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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 today. I'm here with Aaron Muller. Aaron is a Inc 500 entrepreneur and author of the lifestyle business owner how to buy a business, grow your profits and make it run without you. Aaron runs LBO Academy really teaches business or teaches people to buy, have a small business, make six figures and work as little as five hours a week becoming a lifestyle business owner. Welcome, Aaron. It's great to have you on the show today.
Aaron Muller 0:58
Hey, thank you, Ron, I appreciate it.
Ronald Skelton 1:01
Cool. So I always like to start with people like the origin story like you were born. Now you're here, let's fill in that gap between how did you get from, you know, being being used and doing your normal thing and get into m&a and buying businesses and being a small business owner and what we refer to as acquisition entrepreneur.
Aaron Muller 1:22
Well, starts out, basically out of high school, I was in high school and I didn't like want to go to college. So I figured I needed to come up with another plan and pretty much put it out there to my boss at that time, I was washing trucks as a pressure washing and truck washing company. I put it out there to my boss that I wanted to do something on my own. And he offered to sell me half his company. This was all my junior year, once I graduated, I was I would made the deal that I would buy half of his company. And that's what I did. I didn't go to college, I ended up learning that sales was my forte, and we built the business up pretty fast as a young kid, very, very ambitious. Then we got into a retail store, we said hey, let's let's set up a retail store, start selling the industrial equipment. And I always call that my four year college education. I learned how to fail. And I was funding that retail business with our profitable truck washing company. And at one point, I was like, hey, to my partner, Hey, Rob. You know, maybe we should sell our truck washing our really good, profitable business and dump more money into this piece of shit, you know? And so, but how do you sell a business, you know that I'm just literally having this conversation on like a Friday, okay? On and this is no BS here. Monday morning, I come in and there's this envelope underneath my door, it says to the owner personal and confidential. And I was like, Okay, this is kind of scary. This brought this thing into my office. And I'm like, you know, opening up my the envelope, and it says, Have you ever considered selling your business? And I'm like, shocked, right? I'm like, Okay, wait a minute, am I being like recorded, but this is nice. This is a 1999. Right? So technology probably would have been these days. But anyways, it just a random situation. I called the broker, he comes over, I kind of interviewed on I didn't, I wasn't sure if he was very good. But he looked good. You know, he drove a junkie junky car, and I'm like, I'm just gonna give this guy a shot to sell my business. And I had it on the market for like six months. So I would talk to these people, you know, elaborately about our company, and get into everything and, and for six months, and I would sit there and recognize what my broker was doing wrong the entire time. Right. And, and finally, after six months, he hadn't sold the business and he hadn't sold anything. So he was kind of new to the business. And I had asked him, I said, Hey, Mike, you know, you have haven't really sold anything, but I think you might be perfect for our business to buy. Why don't you buy my company from him? And he goes, Aaron, you know, I've actually fallen in love with your company, listening to you talk about it this whole time. So I'm gonna, you know, make an offer and buy your company. So anyways, at that time, I kind of fell in love with his job and he fell in love with my job. And I ended up buying an auto repair shop right after I sold my business. I didn't make anything on the business deal because I had debts and I just walked away with nothing. But I'd save some money up and I bought an auto mechanical auto repair shop with the intention of walking away from that business in one year or not walking away stepping out of the business and becoming a business broker. And this was in 2001. I bought a company in 2001. I became a business broker, selling people's companies for them. That's kind of this, the background.
Ronald Skelton 4:56
Okay, cool. So it's interesting. You're talking about coincidences. I was actually, I helped an investor friend, acquire an interest 60% stake in a tow truck company and they do impounding tow truck. And we were on a call this morning. He's like, Okay, I'm ready for my next acquisition, let's let's do something. And like, so we were looking for bolt ons and you know, auto mechanics, you know, like, that fits in. And I just called him out for the show. I was doing my research again, to kind of just do my background on you. I was like, Do you have any questions for this guy? Because like, he, this is what he does. He's been in this space for a while. He's like, Well, I'm driving right now. But that was cool. I like the CUDA. You know, there's, I think that things happen for a reason. I don't believe in coincidences. But just to have you on the show today. And have you have that experience. That's cool. So let's just go right into the kind of the m&a side of it, knowing what you know, now, and the experience you've had now you're actually helping other people do this? What do you know, now you wish you had known before you sold that first business? Or you bought that first one?
Aaron Muller 5:55
Good question. Let me think what I know now, how to hire a broker better 100%, you know, getting somebody that like, really understands the industry, not new to the business, I find that I'm in a, I traveled between Las Vegas and Seattle, and I've been trying to buy a business in in Las Vegas, and I am so disappointed in our industry, I have tried to buy five companies. And every time I try to buy a company, I get the financials from the broker, and it's all lies. I mean, it's not represented as to what how they're represented is not actual, to how they've represented it online. And so once I did I fail, they get mad thinking that I'm the guy that's not, you know, going to ever do a deal. But it's like, give me some real data. Give me some accurate data and don't lie, you know, like, it's the weirdest thing I've seen. And that's the problem in the industry. And me hiring that guy was, you know, had never sold a business. So he had no, no, you know, experience to really help me so that for that process.
Ronald Skelton 7:04
Yeah, there's, there's an underlying problem there. And, you know, in, in my circles, we kind of joke around say brokers kill deals, the reason they call them brokers, because you work with them, you might be a broker, then you
Aaron Muller 7:16
never heard that. But you know what, you're kind of, right. You know, this, like, I always say I'm a dealmaker, I tell people rough about, hey, listen, I'm a deal maker, I'm gonna try to make this happen one way or the other part of representing you is getting this deal done, you know, sometimes I have to explain things to you from the perspective of a buyer. Right? So Well, I'm sorry, I was, I was gonna make another point on that. One thing that I that I, you know, realize, you know, when I was going through the process of buying a business, I happen to see how everybody did their process. And I saw all these, like, flaws in the process. And so what I wanted to do when I became a broker was give everybody, you know, educate them really well, you know, educate them, don't try to sell them something that they don't need, or that they wouldn't be a good fit for them. It's about matchmaking. It's about listening.
