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Jan. 5, 2022

How2Exit Episode 11: Zoran Sarabaca - a successful Business Broker with over 18 years of experience.

How2Exit Episode 11: Zoran Sarabaca - a successful Business Broker with over 18 years of experience.

Zoran became a broker after the frustration of selling his own Electrical business and prides himself on working with owners, being honest with them, and helping them market the business in a way that will actually sell.

Join us as we chat with...


Zoran became a broker after the frustration of selling his own Electrical business and prides himself on working with owners, being honest with them, and helping them market the business in a way that will actually sell.

Join us as we chat with Zoran about being a business broker, coming up with a proper valuation for a business that wants to sell, and what he's learned having completed hundreds of transactions.
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Contact Zoran on
Linkedin: https://www.linkedin.com/in/zoran-sarabaca-bba2a38/
Website: http://www.xcllusive.com.au/

If you’d like additional ways to support this podcast, you can become a patron here: https://www.patreon.com/bePatron?u=66340956
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Reach me to sell me your business, be on my podcast or just share some love:
Linkedin: https://www.linkedin.com/in/ronskelton/
Twitter: https://twitter.com/ronaldskelton
Facebook: https://www.facebook.com/How2Exit

Have suggestions, comments, or want to tell us about a business for sale call our hotline and leave a message: 918-641-4150
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Watch it on Youtube: https://youtu.be/OLqszNP7yHY
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Other interviews:
Zoran Sarabaca: https://youtu.be/OLqszNP7yHY
John Andrews: https://youtu.be/vmGWbd2y5x0
Chris Daigle: https://youtu.be/jHWzFGRbpD4
Arturo Henriquez: https://youtu.be/uwN7y8AE4EQ
Joe Valley: https://youtu.be/ZQLdybxcZKs
Christopher Wick: https://youtu.be/xhIf9ltgedA
Jonathan Brabrand: https://youtu.be/oC82Ls54CXo
Carl Allen: https://youtu.be/VIU2Lqj_FY4
Klint Kendrick: https://youtu.be/eJ2GICCj2TA
Walker Deibel: https://youtu.be/xoUH_Ixeook
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Ronald P. Skelton - Host -

Reach me to sell me your business, connect for a JV or other business use LinkedIn:
Ronald Skelton: https://www.linkedin.com/in/ronskelton

Have suggestions, comments, or want to tell us about a business for sale
call our hotline and leave a message:  918-641-4150

 

Transcript

Ronald Skelton  0:06  
Hello, and welcome to the how to exit podcast where we introduce you to a world of small to medium business acquisitions and mergers. We interview business owners, industry leaders, authors, mentors and other influencers with the sole intent to share with you what it looks like to buy or sell a business. Let's get rolling

Hello, and welcome to the how to exit podcast where we talk about buying and selling small businesses. Today I am here with Zoran Sarabaca. I know I butchered your name again, we practice this the other day a couple times. I get it closer that time.

Zoran Sarabaca  0:49  
Yeah, very good. Very good. Sarabaca or Sarabacha. But yeah, I gotta go worse. I've got Sambuca. I got Chewbacca. So it's good. 

Ronald Skelton  0:57  
Sambuca is a horrible taste scene alcohol. When I was in the military, I used to keep it in the refrigerator. Because the freezer because it tastes like black licorice. Right? And that none of the dorm mates would steal it from me because they didn't like it. So if I wanted something to my own, I had to get something that I only have a drink. So we'll know

Zoran Sarabaca  1:17  
that you knew you're gonna meet one of them in the future. So there you go.

Ronald Skelton  1:21  
Yeah. So you've been a business broker for over 18 years, and I was reading a little bit about you, it says you become a business broker, out of the frustration of trying to sell your own electrical business years ago, you just thought you could do it, you'll build a better brokerage, you could treat clients better, but it looked like that appealed to me. And then I'm really curious, I have some friends that live in Australia, you are from Australia. And I'm curious to the similarities and difference between people like myself who buy and sell businesses, you know, between the US and Australia in some other areas of the world. So I think we just jump in, let's just get to know you. And I always asked the first question I always ask was just kind of tell me a little bit about yourself, kind of how you got into this space, and then share something interesting, the listeners might find amusing or interesting to connect with you. And let's just start there.

