Daniel Sweet is a 27-year technology industry veteran who decided life was more interesting buying and improving s businesses. Now the Managing Partner of Sweetview Partners, he leads a team in the buying and growing of small, Texas-based BtoB...
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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.
And now a moment for our sponsors. I want to highly recommend you get acquisition Aficionado magazine. Every month acquisition Aficionado magazine brings you tactics for business buying and selling you won't find anywhere else learn firsthand from industry leaders who share their success stories featuring in depth interviews and stories from leading figures in the business acquisition industry. This multi platform mobile magazine speaks to acquisition entrepreneurs wherever they are in the journey. And I want you to visit acquisition aficionado.com today. Hello, and welcome back to the how to exit podcast today. I'm here with Daniel Sweet. Daniel is a managing partner at Sweet view partners where he leads a team buying and growing small, Texas based b2b companies. Welcome Daniel, thank you for being on the show today.
Daniel Sweet 1:19
Absolutely. Thanks for having me.
Ronald Skelton 1:21
I always like to start with kind of how did you get into the origin story I kind of jokingly often say, you know, you were born and now you ended up on a show about mergers and acquisitions? Can you fill out the gap in between? But can you, can you kind of give us some, some ideas of how you got into this space?
Daniel Sweet 1:37
Sure, sure. So I actually started my life as a technology guy. I spent 27 years in the technology industry. And you know was, so I've been through enough of the technology industry to have all sorts of things forced on me. So these are growth experiences. So, you know, I started out to actually have worked Apple's helpdesk as my first real job. Before that I was, you know, in high school doing work for everybody, you got a computer problem more or less. So started out hands on learning the computer stuff on my own, went into a technology career, but always, always felt like more of an entrepreneurial kind of guy, trapped in a 10,12, 20, 70,000 person company. And I every time I left a job, I kept saying, I know I'm gonna small company now. No, no, I'm gonna do a small company. And I never did that, that you know, it turns out the money was too good. Golden handcuffs. So one thing I learned along the way I, I had been forced into sales. So some of your listeners may not have been alive during the.com era, I got forced into sales because there weren't enough salespeople to do anything. And I, you know, was, I was delivering technology services. And, and not a lot of people knew how to talk about that. So they said, You do it turns out, that was a great experience. So I went into sales, sales management, did you know random offices, open some offices for some companies, that kind of thing. So I've done a lot of different things that really kind of scratched the entrepreneurial itch while I was still working for giant companies. And eventually, I got down to the point where I was talking to some M&A guys at the mega global Corp I was with at my last job, my last real job. And they were talking about what they did. And I said, Well, that sounds cool. Could I do that with a small company? And he said, Well, I mean, you could but it wastes be a waste of our time, it takes about the same amount of time to do a small thing is a big thing. So yeah, not for you for me. So because I was familiar with a lot of, you know, three or five person technology companies that, you know, the person who started it would grow it up, make money, do whatever they did, and go okay, well, I'm bored with that, that's over challenge gone, I'm going to just shut it down and move on. And so I started talking to some of those guys about taking over their companies, they could sell it to me, I could put somebody in place, I could put actual real sales people in place, because they never had any of that and grow them there. And that was kind of my retirement plan. In information. Unfortunately, the mega global Court decided that it was reorg time again. And so you know, myself and several 1000 of my closest friends all got an opportunity to try new things. But they had a really good severance plan. So that worked out well. So I jumped into doing larger businesses kind of on my own because I really loved it. It's, you know, having, you know, being a technical guy, you automatically have super ADD. It's all over the place. And doing this kind of work is like doing any seven different jobs at the same time. And it keeps the brain active and engaged and none of it ever gets boring. So I mean, that, that's ultimately how I got into it. And it's, it's just been great since I did
Ronald Skelton 4:58
so this is a beautiful (inaudible) that because there's a lot of different things to look at a lot of moving parts. A lot of shiny objects notice, you gotta be careful with some of that. Let's talk about, like, we had this conversation a little bit before the show. And we talked about this a little bit before and other, other programs where I've been around you, you and I have been in meetings before, through some mentors and some other stuff. And but let's talk about that, like getting that first deal that, like, How critical is getting Nellie in the first one, right?
Daniel Sweet 5:29
I mean, I'll even cut off the word right. So nailing the first deal is key to this whole thing. And you know, it took me a while to figure out, but the reality is, if you are the perfect candidate to buy a business, and you haven't bought a business, you are a guy who wants to buy a business. And that on the totem pole of the way people think about people that's, you know, probably somewhere underground, the guy who wants to buy a business, isn't that nice? Move it along. I, I worked at this. So I jumped full time and just started networking like crazy. And I would talk to all sorts of people about their businesses about what I'm trying to do and how it works together, and how would fit. And, you know, a lot of people were like, Hey, that's pretty cool. I know some people that may be willing to sell all that kind of thing, they'd never come back until I bought my first business. When I bought my first business, then everybody said, Oh, he really meant that he's serious about that thing. Okay. And that's when people started coming back and saying, Yeah, I know of another business, if you're still buying. The first business puts you in a different category, and a large portion of populations mind. So that includes lenders, that includes Investment Partners, that includes other businesses, you, you are in a different category when you're a business owner, versus when you are a wannabe. I guess people have seen probably a lot of wannabes, I guess, you know, you and I probably have to. And there's a lot of enthusiasm, but no real action. Getting over to that business owner world changes to the way everybody thinks about you. And that makes all the difference. It's kind of like your first million, they say, getting your first million is the hardest after that no big deal. Getting your first business is the hardest after that, no big deal.
Ronald Skelton 7:18
That's the nature of things. If you look at almost any information product or anything like that, you know, they sell they sell at 100. Actually, you know, 50 or 60, or crack at open, right? Some of them just sitting and I'm guilty of this a little bit I've got, I've got some info products that I bought in the real estate space anyway, they still have cellophane on them on my shelf somewhere. Right? I bought them because I might need them someday. And it wasn't that expensive. And if I you know, I always had this mentality if I pull one tool out of that, at the volume of business I'm doing improves my business. It's worth it the two grand.
Daniel Sweet 7:50
Ronald Skelton 7:50
Right. So that said, I think the rule of thumb is right now is like 97% of the people that take these courses do nothing with them.