Ronald Skelton 8:03
You know, it's interesting, one of the underlying problems for the business brokerage world is, you know, brokers, a lot of the brokers get paid a fee for the listing and the marketing and the effort to sell so that they'll take on listings. And what happens is it everybody on the show has heard this a few times, and we've been watching your multiple episodes of this. But the scenario typically is business owner decides I think I probably ought to sell so they call broses broker a, maybe it's a referral from a friend or something, and do and it's and I'm trying to sell and you know, what, this is what I need out of my business, and the broker always tries to one up a little bit. Yeah, I can do that probably do a little bit better than that. And they pick a number. And then the business owner thinks he needs a second opinion. He goes the business broker number two, and says, Hey, this guy told me, I can get you know, I'd say it's probably the business, you know, maybe the guy told him I can get you a million bucks for this thing, right? He goes to the next guy that goes, Man, I just thought visited resists broker, my friends told me I should probably talk to you to come to you. And he said, he can get me a million. You know, what do you think about that? And the guy goes, Well, I think I can beat that just a little bit. I can do 1.2. And then, you know, next thing he knows a guy sees a third guy, and now he's got 1.4 and the thing's probably worth 700k. Right? It never was worth what the first guy did because the first guy didn't do an honest evaluation. He just took what the owner wanted. And often when you ask a business owner like what do you want for your business? They say a million dollars he asked him how they came up with the number which I don't I just say how can we get you there and we work on that later but when you find out how they come up with the number their financial advisor told them they needed that added to their investment portfolio portfolio to retire has no connection whatsoever with the value of their business or how it's performing. They're just told that you want to retire comfortably living on what you're living on now you need this number. Right? So I think that's the reason why I think that's the numbers are in the highest high like something like 80% of all businesses listed for sale you know by brokers are on this buy sell this is they just never sell. And that's because nobody was ever honest with a business owner to start with that, you know, certain things need to be in place like your financials and your team and your management structure when you leave, like those have to be in place for it to be an easy sale. And then the valuations were never done fairly for the owner.
Aaron Muller 10:15
Yeah, I mean, I think that that's the biggest problem. You know, my question, I'll ask the question like, what's your what's your magic number? You know, like, what are you wanting for your business? Now? Like, what's your business worth? But what what are you wanting for? Right? I said that it won't, it won't change how I value your business, I just want to know, if you know, once I do a if we're going to be in the ballpark, a lot of times, they won't give me that or they'll you know, think it's worth, like you said owners or sellers always think their business is worth you know, a lot more. But it's really important as a business broker, merger acquisitions, whatever you're doing, to educate you are the expert, not that seller, educate that person on why their business is not worth what they're asking or that they really truly want. And, and you made the comment of like 80% of the businesses don't sell and you're 100%, right, especially in markets that don't have good brokers, that that will inflate, or they'll they'll they'll listen to the seller and just go whatever they want. It's called buying a listing. And basically, I'll walk away from 80 to 90% of the listings, I won't even take them on, because I'll educate that person, I almost do a due diligence, my own little due diligence on that company before I even list it. So I have very, very good listings when I get them because I don't want to waste my time. And I don't want to be s people. And I'm just not interested in that anymore.
Ronald Skelton 11:37
So I was just interviewing one of the top coaches for I don't know if you're familiar with like Roland Frasier and Carl Allen and all those guys, guys, other guys that teach this space, but I was just reviewing one of the top coaches for that yesterday, even and he's prior Marine, he's no joke, you know, straight and thing. And he brought up a great point is that when we're looking at these business owners, and we're expecting a perfect balance sheet, a perfect profit and loss statements and perfect accounting, we're dreaming into a fallacy that doesn't exist, because these guys didn't come out of MBA, they're like the guys like you, they came out of high school, they came out of a situation, they figured out they're really good at something, and people are willing to pay him for it, and they built a business around it, right. And the only reason they ever did a balance sheet or a profit and loss statement, or accounting at all, is because they had to for their taxes, or somebody told them they needed to do it to sell it. So justifying like walking away from a business because the financials are off, you know, he thinks is absolutely BS, you know, he thinks that, you know, when and I believe him now that I listened to his a reason, you know, reasoning behind it. And he says, if they've got a great product that's proven in the market space that people are buying, right, and there's some growth behind and stuff, you shouldn't be able to look past some of the financials, right? If, as you know, is solid enough, you know, as a seasoned entrepreneur, I have a team that can fix that stuff, right, you have a team that can fix that stuff, you own multiple business, you kind of have to. So, you know, a lot of cases where, you know, a lot of these guys doing, you know, acquisitions and stuff. So a lot of their, their balance sheet was off, they have their missing things on there. And like, my responses now is like, Okay, well, that's because they didn't do it, they handed it over to somebody, and they, you know, that was created for them, you know, after the fact. Right? Um, what is your thought process on? You know, great businesses that just don't have great representation in their, in their math in their financials? Well, I
Aaron Muller 13:39
think it's, here's the thing is, I agree with what you said, to a point, right, so if you know nothing about an industry and you're trying to buy that industry, it's a little scary to begin with, right? And then you got to look at so then all you have to do is go by the financials, right, like, what does it cost to run this business? And, you know, what are my revenues, all that sort of thing, right? So if I'm, if I'm in an industry, and I already know about it, I don't care, I just what's your gross revenue? I fix it, and I'm gonna deal with that, right? I already know what to do right off the bat. But an industry I don't know a lot about, like an example, I was looking at a wholesale type distribution business. And they sold to, you know, some big box stores and some on Amazon, all that. Their revenue, or their their revenues were high, but their their profit went from almost 200,000 down to like, $26,000. And I'm like, you know, what happened? Oh, guess what happened? shipping cost went up. 600%. You know, I mean, they tell a story. You can't ignore that those financials because sometimes if you see things happening, and it costs like all of a sudden now like labor costs, especially now you should be looking at financials right now. You should be looking at him because all of our costs as business owners are going up like crazy. Like crazy, so you cannot ignore it right now you have to see what's happening and make good decisions. But you know, I think that they need to get things in line, if they really want top dollar. I mean, I just sold one of my companies for, you know, a ton of money, you know, because and due diligence was 40 days and it closed and I got all cash, because my books were tight. And it didn't change the LOI on the value at all.
