How2Exit Episode 38: Matt Remuzzi - Entrepreneur and a Business Broker for the last 22 years.

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 Matt Remuzzi. Matt is a longtime entrepreneur who has started bought and sold or brokered businesses for the last 22 years. He has owned online businesses, a restaurant, a business brokerage, and now for the last 10 years a bookkeeping accounting firm. During this time, he's worked with 1000s of small business owners optimizing their business and achieving a successful exit. Man, thank you for being on the show. Sorry, I messed up here. We practice that name thing beforehand too.

Matt Remuzzi  1:00  
We did but it's a hard name. I got it now. Thank you so much for having me. I appreciate it. 

Ronald Skelton  1:05  
Yeah, you know, people get skeleton, Skelton all the time wrong. They're like, hey, or is it skeleton or skelton. I was like call me whatever you want to man? I don't get offended. So I like to start off with the origin story. I like to joke around and say, Man, you were born and not you're here, kind of how did you end up on my show? Could you fill up the gap in between? So?

Matt Remuzzi  1:22  
Yeah, absolutely. I mean, it's, it's something you know, I've wanted to be an entrepreneur since I was a little kid, I always was the kid was there was imagining, oh, I could start a t shirt business. I could start a you know, delivery business I did. I the first job I ever had was doing a paper route. And that was you know, I had to go door to door and collect. And if I didn't collect, I didn't get paid. So even there, I was kind of running my own business. And it was something I always wanted to get into. But I didn't know what I wanted to do. And I was, you know, like most entrepreneurs, right, there was a certain amount of fear. What if I fail if I burn through a lot of money, and it's going to be embarrassing, and whatever. So I didn't really know what I wanted to do. So I went to college still didn't know what I wanted to do got into restaurant management. And finally I said, look, it's now or never, you know, I'm not getting any younger, even I was only in my 20s I could already see like, I could fall into this pattern, do this for 40 years, retire and live with regret, right? I didn't want to do that. So still not knowing what I wanted to do. I went to the MBA program here in San Diego, and they had an entrepreneurship track. And I thought, Man, this is where I'm gonna figure stuff out, went to school, made a ton of great contacts, you know, learned a lot about writing business plans, and financials and all that kind of stuff. But by the time I got out, I still didn't really know what I wanted to do. So I took a job at a company that was doing consulting for small businesses, and that this was right@the.com, boom, bust time, right at 2000. And, you know, that company had taken the company I worked for took some financial backing, and it didn't work out. And I got laid off. And I thought, well, you know, I know how to do this consulting thing. I've been doing it for six months, maybe I could just do consulting on my own until I go get another real job. Right. And that was in 2000. And that's the last time I took a paycheck from anybody but myself, I got hooked on the idea of being my own boss, I always wanted to do it. But now I finally had sort of a pathway. So I started doing consulting. And then I got, you know, this was the height of online businesses. So I started taking what I knew as a consultant as a service charge by the hour or project basis says, How can I turn this into a product? I created some products, sold them online, and the very first sale I was so excited, it was 89 bucks. Somebody bought my you know, little software PDF book, I was like, oh my god, like it's true. You can make money while you sleep. Oh, my God is so exciting. So I grew that business. And then I thought, you know, I should hedge myself. Right? And what else can I buy? Right? The online business used to see him come and go, you know, Google would do an algorithm update. All of a sudden, you were on page one, number one, and now all of a sudden your page three. That's like being in Antarctica, right? Nobody will ever find you. They joke about if you want to bury a dead body buried on page three of Google results, no one will ever ever see it. So I thought, you know, what can I do? So I started looking around for a business to buy that I could run in parallel with my online stuff. And I came across this catering business rest catering restaurant for sale. I've been in the restaurant business, I've been a restaurant manager. I know this business, the price seems right. The brand was good, but the operators that were currently running it just were not SMART operators. I learned early on that management is everything right? Good managers will run a business well, and bad management will run the same business into the ground and it's all about that piece. So I went ahead I got an SBA loan, I crossed my fingers I bought the business and then for the next month I wake up every month every you know two in the morning going oh my god, I just signed this giant loan and how am I gonna pay this? If this thing doesn't work, I'm ruined. But got through that got it up on back on track, grew the revenue double grew the profits by 3x because they were not I'm running things very efficiently. And then I decided, you know, as much as this business was doing well, it was taking too much of my time and too much of my mental energy. So I decided, let me see if I can sell it. And I looked at broker options. And I thought, no, no, let me try and sell this thing myself. Let me see how that goes. And was able to successfully sell it had a very nice exit, paid off that SBA loan, so I can sleep again at night. Had a nice war chest set aside, and I thought, Okay, I like this acquisition game, what, you know, where do I go from here, oh, light bulb, what I could do is I could be a business broker, and then I'll get first look at all these deals, and I'll buy my next deal before anyone else even knows it's on the market. So I got my real estate broker's license, which you need in California to broker businesses, and started looking at deals and selling deals. And I ended up selling 36 businesses over the next four years. Never found one I wanted, though, every everyone had something about like, I don't like this. So I'll sell this, I don't like this. And so I'll sell it. And it was a great experience. And I got to know buyer mentality, variable seller mentality, all the ins and outs of the deal making stuff. And the one thing that kept jumping out to me was, you know, every time I talk to these buyers, or sellers, rather than potential sellers, the number one thing is right, I want to value the business. But it's really tough, because their books are a mess, they've got all kinds of wrong stuff in there, they're six months out of date, they were done by the CPA for tax purposes. And they, you know, they minimize the amount that they're showing his profit to minimize taxes, but it's not a good reflection of how the business is really running. But a buyer is going to look at this and go on, I gotta pay you a premium for something that's losing money. So I realized there's a huge need for good, small business, bookkeeping and accounting service that could be you know, it would get done every month, it would get done accurately, it would get done at a flat rate instead of hourly pricing, which you never know, from one month to next, well, how come last month was, you know, 12 hours, and this month is 24 hours, it's the same business? Well, the bookkeeper needed more money I, I don't know why I was going to offer quality service flat rate pricing, you know, accurate every month bookkeeping. And that just took off. I mean, I started out of a spare bedroom, back in 2012, just started just as you know, like every entrepreneur, I'll see if this works, right, I'll give it a few months, see if it works, I'll turn it off, if it doesn't. And here we are. 10 years later, 55 employees over 1000 clients, you know, it's been a phenomenal success and a lot of fun along the way. And now we've got clients all the time, who talked to me about, hey, I'm thinking about selling my business. And I go great, I already know your books are very clean and ready to go. So I can just tell you about some of the other parts of the exit process. But it's so much easier to sell a business and get top dollar for it when all the accounting is done properly. And the books are in good shape, and they're up to date and current and accurate. And you know, that's just something I've learned over all the years of business brokering and then being involved in this. To have a successful exit. That is a key key piece.