Daniel Sweet 7:58
Ronald Skelton 7:58
Right. And it was hard on me because I actually have an education company that I was involved with and ended up selling most or transferring most of it to a partner there. But we created
Daniel Sweet 8:09
Ronald Skelton 8:10
we had a real estate investment, like a thing called the Rec Real Estate Investment Center that I helped create with a partner. And I would teach some of the classes and stuff. And it got to where I just kind of got disillusioned with the whole thing because people come through there. And I mean, I have friends who are performance coaches and everything, we'd stick them on them, and they still wouldn't get those done. Right? Even, even that friend who's a performance coach, this guy is trained on everything, you know, PT cognitive behavior, you name it, he's had the training, if he can't get people to pull the trigger on something nobody can
Daniel Sweet 8:38
Ronald Skelton 8:38
right. And just some people don't.
Daniel Sweet 8:40
for a lot of people getting the knowledge is scratching the itch for so I mean, in the book industry, it used to be they would say roughly 30% of the books that get purchased get opened. Because having it I mean, I could look at it if I wanted to. It's right there. It's mine. Now it's not out here. Having it is half the battle. And a lot of for a lot of people going through the coursework is a lot of the battle. That's the we have a coaching company. We have a executive coaching and leadership development company for Fortune 2000 companies. And one of the constant struggles being a coach is if you actually care about your students, which is really who becomes the coach. It's hard because your students are going to pay you they'll even pay you lots of money to ignore you. You'll give them good advice and they'll go Yeah, okay. I can't, I wish I could. I don't I'll work on it. And never happens.
Ronald Skelton 9:36
You know who, you know, Jay con Revend, Jay Conrad Levinson is a guerrilla marketer. I was one of his coaches. I was actually a guerrilla marketing coach, I got my master's degree in marketing and realized that was worthless. Makes me a good employee for Coca Cola or something. So I went and got trained by him for my own purposes like small and that guerilla marketing isn't the stunts and tactics. It's pretty much anything that's low cost, high impact,
Daniel Sweet 9:59
Ronald Skelton 10:00
So I became one of his coaches, and I got really frustrated in the coaching industry because I call them ask call, right. And ask call, somebody asked you to step by step on how to do something, you lay out a plan, and then they just don't do anything. They just go back to doing
Daniel Sweet 10:13
Ronald Skelton 10:13
what? And they call you up at some point, and they go, Hey, this isn't working. I was like, Okay, did you do step number one?
Daniel Sweet 10:18
no but it still
Ronald Skelton 10:18
Well kinda, kinda, you know, but uh, okay, did you do step number two? No, I didn't get that far. But then it worked. And I was like, Nah, it's working, you're not working, right? So we're, we're, out there, what are the what is a way to get past that what is a way to like, set up a structure to get the first deal done.
Daniel Sweet 10:34
So there's a couple of ways to do this. If you are determined to be the majority owner and do it mostly on your own, what I, what I tell people is the easiest way to do that is to be what people expect to see. So, for instance, my background was technology, the number one acquisition, for me, that was going to be easiest was going to be a technology acquisition. I've done this stuff for 27 years, if you're selling technology company, I pretty much understand how that works, I understand how the market works, I understand how the sales work, I, I can notice things inside your company that tell me about it. Because I've been in enough companies to see that. And that's so for smaller businesses like so we buy in the one to 20 million revenue range, those people are expecting people like that. So an expert in the industry who's ready to own, the banks are expecting to fund somebody who is an expert in the industry ready to do an ensemble, it's, I mean, they're this far away from having done it already. And it's just the next logical step. So if you have a background, a good background and something, whether or not you want to own a business, and that's something that's still going to be your easiest path to get that first company funding that is easiest path is the SBA. And I say easiest, because they will do almost any deal that you're qualified for, and the, and the prices and stupid banks will be a lot more selective. But the purpose of the SBA, if you remember, the purpose of SBA, whatever you're working with them, is to employ more people than and all you're doing is you're functioning as an independent agent of the federal government spending government money, it's the only time you have to do that, spending federal money in order to create a business, buy a business, employ people. That's their focus. So they're a little different than a bank that way, a bank is a little more selective, and you've got to go through a lot of banks, not that you shouldn't. But you've got to go through a lot of banks to find their sweet spot. Because every lender will tell you, yeah, we lend on any project. But 90% of what we learned was this, finding those sweet spots that map up with your, the business you want to get is, is more difficult. But again, for speed of action. The SBA and, and a business that you have a background in are the quickest ways to get there. Now. The SBA is not quick in any other sense of the imagination. It takes them 90 days to work through you the company and figure things out and ask for every paper they've ever touched. And it's, it's very detailed, but and, and there's lots of rules. But it is still the quickest way to get fun to do to deal as long as the deal is under $5
Ronald Skelton 13:11
So we've had a few people. Yeah, that's good.
Daniel Sweet 13:14
I said that was first way sorry.
Ronald Skelton 13:15
Yeah, go ahead.
Daniel Sweet 13:16
ADD? Did I say something before? The second way is to partner with somebody and I always say this is my, this is my self serving? Answer. If you partner with somebody who's already doing a deal, and you buy equity into that deal, then you're an owner. And nobody comes and says, Hey, what percentage do you own. So if you own a, if you're 1%, owner, in a amazing AI technology company, don't do that they don't make any profit, then you are an AI company owner. And, and that's how people will see you, they don't see you as the 1% guy, they see you as an owner guy, and all of a sudden for a much smaller investment. And maybe in a much shorter deal. If you're partnering with the right people you are you get an inside view of what it looks like to do the acquisition and to, and to live it out. And you also get to be an owner now and you've, you've jumped steps. So it makes it, makes a huge difference. To be able to do that. If you're willing to partner you know, a lot of people have a mental block. It's got to be my company, (inaudible). And, and I won't say I haven't thought that from time to time. But if you partner with somebody that's, that's another quick route to getting that first deal done.