Ronald Skelton 15:26
You know, the interesting thing is, I'm of the mind right now, I was actually digging through resumes for bookkeepers and accountants yesterday, because I'm gonna put a couple on the team, that I honestly think that I can fish all that out, if you're willing to show me your business banking statements, I can see, I can see the difference that you paid transport, you know, so and so Transportation Corps, the bill last month was 600. And the bill before that was 100. What happened? So it'll tell stories without actually having them have to have perfect accounting and perfect books. I think we can decipher that, and I might be able to get some decent deals. I'm gonna I'm gonna take a look at some businesses I had originally looked at, oh, yeah, you call me back? Would you hire an accountant to clean up this mess? Right, because, you know, but I think I might be missing some pretty decent deals out there. Just because I'm expecting things from owners that are just not in their natural nature.
Aaron Muller 16:20
Yeah, I think it also, it comes down to time, right? So if you have the time to put into a business you can make and I tell people this all the time, it's like, you know, what are you going to do with this business, because that's the true success, the true potential success of this company, if it's, if it's, it doesn't really truly matter. Like you said, it doesn't truly matter what the numbers are, if you are going to be in there, and really working and all that sort of thing, right and changing things every day. But if you if you want to be able to step out of that business, or kind of be an absentee from the beginning, you got to be a lot pickier about that business. Because if you don't want to put a ton of time into fixing all those things, then it's going to be you need to find a little bit better business in that way. Because that does take a lot of work to define every little problem and then and then fix it and everything so but when you're in it every day, it's a lot easier to do. So I don't think that I don't think like a balance sheet has to be perfect by any means. What I guess what I talk about is when I get these, these financials from these people, right, and I've walked away from the deal, it's total misrepresentation, it's like adding back $170,000 in inventory as a, it's an a negative expense. So then it becomes a positive on the bottom line. I'm like, that's like you're messing with inventory playing games to make it look like you made money, you didn't make money. That's That's what I'm talking about. It's fake, it's fake numbers is manipulation.
Ronald Skelton 17:50
I hear that really quick. Because I always request the last three years of tax returns, right? Like, I want to see what you told the IRS, if you're willing to lie to them, we got a problem, right? You got a problem, you'll, your broker might lie to me on the financials. But when I compare that it needs to match up to some extent they never do. They never match up honor percent needs a match, I need to be able to get the gist of what's going on in your business by looking at your tax returns, compared to what the paperwork you gave me on your financials, if I can't make a correlation of what's going on there. There's something definitely wrong.
Aaron Muller 18:22
Or they're overpricing in the business now buy 100 or two or $300,000. Because the misrepresentation. So all that plays into it when you're talking about books,
Ronald Skelton 18:32
so yeah, absolutely. So one of the things that keeps catching my eye with a book title, and some of the stuff you say on on your LinkedIn and some other things, is, you know, managing a business for, you know, five hours a week. So let's talk a little bit about what you think needs to be in place where a business where you pretty much a board member at that point, right? You're just you're overseeing it, it's running on its own? What does it take to have a business running that? Well, what are the elements,
Aaron Muller 18:57
I'm gonna say the very key thing is good managers to run, whatever, if you have multiple divisions, or you have one company, you know, major company with one division, these managers are key. And so you have to have the revenues, to be able to pay good enough to have the right type of manager in place. And then obviously, all the little systems that you put into place, and those are constantly changing. I mean, I'm constantly updating, fixing my problems and fixing issues, you know, like trying to make it a little better. I mean, got safety programs, and, you know, training programs and different things like that, that oh, you know, man, I'm failing in my accounting department, you know what I mean? Like, but if you have a good manager, that's going to run that business on the day to day and run it like it's theirs. That's 100% key. And that's what I've been able to do for all my companies.
Ronald Skelton 19:48
So your team, your system, and then your systems and processes, right?
Aaron Muller 19:52
Yeah. I mean, the team more than the systems, you know, I mean, the systems are very important too. Don't get me wrong, and that's what I teach in my book. but it's really like you got to have a foundation of having somebody that will follow the procedures and everything. You can't just have somebody that wants to do it their way you want them to think like an owner. And one of my things, I when I hire my managers, I only hire managers. I don't hire all the people, but I say to them, first thing is, do you like to be micromanaged, and ethically minded, then it's like, okay, well, this might not be a good fit, because I'm not a micromanager. I need somebody to be thinking, like a business owner, I'm gonna give you a lot of freedom. I said, but if I see things going on, that need to be adjusted, I'm gonna give you that feedback. And I expect that you're gonna make those changes, because I'm giving you very limited feedback. And when I do, it means a lot to me. And it should mean a lot to you.
