systems and processes and stuff. Fixing broken stuff. And I'm kind of this guy, I made a name for myself in the tech industry for going in when operations were, really low, high performance in tech companies and being able to get 'em up to the 4-9s, 5-9, 6-9, basically get 'em up to high performing and, putting in operation procedures and stuff.

[00:42:29] But once everything that's broken is fixed, I get bored and go to the next company. It's like, okay, everything's working here. Nobody calls me at night and tells me something's broken. I grew out of that phase, trust me. I don't wanna be called in the middle of that anymore. I got two kids and stuff.

[00:42:41] But the point is, is that, people have different things that they're really good at. There's different phases and stuff. So I would imagine some of your clients, they want to go in. They wanna grow something, put systems, processes, and then they wanna sell it and go find the next one. 

[00:42:54] Robert Nance: My partners. 

[00:42:55] Ron Skelton: Your partners. I'll get it. I'll get it. We go 

[00:42:57] Robert Nance: Everything, inside [00:43:00] this model, I'm very flexible. Inside the business acquisition model. If I find someone who's great at it, who's great at turning this around, I'll buy them any company they want. Put 'em in, turn 'em around, I'll the next company they want. I'm looking for operational partners.

[00:43:15] And if you're great at it, I hope to be your partner. I hope to be your partner in the future. Beyond the first deal. So yeah, it's all about buying businesses and finding the right partners. And that's really what we're looking for right now. 

[00:43:30] Ron Skelton: I smile because I think that's the key in anything, right? Finding the right people. So I'm in a hiring phase right now. I'm looking for kind of a, I'm looking for somebody way organized, right? I look at this like, I told a couple of the people interviews like, look, if you turn out to be the right person, I own other things too. You'll be the right person, come in, you're hyper organized, you get this thing up and running and got a couple projects that they're going on. But it's just a key. I probably interviewed a dozen people and nobody's the right person yet. [00:44:00] So you find that operator, that's just, that's what they do. They could they have a particular skillset.

[00:44:05] You could find a partner for life on some of this stuff. 

[00:44:07] Robert Nance: Yeah. All my partners right now are great operators. Great operators. They all own their own business right now. They call themselves, solopreneurs. So they've got one or two employees and they're ready. They've been running their own business. They're great operators. They don't really like the, the long term running, but they like getting in and changing things and they're very technical minded, and we're very close to buying our first deals. We're very close. 

[00:44:32] Ron Skelton: Okay, so this is a new program. You guys are, you're lining people up. You're about to, ready to close your first deals and stuff. You've been mining for a while. Then I'm talking about you and your partners together. Let's make sure people know how to, what, where's the Facebook group? What is it called? 

[00:44:46] Robert Nance: Small biz Acquisitions. Facebook. 

[00:44:48] Ron Skelton: So they go to Facebook. Small acquisitions. Facebook Small. Yeah, it's in its small Biz acquisitions. I'll put that in the show notes for everybody. And then you guys are, you got the website, is [00:45:00] that up and running now? The small biz acquisitions.com?

[00:45:03] Robert Nance: It is.

[00:45:03] Ron Skelton: Cool. So I'll put that in the show notes. And then, do you want me to put your, you got a cell phone number here of how people wanna contact you want that in? 

[00:45:11] Robert Nance: Absolutely. Yeah, absolutely. I like, I'm looking for partners. I'm not selling courses. I'm not trying to, I'm looking for partners and if you think you're a partner, call me. The phone number's there. I'll put my phone number out. It's my direct phone number. And, that's what we're doing. We're looking for partners. We're looking for great operational partners who have the expertise, may not have the money, may not have the, definitely doesn't have the knowledge. It's difficult to acquire business acquisition knowledge.

[00:45:37] I'm very open. I'm very accessible. I'm not a guy who looks at this as a, I'm a guy who looks at, I'm looking for partners. I wouldn't disrespect my potential partners by saying, oh, go through this person and this person and book a call on my calendar.

[00:45:55] No, just call me, text me. I don't have a calendar. I don't have, I don't do that. I [00:46:00] find that to be fairly disrespectful and even though I'm getting overwhelmed, I do have someone who keeps my calendar. But partners call me, contact me. 

[00:46:10] Ron Skelton: All right. What's the big takeaway? If somebody, they heard a podcast, they listened to you, and they can only remember one or two things from the call today, what would you want 'em to remember before they like, as part of what we covered?