Ronald Skelton 14:34
And I'd say spend some time and you with anybody you're considering partner. I think partnerships are worse are harder to, to manage and deal with than marriages. Because there's fewer anchors to hold you there to figure things out, right? If you're married, you end up having a couple of kids, you're highly motivated to figure things out. You buy a business with somebody or own a business or somebody things are going rough and the money's just not coming in. It's pretty easy to tell the guy to take a high commission You're absolutely in love with the market the space or the you know, the problem you're trying to solve for
Daniel Sweet 15:06
Ronald Skelton 15:06
where you're, you're there for a mission. If you're not, if you're, if you don't have a huge why, while you're there, it, it's gets tough. Right? So picking, picking partners is great. I love the idea. I love the concept. But I, I've had some good ones, and I've had some really rough ones so
Daniel Sweet 15:21
right. So it depends on why you're picking a partner, if you're picking a partner, because you think that you two or three, or eight or whoever can run the best killer lemonade stand business in the world, you're probably especially the more partners you have, the more frustration you're going to have. But if your goal is to buy 1% into a deal, so that you are a business owner now, if the company flops, you're out you're 1%
Ronald Skelton 15:47
Daniel Sweet 15:47
Which, you know,
Ronald Skelton 15:48
Daniel Sweet 15:49
I feel like this is pretty small number, but it will enable you to get to that next business that will be entirely yours.
Ronald Skelton 15:55
So let's talk about brokers and advisors. Do you go through brokers and advisors or advisors going through brokers and advisors? Or would you prefer off market?
Daniel Sweet 16:02
Short answer is yes, we use brokers to train our junior analysts on. So I use brokers a lot in the beginning. And I learned that brokers are a differently motivated third negotiating partner that makes everything harder. And they will often kill a deal, because they're not making enough money on it. They would rather have everybody up nothing than they didn't make what they had in their mind.
Ronald Skelton 16:26
Daniel Sweet 16:27
It's been my experience, I'm sure I'm alone.
Ronald Skelton 16:30
That's why they're called brokers, you end up broker if you work with them.
Daniel Sweet 16:32
Exactly. But we do use brokers to train our junior analysts which are generally think interns that were training how to look at companies. And by using broker led deals, they get to see a ton of financials a ton of companies and learn to look at, you know, learn what to look for in the p&l learn what to look for, in the balance sheet, learn the red flags of the lies that will be told on the Sims, they get to they get a lot of at bats that way. And so it really helps them learn what to look for. So that when they're done with that junior analyst time, there, they have a better education than most MBAs on how to find a good company. As long as you ignore the broker part. And, and frankly, what we use them for, is they're very low cost people who can grind through the hundreds of broker lead deals to find those one or two good ones at a pay rate. That makes sense, because I can't do it for me. Otherwise, I won't be making any money ever. But if I've got a low paid person that's grinding through it, and they get to learn at the same time, everybody wins. And we'll pick out those few you know diamonds in the rough that are usually in there. And the broker didn't know how to, how to market it. And so he didn't recognize what he had is usually how it works. But we can, having seen enough of them, we can kind of see through and say, oh, yeah, that one probably will work. So we do use them. But just in that sense. Generally speaking, I. So the success rate for using brokers, the, the standard that I've always heard is one out of 100 you look at can be done. Our numbers in the early days were more like one and 200 or one and 250. It was bad. So I stopped using brokers entirely until we started this junior analyst program. It was just such a waste of time, it didn't matter how good the company was the there was a high probability the broker would kill the deal.
Ronald Skelton 18:31
I get brokers trying to be on the show constantly. And I do a lot of vetting to make sure they've owned a business. If you watch the brokers that have been on my show, they bought a business sold it and then ended up being a broker because they didn't like the way they were treated.
Daniel Sweet 18:41
Ronald Skelton 18:42
They actually they got hands on experience. They just didn't show up. The early days. I had some friends that bought brokerages and I brought them on or whatever but you know you want to be on the show. Now you got to show me you got some, some skin in the game some experience or something because there's just some states like Oklahoma, where I just moved from there's no license requirement whatsoever to be a business broker. I mean, there's a lot of
Daniel Sweet 19:01
(inaudible) license regarding most states.
Ronald Skelton 19:03
Yes, like are you just have to be a real estate broker. Right? Even here in California. You had to be a business broker, you have to be a real estate broker. But I don't know that there's an actual certification or extra test the label yourself as a business broker on top of it. I just don't think there is
Daniel Sweet 19:17
there's, there's I triple B and all sorts of other places that you can get an industry cert, but I, I don't know of many state certs.
Ronald Skelton 19:24
Daniel Sweet 19:24
So the thing to remember about brokerage is this. The so brokers are just like insurance agencies. The top guy owns the agency, he owns the region he knows the geography the top person excuse me the but the salespeople that he hires are almost entirely commission based, have never been in the industry are thrown to the wolves to try and find something and hopefully they make some money. They close 20 ish percent of the deals on, on hold brokers as a whole. Close about 20% of the deals they list Test, which means there's a, you know, eight out of 10 chance, you're ain't gonna get listed, you ain't gonna get sold. You know, all of those factors tell you why there's a problem. Because most people approach brokers like, hey, they're professional in this industry, they know what they're doing, they wouldn't kill themselves to keep a deal from happening, but turns out, most of them have not been in it for more than a year. If you ask a broker, how long have you done this? The average answer is about seven months that we've received, we started keeping track because it was interesting, when we kept changing brokers on the same deal over and over the and they're not they haven't learned enough to be a professional in this in this, in the industry yet. So I mean, explains why it happens. But still, broker deals are a drug. Here's the answer broker dealer are drug, because you could see a pretty picture of a pretty company that you could own because it's for sale. And you just think all I have to do is make the right offer and know there's so much more negotiation to make all that happen. That it's, it's just a giant drug that I tell people not to imbibe on,
Ronald Skelton 21:05
there are some good ones out there. Don't get me wrong, I just actually
Daniel Sweet 21:07
Ronald Skelton 21:08
make big announcement coming up. Not today. But we just partnered, we're a channel partner of, of IT based brokerage has been around since the 80s. Right, and they have buyers lined up, they coach people, I mean, they're,
Daniel Sweet 21:22
they're real broker
Ronald Skelton 21:23
they're been around for a while they know what they're doing. And finally,
Daniel Sweet 21:25
Ronald Skelton 21:25
like when I found them, and they they actually reached out to me. And at first I'm like, I'm not partnering up with a broker. And then I started researching what they do and who they were. And, and it it's a huge difference when somebody they've been like, they've been doing this since the 80s, like 87,89, or something like that. All, all IT companies all 5 million to $30 million range.