Ronald Skelton 20:48
There's something to be said, for that rigor of here's what here's how to do this business. Here's what step one looks like. And I'm doing that for one of the projects I've got going on. Actually, in my wife's business, I'm helping our kickoff. And it's imagine what you when you sit down to write down how to do what you do, sometimes you step back and go, Why don't we do it that way? That there's an easy way. So you clean up a lot of the systems and processes because you're in the process of documenting it, just because something's always been done a certain way doesn't mean that that's the way it needs to be done. And a lot of times, you know, things are happening. And that happens, a lot of these businesses you're looking to acquire, that have been around for 1520 30 years or less the way we've always done it. Well, aren't you glad I'm here? Because
Aaron Muller 21:29
I'm older. And I say, you know, when I'm selling like, I never sold houses, but you know, here's the difference between a person buying a house and person buying a business, right? You got to somebody walks into a house, and they're like, oh, I don't like the colors of the walls. You know, like, I don't, I don't, I'm not gonna buy, you know, like, we're all thinking to paint the damn walls, man, right? But a business broker, or I'm not a business buyer, that they'll go in and go, Oh, man, if I just change the color of the walls, I'm gonna double the business, right? So they have a vision, and you have to have that vision and and be constantly questioning your business. I do it every day, I go into companies, and I see what people are doing better. And I sit there and go, Okay, how can I enhance my business based on some things I've seen as a broker and seeing 1000s of businesses a year of not a year, but like, you know, through the years, it's like, I've been able to, you know, really make my companies better by constantly wanting to try to be better, never thinking that I know everything and knowing that there's things out there that are changing constantly, technology and everything else, but you have to be open to it, you can't be so just pigheaded when it comes to change and doing better just because you've been doing it for that many years. Like you said,
Ronald Skelton 22:44
it's funny, as I've been in both worlds, I have a real estate portfolio. And that was my previous business before I got into acquisitions. So I've been in both worlds. And I can tell you business, homebuyers are not visionary at all. That's why there's a there's a business out there called staging, right? People will put, you put an empty room and people and it looks small people go, I don't know if my furniture will fit in here. But if you stage it will, as a kid's room or on a stage that has an office. And believe it or no by the house, right? It's a huge difference. I can see where in businesses, that's different, right? And then you were you're talking about, you know, that visionary side of it and been able to improve things, you know, I go to regularly go to the like pitch things like where VCs or people are pitching VC ideas, I go to the co working spaces and, and do entrepreneurial days and stuff and listen to pitches, and one of my close friends knows me pretty well. It's because you don't invest in startups anymore. Like I gave him a startup that reached out through me, and it's doing pretty good. So he says, Why do you buy businesses instead of startup? And we started quite a few and you do really well. I said, it's just a numbers game. I finally somebody showed me the math that you know, only X number of percentage of businesses succeed after the first summer years and only a certain percentage of those, make it to the you know, significant business scale where it's a million dollars or more. And I said when you do the math, it's like one and 2000. So if I want to create a business that'll generate a million dollars a year in revenue, I need to go start like 2000 businesses that if I wanted to play only my statistics, I could just go buy one that's doing that right now and have it you know, and within 90 days probably be up and running it. Right? Yeah.
Aaron Muller 24:16
100% and it takes for four to five years before and I love it. Well, I was profitable. Year one. Yeah, well, you making 1000 bucks a year. I mean, like that. I'm not come on man. Like don't even don't even kid yourself. It's like that's what you buy a business because you can be profitable from day one, like hundreds of 1000s of dollars profitability versus, you know, like dumping money into a business for four or five years. I don't know if you knew I had a company called Chum Chum roller. Have you heard of that?
Ronald Skelton 24:46
What was that?
Aaron Muller 24:46
Pet hair roller?
Ronald Skelton 24:46
Oh, okay. Yeah.
Aaron Muller 24:49
And I discovered this product in 2008 with a partner and yet cat problems and or cat hair all over the place and he discovered this product anyways, it took three Here's before, I mean, I could even sell 5000 units, right like, and I was ready to give up, I'm like going into the storage unit, and I'm putting stickers on each one. I mean, it was it was three years for 5000 units, and then all of a sudden, it started going up. And by the time I just sold it, and by the time it was 10 years into it, we're selling, you know, 3500 a day, you know, but it took eight years, almost five to eight years before making real money, you know, like, and then it started, it blew up, right? So it takes that long, you know, even within I had the world's best pet, I mean, I have over 100,000 reviews on Amazon, like it was that good of a product, right? And all that stuff. And so it just takes that long, I don't care about patents, I mean, I had all that, it just doesn't matter, it takes that long to be successful.
Ronald Skelton 25:49
So many people think that business is either a sprint, I can get done, I can get there faster, it's our marathon, I gotta be in it for the long run. And they're both wrong. I don't think the business is a sprint or businesses a marathon, I think it's a relay race. And I just want to pick up the baton, when you're five minutes, five minutes from the finish line, or 500 yards from the finish line or whatever, I want to pick up the baton, when you you're up, you're running, you're in the lead, you're doing well. And then take it from there. So you I love using that analogy is like, you know, a lot of these guys like why? Why don't you want to start another business? And I was like, you know, because I've just, I'm 50. And it's a lot of work. So you've been doing this for a while now, you've got a lot of stuff. Is there a Is there a particular reason you have a lot of stuff that's kind of centered around that auto area? Or is that just what you fell into? Because that's kind of what you what you do? I'm looking at it because it's very profitable industry, it's actually a decent profit margins are, I think they're kind of ripe for a decent roll up. So,
Aaron Muller 26:48
yeah, I mean, you know, I kind of I, other than just automotive, I like to service companies, because I have like a commercial pressure washing commercial hood cleaning, truck washing company, you know, and then I have a handful of auto shops and things like that, right? So I don't really, you know, say I go towards just that I go for service companies where you can't compare pricing, right. So luckily, for TomTom roller, we own the patent and trademark and all that right. So we were able to dominate a market. In the audit mode of business, I could be the most expensive shop in town, but be the busy shop. Because as long as I'm giving the customer what they want, all the things that people are craving in America these days, service. It's as simple as that, really, and on good quality. But still, like service is still like what people want and be treated good and all that you can you can dominate your industry, you know, and there's no they can't, you can't really, people can't really compare your pricing so much, because it's not always apples apples, right? They just know that, hey, I get treated good there, and they always get my car fixed. Right? And, and if I do have a problem, and they take care of it, and I get my car washed and you know, things like that they justify themselves, like I know, the really expensive, but they're really good, you know, so I want that, then then a product business, you know,
Ronald Skelton 28:15
I get it, I get it. So you've got you've got a unique position in the fact that you're both an acquisition entrepreneur, are you buying your own businesses? And you're a business broker? Or are you currently business broker, you've been a business broker in the past,
Aaron Muller 28:28
you're in Washington State, and I'm getting my license in Nevada, because I can't find a business to buy through the brokers. I'm gonna get my own license.