Ronald Skelton  8:02  
I get it. You know, it's interesting, we had a recent show, I think it's actually going live this week, Patch Baker. Patch is a serial entrepreneur, I think he actually currently owns like 44 businesses. He's a coach and mentor in the space under Roland Frasier. But I had him on the show. And I was like, you know, I'm really frustrated with all these business owners bring in, you know, just horrible books to me. And he just shook his head. He's like, quit, quit getting frustrated about it and quit turning those deals away. How do you expect you know, a business owner who's never been taught accounting to have what you expect, they've never seen a profit or loss or a balance state where anything until you ask for one. And then quite literally, they go out and download the closest template they can find and try to fill it in? You know, like you said, their accounting is done for tax purposes. So I revisited that concept. And now I look for great businesses. And you know, I'm not looking for financial issues. But if there's stuff not an order, you know, who do I pair them up with to make sure I can get an order or I can have a team put it into order once we have it is kind of one of the gaps. I've looked at the field now. So what is the process you go through when you have a business owner and they, you know, first generation second generation, I've seen a third generation business with 63 years of business, hand me stuff financially, and I'm like, Oh, my God. Now I think they had some serious issue. I think somebody might have been embezzling in that company. But there was there was just money missing millions, and they didn't know where it went. So and they couldn't have the accounting to show it to me. It's funny, a matter of fact my offer to that company was look, I'll give you $1 down we'll take over all your debt. And in 45 days, if I find something so wrong that I just can't deal with it. I get to give it back to you. And they didn't balk at the offer at all. They they threw a fit about me wanting to give it back to him in 45 days. And luckily for me and probably luckily for them they had some issues, during the due diligence that didn't allow the transfer, they owed money to individuals that would not allow me to take over the debt. Three-lettered agencies put it that way. So, anyway, um, how do we, how do you go about that? I mean, you've got a company, it looks like it's running well, and you see their messed up books, and you kind of usually step back and go, it's not malicious. It's not intentional, they're not trying to hide anything from you, especially if they're not through a broker or anything, right? Nobody's trying to make this work. They just handed you what they thought you asked for, with no preconceived notion of this is how it's always done. And they're just honestly thinking, unless if they're under, say, four or $5 million a year in revenue, they really can't afford a CFO. Right? So what how do you how do you go through that process? What's the way to, you know, take a business owner, take what they've got, and make it work?

Matt Remuzzi  10:56  
I mean, a lot of times, it starts with a total rebuild, right? We'll go back and say, Okay, let's, you know, 2020 is probably too far water under the bridge, right, but maybe we'll do 2021. And then this year to date. So we got, we have some good history, right, we can do month over month, comparison year over year comparisons with last year, if we do last year, and then we'll do this year. But a lot of times, it's really a start from scratch, I'm going to throw out whatever accounting you have, I'm going to set up a new set of books, I'm going to get your bank statements, your credit card statements, your merchant account statements, whatever else and rebuild this thing. And hopefully, it looks at least you know, a lot of entrepreneurs, they have a good seat of the pants feel, right. They know their business, they live it every day. I know basically, what my margin is on these products. I know basically what my expenses are, I know basically how much cash I need for things, but they don't have it in black and white, they don't have it in hard data that's supported by the supporting documents and statements. So that's what we do. Once in a while though, people, man, my business is fantastic. I'm making money hand over fist. And really, I don't, I don't see it. But okay, let's rebuild the books. And then you have to break the harsh truth, right? You're not doing nearly thought that. You might want to scale back some of those big plans you had until you get things better off. Or sometimes the opposite happens, you know, people are real careful. And they're always putting money in the savings account. I'm just not sure you know, and then you've come to tell, hey, you're making 40% net profit here, you can probably unclench a little, you can probably, you know, invest a little more ad spend or whatever, and kind of grow things you're doing pretty well. But the fact that they don't know either way is that's the scary part. And to me, you know, I love business. And I love the creative side of it, and the ideas and expansion and brand ideas and logos and whatever. But I also I am all about the data, right? I want to know how I'm doing where am I spending money? Where's it coming in? Where's it going out? And then I want to benchmark that and see can I be this can this month be last month and this month this year beat last month, that same month last year, and I love those numbers, I wanted to see where I'm at. And when you're not looking at any of that stuff, you're really just winging it. And chances are you're underperforming what you could be if you were just keeping track of it.

Ronald Skelton  13:15  
I get that. So you've got you've got clients, they come in you go you rebuild their books and stuff. You still own the business for brokerage, do you help help them exit now? Or what do you?

Matt Remuzzi  13:26  
We, we don't I still do a lot of consulting just sort of free. Like if you're thinking about selling six months from now, here's what you want to do between now and six months good thing, you know, I'll give them that kind of advice. We don't do commission based brokering anymore, though we have a lot of partner firms that we work with who take that piece, and they send us their stuff, right? Somebody comes in their door and says, Hey, I think I'm getting ready to sell and they'll go same thing. Okay, let's look at your finances. Oh, you know what call Matt, simply, please call Matt. Let him do his thing and then come back to us in a month and then we can sell it because if I've taken you to market with this, you're you're leaving so much money on the table. And most,

Ronald Skelton  14:05  
That might be my new phrase. Call Matt.