Daniel Sweet 21:45
Ronald Skelton 21:45
And they get them done, and they have buyers lined up to date commonly get 10, 15 offers, and then they hone it down to four or five. And then they work with those guys, because they've, they've built relationships with PNE firms, family offices and tech buyers for years. And we should be announcing that in the next few days or so. But
Daniel Sweet 22:04
well I mean, if you've got a brokerage out there that specializes in a vertical and has been around for more than five years, chances are they're doing really well what they do.
Ronald Skelton 22:13
Daniel Sweet 22:14
the problem is the majority of brokers are we sell anything?
Ronald Skelton 22:17
Daniel Sweet 22:17
Well, I mean, how do you know anything about that business?
Because we sell anything,
Ronald Skelton 22:22
Daniel Sweet 22:24
There are great brokers, they're just hard to find.
Ronald Skelton 22:26
So, so put the brokers aside, let's talk about off market, what's the best way to find off market deals.
Daniel Sweet 22:31
So the best way is also the way that is challenging for most people that are just entering. So the best off market deal you're gonna get is from somebody you already know. Somebody who is somewhere in your network already knows, you knows you're an honest person knows that you're not fly by night, and has a business for sale that they want to go to. If not a relative, they then want to go to somebody they trust. So
Ronald Skelton 22:58
Daniel Sweet 22:58
the best, easiest, easiest deal is one that's in your network already. And you just have to mine your network to ask people Hey, are you looking to sell? Do you know somebody who's looking to sell? That's always the best deal?
Ronald Skelton 23:12
Do you do cold outreach and off market like you, you identify a highly targeted, like, we want companies that match this criteria, and you reach out to them.
Daniel Sweet 23:21
So honestly, not much. Certainly not much anymore. We did a lot of networking, one on one to meet a lot of folks. But these days, we don't do that much anymore, because we're looking for. And this, you know, this sounds like what everybody should be doing, right. But we're looking for companies to qualify themselves and come to us. And so we have set up a little bit for me a little bit of a persona on LinkedIn, that talks about small business stuff. We'll do presentations here and there will do a podcast here and there. We'll do articles for magazines, occasionally, we do a lot of things that display our expertise, and hopefully are really helpful to that business owners looking to sell. And we've got a video series that's been in my head for a year and a half, and I've had no time to do that I'm going to do now. Just little short videos that walk through the entire process with a, with a seller, someone who's considering selling a business, but they, they all say the same thing. I have no idea where to go, I look online, I get a bunch of trash. I have no idea who I can trust. So we're trying to put together a series of videos that at least walks through the process about the things they need to know if they're going to sell.
Ronald Skelton 24:40
You're going to do like an email drip or how are you going to how you gonna present it.
Daniel Sweet 24:44
So we're gonna have it so we have a you know, everybody, every couple of years has a brand new website, we just have a new website. So on our new website and on LinkedIn, we're going to be sending it out and we are working with so we don't have all the things I know I need to do it Don't beat me up Mr. Marketing man. All the things I need to know we need to do have the newsletter, have the email list all that stuff. The honest truth is we've been too busy to get that done, which is a good reason not to do it. But it's still, as I'm building sweeping partners to be able to handle more capacity. Absolutely things we are going to be doing.
Ronald Skelton 25:19
Awesome. What's the importance of having a highly targeted buying criteria? And do you guys have one,
Daniel Sweet 25:25
our our buying criteria is relatively simple, we buy in the state of Texas, one to 20 million in revenue, except in technology we'd like them to be have been around at least 10 years and have at least 10 employees. They need to be profitable. And we, we buy b2b generally. And our specialty is our energy technology construction, that, that's our specification, because we know our success rate is much higher in that area. The importance of it is twofold. One is it helps you focus, because like you're saying there's lots of shiny things out there. And if you get distracted as most entrepreneurs who are also ADD and easily distracted. There's too many companies out there to distract you. If you're just thinking anything that's good. Having that helps keep you focused, and we use it with our junior hours now is we've got a worksheet that says here's the specification, and constantly is it's, it's just like our own brain, with, with what makes me upset. It's just like our own brain. They'll come back and say, Well, what about this one? I said, Okay. Is it this? Yes? Is it this? Yes. Is it this? No, that sounds like a no. And they say, but it's a great company. Yeah, yeah, that's not what we do. We do this. So it really helps to focus your own brain. But equally importantly, everybody you talk to that tell you tell your buying businesses now, it helps them focus their brain to because if you tell them you're doing everything I buy any kind of business, they're gonna go, Oh, that's nice. But if you tell them, I buy left handed cat Emporia based in southern states, with people who have been in their town for three generations, you can bet when they walk into the next left hand of cat Emporium, they're going to say, I know a guy who wants to buy this very business. And they will remember you, it helps them to everybody wants to categorize you. So they know how better to think about you. And that's not a bad thing. It's just a thing. And so if you help them with that category, it keeps it in their mind. So they're now becoming your salespeople effectively. So both for you and for people you talk to is important to have that deal specification down pat,
Ronald Skelton 27:41
the deal specification, I get like, you know, I know right now I'm looking for businesses that do a million to $10 million. I prefer things that either have a recurring revenue model or something I can add to it fairly simple, right? There's 10 or more employees, I don't want to buy myself a job I understand. And I acknowledge that I'll have to get in and get busy for the first while but I want it to be up running and fairly operator independent, like I don't need to be the and be honest, most of the time, I don't want the, the main operator to stay. Right.
Daniel Sweet 28:13
Ronald Skelton 28:13
I'm not a PE firm. I'm not gonna, I'm not doing that. But I also want like, I want to know that you have somebody has been there for 15 years, he's kind of the floor manager, he knows the business inside and out. And he could run it when you're gone. He's been running where do you go on?