Ronald Skelton 28:36
So, you know, the interesting thing is you got you've got both sides, if you're an active buyer, and you're an active broker. So one of the things I like to ask people, What are some of the common myths inside of this profession that you'd like to just debunk? It's just not true. People believe it. It's just nonsense.
Aaron Muller 28:55
Oh, well, the pricing myth, you know, that your business is worth X amount over your revenues? Like, that's almost not even existent. You know, like, you know, some businesses might sell one times revenues, right. You know, but a lot of people think that it's two, three times revenues. I hear that all the time. That's a huge myth.
Ronald Skelton 29:15
Two to three times profit or your sellers, discretionary earnings, maybe, you know, but not your revenues. Yeah, matter of fact, I could care less what your revenues are like you can have a $50 million revenue business, if your profit margin and if I can't figure out how to fix your profit margin, and if you're not, you know, I looked at what I actually looked at when I first got into this, they were doing 12 to $13 million a year, but their profit for the previous year was 15,000 bucks. The other reason I put an offer on that was I thought I could fix it because I looked at the industry, I was looking at comparable businesses in the space and the profit margin should be 15 to 20%. So if I can even get close to that it'd be a wonderful business don't write. They had too many employees too much equivalent 55 employees and Uh, I think 40 Something vehicles, company vehicles of some sort, transportation, heavy equipment and that type of stuff. And you know, I looked down the road, there's a company only doing 3 million, they had run $3 million business, not a 12 million, but 3 million on almost 18 or 19 employees. And they outsourced all their transportation. And they're running at a 22% profit margin 25% profit margins. So they were for sale is like my first thought was I talked to both of them, I'll buy this one have a run that one. Because they're about 45 miles apart, but I'm more interested in a lot of people I know are more interested is like, what is the cashflow month a month because that's incredible. You could you could be as rapid all the revenue in the world and even be decently profitable. If you don't know how to manage cash flow, you could be in trouble because you might be like, there's if you're cyclical or anything like that, and you don't manage it, you know, cash flow is critical. And then, you know, the profit margin, you know, what's what's there at the end of the day, that tells you more about like how well a business has been. So is there any other myths besides that the revenue model multiple, like they should get two or 3x what their revenue is?
Aaron Muller 31:10
I think, I mean, I can't honestly, I can't think of a myth of our industry. Other than that, you know, like, just pricing. I mean, there's just, you know, to me, it's a lot of that, but, you know, if that's what you're asking me, right? It's just a myth of the business brokerage world, the industry, even
Ronald Skelton 31:26
Or even in the in the acquisition, entrepreneurship world, right, like,
Aaron Muller 31:30
oh, that okay, that all owners make a lot of money businesses, I mean, like that everybody's a millionaire, that's a business owner, you know, that you're profitable. Like I said, you know, from day one, it's like, these are all all things that are untrue. I mean, business ownership is very risky and difficult, but extremely rewarding. And people that do it are so happy every time and but they have to put in time and even in my book, I say, you know, I recommend that you spend at least 12 months in that business, learning it inside and out before you become an absentee business owner. You know, there's so many people that call me and go, Aaron, I want to I want like, I want to get like one business. And then I want to get like, three more in the year. And I'm like, Well, okay, I mean, that's cool and stuff, but let's just do one first, let's see how you do. And I've seen some people be able to do it, right, and they're really good that way. But most people need to really get their hands wrapped around within a year to two years in a business before they should even go into another business. Because, you know, it just takes away their ability to focus and, and do a good job, especially if the company is not real large to, you know, because you don't have all the people to to help you run it properly.
Ronald Skelton 32:43
What's the biggest area around mergers and acquisitions that you're still intrigued by and learning more about?
Aaron Muller 32:48
I'd say right now, it's a lot of the Internet businesses, the E commerce, FBA Amazon stuff is changing, you know, a lot of people are wanting to go that down that path than brick and mortar. It's, you know, I see it, I see it changing in a negative way. Because of, you know, all of our supply chain problems and stuff like that. You know, so I keep an eye on it. But I'm not as optimistic about it as I was and cost. I mean, looking Amazon just added another 5% on to their their sellers, you know, for fuel. It's like 5% That's a lot. You know, like they're already taken. If you're letting them do everything, they're they're taking about 30%. So it's, it's a lot.
Ronald Skelton 33:36
So I stay away from the so I have a what are the rules that I told you like nevermind myself another job. And I say that anything I get a hold of I expect to be there for 60, 90, 120 days. Right? But it's I want to know a plan for they're running it on their own. The second rule of thumb is, is I don't touch anything where a single party can disrupt the entire business. Yeah, right. So me the those Amazon stores and Amazon fulfillment is exactly there. You're one decision away from Amazon, imagine running a fairly lean competitive space, where you only have a seven or 8% profit margin on your product. And Amazon goes, We're gonna charge you 5% more, you know, on cost, you know, now that's 5% of their so it doesn't translate to a 5% of your profit margin, but it eats into it right? You're already running really lean. So I'm just not a fan where like one or two parties, you know, can just totally disrupt your day. I have friends who were doing really well in the they were doing product reviews, and they were making a killing off of like Google Adsense type of stuff. And this is 10, 15 years ago, but they were printing money and this was crazy. And then there was a change. And one day they were doing like affiliate stuff for Amazon and stuff. Amazon changes their affiliate program goes from I think was like 10% to 2% something crazy and two of them just Like, I just can't do this anymore. I just have no money in it left for me. So, you know, what's your feeling on like, knowing who the disruptors are, that can ruin your day, when you're looking at these businesses to acquire?