Matt Remuzzi  14:07  
Yeah! It's, we work with a lot of brokerage firms that you know, it's exactly to your point, right. Somebody is interested in selling and they can't work with them. You know, I can't represent this, I will lose out on commission, you will lose out on equity. This doesn't make any sense. If we take it to market like this, either. The numbers just don't work as as they are or it's okay. But what's going to happen is you're going to go and do diligence and they're going to tear you to shreds. And they're going to revise their loi down by a by a big amount with all the crap that they find. And even if materially at the end of the day, your business is still solid just for the fact that your stuff is such a mess. They're going to revise their offer down. So our goal when when we take on a project for a client we know is thinking about selling or is in the process of selling. I always tell me have two goals. goal one is we want to get you the highest possible valuation we can justify with the numbers from your business, right we by redoing it, recasting it, you know reducing, showing the Add backs, unwinding all the commingling and other junk you've thrown in there, right, we want to get you the highest and best valuation. And then part two of that as critical or even more critical is it has to survive due diligence, right? There's no point in going to market with something that looks like a good number. If you can't support that, and it just gets torn apart anyway, now you look even worse. Now people go, Well, here's all the stuff I found that you didn't tell me about what didn't I find that I'm really nervous about, right. So you have to have good numbers, and then they have to survive that process. In order to have a successful exit.

Ronald Skelton  15:43  
From the buyer side, we have to write if I get a mess handed to me, and it looks like you're a decent business. I'm unaware of the level of work, it's going to be required to maintain it grow in a capital, right? If you can't show me your capital management, how you manage to cash in and cash out your balance statement profits and all that stuff, then I have to assume I better set aside some money to put into this. Until we have all until I have a clearer picture of what now then what stopped me at this point from you know, wanting to put an offer on something, but it was certainly lower. What that offer would be because you know, I'm an entrepreneur, I'm risk adverse to some extent, but I'm also not stupid, right? And most buyers are they're going to be that way. It's like, okay, I don't know what I've got my hands on here. I love the widget. I love what they're making. And it looks profitable, but they can't show me concrete evidence of it. And due diligence, I look at your last three years of profit and loss statements which you don't have. So I don't have, or your last three years of bank statements. I see all the commingling and, you know, it takes a lot of time, energy and effort to put together a picture of what what I have in front of me. So, 

Matt Remuzzi  16:54  
Absolutely, I mean, what sellers need to understand is the way a buyer mitigates their risk is by reducing the offer, right, I don't know how well this is going to do. So I can only pay you a limited amount. If you came to me with clean books and clear evidence that this business was profitable at this level consistently and growing over time and had cash management under control, I'm happy to pay a higher price, because I have much more confidence that I'll get the same results when I take over ownership. But to the extent that I don't have a clear picture of that and faith in what you're telling me, I'm going to mitigate that risk by either walking away, or reducing my offer to a level where I feel like Okay, at this price, I can take that risk on and if I discover problems, I will still have paid a fair price. But, you know, again, the sellers are leaving money on the table if they could have shown good results and just didn't. It's crazy to me.

Ronald Skelton  17:53  
You know, up until that interview with one of the other podcast guests, I was just walking away from them. Just I'm not an accountant. And, you know, I have to bring in accountants to keep my own business afloat and out of being in a mess. So I don't want to straighten out yours is the mindset I had. And he's I'm looking at it differently. Now. It's interesting if you look at certain industries, like you mentioned, restaurant union, all my plans factor your internet struggle. I honestly have this maybe it's a miss misconceived notions that restaurants are historically hard to manage and very low profit. My wife has a degree in Hospitality Management. And I remember her going through that, and watching her study and reading some of the stuff she was working on. And it's like the average restaurant has a profit margin to 3%. I'm like, oh, man, that's that's not much room for error there. Right? So I've got this knee jerk reaction when I hear restaurants, but there's a lot of industries like that, where it's very competitive. It's a very lean industry. And if your books aren't clean, you're not gonna get a great offer. Because of that they're worried about, like, there's not much room to to play here.

Matt Remuzzi  18:59  
Yeah, well, I mean, I am a strong advocate. Whenever somebody comes to me and says, I'm thinking about buying a business. My advice is always learn is first of all pick kind of business, right? Because sometimes, well, today I looked at a truck stop and tomorrow I'm looking at a restaurant and the day after that I'm looking at a software business like that, you can't you can't know the ins and outs of each of those, right? So pick one of those get to know it really well. And then when you start looking at opportunities, you'll immediately be able to be spot this one's good. This one's so so now when I don't want to touch with a 10 foot pole, but to your point about restaurants right? That is one there are some super high performers I mean literally just cash machine restaurants and then there's some that are good and you know sort of the franchise model where you can have multiple locations and build a really good business out and then there's a lot that are garbage and you have to be able to tell which is which and not be suckered into the one that you thought was pretty good and restaurants are notorious for their for financials being iffy. And that 3% profit margin that comes from IRS data. And why do restaurants perform so poorly as far as the IRS knows, because there's a cash component? So, yeah, you look at that, you know, why would anybody ever open a restaurant? Profit? Well, that's the average. A lot of them report losses year after year, which are on paper their losses in reality. Oh, well, that's funny, though. The guy hasn't made money in 20 years yet. He's got a new Mercedes every two years. How does that work?

Ronald Skelton  20:29  
That's interesting, because I've always heard it like, think it's pizza restaurants and sub sandwiches, sandwich shops have the highest profit margin, if you can add a bar in there somehow. Like, if you could have a pizza restaurant with a bar, you're doing okay. It's the labor cost. And the the, I guess the variety of food costs that the driver issue. So we just dispelled one of the myths that you know, that I have what other myths that are around your profession that you think are kind of out there that you really think shouldn't be debunked?