Daniel Sweet 28:29
Ronald Skelton 28:29
And, you know, not every company. I'm a big fan of this. But not every company needs a CEO. That's an ego title. You need a good GM a good general manager that knows where everything goes, know how the widgets are made know who's made, who makes what, when you know, where things are supposed to be? Who's supposed to be there, you need all that. But you know, you don't necessarily need a CEO level person for a company doing less than $5 million a year. Right.
Daniel Sweet 28:54
Ronald Skelton 28:55
You know, you need a good operator. And that's the one of the critical things I have right now is one of the questions I asked you'll get it and we'll get, we'll get to this point at some point. How do you pick right operators? Because been burned a few times. And, you know, I've tried, we just, we just talked about this for half the last show I did, which is we do disc profiles and Clifton Strengths and other stuff, but there's just something about, and I've had some people that pass everything and have a good gut fill. The one thing I've never found a standardized test for is integrity. Right?
Daniel Sweet 29:27
Ronald Skelton 29:28
You know, like, you'll do well, they do what they say they're going to do. And I guess you get that from the call and the referrals and your call in their references. But how critical is the people that limit when you're looking at companies like what do you look at as far as culture, skill set and team environment when you're looking at these companies you're acquiring?
Daniel Sweet 29:51
So most of our companies one way or another? The ones we acquire because they're b2b, tend to be professional services of some sort. So what we're looking for are companies that are really kind of rock stars and what they do. And they've got good people who are extremely experienced and doing the thing, and they love it, but they have no idea how to tell anybody else about it. So their, their delivery is fantastic. They have great repeat customers that keep coming back, because it's so fantastic. But what they don't know is everything around that. So they know how to operate. They don't know how to sail, sell market, they don't know how to do the business admin, they don't know, benefits, they don't know a lot of personnel issues, all of that stuff is, is just at this size, usually missing from the companies that we acquire. And, and we love that because that's a great opportunity for us. So one of the first things we do, so we do generally replace the operator, the owner. And that's because our focus is to take something that's really great, and grow it. So in order for that to happen, you have to do things like I don't know, sales and marketing, that the owner is necessarily uncomfortable doing or he would have done them.
Ronald Skelton 31:05
Daniel Sweet 31:06
We have situations where the owner of state and we, we made very clear, listen, we're gonna do this kind of stuff, I am great with you, Stan, but we're gonna make changes, we're gonna do things differently. And you've got to be okay with that. And most of them honestly are not, I mean, they've done their way for 20, 30 years, I get it. So usually, we want to replace that person with somebody of our own choosing. Because we're relatively small, as a acquisitions firm, we can use usually somebody from our network, or from their network, that is who we choose. And so we've got a very close personal connection with them. And we do we do the assessments on them as well, and we interview them with a bunch people. What I'm about to start doing is I'm about to whenever I have a president I want to bring in, I'm going to have my other presidents interview, and say, okay, you know, our culture, you know, how we operate here, you know, what I expect? Maybe he's telling me one thing and you another, I don't know, what do you think? So,
Ronald Skelton 32:06
Daniel Sweet 32:07
guys to evaluate their peers effectively, and see if they fit, because they know that culture,
Ronald Skelton 32:13
great idea, as I acquire, you know, more than just a few, that would be a great way to do it just because they know the culture, they know the environment. And it gives, it gives that other the guy you're trying to bring in, they get a sense of competence from it, because they've talked to the other people that are working right. What's the to you, we talked a little bit about this already. What's difficulty versus like, I had the luxury, this is all I do I get on the podcast, and I look for businesses. Right?
Daniel Sweet 32:39
Ronald Skelton 32:39
Some people are in a job and they're wanting to make the transition, how do you manage a part time search? Because that, that seems like I don't know how you could do it?
Daniel Sweet 32:47
That's hard, is what the answer is that is hard. So the way to do it is to have a meeting with your entire family, assuming you have people you live with, that you care about. Both are good. Get them all together and say, Okay, so here's what I'm trying to do. I'm trying to serve our future by buying a business for multiple businesses, but I have to start with one, because I have a full time job. That means I'm going to be mostly a stranger for the next minimum six months. If we want to do things together as a family, we need to pre plan them, because otherwise they aren't gonna happen. Because I'm gonna be working two full time jobs, it, it's hard. The problem is that you've got to interact with a lot of people in order to find, you know, kiss a lot of frogs to find your prince, you've got to go through a lot of businesses before you find it's not just a business ready to sell, it's in the right industry, has the right attitude, is willing to sell is willing to sell at a reasonable valuation has the motivation to complete a sale, which is a huge thing that most people miss is appreciate you as a buyer, which is a big piece, and can see his way through the entire deal.
Ronald Skelton 34:07
I'll add one to that one.
Daniel Sweet 34:08
Ronald Skelton 34:10
I'll add one to that because they
Daniel Sweet 34:11
Ronald Skelton 34:11
know what we're doing next. There's so
Daniel Sweet 34:13
Ronald Skelton 34:13
many deals that get killed in the last second. And I've seen this over again, I've talked to like, I'm on track to interview over 100 people this year in the space probably in the 70s right now. I'll hit 100 easily this year. And one of the common elements is these deals fall apart at the last second when I dig into why is they don't have the they tie so much of their identity to being a business owner. And the, and the guy who produces XYZ widgets. They don't know who they would be without it. And at the last second, they're like I don't know what to do with myself. Right. I actually have a company in Tulsa I really was interested in though, though a friend knows him. I know the, I know the owner. Our friend knows the owner and knows the owners family really well goes to dinner with him stuff and he says you know the wife's really pushing. They're in their 70s late 70s Is the wife really pushing for him to sell and they built a 750,000, which is huge. And Oklahoma lake house over, over one of the beautiful lakes there. And the wife just wants to go spend time with the lake with him and don't want him working anymore. So I get him on the phone. And because she's wanting to sell it, and you know, he's there. And he's been a business broker before in the past, it's a little different, difficult conversation. But
Daniel Sweet 35:22
Ronald Skelton 35:22
first thing he said to me is, I don't sell this, I'll die. All my friends have sold their business at this age, they die within a few months, I'm not ready to die. Like his whole identity, his sense of purpose, he has to it has to live because he has a company and all those employees count on him. He's tied his who he is so much to it. I don't know that he has, I mean, until he breaks that mental block. I don't know if he has a choice of leaving, because he's convinced himself that when he's done, he's done. Right? So you've, you've got people who can make it through the process, they know what they're going to do next. What's the first conversation? What's that first conversation look for it for you, when you, when you get somebody on the phone? They're talking to you? Maybe they reached out to you? Or maybe you you knew they're in the space? You know, they're they're 55, 60, they're thinking about doing something else? Somebody makes an introduction? How do you what's that first conversation with a business owner? In, in your book? What does that look like?