[00:46:23] Robert Nance: Buying a small business is very difficult. You need someone to help you. I'm looking for operational partners. People who are ready to take that step, and if you fit that, I'd love to talk to you.

[00:46:45] Ron Skelton: Okay. I appreciate you, man. I really enjoyed what we talked about here. If there's anything else you wanna add before you go? 

[00:46:52] Robert Nance: I don't think so. Anything that you can think of that I didn't answer? I know we, we went through the process. Just don't be scared [00:47:00] to buy a company. Don't be scared to get into, go into the Facebook group, small biz acquisitions and just look around. Go into the guides, listen to the videos, the audios. This will be in there eventually or a portion thereof. Buy a company that's buying a company is the fastest way to change generational wealth. 

[00:47:23] Ron Skelton: Awesome. I guess that's a good question. Do you have any support for some of these guys that they've been working, a lot of these guys, they've been working for the same company for, 10, 20, 15, 15, 20 years, whatever.

[00:47:34] They own a company now. Now their income is significantly increased and not knowing how to manage that change can get themselves into problems too, right? They buy a bigger house, buy a fancier car. Then the next thing you know they're in trouble because they, over their personal life.

[00:47:49] Do you work with them on how to manage that new increased income or suggestions, or you just look for that trait before? 

[00:47:57] Robert Nance: I'll look for the trait beforehand. I look for that trait [00:48:00] beforehand. I don't partner with 20 somethings. That still have something to prove and still have to go buy the, all the Mercedes and the Lambos. That's not who we are. We're guys who buy boring companies that make a lot of money. And once we do, once you do that, you can go get your houses.

[00:48:15] I've got the houses I've, it's just that you have to do it methodically. And I watch that. I can see those traits quick. My partners are guys like me, serious guys that have run the companies that make money. These guys are already making money and they just want to step up to the next level.

[00:48:34] Ron Skelton: Got it. Just curious on that, just because I know some people that, recently acquired, a company that's doing mid seven figures, eight, $10 million a year in revenue. And within the first six months they went out and bought a house that's five times bigger than there's, bigger than they need.

[00:48:50] They went out and bought two, a hundred thousand dollars pickup trucks, Ford, TXs, and, I mean, they're just, I get it. You got the new money, right? Yeah. It's that Novo reach. You [00:49:00] got the new money, but yeah, man, you're just, they're still figuring out how that company runs. What are you doing, right?

[00:49:05] Robert Nance: Yeah. And I'll look for, I, look, I'll look for those straights. I've got a certain background that allows me to look for traits and listen. Got a degree in psychology. I'll listen to that. Just listen. Everything has to fit together. Partnerships, the sellers, everything has to fit together to form a great business, small business acquisition.

[00:49:26] It's, but it's a great world. It's a great life, but it's a life that I find that most people just come in and bounce around because either they're intelligence level is too high and they think they can do it on their own. And some people can't. Again, some people can do that. Most can't even with a very high intelligence level.

[00:49:44] And then some people are just too cheap to come in and say, Hey, listen, I need this. I want this partnership. And they're just not really ready to commit. There's the diamonds that I've picked out so far that, that are just perfect partners. Just perfect partners, and that's what I'm seeing [00:50:00] more and more each conversation I have that reach out to me from the Facebook group.

[00:50:03] They're just perfect partners. They're just perfectly situated for what we're looking for in a partnership. 

[00:50:10] Ron Skelton: All right, before we go, you wanna tell everybody what that is? You got an idea? Kind of, that one more time recap. What you're looking for in that partner. 

[00:50:16] Robert Nance: I'm looking for someone who's motivated, who has a family, who's been in a management position for five plus years. That's ready, that's just ready to step out and own their own business, but just don't know how. 

[00:50:28] Ron Skelton: All right, Robert. I wanna, 

[00:50:30] Robert Nance: The rest of it's easy for us. 

[00:50:32] Ron Skelton: Okay. Well, cool. I wanna thank you for being on show today. We'll, make sure, one more time, tell everybody what your Facebook group is. 

[00:50:39] Robert Nance: Small Biz Acquisitions facebook group.

[00:50:41] Ron Skelton: All right. We'll put that in the show notes and, thank you for being here, man. Hang out for just a few seconds after I stop the recording. That's the show, guys. 

[00:50:47] Robert Nance: Thanks for having me. 

[00:50:48] Yep.