Zoran Sarabaca  2:20  
Right? Look, I'm always I told I was always going to end up in business I did. He happened much faster than what I taught. So I never worked for anybody else. I had a couple of contracting jobs a few months. But most of my life, I was self employed. So it came from my father, my father had a quite large business in Libya, or the world places in 1970s. Libya used to be a bit like Saudi Arabia before the crash of 2008. So there was a lot a lot of American money, a lot of European money, a lot of European and American companies actually working in Libya doing started because of the oil. And then from the day they started doing infrastructure and few other things. My father was involved in water infrastructure developments, and he had abouts from the memory about well, I don't remember any of that, but from what he was saying to me. Back then we had about 300 people employed. And then the 1970 when I was born was the same time with Gaddafi came to power, and started nationalizing companies, so they had to leave. So then they moved to Croatia, well, back then Yugoslavia, now Croatia for few years, and then to Serbia and I grew up in Serbia. In he always had the businesses and I was kind of groomed or brought up in there's only one way you got to be in control of your own destiny. And if you want to do that, you run your own business. So then, in ninety-one, 1991, trouble in all Yugoslavia started and I had two choices to join the army or to leave so I chosen to, to leave and ended up in Australia, ninety-one. And that's how everything started. So that's how I ended up being here. Back then 21 years of age, and with hardly any life experience, but when you're 21, you think, you know, the old less started the business age of 21. And that was the beginning of me coming to the country and actually starting a business. But what happened then, a lot of people don't. Often we talk to people they ask you, what would you do different like in what would you wish you knew when you started a business and my answer is just about everything. The diet just jumped into it. and learned the hard way and learned on my mistakes and so about. From memory about seven years into business, we invested some money in some real estate and there was a bit of real estate adjustment and few other issues, he and I needed to got myself in a little bit of trouble. And the only the quickest way to get me out of trouble was to sell the business. And I put the business on the market with few of the well not few of the brokers, I interviewed few of the brokers when they were the one that I taught, there was the best match for for what we needed to do. And I was bit disappointed with the type of service that they're there we received in a nutshell was okay, you give us your business, we put on a few websites, and somebody made a comment if they can we send them to talk to you and and you sell your business. If you sell their business, you give us some money. And but I was not getting inquiries, and I was bit confused. Why not? Like my no one is looking at it. So I bought few books, bought them from Amazon from United States. And so you're talking 2000 Something like Amazon was in its infancy, I think I owe the five books and took about 28 days. And they were all one book every four or five days. So I read through it and get some idea how to do it further together, put it on the market. And it took me about four weeks to sell it. And that's how I got into business broking. And by the way, that's how a lot of people get into business broking you try yourself You either like it or you don't like it, I think you can do it better. And you get no no one ever goes to school to become a business broker.

Ronald Skelton  6:50  
It's interesting, it's interesting. Here in the United States, or at least in Oklahoma, every stage here is a little different. But here in Oklahoma, the you don't actually have to have any formal license to be a business broker, right? So you can like put a business card together, so your business broker and go out and buy and sell businesses. Some states actually have it fairly regularly. But uh, just like any other business, you end up in these, like a business broker or any other business. For one of many reasons. Most of the time. I do hear a lot of businesses like, they think they can do it better. Like that's the number one reason like, I tried using the service, I didn't like it, I think I could do it better. So I jumped into it to fix a wrong, right? Or, you know, a, they think it opens an opportunity. When I first got into mergers and acquisitions, one of my teammates went and bought a business brokerage because he thought it would be a great source of leads. You know, he's like, I'll just filter everything that you know, anything I think you want, we'll we'll evaluate and everything else will put on the market for other people. And he didn't realize or I don't think he realized how much of a business billion a business broker is he needs to market or four there's a lot of work that goes in that. I've seen a few deals but uh, I don't think it's going as well as what he thought like I think

Zoran Sarabaca  8:13  
I bought a few business brokerages from from from people like your your friend. It's much easier. And they said, listen, just give me other here, right? Like, let's just do the deal. Give me anything I just want to clear up. You told me the first, there's quite quite a few points you mentioned. And one was about licensing. And, look, I don't think necessarily not having a license is a good thing. Because it's heavily licensed in Australia, but it's a real estate license. Right. And you do both real estate and business. And very quickly you figure out that they got nothing to do with each other. So there's a lot of constraints and a lot of issues that we have to because of the licensing to deal with, which are really not applicable to businesses whatsoever. So becomes a burden. It just becomes this red tape. That's not necessary. I'm a big believer in you know, it's a core of every invention competition. So anybody who wants to go into industry should be able to government licensing, it's not necessary. In many places where it exists, but people got the choice, you can either join one of these organizations, you can do it on your own. The reason why a lot of these businesses don't work very well. It's a low barrier to entry. So people think how sweet is this? Alright, I'm gonna make a 10% of every sale and I don't need anything I can do this from you know, a laptop and are going to have this fantastic lifestyle. And I got to do this $5 million deal. I got to make $500,000 It's, it's, it's not that easy. And a lot of these things are not run. They're run like agencies not Like a business's, and that's another problem because the whole problem with the business broking from the business point of view or challenge is that two distinct pipelines, one is getting a leads in in order to sell and then he could, it could take about three years negotiating with somebody before taking to the market. And then once when you got them, you got to sell him. But also when you're selling a business is there's two things to it. One is finding a buyer for the business. And at the beginning, that's hard, but as your network and grows and like our database of buyers, it's in 1000s, I think it's about 37,000 people that we got. So I can go into our database and said, Okay, I've got their conditioning business, in such and such area, and I can filter and get 200 people that they already told me that that's what they're looking for. And I get to send them an email instantly. But but that's the first part once when you find a buyer, your process of it's not selling anymore, but it's actually