Daniel Sweet 36:11
So related to what you're talking about? One of the first? Maybe not the first, but one of the first questions. All I ask is, why is now the time to sell? And listen to what the answer is? The real answer is the honest to goodness, answers that get to closings are usually an external factor has acted upon this person, their health, their family's health, their kid has gone crazy. They have a new grandkid, they want to spend time with they've real their, their spouse is about to leave them because they haven't spent time with them in 40 years, whatever. There's an external factor that is acting upon them, that is causing them to make that change. Because like you say, it's very painful for him. So I listen for why they're selling as one of the first questions because you may have the best business, and I may want to acquire it, and you may only want 36 cents for it. But if you're not truly ready to sell, it'll never happen, I can go through the whole process and you're gonna drop out.
Ronald Skelton 37:10
And that's very time consuming. You could spend six months working with somebody, and at the very last second, they're like, Yeah, I don't think we're gonna let this go yet.
Daniel Sweet 37:16
In my mind, as the seller, it's worth X and you're at half of x or less, or whatever it is. And we, we completely understand that it's their business. And so will, will very, very friendly, we will kindly disengage with them and say, Listen, I get that our valuation is just based on how we know we can make a profit with it. There are lots of other valuations out there, and I hope you find the one you're looking for. If not, you know, give us a call back, whatever. So we'll frequently walk away, because we can see it's not going to come together. And they frequently need some more time to think about these new concepts. Sometimes they need time to be beat up by the market and see that we're just not lying to them, oh, this is a market reality.
Ronald Skelton 38:01
Daniel Sweet 38:02
And then come back later.
Ronald Skelton 38:03
It's interesting, because I do the same approach when I'm talking to these guys. And one of the things I do a lot of times that conversation of what they want, I don't bring it up very early in the conversation, it's usually the second or third call. But if it does come up early, it's my initial response. No, I don't care if I don't, I don't know how to. I don't have enough data at this point most of the time.
Daniel Sweet 38:22
Ronald Skelton 38:22
So I don't care if they tell me it's worth, they want $1 Or they want $100 million. I'm like, great. Let's see how we can get you there. And that's all I say let's Great. Let's see how we can get you there. Yeah, and the purpose of that is is often getting you there as a hey, look, I know that you asked for $100 million your company's like I can only in my mathematical what I can do, I can only go to 10 how I would get you there is you got to do this to your revenue you got to get to this to your system operating procedures. This is what you got to do. You get all that done and you know, myself or somebody else might move that number way up there where you want it. Right
Daniel Sweet 38:53
Ronald Skelton 38:54
There might be somebody out there crazy enough, you know, I don't use that word, but there might be somebody out there creative enough that they're gonna give you what you're looking for. It's just not me.
Daniel Sweet 39:01
Ronald Skelton 39:02
Here's a plan to get you there have a you know good look. But it's not until after I've seen the numbers, I've got that data and
Daniel Sweet 39:08
Ronald Skelton 39:09
a lot of times I'm like well why do you base your nearly there's a discussion like why do you base your numbers off of this? Like, okay, here's the industry standard. Here's where you're at, you know,
Daniel Sweet 39:17
we, we actually call under the same we'll
Ronald Skelton 39:20
Daniel Sweet 39:20
call him up and say hey, listen, we really liked your company, you run a really you run a very well you have a very well operated company there. We really like it. I wanted to see if you had sold it yet or, or what the status was had has the business changed at all? You know is it is now a good time to have a conversation on that we we just like your company and, and wanting to talk more.
Ronald Skelton 39:42
about the, the conversation. Do you spend much time building rapport at the beginning are you need to me this is a business person. This guy is needed to know me like me and trust me and to get there as fast as possible but just asking questions and doing my best to listen and quite honestly, I don't try to ask for financials or if they off For him, I look at him. But I don't get into that stuff until I have your origin story know why you created what you created knowing where you're going? What's your vision for this? If you had all if you had unlimited resources, what would you fix, you know, to just really get into their story and why they're going where they're going. Because there's so much value in that if we get into numbers beforehand, it just kills a lot of that conversation.
Daniel Sweet 40:23
Ronald Skelton 40:24
And it all becomes like, I have rather I just don't take negotiating based off in numbers, is you've done a lot more deals than I have. I'm just, I'm just getting started in this, I feel that negotiating often numbers is a deficit, you're actually you're starting in the hole, you don't have the repport, you're, you're basically shooting yourself in, in the foot.
Daniel Sweet 40:44
I did a negotiation class recently. And part of my, my commentary there was, if I don't know you, and you don't know me, money is the only common element that we can use to do this deal. But once we get to know each other, we can then learn the things of value. I mean, maybe the deal could be done with three pigs and chicken, in which case, I'll go find three pigs in a chicken. But I've gotten to know you and what you value in order to replace money with something else. And so and, and that's, to my first conversations, what I tell my staff is what I do is color commentary. The numbers tell one story, but the discussion with the seller tells it fills in all of those numbers with the color. Right,
Ronald Skelton 41:32
Daniel Sweet 41:32
So I'll find out, you know, it seems like it got a really cool business here. Tell me how did you get into this? How, how do you build it? What's the coolest stuff you've done? What are you proudest of? Why is now the time to leave? You know, all of those questions around, you know, tell me the story of your business. Numbers are great. Well, we both have numbers, people that will look at that. But I want to know, you know, tell me more tell me the humanity. And so that's the discussion I like to have, which inevitably leads to they learn who I am. And I am too old and too long and corporate America to be fake about who I am. So you're good. Like you're saying you may not like my directness. But you know, that's the way I am. And that's why I'm going to be so if you don't like that you shouldn't sell to me.