Aaron Muller 35:11
I think it's very important night. And I look at all that. Because, like you said, you know, one little change, and I had a lot of challenges with my, my FBA business that I that I overcame, you know, and I was lucky that there was changes made through Amazon and different things that actually saved my product. But there was, you know, counterfeiters, and all those types of people out there, you know, that are just trying to take take a piece of your pie and, and so you have to really look at, you know, there's a lot of consolidation happening with companies in every industry. I mean, I've been saying this for a while that, you know, eventually there's not going to be any more mom and pops, because corporate America has basically like gobbled up everything and run people out, you know, it's hard to do a hardware store to try to compete against, you know, Home Depot or Lowe's, you know, they they're a disrupter. And it was, you know, a lot of people didn't see that coming, you know, but you have to try to like, you know, that's what again, I like service companies, because, you know, you made a comment about being recession, recession proof or resistant. And I like those kinds of businesses. I like niche businesses, I bought a restaurant hood cleaning business right before the COVID crash, right? And, or the COVID thing, you know,
Ronald Skelton 36:27
That thing. That worldwide pandemic.
Aaron Muller 36:28
Think about it, but right before I bought it, and I was thinking, Oh, this is like literally the most recession proof business, I'm buying. For restaurants, you know, and they have, because the hoods are, you know, liabilities, all this stuff. I kid you not two months later, COVID happened.
Ronald Skelton 36:48
And universe says hold my beer.
Aaron Muller 36:51
God, thank God, I was doing grocery stores. So I was able to like stay in business, because the grocery stores still had a deli. And so we were busy the whole entire time. But that was a great like, whoa, slap in the face, like, wait a minute, there's nothing that's that's why I made the comment is it's not recession proof ever, it's resistant. And then something else comes and hits you in the gut and goes, oh my gosh, man, like, so you know, you never know what's going to happen out there be can't be afraid of everything, like, I've made millions of dollars and been very successful as a business owner. And I've failed many, many times, man many times. And as I get older, I don't want to fail as much anymore. But you know, if you don't take those risks, and just go out there and do it and try it and see if it happens, can make it happen. You know, you're never even going to have the opportunity of total success, too.
Ronald Skelton 37:44
So what are your top three tips, if you're, like, you know, are top three things you want people to know, if they're thinking about buying a business going to you as a broker? Or, you know, when they're thinking about buying, like, I don't know, if it's like stay in your industry or that type of stuff. But what are the top three things you think are important from the buying side, and then we could go with a walk, she talked about a little bit about what they're like when you're selling.
Aaron Muller 38:07
Yeah, for buying side, I tried to tell people you know, don't get it. Don't buy your hobby. Like I recommend not buying their hobby. Try to find a business that makes a lot of sense that everybody needs that service or product or whatever. And it's not potentially going to go away in the next 10 years. Right. So you know, something that's, you know, maybe a niche type industry that you can kind of you know, say I always say the guy that's pumping septic tanks is living on the lake. Yeah, no, it doesn't have to be glamorous people always want some fancy business like a restaurant and I'm like, they come to me about a restaurant. I'm like, Have you ever been in in the industry? Have you ever owned a restaurant, right? No. So okay, well, I don't recommend buying it because that's one of the most difficult industries to be in if especially if you don't know anything about it. You can get robbed blind and a lot of people you know buying because they're glamorous, so they think oh, my friends are gonna come over you're like, you don't want your friends coming to the damn restaurant.
Ronald Skelton 39:07
They want a discount.
Aaron Muller 39:07
They want everything discounted. Yes. And I say the same thing about my auto shift. I don't want you know, I told my friend he's like well don't you want people coming? I said no, I don't want my friend you just notice I don't advertise my auto shops on my Facebook page. I don't want you to come in because my other customers love me. You guys all think that you should be treated like a king and if you're not yet I'm a big jerk or whatever, you know, like I don't want to deal with that man and you want a big discount. So just try to stick with companies that make sense and like try to be very logical minded with a non emotional you know. Like I love flowers. I'm gonna buy a flower shop you know, don't do that like try to think you know, our flowers a big business a good business still you know photo process I love photos. I'm going to get a photo processing company. Next thing you know they digital photos, right you know, like, you just got to be liked Try to be like, logical about it. And if it's gonna last
Ronald Skelton 40:04
funny thing was one of the one of the borrowers pulled me aside one day he says, I'm thinking about selling this place, are you interested? And he knew I had, you know, ties in the tech industry and I'd had some decent money coming from the, like, the tech space, I was just bouncing on the side. And I said, you know, I don't think I do. And he says, why so because I know everybody here, I beat up half of them. And if I'm the owner, they're gonna either want to discount or be mad at me because I don't let them come. I kicked them out of the bar down the street five weeks ago, right. And I say that jokingly, but, you know, I wouldn't want to own a business where everybody that comes to the door is my friend just because it's just a it's a tough thing to do. I really believe that there's a disconnect, in normal friendships where in a perfect world, if you decided to start a business, they should start like a baby shower, like all your friends should come together, bring business to you, bring you some presents to help you start your business and support you. Where what they do is like, Hey, I know you're on the auto thing. Give me yeah, what can you you know, could you give me a discount? My car doesn't work. And I'm really having a rough time. Like, dude, I know, you got money in the bank. I just watched, you know, but yeah, you're
Aaron Muller 41:11
right. And one thing I learned from my retail store, I told you my four year college education I had, you know, I, you know, I was the nice guy, you know, nice guys. Seriously, they finished last in business. I'm sorry, they finished last. Like, don't be that nice guy. Because, you know, you go above and beyond you do all this stuff. Yeah. And you never get paid for it. Okay. And so one thing, I made the commitment to myself, I said, the next business I have, I am going to be very good about my margins, I'm going to not give these big discounts when I don't need to, and I'm not going to, you know, go above and beyond unless I'm gonna get paid for it. Right. And so when I opened my auto shop, I set decided friends and family 10% My mom gets 10% My dad, it's a hard ass way of thinking. But you know what, it's made me survive. And I've had situations with family getting upset, because I charged them for a battery. I'm like, fucking batteries. $110 man, like, I'm fucking mad that you even have a fucking, you're pissed off that I had to try to keep my business open, I got employees to pay, like, don't come in.