obstacle, overcoming. So as once we got the buyer was going to look at this, and well, I don't like the way this is structured, I don't like the way the handle was going to be done, we're going to see the problems. And each time when the problem arises, you're going to resolve them find the solution to the problem until you get it to the end, and you bought a few businesses in you know, that's exactly once we start due diligence, that's where the issues are popping up. Even if you're very prepared for the due diligence, because your situation may gonna be different, to sell a situation. And certain things work very well for the seller, but they don't work very well for you. So I'll give you an example. We were in the middle of the deal. And they wanted to buy the company, they wanted to buy the corporation, not not not the business assets, for one reason, or the other main reason was because there was about 700 contracts. And otherwise, you'd have to resign or the 700 contracts if you buy the company. So you need to resolve the issue before the deal comes through. And so what happens here, what why it's really hard to find a good business broker, because it's a different skill to somebody who's good in finding a broker, finding a buyer to somebody who knows how to actually overcome the the issue like this. And in our organization, we got about 20 people that sell businesses and 10 people that support them. So we got a different people that look for the business and different people that selling businesses. So the brokers actually don't look 100% of the time isn't selling businesses. And the reason why I took 18 years to get to this stage, the hardest part for me was to find the talent to find people, they're able to do both parties to call the deal together to be to control the emotional part of the buyers and the sellers, and at the same time have enough knowledge about businesses in order to overcome the issues as account. So the accountants are normally really good at that they know how to how to resolve issues, how to work on the on the businesses, not really good, all the good relationship with the people. So you're going to find a good salesperson that's really good in holding a relationship, but they don't understand the business. So it takes a particular type of person. And a lot of them are ex consultants, ex business owners that actually lived through business life already. But successful business life, not just any business life. And that's why in my opinion, is hard to find a good business broker, but it's not impossible, like I'm showing in this. There's a lot of good guides, in states in all over the world that do this,

Ronald Skelton  13:50  
I think I think you hit a really good point there. And one of the things I think that you hit on is the problem solving, I think I've always considered myself a really decent problem solver. And I've also, you know, look for other problem solving type people for my business. And I'm pretty much at the conclusion that it's only about 3% of the population is actually really good at seeing a problem like you know, like kind of a mixed up puzzle and being able to quickly find the pieces, put them where they need to go and solve it and move forward. I honestly think it's one of the rare forms of you know, existence as a human to just naturally see problems and go okay, I can come up with an opportunity out of that sort that out. So I can see where a lot of brokers run into that. Having evaluated quite a few businesses. I don't when I see a problem or an obstacle, I don't actually you know, turn like a lot of people would say okay, this thing has a huge problem. You know, I can look at them and try to untangle them myself. One of my last businesses was actually a four stopping foreclosures and dealing with negotiating with banks and untangling short sells and stuff like that, that was nothing but problems. So, you know, but I can see that I can see where like, I think in the US the statistics are like, it's higher than 80%. So higher than 80%. And sure one of my listeners will correct me if I'm wrong. But higher than 80% of all businesses ever listed by a business broker don't sell here. And I think you hit it right on the head, it's because they can, they know how to market and get a listing. And they know how to look at the financials and go, Okay, it's a sellable business. But when the due diligence comes down, you know, for anybody, and there's a problem, they basically tell the owner, you got a problem, you got to solve that, or we can't sell it. And rarely is the person who caused the problem, the person who's able to solve it, right, it's usually they usually need an outside set of eyes and an outside hand in solving something they created, especially if they've created over five years, 10 years, 30 years of running the business.

Zoran Sarabaca  16:00  
Well, also, you once we run your own business, you got a problem of one business, because that's what you've been doing for 1010 years. If you find a broker, that's experience, like I can't tell you I mean, every day I find something new but but the amount of the issues of problems. Or messed up situation that that we came across, it's huge. And there's always a solution, there's always a solution, you just get out and experience that you've seen something similar in the past, it helps you to suggest and point people in the random right direction. Not necessarily we can resolve every issue, but we know where we can find people that can resolve those type of issues. So we can actually continue with this. You mentioned something about large amount of businesses not selling with the brokers, I challenge that little bit in terms of why they don't sell and from what I've seen over the years, main issue is our pricing businesses is not finding everything is sellable, and everything's got the right price. But what people try to do is to over value the business thinking, Well, I gotta leave some room some room for negotiation, like running joke is fastest way to value the business is as the owner what he wants it, then they have, it's very accurate. So, but but here's the deal, alright, if I've got a $3 million business, and I'm trying to sell it for 6 million, person that's looking for $3 million business won't even call me. Because it's $6 million business, I can't afford that person that looks at a $6 million business is just going to walk away. Because when you're dreaming, alright, so you're you're not serious about selling. And even if you're serious, you're asking 6 million for something, they won't even offer you 3 million, because they don't want to insult you, right? Now. Put a broker into the mix. And over the time, they learned that that's the case. So easiest way to actually get the deal from you, is to tell you what you want to hear know what you need to know. So if you tell me that you got a $6 million business, I just got a second from of course, I can sell this for $6 million dollars, and I get paid for it some money. Alright. So it creates this moral hazard. And but it's counterintuitive when the broker comes in and said, Look, you actually don't have a $6 million business and you've got $3 million business and going for $6 million dollar on the market and it's just going to damage your chances of selling because what happens, you're going to stay too long. And then the business becomes stale. And then you go to if people see business on the market that's been advertised for more than a year first thing that they think it's what's wrong with it. All right, why has it sold. So when the broker tells you then as the owner, you actually don't like them because they value intangible assets, but they actually the guy, the the person that really is got your best interest in mind in telling you what you want. Like if I go to the doctor and something's wrong with him, I don't want him to sugarcoat it tell me what it is and let's get on with it. Similar hate you need a good diagnosis and the price is the big problem in all of this alright, I can't tell you how many times happened to us that we lost the deal because we don't think it's worth what they think that they selling then they try some a year and a half later they come back to us and then very short period of time we have a buyer we do the deal. So so that valuation is really important, which is another different skill to everything that we talked about. You need to know how to value the businesses