Matt Remuzzi  21:01  
Well, I mean, I think, again, I one of the one of the things I see a lot with people who are looking to get into the, you know, I like I feel like the fastest path to entrepreneurship is to buy a business. So I want to buy a business, but they they focus too much on that cashflow number, or the SD number that brokers present. And they're not thinking through what really they can be successful with. Right? And I see it all the time. You know, somebody who's been a an HR manager for 20 years, right? Now, they want to own a restaurant. Have you ever owned a restaurant? No, but I like good food? Well, if you know that that's not a good criteria for getting in the business. Do you understand restaurants are seven day a week operations. Right? If you're going to be an owner, operator, you're looking at 80 hours a week, you know, until you get up and running and big enough to afford management. So I like people kind of focus on that bottom line number without thinking about the kind of industry they're in. Is it a good fit for me? Am I you know, we get introverts all the time looking at businesses that require a heavy sales component. Right? Look, you're gonna, the guy you're buying it from this is the guy that's out shaking hands, kissing babies knows everybody in town, you know, everybody loves to do business with them. He's as a backyard barbecue once a month, and you like to sit in your office and play on the computer, you're not going to be able to take that business over and get the same result. Yes, his numbers are good. His books are fantastic. His results are accurate. But think more about am I a good fit for this business, right? Maybe you're a better fit for a software business where you can sit in the office and program and run at you know, Google ads, you never have to talk to a single person, you can still have a seven figure business. But I think a lot of people that get into the I want to buy a business game. Focus on the money, right? Okay, well, I make 150k a year, so I got to buy something that after debt service can still pay me 150k A year and that they're looking at that number. And ignoring all the other factors that go into that being a successful business.

Ronald Skelton  23:05  
You know, I'll play the devil's advocate on this, I will say that, if you want to buy a business, and you don't know the industry, you need to buy a bigger one. And what I mean by that is, I I don't know the first thing about, you know, running a large scale marketing agency. So when we were doing a roll up last year, you know, we were looking for our market agencies, 10 or more employees been our business for 10 or more years, you know, there were people there to run it. And that's kind of the criteria I have now, unless I know it, which is basically it in real estate. You know, if I, if I don't know the industry, I'm not expecting to come in here and learn how to make something on machine and a machine shop right away. But if you got to a machine shop with 20 people and a decent general manager that can run things when you're not there. I'm interested because I can hire a CEO or general manager if you're doing the right numbers.

Matt Remuzzi  23:54  
Absolutely, yeah, it's the difference between going in as an owner operator and going in as more of a an investor. Right, and that it's two separate businesses. And it's two different sizes, scales of business. You know, I think it's still there's, there's a certain amount of you want to investigate, right? If there's 20 people, but there's like two key employees. And if you lost either one of those, it would be hard, you know, then the other 18 are going well, I don't know what to do. Now, you know, Joe laughs I don't, I don't know what to do. So you know, you want to mitigate that risk, and make sure you understand who the key players are. And if one or the other was to leave, or, you know, how easy are they to replace and whatever. But yes, I get what you mean, you know, some people are looking to buy a business to replace income, and then that's going to become their full time job. And then Boy, you better know how to replace that owner who's doing the 40 hours a week that you're going to have to do. Or you look at a bigger business where there's a team in place and your role is going to be management and you know, strategy and direction and growth opportunities and things like that. So again, just knowing what you're what you're buying and not just oh this one makes 500k I'd like to buy 500k worth of cash flow. That's a little harder than that.

Ronald Skelton  25:05  
Yeah, and a lot of times people don't understand that that owner is wearing four hats, he's working 120 hours a week. And you're not going to do that. And when you go to replace him, it's not an add in of like, you know, you need $150,000 a year salary. So you know, you're a CEO, and that position makes 150. Now, you got to have the CEO, and you got to have the sales rep. And I have two good examples of what we were just talking about. One was a machine shop, like I was just saying, and the owner was the sales rep. And the owner was the CEO, the owner did most of the accounting and HR, like he had 40 Something people out in the shop, or maybe 30, something, it's been a while. But the the two things that got me the most was like if one of the big machines broke, before he called out to service maintenance, he went out there, a lot of times he could fix it himself. He's been doing this for 40 something years. And I'm like, I'm not an electrician, I wouldn't open the panel, you know, I've got more education in that space than most people, right, I have a computer and electronics degree from way back in the 90s. But, uh, you know, probably got more experienced than most, but I still wouldn't open the panel and try to rewire something, and this guy does that does that type of stuff. So now he needs a maintenance guy, a sales guy, a general manager, the CEO, and any, and he's paying himself 80k a year. He's comfortable that it just it's not a replacement. And the other example I had you were talking about, like, you know, if the owner leaves, or one of the key players left, I found this beautiful little engineering company. I thought it was like, okay, books were great. One of the there was four or three or four when I was gone. Now there was originally for partners, friends, it's college buddies, I started this years ago, they've all went together, the CEO reaches out to me, we started going on the due diligence books were beautiful. One of the one of the four happened to have a CPA, right, you know, and he did CPA work for other businesses on the side. But their books were beautiful. But I found out like he's 72. And they're all about the same age. And I said, Well, what is going to happen when the other three guys you know, when once you sell this and retire? And I don't know, I haven't asked him. So I get on the phone with two of the two of the other guys. They're like, Oh, we're just hanging around until he's retired. It's not a loyalty, we're still here. We've been trying to get him to retire for a while now. So I'm like, I'm gonna lose the entire executive staff. You know, I don't know, the first thing about engineering looks like it's structural engineering of like bridges and like all kinds like big engineering projects. Nice, firm. But, uh, I was like I told him, I said, Gee, I You can't sell this right now. It's you, whoever it is, you sell it to better you already own an engineering firm, because all the rest of us can't have the top four guys walking out of your company. Right. So yeah, I get that. Let's go back to the like bookkeeping. And, you know, what do you see? And I know kind of what I'm looking for it I know that a lot of other buyers can't ask for. But when you sit down with a business owner, what do you help them prepare first? Well,