Ronald Skelton 42:24
Daniel Sweet 42:25
And if they don't, they won't, if they don't like you, they won't tell you
Ronald Skelton 42:29
you're talking about like, what is when there's numbers yearly, you know, negotiate enough numbers, I honestly think there's an extra element inside of that, right? If we're only negotiating the numbers, if I don't like you, it's gonna cost you more, right?
Daniel Sweet 42:41
Ronald Skelton 42:41
Or if I dislike you, it's gonna cost you a lot more, right.
Daniel Sweet 42:44
Ronald Skelton 42:45
I've been even on job interviews were like, I don't want this freaking job. And, you know, but I'm, I'm a consultant back then. And one of the guys asked me one day to this consulting gig. And they're like, Well, how much like they want me to write documents for the next few months. And I, I just, I'm an add guy in order to write security documents, like
Daniel Sweet 43:02
Ronald Skelton 43:03
operating manuals and stuff for computer security stuff. I'm a nerd from a previous life. And I was like, 200 bucks an hour. And I Okay, when can you start? That was too easy. Right?
Daniel Sweet 43:14
Ronald Skelton 43:15
Here. I know, I'm making eight grand a week writing documents. I got it done. And,
Daniel Sweet 43:21
Ronald Skelton 43:21
but the point was, is and they needed it because they were entering into another country. And that country had to have certain things for security compliance operating. In (inaudible) the United States, Safe Harbor is a totally different thing in Europe, it just means it's the exchange of personal information and how it's managed and stuff here. It's something
Daniel Sweet 43:40
Ronald Skelton 43:40
to do with like, adult material or something. In, in Europe, it's about so I was writing the computer security, manual operating procedures and stuff to prove that they had this secure and safe system. And I was a computer security expert prior to that, designing firewalls for government agencies and stuff. And so kind of knew the space inside and out, you know, learned a few things, we had to fix a few things along the way. Because, you know, you know, I wanted everything in the document to be true. But, uh, you know, by the end of writing that document the last day when I finished it, they basically I finished the document this okay, you're done. They got me up and walk me out there because they realize how much they spent to write the document. But I, I, I didn't want to do it, right.
Daniel Sweet 44:19
Ronald Skelton 44:19
So, but that said, if you're negotiating based off of numbers alone, you're probably not going to get there because the numbers just aren't going to make sense. You haven't built the repport. And, you know, they don't trust you know, you, you know want, want to hand it over to you. So they're going to, they're going to need to premium. Right.
Daniel Sweet 44:37
Ronald Skelton 44:37
Especially, there's a there's an element in spite of these businesses that are run by the original founder, and it has been around or second or third generation founders call the Safe, safe pair of hands. Right. the loyalty of their doom to their employees of safe pair of hands, the hand that, that love that brand with their day built with their dad built with their granddad built and those employees that work there, their dad work there. Like there's a, there's a human element to this that a lot of people overlook?
Daniel Sweet 45:04
Absolutely, absolutely. And part of our we, you know, we have, you know, our discussion of what we do and back up with, you know, facts and our history when we take care of people. But part of what we do now that we've gotten to a certain size is, we'll come into a company, we say, Listen, part of, we know that a business is, is based on your work. And frankly, I'm too lazy to go around and hire a bunch of more people, because I pissed you off. So I, I don't have any desire to be doing that. So instead, what we do now is we bring in a really nice benefits plan that we put across the entire portfolio. And we, we tell them, Okay, we're gonna bring in these benefits, they're really good benefits, the price is really good. But we pay for the employee, we pay for every employee the full rate. And if you want to add your family, it's, it's relatively inexpensive. But we want to provide you a full set of really good benefits, because we know that's a big part of making you want to stay and I will be completely transparent. I want you to stay. And so we, we, we talked through this with the employees, and help them understand what we're looking to do and why that benefits them.
Ronald Skelton 46:18
It's interesting that you say that, because I was talking to the wife, my wife still works. And usually we, we move into where we move around a little bit, we're in the Redwood Forest to California, right now, when we get somewhere we start looking around, say who has the best benefits, and that's who
Daniel Sweet 46:30
Ronald Skelton 46:30
we tried to get her employed with. And hear the difference that she found an employer that did exactly what you're talking about, right? They cover everything. The difference was our medical insurance and benefits in Oklahoma with her working took about 700, almost $800 a month out of her check. And here, it's $75
Daniel Sweet 46:50
Ronald Skelton 46:51
with better coverage and better insurance. And like the whole nine No, everything's better about what it is it's a higher quality package of benefits. And instead of nearly 800 bucks, it's like 78 and things with the numbers right now. And so I was telling us, like, you know, one more acquisition away that we can just replace that you don't have to work, right, I'm just, you know, most of my assets right now in real estate. So there's some (inaudible) and flow with it right now. So it does, it is comfortable that, you know, we structured our life to where we paid a pay cash for the house, I paid cash for my farm. We don't actually have any bills. So it's like, if, if everything else went to hell in a handbasket, we can live on her paycheck. You know, that may not need (inaudible) you know, I still wouldn't leave this the benefits, you know, she just logical she goes, it's worth 40 hours a week to not have to pay four five if we did this on one of your companies as small as they are. It probably cost us four or five grand a month as independent operators as opposed to like we did, we did the math, we actually looked a little bit 3200 is the best I could find for having a family for insured at that level. You know, it just makes sense. Plus I, I kind of like being away and doing it gives her a sense of purpose to so yeah, it's critical that the benefits packages are great, because that's how you keep the team around and stuff. So I like that.
Daniel Sweet 48:08
So you know, you're ready to sell me the podcast, you can become an employee and we get to great benefits.
Ronald Skelton 48:15
Yeah, so the cool, I'm just talking about your company real quick. The Sweetwater, Sweetwater
Daniel Sweet 48:26
sweet view, sweet view
Ronald Skelton 48:27
sweet view I keep one called Sweetwater I don't know why
Daniel Sweet 48:28
Ronald Skelton 48:30
Is it a? Is it a song or something? See what sweet view partner
Daniel Sweet 48:33
sweet water is
a place in both Oklahoma and Texas. And it's been in a lot of movies and books. And yeah,
Ronald Skelton 48:39
they'll still waters in Oklahoma. So maybe that like their I don't know if there's there might be a sweet water too. I don't remember that. But let's talk about that. Let's talk about your company a little bit like how do people reach out to you? What are you looking for? I, we've been on here for an hour a little bit. So I don't want to cut you off anytime. And you might have other stuff to do. So let's make sure people know, you know, what sweet view is looking for how to reach out to you. You know, give us a pitch. It's 100%. Okay, on this show to pitch something.