Ronald Skelton  19:47  
so interesting. Here you know here in the United States, I've went to two or three actually three now a different mentors where I learned acquisitions and mergers when I decided I wanted to move from real estate to mergers and acquisition. I thought, Well, I'm just gonna go do what I did in the real estate after I learned a few deals in real estate and realize that the best way to learn this is to tag along with somebody that's done it. So I hired a couple of different mentors, and they, they, two out of the three said, Don't ever talk to a broker. And the reason is, the reason is, is they're always over pricing in the broker kind of gets in the way of the deal. And the reason they think they're overpriced, and I get this, as I'm a business owner, I go to broker number one, and I want a million dollars for my $500,000 business. Right? And I go in there, and he goes, Yeah, yeah, I can get you a million dollars, I either let him list it, which is wrong, because it's not worth that, you know, it's a $500,000 business. And I want a million. So he said, Yes. Or I go to him, and he says, I, you know, I can get you a billion dollars, if that's what you want, we can do this, you know, I have already scheduled two or three other appointments, I go to visit broker number two, and I said, Hey, the last guy said, you can get me a million dollars, it's kind of want to where I want, what's your valuation on my business, and he goes, I can get you 1.25. And by the time he gets, you know, guy, three, it's 1.5 million, now you got a business listed for 1.5 million is worth probably 500 to 800,000. Right? And it never sells and the business owner doesn't know why. Right? And it wouldn't, when they I get a hold of some of these guys, because they reached out to me and he had been with a broker for a long time, they don't sell, I use fairly simplistic models, kind of the valuation models of multiples, just to start off with and then we later on we go, and I can tell them right off the bat most of the time, it's just because your your price is really high. Unless you've got something I just can't see. You know, you can't, if you got a business make an under a million dollars, and you're wanting to 6x Multiple and your your your sellers, discretionary earnings. Most industries, it's just not gonna work. Right. And so that's, that's kind of why they tell us to shy away from it. But, you know, there needs to be more brokers like yourself that just stand up and go, Hey, the proper valuation for your business is x, all listed, if that's what you want me to do, but if not, then good luck with the other guys. And when they can't sell it, come back and talk to me. Right?

Zoran Sarabaca  22:07  
Yeah. Yeah. And there was my thought when I started the business, or look, everybody is going the wrong way about it. But that's not necessarily the case. So what happens a lot of larger organization goes that way about it because it's run by agency model. Alright, so you're the broker, I'll give you the card world is your oyster. And you got to go and fend for yourself, you got to do best you can. And you learn very quickly that the fastest way to earn money here or to get listings is to tell people what they want to hear. So there's no there's no control. There's no quality control at the back. And that's really hard to scale. It's possible, but a lot of them don't do it. Right. So smaller brokers in general, do much better job in value in business, because they don't want 20, 30 businesses, they want five and they want to sell those five. All right, so they can afford to actually say no, well, this is how everything works. There's no internal competition and everything else. And but what happens when you're selling with a smaller broker, they normally don't have as large market as somebody larger. So there's no wrong in the industry. For example, most of the payment comes in as a success fee as a commission on the end. Alright. So broker takes on the business doesn't charge you anything, it's only going to get paid if you sell. So as a seller, you think this is really good deal because it's going to work hard. But the broker thinks well, I don't have to pay anything. You go and complain, complaining about you paid me nothing. So So you got the accrual, and when your work or service for no payment. And so some sort of hybrid model works best, but it's really hard to do. And so the industry No, it's I mean, it changed so much in 18 years since I was there. Now a lot of if I go back even 10 years ago, a lot of these guys family offices, motors acquisition guys would not talk to the brokers are you there I lost you there for a second. So wouldn't wouldn't even talk to the brokers. And but now it's different because they're figuring out that certain brokers got a good deals and they're coming to them and actually like having a broker on the other end. Because as you can see, we understand, like we talking here in the stand each other. So I'm not gonna call you know, unless I've got something that fits what you're looking for. Because what's the point you're just going to waste time and you're never going to listen to me again. Alright, so if I call and said, Ron, I've got a deal. I know what you're looking for. It's very well priced. And there's a couple issues in the business. We can overcome this is the deal that we're looking for? Are you interested yes or no. And it makes your job much easier because the deals are not come coming to you. But 10 years ago, that wasn't happening in Australia last five years. I mean, all this stuff of merger or acquisition guys, people call themselves different types of investments or whatever there is family offices, businesses, they're looking to expand and luck on our list is just getting bigger and bigger and bigger. Accountants starting to listen to us because you know, like you got to specialists. You know what the deal is, but it's secret to good business broking practices. Advice, from the very beginning, make sure that you do the work. And if you lose, you have to say no to deals, I have to say, we say probably not to none, well, maybe 8, 18 10. And main issue is either how they want to go about selling a business. But the main issue is price. I want 3 million and without 3 million on exiting, but it's a $3 million business so I can help you.

Ronald Skelton  26:07  
It's interesting and I've talked to business owners, and if they call me I'll have an ad or if I called him because I I seen they ran an ad somewhere or you know, somebody introduced me to him. You know, when when a business owner, like the very first thing they'll often do is like, look, I heard you buy businesses, if you're not, I'm interested in selling my business, I'm looking for 2 million if you're not like interested, if you don't think that's in your ballpark, we're just wasting time. And my number one response is, okay, let's just see how we can get you there. All right, I already know that half the time or I'd say way more than half the time, most of the time. We we can't get them there just because they're their business isn't worth that. But until I see the inside of the business, that's the only thing I can say is like, Great, let's see how we can get you there. You know, and a lot of times, my answer is run it for five more years, double your revenue, and then I'll pay you that for it, you're not there yet. If you want to sell it now, you this is the best I can do. Right, if you can fix XYZ and double your revenue, and now we're at your number where you want to be. And I'm still interested in at that level too.