Matt Remuzzi  27:53  
I mean, the basis of everything right as the financial statements, we've got to have an accurate p&l That reflects the correct top line revenue, the cost of goods sold the expenses. And, you know, depending on how the business runs, generally, it'll be on accrual basis. Sometimes some businesses operate fine on cash basis, but those numbers have to be accurate. And they have to be, you know, month by month, we don't just sometimes you some people still go to their CPA, right. And the CPA just throws together a year end summary. Well, great. You made a million dollars this year, but it makes a big difference to me. Was that $80,000 a month? Or was that 10 months of nothing? And then you sell Christmas trees, right? And you make all million dollars in four or five weeks, and then it's back to zero? That's a huge important question. Right? So me seeing just a summary number for the year is no help. Or what if, in January last year, you were at 150k, a year or a month, and now you're at $50,000 a month because the business is going off a cliff telling me you made a million dollars this year. That alone doesn't help. Right. So we want to get it lined up by month. Hopefully what we're seeing is revenue is growing. Hopefully what we're seeing is cost of goods sold and other inputs, as a percent of revenue is staying fairly flat, right? You're not revenues not going up by you know, 50%, but costs are going up by 100% or something and profits going down. So getting that together hat seeing what that picture looks like is kind of step one, then we'll talk to them about Look, do you because a lot of entrepreneurs are more than one business, and they have costs commingled in there, right? Well, this is my marketing guy, he helps this business but he also helps you with two other business. All right, well, we need to allocate that or pull that out. Right? We don't want to have all this commingled stuff in here. I've got you know, deposits from my other business. Sometimes they hit here when I'm low on cash. Look what you're selling. You want to have it nicely walled off, so that when I present it, I'm only talking about this and I'm not saying well ignore that and don't look at this and these deposits don't care. Buyers immediately go Oh, Kitt, that's messy, and how do I know you're telling me? You know, don't worry about these expenses, but I see them, how do I know what you've done with it. So, step one is, you know, clean books. And step two is also structurally sort of cleaning the business up. So that whatever part you're selling is the only part that we're presenting here. And then just gathering everything else, right, they're gonna want to see tax returns. So you might as well get them now they're gonna want to see bank statements, credit card statements, sales tax reports, you know, let's get all that stuff in a nice, neat package. So that when that due diligence request list comes in, you just go, here's a link to the folder, it's all in there, let me know if there's anything else you don't see that you want. And they go, Wow, you're so organized. And on top of it, that's what you want to convey not. You need what oh, God, I think it's in a filing drawer, you know, it's in a storage unit. I got to, I got to ask my CPA for it, because I don't know where that is. You want to attach an image have clean and ready to go.

Ronald Skelton  30:55  
I tell you I've, in the last two years, I've looked at about, I want to say probably 280 300 deals, the big roll up, we looked at over 200 marketing agencies. I've seen a prepared deal room three times, maybe four, four times, meaning the deal room is that folder, the folder has all the like, everything I'd asked for it, it's in there, right, the checklist, like that guy was prepared, it was a marketing agency. And he was brilliant, and brilliantly prepared, because there was a little video in there where they, like showed the culture and different T employees that knew the place where you know, they would might they might sell the way he presented it, they kind of introduce you to the culture, it was really done well. So all you know, there was extra stuff in there, it was a marketing agency. But the books were in there, the just and it was up to date. I think that's a great way and I think was the guy, John Warillow wrote a book. On exiting, I'm totally drawing a blank here. But he teaches that like, you cheat, you run it as if it's for sale that dealroom thinks should be there ready to go at all times. I think that's a great mindset to have is that, you know, and I've talked to my partners and stuff, that's what we're working towards is when we do our next acquisition from day one, there's a deal room folder that the everybody just updates, we may not sell it for three to five years. But at any given time somebody comes up to us and goes, hey, we'd like kind of like losing business cool sign this NDA, signed the NDA. So okay, here's the dropbox link to a secured folder that says like, everything you would want to see about this business is there, maybe do it in stages, here's what you need to get interested, right. And then if you're still interested, let's have a talk. And I'll give you access to the next folder. But I think it's brilliant to keep that stuff up to date. And, you know, run it as if you're selling it, now I get it, if that's the space I'm in buying and selling, if you're just going to run a business, you plan on holding it for 15 years, the taxes are going to be different, because you're kind of trying to minimize minimize your tax impact. I come from the real estate space, I see many times where that effort to minimize their tax impact, really minimize what kind of house they buy. So they when you go to buy a house, they know that the bank is gonna want to see those same statements, and they want to see that you have the cash flow to pay a mortgage payment. And if you've been minimizing it for the last two or three years, so there's more than one reason to have your books just really an order. One, it's easier to run a business, I think, personally, and to whenever you want to use any type of debt structure, financing or anything else like that. It's critical inside of there.

Matt Remuzzi  33:30  
Absolutely. Well, and I think it's you know, if you think about the same sort of example, from the real estate world, right, what happens when somebody decides they're going to sell their house, they run around, and we got to fix the pain and fix that broken door and the window that doesn't open and the big water spot on the ceiling that we never got around to and right, you'd go around and try to fix everything. And then you think, Well, gosh, now the house looks pretty good. Why are we selling again? Like why did we do that all along? Right? Well, you know, that big pile of crap in the side yard, we got to haul that out. And you know, that's the same thing with the business, right? People go, oh, well, I've got these extra expenses, and I pay that guy I don't probably don't need to and I have these things I don't really use I'm paying for it. And if I clean all that up, my profit would look so much better. And I'd be you know, more presentable as a deal. why don't you do that anyway, right? Why? clean house anyway? And always just run things as optimized as possible. And then anytime somebody walks through the door and says, Hey, I like what you've got here, would you consider an offer? You can say? Well, I'd be happy to talk right? Instead of oh my god, I gotta clean up and you know, reorganize everything and get rid of the, you know, just run it that way from the beginning. You'll you'll be more profitable, you'll have more cash to go around and should the opportunity present itself unexpectedly. You're ready for it.