Daniel Sweet 49:08
Absolutely. So sweet view partners, as we talked about is looking for Texas based small businesses in the one to $20 million range. We're we are generically business, the business, specifically construction, energy and technology businesses. And what we do so there's a lot of places to pick to sell your business to. But the reason people pick us is because we are going to maintain the name we're going to attain, maintain the people, except in one case with one employee where they recommend the owner recommended.
Ronald Skelton 49:40
Maybe you want to tell us otherwise.
Daniel Sweet 49:41
We maintain the people and what we're doing is we're building around the edges to grow that. So our job is to take it from what you have built which is usually really high quality and take it to the next stage where it can survive on its own it becomes its own organism at that point. of all, at that point, this thing that you built with the name you gave it, and probably most of the poor people still there is able to survive on its own without the day to day involvement of a president or an owner. And, and that's our goal is to take your thing that can't survive without you right now and turn it into something that survives on its own and can keep growing. With the pieces that we've put in there will we will add on compatible businesses will grow sales will help your employees likely with benefits will often come in and offer key employees a chance to buy into the equity to get really connected with the company. And, and we are because most of our stuff is professional services, we understand how important people are. So we treat them right. That's what we do.
Ronald Skelton 50:52
Awesome. How do people reach out to you I mean, what's the best way to contact you?
Daniel Sweet 50:55
Best way to find this is via the website, sweet view partners.com, there's a Contact Us section there, you can either just send us an email, or you can actually schedule with one of us there. That that's the easiest way to get ahold of us. And frankly, I'm, I'm a little bit of a add workaholic, perhaps. So I'm usually in a meeting somewhere. So if you call me, you're going to end up leaving a voicemail anyway. So you might as well leave email,
Ronald Skelton 51:22
right? So you guys looking for any teammates or anything like that also, or
Daniel Sweet 51:27
so we're always looking for really good people. So, you know, we always need new presidents. And so we're always looking for really good qualified people who, again my, my idea of qualified is you are high character, you have had the responsibility of at least a p&l in a larger company. And you're looking to take all the skills you've built over your entire life, and start to deploy them in a place where you're making the decisions. You know, you can do it, you've, you know, there's all sorts of this stuff you've proposed to your companies before. And you just need the right opportunity. And in doing that, we partner with our presidents to create milestones to get them equity in the company. So that everybody wins when they win, everybody wins. So we're always looking for really good quality in Texas people.
Ronald Skelton 52:21
Awesome. And I love that, that model, because that's kind of where I'm at with the same thing as I'm looking to bring people in that are, you know, they've done it before, there would be an excellent leader inside of that space, they might even be out there looking for a business to buy of their own and just don't know how to negotiate, this gives them an opportunity to come in own a piece, earn a bigger piece over time. And eventually, you know, I do plan on wholesome holding some of these long term but some of these companies, I'd be interested in working with one of these particular operators, I go out negotiate it, we buy it together, we grow it, you eventually buy it out of underneath me at a decent, you know, I made, you know, make my money, and then it's yours, right?
Daniel Sweet 52:59
Ronald Skelton 53:00
Working with two guys right now that that's what we're looking at. It's it's part of their retirement plan, were retiring them out of government services. And so I'm talking to companies they might be interested in, and
Daniel Sweet 53:10
Ronald Skelton 53:10
potentially a third. So that's fun, right? Like, I'll go out? Well, I'll find it, I'll negotiate it, we'll do it together, we'll own a big chunk of it together. And over time, you buy me out and it's yours, or I bought you know, you decide you don't something you don't want, I'm buying you up because I'm not going to negotiate anything for you that I wouldn't want to write.
Daniel Sweet 53:27
So frankly, we sell it and we both take the money and
Ronald Skelton 53:30
Daniel Sweet 53:30
live on Fiji.
Ronald Skelton 53:32
Right. So not a bad idea
Daniel Sweet 53:33
or even redwoods.
Ronald Skelton 53:35
This is where I'm at now. But uh, okay, I appreciate everything. We're, we're at the time that I just like to, were, were talking about this earlier on the last show is there's this part of this, this arc effect where you're at the peak of this conversation, it's getting good, and then you're out of time.
Daniel Sweet 53:50
Ronald Skelton 53:50
So might be a concept where take these shows a little longer just like let it ride and tell people like we're going to talk until it starts to slow down, and then we're going to cut it off. But uh, as of right now, we're scheduled for an hour an hour four so I do appreciate you being here, hang out for just a second afterwards. And for you guys listening. And that's the show, man. Thank you for being here.
Daniel Sweet 54:09
Thank you. Appreciate it.
Ronald Skelton 54:11
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. I don't want to announce our new channel partners the ITX marketplace since 1998 ITX has created 5 billion in value by selling more than 225 it businesses in 20 countries. IDX works exclusively with it enabled businesses generating between 5,000,030 millions who are ready to be sold in M&A to decision makers who are ready to buy for over 25 years ITX has developed industry knowledge that helps determine whether a seller is a good fit for their buyers before making the match ITX mergers and acquisition marketplace we have partnered with has a proprietary database of 50,000 plus global buyers seeking it service firms managed service providers, Microsoft service providers software as a service platforms and channel partners with Microsoft Oracle ServiceNow itself in the Salesforce space. If you have an IT enabled business you're ready to sell. I want you to visit the I T exchange net.com/marketplace How to exit that link will be in the show notes visit them now. The investors and entrepreneurs professional mastermind. The investors and entrepreneurs professional mastermind combines that additional peer to peer mastermind introduced first in Napoleon Hill's famous book Thinking grow rich with accountability partnering, where your peers help you ensure that you set goals take action and get results. If you want to scale blow past roadblocks and achieve success faster than you might think it's 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