Zoran Sarabaca  27:14  
So and that comes from the wrong advice on day end. Alright. So you got to look at my people selling businesses, less than 20% of businesses there. So at least in our books are sold because people retiring, alright. So normally what happens is, something happens in your business, or something happens in your life, that forces your hand on selling your business. Big one is mood change, like you're going from one state to another or you're moving or your wife had enough of this or your husband, change the Korea and you're following your husband, whatever it is. or something happened within a business and often would be, well, I got two parts of the business and one got too much bigger. This one is good, but it's not our core business. So we can offload it and sell it. And what happens you need a good advice on that. So it's not what you need to get out of it. But before you make a decision to go on the market, you really need to know realistically, what somebody is going to pay for it, and then make a decision. What happens people normally make a decision, and then it looks for somebody who's gonna fulfill what they did. And a lot of these businesses that don't either come to you and said, Look, I want to sell a business for 2 million. And if you can't get there, and he ends up getting a million dollars, another another reason why they do that, because they think that's a good way to negotiate. You don't grow your business by overpaying for the asset, you want to pay a fair, fair market price. Alright. So sometimes it's better for you to wait.

Ronald Skelton  28:47  
Yeah. Like a lot of the business owners like you'll ask them, Well, how did you come up with that number? It has nothing to do with their business, at least at least the ones I've talked to here locally. It's like, well, how did you how did you evaluate your business and think that's worth a million bucks? Well, that's what I need to retire, I'm ready to retire. Okay, that has nothing to do with like the performance of your business, how well it's run, how well it's managed. It has a lot to do with your personal side. And it's it's amusing. Some of these guys have run their business for 30 years, 40 years, and they still haven't separated personal wants and needs, with what the business is actually worth. So do you come across that also or

Zoran Sarabaca  29:27  
all the time, but that's that just a lack of information, or a lack of trusted source of information. So I remember 20 odd years ago, I had a I had a head coach, business coach and one of the first meetings and he said, Listen, you know how the coaches did like, we're going to do in the one year term, three year term, five year times, five year, five years time and he goes, how's your business going to look like how many people are going to employ how much is going to be worth it? And that's the first time that I got exposed to any of the business. And I couldn't, I had no idea how much my business is worth. And I remember then it refreshed my memory because I got into this type of line of work later. But that was the only time that we mentioned it. So until I sold business, there was no any conversation about the value of the business. And in fact, when I started selling my first business, I have no idea how much how the businesses are valued. It's not something that you get exposed, it's not really important to you, when you're running a business. I read in so many books in our head, so many times you should start thinking of selling your business the moment you started, no one does. When I start a business, I just want to stay afloat, or I want to pay that bill, how do I want to go broke, that's that's my goal for first three years, and then the business grows, and then I'm growing a business and then business starts making money. And then I'm enjoying the money that businesses making, we ask questions such as Have you had the business professional evaluate? And that makes them think well, what's professional valuation? And how does that work? Because the value of the business doesn't come just from your business, but it comes from what buyer can do with that money elsewhere. Alright, so I don't have to buy the business, I could invest in real estate, I could invest in Bitcoin, if I want to do at the time, alright. So the white investment market dictates the price or range of the business, then we did the range quality of your business points out or your towards the law to high end. Alright. So good conversation with the business owner will help now, where the business owners got a problem is the bias of the advisors that they talking to. So if they're gone, often they go to the accountant. And the accountant often overvalues the business, because it doesn't want to damage the client is afraid of, you know, making a mistake. So he figures Well, if the business is worth $2 million, and I tell him, it's 3 million, it sells us for 2 million, no one's gonna sue me. But if I tell you $2 million in sell for two, well, no one's gonna sue because it's all for 2 million, but that's what they think that's gonna happen. So what happens often they already do the business as well. So it's really hard for any business owner together. Really good advice at the beginning of the process, by time they sell the business or get to the end, they got a really good idea whatsoever, alright, but by that time, it's often too late, a lot of damage was done at the beginning. So business broker, advising the client at the beginning, and he wants to give him a right advice often comes against that barrier of or issue when I'm telling you that what you built over 20 or 30 years, it's nowhere near as worth as what you think, and ability to deliver that in accurate way is but also in such a way that the owners gonna say okay, actually, this makes sense. It's make or break. It's, it's, it's a golden point if business sells.

Ronald Skelton  33:12  
If you go to look, even if a business owner wanted to do their research, and decided to jump on it start Googling how to value my business. In the Ivy League schools here teach anywhere from 100 Things between 140 150 different valuation models, there are entire courses on Udemy. And other websites out there that all you know, it's 40 hours worth of coursework on how to do business valuation. And the chances are as a buyer like myself, or other you know, guys in the m&a field, we have our own models we look at right, we have things that we've adopted. And, you know, I Is there a right answer that, you know, if you do the math on a bunch of them, there's a range, a lot of them will fall within the same, like a general range, I don't think they're they're really disparaging, like between the two. But if you were just a business owner and go, Okay, I'm tired, I'm tired, I want to retire, I got this new opportunity I want to get out of the business, or I'm going through divorce and I have to sell what's my business worth and like you google how to value my business, you could get lost in a rabbit hole of days and still not be able to come up with a number that is going to be representative of what a buyer will actually pay. Because of all the different models out there and how complex they are.