Ronald Skelton  34:46  
It's interesting, isn't it? I think that most business owners will find that it's a lot less stressful to run the business also, but it's everything I get rid of. It's like okay, that's one thing I never have to fix because I was I think keep saying I gotta go take this. Got to take that over to this guy. Heavy. Well done. Let's go fix that, you know. So it's the same thing with your business, if you fix it, get it clean, I think a lot of the stress are go away, because everything that you own, including a business kind of owns you. And a lot of those undone tasks are just a kind of a state of incompleteness. And as far as I have a big woodshop out there, and I haven't made anything with wood in a long time. And as I'm selling off the tools, there's probably like, I don't want to sell my tools off, because I might want to build something like you haven't been in the shop and six months guy, I bought a woodshop I built a woodshop. Because I might that's what might the deal with my dad growing up, and I thought it'd be fun. I built some stuff with my kids. But you know, I don't need a table saw that has a 12 inch blade on it for cutting, you know, planks of wood. But I got one 220 volt one, right. So, you know, it's just one of those, like I said, everything you own owns you and all this stuff you leave undone inside your business, your booking your accounting, and stuff like that. I know, you're about to 15th podcast guests that said, you know, it's funny, when you clean all this up, you might want to keep it. It's the same scenario, like you got a car you like, I'm gonna go trade my car and you go get it cleaned in detail, you get that last little pop out that little ding and it popped out and stuff like that. So you can get your best resale traded value. And then, like, get ready to drive it over. Like, I don't know, this is this is pretty nice now and I don't have a payment on anymore. Why would I take on a payment? So?

Matt Remuzzi  36:24  
Yeah, no, I think I mean, we're all we're all in the same space, we kind of all see the same things, the same issues come up. So I agree. I mean, I'm all about simplicity, right. Sometimes clients will call, I need help cleaning up the books. And I'm like, Okay, let's go through what do you have? Like? Well, I have six bank accounts? Six? What Why? Why are you one for this one for that? And what will does it help? Does that is that? Well, no, actually, I keep paying all these bounced check fees, because I forget to transfer money like why, you know, I run my business with one checking account. Right, and we healthy balance and healthy revenue. But one that's it right, unless there's a good use case for adding a second one, which I haven't heard yet. I don't need the second one. So you know, you start to same thing. I got 15 credit cards 50. Well, I wanted to get a point and this. Yeah, but what happened I forget to pay the balance, you know, late fees, late fees, late fees all over the place. And well, what if you cut it down to two or three? Like, wouldn't that work? Just I guess you're so I think there's a, there's a natural tendency in life, right to just accumulate stuff, especially as Americans, right? We're just, we get stuff we get, we have space, so we get stuff. And it doesn't really help it does the opposite. It just adds extra work and time and Oriol, I got to figure that out and think about this thing. So I'm all about, keep it simple. And if there's not a good reason to add, then don't add, right, make sure that the ad makes sense. And you're gonna get more value out of it than whatever headache, it's gonna cause you whether that's opening a bank account, or launching another division or opening a second office or whatever it is, right, make sure that it makes sense. And that it pays for itself and it justifies its existence. Otherwise, don't add it.

Ronald Skelton  38:09  
So you've been you've been at this for 21, almost 22 years, you're I'm looking at your LinkedIn profile. My other screen it says 21 years and eight months. So what's your favorite deal? Like if this is storytime? Like tell me about the like, what's the maybe the craziest one or the best one or I don't know, what sticks out in your mind is an entrepreneurial acquisition, the mergers type of deal?

Matt Remuzzi  38:32  
Well, I mean, I think the ones that are memorable or are, you know, the ones that it almost didn't work or that you know, there was a lot of drama, right? The ones that got a smoothie, kind of okay, great and cashed a check and move on. But I had one deal, I was brokering and it was an urban winery. So basically the seller did everything but grow grapes, right? They would buy grapes, but then they would crush them and they would ferment them and they would make different wines. They had white wines and red wines and whatever else and they decided they were ready to exit the business. And the buyer came along. And you know, we got into the deal. And it all went it all started smoothly, right. But it's funny how people get hung up on certain things and especially again, like the closer you get to the exit, sometimes the sellers just, you know, get hung up on stuff and these particular sellers there was a little sign you know, behind the tasting room that you know said I don't even remember something about you know, the uncorking at the end of the day or whatever right? It was literally like the kind of sign you could buy at Home Goods for 10 bucks. And the buyer made some kind of you know offhand comment about oh, I love the site you know, I love what I'm standing here and talk to him and then the sellers go well, well the signs not going with the deal. Wait a minute what? And it turned into a fight that almost ended the deal over literally a $10 and it was just it's just funny how stuff you know, sellers get very sentimental Right before, you know, I grew this thing from nothing, and I've had it all these years, and I'm not, you know, maybe I don't. And, you know, the buyers are gonna start already moving in, right? Oh, I'm not gonna change this and change that. And I hate that pink color and the sellers arrive, I picked that out with my wife and you just, it's it's funny to me how much deals can get emotional? And there's psychology in them where you would think, Hey, we're all business owners here right? It's it's a business deal. It's a business decision. But people get so emotional and so tied up in it that you have to kind of remember that piece to remember you're dealing with people, you remember you're dealing with emotions, and take that into account on the on the transaction side of it. It's not just the numbers in the bank approve the loan, what's the problem? Well, the guy wants to sigh. So that's the that's the interesting part to me. And I'm not there's a million stories along those lines. 