Ronald Skelton 42:14
You should try to put, you should try to put batteries in the diesels. I think I paid 300 bucks apiece for mine. Like,
Aaron Muller 42:19
Probably load 110 now, you know. I've been out of business. Every day. It's like 150 now, so you don't even want to do business with people like that. You want people that appreciate that, hey, I can trust these guys, I trust my my brother or whoever you know, to give me or my friend that are at least not going to take advantage of me and they're going to be in they're going to take care of it. If there is a problem. That's what you're looking for. Right? Oh, support business, people friends and stuff. And I don't want discounts.
Ronald Skelton 42:48
Awesome. So from the selling side, like a were taught, we just talked about, like, what are the things to know about buying it when you're selling your business? What are your top three points that you would make as a broker like, Hey, before you come to me how this in order have this done?
Aaron Muller 43:05
Well, it's organizing the financials, I mean, like, that's 100% If you want top dollar for your business, get your financials in line, because you're gonna get a guy like Ron who wants to go buy it at a deal, because your business isn't all organized, and he's just gonna, he's gonna have to get you to discount it. So he can get a deal on it, or so he can fix it right. And so, you know, have your books in line and make sure that it looks good, make sure that you're profitable. I mean, I know that's a broad statement, but you know, try to be making at least 10 to 15% Bottom line, you know, so that you have some good value on the business. And you don't have to worry about cleaning that business and making it super perfect, because again, those people are buyers, you know, had the vision and they, they might see what they're going to do. So I kind of like it when people have things a little messy. But make sure that those financials are good. And before you put it on the market, make sure your broker puts together like a very extensive marketing package that has a lot of information and data in it, that a buyer can make a really good, easy decision to buy it and pay top dollar because the information was given to them in a very clean and thorough way. It actually adds value to the business and you're in your systems if you if your systems are in place. That will add value to your business too. Because it'll be really easy for somebody to go wow, they run that business really gets can be really easy for me to find this business. So that's how you get top dollar for your business on all those things right
Ronald Skelton 44:37
there. And I'd love to see that I've been really really active last year. So even though I've been doing this only the acquisition entrepreneurship for probably two two and a half years. I've been an entrepreneur most my life so but I've bought things and sold things, but just this is what I do. I've looked at at least 250 We did 200 At least for the marketing roll up So 250 visits and I can tell you I can count on a single hand. How many times people had a what I call a deal room or a dropbox folder that had everything from day one, we reached out to them, they were interested in, you know, selling, we were interested in buying, we signed an NDA, and they gave us access to a dropbox folder that had all the financials all the, you know, tax statement, everything we knew at least, or at least a big chunk of it, until we gave an LOI, then they had the rest of it ready, I can count it, maybe I think on two or three fingers, you know, I don't think I get always is my fifth finger, my thumb, I don't think I could have to use my thumb, if I counted how many times like when I would search, have your act together. Usually the process is I asked for certain things, and I have to wait a week or two to get a
Aaron Muller 45:45
meal together. And that's why giving up an order ahead of time. And that's why I won't even put it on the market until I have my whole package ready to go. When I sold our company. We had over 25 people doing due diligence on the other side. And do I have everything right off the bat? No, but I was able to get it all put together within I'd say 10 days of due diligence, I was able to it was a massive amount to I mean, it was unlike anything I've ever seen. But you know, it's I was organized enough that I knew where everything was that I could do that, you know, but have a broker help you with that. Because that's key, you know, the broker at least needs to be a good broker. Because they'll they'll know that, you know, that you can't like so many brokers piecemeal stuff to people, you know, I Okay, now, can I have the tax return? Now? Can I have this? Oh, okay, see, I see that, what about this, if you just put it all in there, right off the bat, I mean, you're gonna have, the offer that comes in is gonna go to closing if it's if it's all been represented properly.