Zoran Sarabaca  34:29  
And I don't think you can do it. If you've never done it before without anyone's help you can do it. I'm registered as a business failure with Australian history of business brokers and there was a 80 hour course with another for the hour assignments 120 hours but the prerequisite for this is five years in the industry. And I remember years ago when I've done a course I wasn't a good as a vendor. It took me like three to five years so it took me about a good 10 years in industry before I could Look at the businesses now. For the business owner who wants to sell a business was getting divorce and he needs to know how much is a business worth, to actually go and do the course and value them yourself. It's, it's crazy stuff already, it's like I want to build a house are going to become an architect, you just have to just call the architect and you trust. So the trick is to find a good way you have to trick is to find a good advisor who's going to lead you through the process, and good advisor. I don't have a formula, how do you know what's a good advisor, right? Like, does your gut feeling work? Sometimes it does, sometimes it doesn't, as some sort of, you know, slow system to analyze, my work might not gonna work. We, you mentioned something about 120, or whatever the number was different valuation models, you do need to look at a few valuation models to actually understand the value. So you got to look at your business and you got to look at the return on investment, then one thing that I like doing is a comparable sales. Alright, so let's have a look at the five or six or 10, or five or three or whatever number of businesses, they have sold the way that we got accurate data that we can trust. And let's compare those businesses to yours, then then then let's look at the asset method. And then on the end, you come to some sort of conclusion based on informed decision and understanding what's happening on the market, what people are paying, and why. And you can actually explain that to people. But the processes to really run your business accurately, normally takes us about 40 hours. So it's a whole week's worth of work. So I really got to do go through some pre due diligence, I got asked a lot of questions. And a lot of stuff is not a financial stuff. It's not what the what the shows on the bottom line, but the risk associated with generating this bottom line. So what happens if you go into business owner goes through the process, not just given report to read on the end. But if the business owner is part of the process, by the end of that process in five or six days, they actually understand. And look, business owners are smart people, I mean, it's not easy to run a business these days, like, it was never, never easy. It's getting more and more complex, not not easy. I mean, you're doing podcasts, I'm doing podcasts, like you can even employ people to do online marketing for you need five people to do online marketing. That's how complex it is. So these people know, they understand stuff, so So when the business owner goes through five days of process, they actually arrive themselves to understanding where the value is. And I think that's the way to go about it. So don't just ask people for the number but be the part of the process. So you're going to be much better, even if you decide not to sell, you'll know now, where the value drivers in your business and when the risk issues are, so you can actually address them. So improve the business and you're gonna know realistically what's what's doable, what's not doable? I've seen a lot of advisors coming in and said, Look, you've got a business, that's three times and we're gonna show you how to do it six or seven times, I can tell it's not going to happen. It's not going to happen if you first First of all, it's not that easy. Alright. Okay, second, second of all, like, if you want to improve the value of the business, you got to improve the profitability. But what do you think this guy didn't want to improve the profitability philosophy is he just want to run a business as well. And this multiplies to double the multipliers in 12 months, it's impossible, I've never seen it, I've never seen it in close to 20 years, haven't seen it once. So, so be very careful if it's too good to be true.

Ronald Skelton  38:51  
Even inside of that, there's just an immense amount of work, you know, you know, the advisors we brought in to do that type of work, are guys that have done it 10 times they charge $5,000 an hour to walk in the door. Right? And, you know, they get it done. But like, I do agree that it's next to impossible if you think you're gonna, you know, that's an interesting thing you brought up too because a lot of guys buy businesses with this thing. They have this illusion that yeah, this guy's been running it for 20 years, but you missed this key element and I'm going to double that business in the next two years. And it's possible but not probable right. But unless you're bolting on something to an existing customer race where you have a deep relationship and you know the pretty much by anything you sort of stick in front of them, it's not going to happen. And

Zoran Sarabaca  39:41  
so we always overestimate what we can do in short periods of time and underestimate what we can do and long period of time look back on the on the selling part of businesses and then the brokers when you said low brokers don't

Ronald Skelton  39:57  
sell it you know, I have some friends that are business brokers are just 30 now and there's a I'm sure there's people listening to this, to this thanks that I have a lot of contacts in the mergers and acquisition space, they're just, you know, the thought of these guys are just getting into it to just taking a course somewhere, maybe their real estate investors or their business owners and they want to get into to buying businesses to grow theirs to grow through acquisitions, and mergers are something if you're looking at buying a business brokerage, and or thinking of a comment a business broker, what would be your key advice to somebody that's just like just getting into this industry? What would you I mean, how do they

Zoran Sarabaca  40:34  
start, like so many different ways to start, but focus a quality focus of delivery, the results, alright, don't worry too much about volumes or anything like that. But each client that you're in front of that, from the beginning to the end, you've got to focus in on delivering results, deliver the the accurate information about the valuation, if you're not certain courses, find people that can help you pay people, they're gonna do it for you, then there must be start selling businesses, there's only three ways to find a buyer for the business, alright. So you can either be already on your database, you can advertise their business, or you can directly approach people in the industry. There's few others, but they are like marginal, so they're not worth mentioning. So these are the three most common ways of finding a buyer for the business. So whatever your system is, for selling, businesses have to incorporate all three. Alright, so you got to build your database over a period of time, you gotta have a good way of marketing that business. But you have to actively look for the buyer. So if I don't know your your, your, I'm selling a marketing agency, it makes sense that I gotta go onto LinkedIn and make a list of every single marketing agents in the area that I'm targeting, don't get on the phone and start calling these people. All right, that there's no easy way about it. And sometimes you've got to make 20 calls before you get to the right person, but you should keep on doing it. Marketing is also not that easy. Because how you market the business and what information goes into this advertising piece. It's really important because you can either entice people to call or entice them to dismiss your, your, your communication altogether.