Ronald Skelton  40:52  
I used to own a real estate investment firm. And I've actually turned down a deal for something similar. It was I was when I wanted to place for my personal use. I had a beautiful little orchard on of semi mature trees. They weren't too huge, but they were already bearing fruit. And if you've ever planted fruit trees, you know that they've been in the ground for five years before they do, right. So I'm like, Oh, this is beautiful. We're going to talk about I put an offer on the property and we start talking. I was like, Yeah, I think I'm going to use this one as my own. I'm going to sell my little farm and move over into this. Love the little orchard. He goes, Oh, well wait a second. The Orchard knots going I was like it's part of the land. It's going like No, no, my brothers and I went with a tree guy arborist or somebody that he has the equipment to move it and we bought 25 acres by the lake, we're going to we're going to move the orchard they're gonna come dig these trees up, put them on the semis take them out of here. I was like, Yeah, we're not doing that. Right, that was just me. And they will fill in the whole of the beautiful field as like, the one of the main reasons I wanted was the view, it had a good view. And I'd already had a mature orchard. I've been spending too. I have a little one on my property that I've been planning. And every time we get the cherry trees in the ground, the deers come and eat them. Right. I thought this is this is a jumpstart. But, uh, he ended up selling to somebody else because I like look, you know, and he was rude about it. Once we got into like, Yeah, I'm not dealing with you. So it does happen, there is an emotional side. And I'll be honest, I honestly think that a lot of business owners think that they're selling for the money. But when they get down to it, there's a lot of emotional ties that build a business. And I've interviewed quite a few of them who didn't take the highest and best offer, they took the offer that they felt was the safest pair of hands for what they created. This isn't just their business, this is a lifestyle. Like a lot of business owner, I do. I did. And I gotta catch myself on this a lot. I identify myself as what I do on the acquisition entrepreneur, or an entrepreneur in general, is part of my identity. When somebody asks you who you are, I don't say, Ronald Skelton, I'm an entrepreneur, I hope I'd sell businesses, or I buy it for myself. All these business owners, if they've been in that business for 15 years, they've tied their identity to some level, most likely to it. And, you know, you're not dealing with just the books and the numbers and the exchange of assets. You're dealing with human beings with emotions and feelings. So kind of the same. So I guess you didn't get tripped up in there.

Matt Remuzzi  43:08  
It definitely. And it goes both ways, too. I mean, the buyers, generally speaking, and I can speak from personal experience, having felt the same thing. The closer you get to the deal going through the more nervous you know, I Oh, gosh, did I miss something? Am I overlooking some do I really want to take like, my life right now is pretty good. I'm gonna suddenly take on this huge amount of additional responsibilities, and I gotta get this thing up and running and going or, you know, smooth out, I gotta learn all these new things. The buyer, you know, you get kind of that panic attack feeling of oh, my god, maybe I just walk or maybe I just cancel it right? I don't know. So you, you have to take that into account as the seller, as the buyer as the intermediary, knowing, you know, people are having these thoughts, they're having these concerns. Sometimes the sellers, you know, they get to the point where they start, they get checked out, you know, I'm not going to own this thing in a couple of weeks, I'm not gonna worry about fixing that. I'm not going to deal with this guy. That guy's always been a jerk, I'm just going to fire him. Because you know, it's not going to be my problem in a week anyway, you know, they start to have that sort of the senior itis, right? They're already one foot out the door, and you got to make sure they don't do anything. Before you take over and the buyers get really nervous about why maybe this was, you know, in the beginning of the deal, when it's still two, three months off, they're super excited, I'm gonna take over, I'm gonna cashflow and make all these changes. It's going to be fantastic. But right before the deal, they're like, Ah, maybe I don't want to do this. Did I really think this through so it there's just a lot of psychology in it along with all the other stuff.

Ronald Skelton  44:44  
You know, it's on the psychology side of things and management style. You know, we were looking at one down in Texas, and kind of an engineering again, kind of an engineering thing and The manager when I started looking at the culture of the business, start asking cultural questions. Three of the senior people were in on the conversation because he wanted them to be they own minority share, like 20 20%. So he owned, like 60. And they had 20 and 20%. So but he wanted them in on the conversation, which is good for me. I want to talk to all vested parties. And when I got him, he were one of the Colts he wasn't on there. I said, Well, how does he manage? How is it? How does it work there? And he's all the managers by screaming yelling and kicking things. I was like, What are you kidding me? They're like, No, no, no, what when people don't get things done, he literally kicks there's all this all the trash cans in here have giant dents in it from being kicked across the room. And I just I killed the deal right then and there in my head and later, like on conversations, because I don't manage that way. And I wouldn't want to hire anybody that did. And that other two execs like, well, everybody here, they're used to that. And if you don't do it, we don't get stuff done. Of course, that's true. Absolutely true. Anybody that would tolerate that needs that to be around. I don't tolerate it nor want to be around it. So I'm out. You know, so culture comes into play there too, right?

Matt Remuzzi  46:08  
Definitely. I mean, it's, you want to know how it's run now. Because ideally, it's run well, and you want to come in and not rock the boat. Or if it's not run? Well, it's something you can fix in a positive way. But I 100% agree, if you have to come in and be the kicking, screaming, yelling guy, I don't want to do that. I don't think it's a healthy and productive way to run a business. And the people who stay and put up with that, and that's their, that's how they I don't want to manage those people either. Because that's they're gonna hire people, and they're gonna yell at the boss yells. So maybe that's how we run things here. So I'm going to be yelled out. Now, forget all that.

Ronald Skelton  46:45  
Nuts. It's just like, it's gotta be a fit and multiple levels. So. So you again, I'm going to refer to your experience, you've been around this, you know, quite a lot longer than I have. Right? Probably close to 10 times longer, right? Because I've been doing I've been doing I've been doing I've been in business for a long time. But I just started getting into acquisition and mergers a couple years ago. And so what would you say or your top three tips like to either buying or selling a business? Like what are the top three things that come to mind? That we should know?