Ronald Skelton 46:44
A, the one thing I would say is, if you go into a business broker today, and expecting him to help you straighten out your finances, you're not gonna get top dollar, we look at the last three years of everything. So I want to see your last at least like we might add, you let you add a year because of COVID. Like, you know, if the last three years, you had a bad year, because of COVID, or something, a year, not too good of a year or something, something's off and you want to, you know, we might ask for another year, or we might like, you know, you can ask us and go, Hey, the first, the first six months of COVID, we were in Shell Shock, we didn't know what we were doing. And we recovered afterwards, we'd like to give you you know, one of the messes of 2018 19, the year before it started. And that's okay. But we're going to look at an average over a period of time. So what you have today, and what you didn't done in the last six months, isn't really going to add a lot of value to your thing without having what you've done the whole time. And the last three years is going to be way, way more important, the average of everything, then, like what you've done in the last two or three months. So how do you how do you combat that? As a business broker? You just you work with what you got? And
Aaron Muller 47:51
yeah, I mean, you know, we're always looking for the story, right? You know, and you want to try to figure out why. And, you know, large swings always scare me, when I see large swings, I especially in the year that they want to sell it all of a sudden, they're like, super profitable, but they weren't, you know, like, the last tail. But then this year, they're super profitable, then you're like, Okay, but why, you know, like, you know, I'm having a hard time even, you know, digesting this myself. And I always look at everything as if I'm gonna buy it. And so that's how I can give good advice to people. But I think that you have to try to tell a story. As to oh, you know, COVID, let's just say it's the worst story, you know, because it's just, it's so messy. And you don't know really what's what, for those two years. Like an example, we had a company, one of our companies is a is a cleaning of commercial pressure washing, and we did all this disinfecting, right, and we are doing it for Amazon, you know, I'm doing over $60,000 A month extra in business there. But if you looked at that in my revenues, and then you looked at the next year, when I didn't do any disinfecting, and my revenues grew with with not getting that 60,000 a month. Okay, that's a good story, you know, like, hey, they actually got another $60,000 worth of work, and they still grew from that, and aren't even doing that work over there anymore. So that's the, that's like a big selling pitch, right? But if they're like, you know, it went up $60,000 a month and, and then the next year is down. And then they want to value the business based on the the one where it was high, and you're like, oh, you know, it's not going to happen. And you know, like this, that current year, you know, is really truly important. You know, I'd say I've sold in my years of selling businesses. I've sold more businesses on that last year than I have the average like you're saying, so it kind of contradicts a little bit what you're saying but it's true. What you're saying is true as well, but it's because I know how to package that properly and tell the story, story properly. And so many bro Because don't do that the right way. And so you're like, okay, but that doesn't make sense. You know? Like, like, what you're trying to tell me doesn't make sense. But if you do it and it makes sense, logical sense. Oh, okay, that. Yeah, this year is good. And it's, it's not an anomaly, you know, this is real, you know, this is really something that's, that is worth, you know, Pan paying more money for or less money. I mean, if it's making less money that year, then that's what they're gonna get paid on that year, you know. So
Ronald Skelton 50:27
I could see that. And if you could show me like, I think my biggest concern is show me how this is gonna continue. Like, this isn't just a,
Aaron Muller 50:34
And see that .They're making an investment, they want to return on it. And so and they're not, I always say, Listen, I'm not starting the business for a reason. I want a business as making money right now and he's got organized, don't tell me what I can do. That's my time. My time is not your value. You know, like,
Ronald Skelton 50:52
I don't like anything I coulda, woulda shoulda's right?
Aaron Muller 50:54
Like why are you not doing it? I would say, Well, how come you're not doing it? I'll ask the seller that will do that you can do this. I said, Well, how come you're not doing it? Well, it's hard. I said, Okay. Well, you know, I mean, that's gonna take somebody's money and time and energy to do so you can't give value for something that you would have should have could have done, you know.
Ronald Skelton 51:11
I don't pay money for woulda, coulda, shoulda's. I break it off real quick. When they say like, well, if you do this, and this will be worth that. And we want to premium on that. I was like, no, no. So hey, we're heading the top of the hour, we're gonna have to wrap this up. Let's make sure people know how to get a hold of you. Right. So we have it on the screen. So if you're watching this, it is there is businesses on their IBO Academy,
Aaron Muller 51:34
No, no no. LBO.
Ronald Skelton 51:35
LBO. Sorry, I've read them. I think it's LBO Academy, sorry.
Aaron Muller 51:39
Lifestyle Business Owner.
Ronald Skelton 51:40
Lifestyle Business Owner Academy. And the other one is reached out to is his let's see if I get that to work. There we go. His LinkedIn, if you want to reach out to him, and connect with him, ask him about, you know different things or just connect with him and watch what he puts out there to content and what he's up to in the world. It's the standard LinkedIn, which is HTTPS linkedin.com, dot in slash A-A-R-O-N, hyphen, M U L L, E R. Again, it's, so that'll be in the show notes. It'll be on the it's on the screen. Now if you're watching the video, but if you're on the podcast channel, it'll be in the show notes for you. But you can find him on LinkedIn or at LBO academy.com. So I do appreciate having you here. We got about two minutes or actually one minute left. Is there one key takeaway you want people to know, like the finish and notice that if you don't remember anything else, remember this?
Aaron Muller 52:36
I think getting information out there is important, but don't over absorb yourself with too many books. I mean, you get all written 20 bucks a month, you know, it's like, man, like that'll shut you down. Stay focus a little bit, you know, especially if you're a little ADHD like me, you know, like, you gotta like, really focus. So you can, you know, listen to Ron's podcast, but don't listen to 20 podcasts. Because, you know, I always say, you know, don't get ready to get ready. And that's what those people are doing. They're always getting ready to get ready versus doing it. And all you do is just do it. And there's failures in life and business and everything else. But you don't have successes without you know, potential failures
Ronald Skelton 53:14
was awesome. And thank you for being on the show, and that your key takeaway is stay away from the analysis paralysis. Right. jokingly call it. Thank you for being here. I'm going to end this show right now. Thank you. Awesome. And hang out for a second when we're done. All right. Hey, it's your host, Ronald Skelton. I want to thank you personally for watching the show today and invite you to call our new hotline 918-641-4150 That's 918-641-4150 Call us and tell us about our show, ask questions, suggested guests or even tell me about a business you have for sale and we'll reach back out to you again that number is 918-641-4150 call our hotline leave us some information. Thank you, the investors and entrepreneurs professional mastermind. The investors and entrepreneurs professional mastermind combines that additional peer to peer mastermind introduce first in Napoleon Hill's famous book Think and 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 blow past roadblocks and achieve success faster than you might think is possible. I suggest you take a visit over to tiepm.com That's T i e. P m.com. And check out the investors and entrepreneurs professional mastermind