Ronald Skelton  42:18  
It can also cause a disruption in the business, right? I I've had a couple of business owners call me and go, Hey, my business broker listed my business, my employees found it online, and I've losing employees. You know, I see that you're willing to buy businesses fairly quick. What's your timeline? I was like, well, in the business buying world fairly quick, 60 to 90 days, in most cases, I still have to do a lot of account. I mean, that's fast. I accounting due diligence, looking at stuff, you know, I'm not going to come to a drive by walk through your business and write you a check if that's what you're thinking, especially if you're having an exodus. Right? So I can get that what's being advertised is critical. And you know, the first thing I always ask the business owners, why were you open with the business, you know, with the employees to start with? Right? I mean, if you'd had that conversation before you listed it out in the public, you wouldn't have had this problem.

Zoran Sarabaca  43:07  
So look I missed a little bit, because connection wasn't that good. But like we talked about confidentiality, and what do you do about? Look, first of all, you can sell secret. Alright, so in there's always, there's always danger that people gonna find out that you don't want them to find out that the business is for sale. Okay, I've been doing this for 18 years. And twice, in this 18 years, we had a serious breach of confidentiality, that's some that somebody found out that we really didn't want to find other businesses for sale. So twice, alright, we deal with about 200 sales a year. In both of the cases, there was no damage done to the business like so. So so a lot of this fee of that confidentiality, is in the honest head. It's us selling a business being worried what if most of the fee is a time travel that we think something in the future is going to happen that's going to damages, but actually doesn't, that doesn't happen? And honestly, I can tell you in the 18, 20 years, never had any any serious problems. I did have people that find out that business for sale and they quit in the means of the due diligence, we had the General General Manager leave because he felt that he should have been part of it and and we still managed to the deal. Find the new general manager and do the deals, you brought

Ronald Skelton  44:38  
a good a good statement and they're the what if I've also noticed that when people are trying to self value their business, they include a little bit too much what if. If I hadn't lost this client, I'd be at a million dollars in revenue, then I would be worth this. You could go get that client back. And then you're worth that I want this for my business and they're selling the whole business on this perspective or this Future thing is, if they hadn't lost that big client, or if they had gained that client, and they think you can, so they want the prices if it's as if they're already there, right? So the what if comes into play, but what I was saying is the what if comes in play on both sides, right? When somebody is trying to figure out like, you know what they want to sell their business for that conversation where you're getting into knowing where they're at, and what their business is worth? That what if comes up quite a bit there, I never totally discounted, I always say great, if you get them back? Well, we'll add that in. Right? Or if we get them back together, you know, we'll add that in. And

Zoran Sarabaca  45:35  
there's a lot of ways and that goes to what we talked about the beginning that problem solving, alright, look, you know, I'm gonna buy the clients. So if you can get me more clients, I've got no problem paying extra for the clients. Right? So but but help me help me win that client? Yeah, let's get it because that's what I'm buying your business. Look. So so from the buyers point of view, if you find the people i i often, you know, buyers are talking to us and said, Look, you know, how do I find a good business? Well, first of all, if you're looking to spend a million dollars, start looking at the business of $2 million, because we just talked about it, most of them are priced in find a $2 million business and pull it off fine. And if they tell you where to go, just monitor it. And all of a sudden, six to 12 months down the track your million dollar potential, you know, soft offer becomes very attractive. Don't Don't try to do that without clients because we know the three current so we all will just say no, we're gonna sell it somebody for the advertising. Off. Look, most of the businesses if advertised correctly, and price correctly, will sell without any negotiation on price extra little bit. So that pricing is a most important thing is selling a business get a ride marketed right? Help people buy so don't be well take it a little bit help him by see what issues they got in an open going up. And you're going to do the deal like this. Most of the deals that we do, we find the buying in a matter of days, like matter of days, literally matter of days, 10, 20, 5 days, all right, it takes a little bit longer to get them across the line because you know, lawyers get involved or accountants get involved. Business Partners, banks get involved. mother's father's Auntie's, everybody has you. And you got to satisfy them all, as you're going through the process. But finding a buyer and agreeing on the price. It's very, very fast if the price is right.

Ronald Skelton  47:38  
So we're coming up to the top of the hour, one of the questions I always like to ask if you could step into my shoes, and you were interviewing me, what questions should I have asked?

Zoran Sarabaca  47:47  
Or the important points? I think, look, I would ask what's the most important message that you got for selling when people selling your businesses? So if you if you were to ask me, then I will the answer, my answer would be just make sure that the business is priced accurately, from day one,

Ronald Skelton  48:12  
priced accurately from day one. And as a buyer, I would say make sure you have your paperwork ready, or I mean, I need to, I need to see the numbers, the accounting, the profit and loss statements, your bank statements, your tax returns, there's a lot of stuff I got to see, to help me understand that that price is that price during the due diligence, and I've come up with a price on a business got a business owner agreed to it, and get into the numbers and they just don't have their accounting clean enough to to justify, you know, it, it looks right that could see the deposits going into the bank, but their accounting such a mess. And I'm gonna have to have a forensic forensic accountant tear it apart and put it back together in order for it to be illegal for me to run it. So