Matt Remuzzi  47:16  
So I mean, I think if it's from, from a buyer's perspective, again, I think you want to look at the numbers, right? But you also want to look at the the fit between the buyer and the business, and make sure that's a good fit. And then you want to make sure that there's upside opportunity. And sometimes again, I think people think, well, I'll buy this business, it produces, you know, $400,000 of your cash, and I'm happy with 400,000. And that'll be fine for it. But you can't expect that it's going to be status quo, right? You, you should be able to come in and say I have ideas on how to improve it, and how to grow it, and how to continue on this trajectory. Because if you're expecting status quo, what you're going to get his falling off, right, so you should have an idea on how to improve it, you should have an idea that it's a good fit for you personally. And then of course, you should be confident and understand the financials and the numbers and that it's a good business in the economic side of and I'll give you an example of where two out of those three had a lot of potential. And the buyer fit was a problem. We had a guy who was a C suite executive kind of guy, right used to, you know, expensive suits expensive meals, sitting around a nice mahogany conference table and talking to other executives, right. And he had a fight with some of the other people and just you know, sort of one of those The hell with that I'm out. And he decided, okay, I need I'm going to buy a business, I know how to run a business, I'm gonna buy a business, replace my income and grow it from there. The business he ended up buying was a moving company. And if you can imagine, right, who works at a moving company, it's day labor kind of guys who bill you know, recently out of prison, soon to be on their on their way back to prison.

Ronald Skelton  49:03  
That's the first thing that came to my mind.

Matt Remuzzi  49:06  
It's a different culture. So he comes in with his boardroom management style of, you know, shaking hands and talking about you know, I would like to give you guys some equity interest. And, you know, I really want to grow the team and these guys are looking at him going now, okay, we can walk all over this guy. So you know, 10 minute breaks, turned into our breaks and you know, they're using the delivery vans for personal hold, you know, and it just, it was a disaster, and he ended up selling it back to the original seller for half of what he paid for it just to get the hell out of it. Because he was a terrible fit for that business. Right. He should have bought he would have been a guy that could run a marketing agency or some kind of professional services firm. That that's what he knew. That's the environment. He was good for. Him. Moving Company, you know, working with that crew, the business was great the business did well financially, right. And the business had a lot of opportunity for growth, because they were just getting into where they had the other guy, the original seller had bought a storage lot. And so they were doing long term storage, in addition to moving, which is just easy money, right? You just park it on the lot, and you charge them 500 bucks a month and leave their stuff there. You know. So the business had tremendous opportunity, and was really a good performer. But this guy was not the guy. And he didn't wasn't self aware enough to spot that. And so those are my three tips, as a buyer to look at things and make sure you've got to fit across all three of you got three green checks, great. But if one of them's a big red X, don't do it.

Ronald Skelton  50:46  
Yeah, I get that, I get that. So we're getting close to the top of the hour, we've been going for about 15 minutes. Now let's make sure everybody knows how to get a hold of you real quick. This is a chance for you to plug your business tell us about CAP Forge and how they can reach you.

Matt Remuzzi  50:59  
Yeah, definitely. So I think I mean, the best way to get a hold of us is through the website, right cap forge.com. There's a lot of information on there about what we do, you can send us an email, you can give us a call, I'm always I'm happy to chat with anybody, whether you're a potential client, or you just have some questions or you know, whatever down the road, who knows, I'm a big believer in karma, right? And try to give back first and then we'll good things will come to us over time. But one of the you know, the things that we do that are particularly relevant to this conversation, right, we do a counting cleanup. So if you're looking at a potential acquisition, and you can't make heads or tails of what they've got, we can go in and do recreate the books. So then you have a very solid understanding of the financial performance of that business. Or if you're looking at a target, and they have some books, and you want us to do a due diligence project, we can again, go in and make sure that everything that you're being presented is accurate. Or if there's discrepancies, what are they? Are they big discrepancies, like walk away kind of discrepancies? Are they small ones you can mitigate and deal with and maybe after revise the offer a little bit, but at least you know what you're getting into. And then once you've got a deal, you're the new owner you're running along, you need bookkeeping help you need tax accounting consultation help, right? You're probably not, it's not a big enough business to have an in house person for that or resource for that. So more of an outsourced CFO, Bookkeeping Tax solution, we do that. So any or all of those, we're happy to help with happy to have the conversation.

Ronald Skelton  52:29  
And that's cap forged.com ca P fo r g e.com. It'll be in the show notes for you guys. Listen to the podcast. It's on the screen if you're watching the video. And I want to make sure everybody has that. The one thing we always like to wrap up the show with is what can my self or the audience do for you?

Matt Remuzzi  52:47  
Really, if you know anybody who owns a business, and has some bookkeeping, that's not up to speed, tell him to give me a call, I'd be happy to talk to him. We don't we're not a fit for everybody. I'll be the first person to tell somebody, Hey, you know what your specific needs, you'd be better off with X, Y or Z. It's not us. But there are a lot of firms that we can help so that you have those books that are accurate, they're updated, they're timely every month, you can use them to make good management decisions. And should you decide to sell, you're ready to go. You don't have to do a big cleanup project or worry that you're leaving money on the table. So if you know somebody who's a small business owner, medium business owner, who could use that kind of help, I would love to be able to have that conversation with whoever that is.

Ronald Skelton  53:35  
Awesome. Thank you, Matt, for being on the show today. hang out for a few minutes afterwards. And we're gonna wrap this up. 

Matt Remuzzi  53:40  
Thanks for having me. I appreciate it. 

Ronald Skelton  53:42  
All right. Awesome. And that's the show, guys. 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 introduced first in Napoleon Hills 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 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