Zoran Sarabaca  48:57  
each jurisdiction each part of the world, even here in Australia, different states got a different way of going about it. They all got different ways that they're trying to overcome these issues with businesses and you know, like smaller businesses, hey, you have to have some score form to some states perform six, which if your business got the revenue less than 300, your your accountant has to do prepare the figures and sign them off. But and then the larger businesses, I think it's revenue 20 or 15 million in Australia. Regardless, even if you're not a listed company, you have to have audits done on the annual basis, ie that stuff in between the operating is this but even that come in, like you say the owner can do a lot to actually put that in order and just make sure that it's up to date and accessible when you need it because if you're buying a business and you're about to spend $3 million of real money or I because you probably won't borrow against it because the bank won't take As a security, so you have to have either equity elsewhere, or $3 million in cash, don't expand at some, but expect that somebody's just going to handle it. All right, they want to make sure that the promise, your promise that this works and operates and generates this profit works. And there's there's nothing wrong with them really pulling everything apart and satisfying themselves and don't think that they don't trust you, and they shouldn't trust you, or they just met you, alright, and you got to have a clear reason to tell them what they want to hear, alright, so they want to satisfy themselves. So don't exaggerate the stuff, tell people the way the way it is, and give them opportunity to actually confirm that for themselves. And, look, average business for us sells about in 200 days. So that's from the beginning to the answer, you come and see us today and said, Look, I'm thinking of selling a business. And until we have money in the bank, you can count in 200 days, you can do it earlier, it can take longer, right,

Ronald Skelton  51:00  
that's a that's an interesting thing. I've never, I do a lot of real estate, and we always track on the days on market, our average days on market, I've never thought about that inside of the business. You know, buying and selling businesses is what is the average days on market for a business out there. So 200 Seems really reasonable because of the extra paperwork and due diligence. And, you know, you're not buying a house that's sticking there. And it's going to be that way, you know, you're buying a business a system or process human resources, people, workers and their personalities and the culture and the values of the company. And with it takes more than you know, 30,60, 90 days to sort all that out and make sure it's something that aligns with what you're looking for. So

Zoran Sarabaca  51:45  
and two to three quarters of this time, it's actually getting the deal across the line, not finding a buyer. So the buyer is very often finding this first, you know, 50 days, and then the rest 150 days, it's overcoming those obstacles, contracting everything, doing your due diligence, addressing the issues, what we talked about having this information to get up from the very beginning, and realistic price will help you reduce this time, which means less chance of something popping up, that's gonna derail the deal. Alright, so you really have to be ready and organized at the very, very beginning, finding buyers easy, and then you work really hard to close that deal. So there are two distinct parts. One is finding a buyer, the other one is getting across the line. But before that finding a buyer, what you get what you need for the second part, which is getting the deal across the line, you have to do a lot of preparation, a lot of organization and have everything ready. And then it's braised, and it's much nicer experience as well. It could be sometimes he ends up being stressful, and it's not because of the business is because of the people buying the cell and depending on what what type of personality you're dealing with. It can be a really, really enjoyable process. But often it's very, very stressful process. And it doesn't have to be,

Ronald Skelton  53:09  
how should they reach you?

Zoran Sarabaca  53:10  
Well, look, anybody we got a few brands. So we cover pre pretty much everything from very small businesses to about $20 million deals. The best way to find us just look us up, it's exclusive business sells, it's spelled X-C-Double L-U-S-I-V-E.com.au. And just just contact us there's a lot of phone numbers, a lot of email addresses and everything else you'll be able to the right person and will take care of it doesn't matter if you got a if you just need a business valuation, unit certified business valuation, then business is not selling because you're selling you're not passing on to your family or you got a family court or anything like that. Or if you're selling a business and you want to sell the business, you know, give us a call. And we'll we'll see how we can help. If you buy a call register on our database and tell us what you're looking for. And next time and when we got a business that matches your criteria, we'll be on the phone to you, I'd say hey, we've got something that could be interesting. We do have a little office in Hawaii. So if you're listening to this from Hawaii, we starting a little experiment in Hawaii, it's going very well we got a presence in Hawaii. And we are seriously thinking of putting some offices in United States. We're going to do some some some serious research this year and see if we if we can make it work in the States.

Ronald Skelton  54:40  
Okay, cool. So if you're looking to sell a business brokerage in the United States, I definitely think you should reach out to him if you've got one and it's not working the way you want to you've got some revenue coming in I would reach out alright, if you guys want to contact me I'm on LinkedIn, fastest way to get ahold of me. It's LinkedIn. Ronald Skelton so it's actually a Ron Skelton on there I put the URL on the on the screen it'll be in the show notes. I'll put a Zoran's, I'll put your contact information inside of the show notes. I'll have my, my podcast person do that for me, so people can reach there. And yeah, so let's wrap this show up. I thank you for being on it and hang out for a few minutes after I stopped the stream and we'll we'll share information. Alright, so thank you everybody for joining us. See you next time. The investors and entrepreneur roles professional mastermind. The investors and entrepreneurs professional mastermind combines the traditional peer to peer mastermind introduce first in Napoleon Hill's famous book Thinking Grow Rich, with accountability partnering, where your peers help you ensure that you set goals take action and get results. If you want to scale  Bo pass roadblocks and achieve success faster than you might think it's possible, I suggest you take a visit over to tiepm.com that's tiepm.com and check out the investors and entrepreneurs professional mastermind