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Dec. 7, 2022

How2Exit Episode 76: John Kettley - Serial Entrepreneur, Business Investor & Turnaround Specialist

How2Exit Episode 76: John Kettley - Serial Entrepreneur, Business Investor & Turnaround Specialist

How2Exit Episode 76: John Kettley - Serial Entrepreneur, Business Investor & Turnaround Specialist

Serial entrepreneur, business investor & turnaround specialist. He is fast becoming known as one of the SME communities most inspirational M&A...


How2Exit Episode 76: John Kettley - Serial Entrepreneur, Business Investor & Turnaround Specialist

Serial entrepreneur, business investor & turnaround specialist. He is fast becoming known as one of the SME communities most inspirational M&A business development speakers and deal JV Partner

Watch it on Youtube: https://youtu.be/ko7utsddq_w
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Contact John on
Linkedin: https://www.linkedin.com/in/johnkettley/
Website: www.johnfkettley.com
Email: john@johnfkettley.com
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Transcript

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

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 to the how to exit podcast today. I'm here with John Kettley. John is a serial acquisition entrepreneur having done over 26,27 deals. And with much more in the pipeline. I want to thank you for being on show today, John,

John Kettley  1:18  
Absolute pleasure to be with you looking forward to our conversation.

Ronald Skelton  1:23  
That's awesome. One of the things I always like to ask people, it's kind of learn the background, right? Like how did you kind of get into this space? What got you started in buying and selling companies?

John Kettley  1:32  
That kind of goes back, right? Believe it or not to teenage years in that I left school, 15 years of age, no one was gonna give him a job. He was wearing two badges that they give the kids these days, you know, ADD and Dyslexia. But fortunately, this is like the 1970s. No one knew that, that was a bad thing back then. And you know, I think they should give them the badges today because they think it's a negative, I actually look at it as kind of a plus. So, to cut a long story short, because we were dirt bike racers, and we were just a normal family, we didn't have a huge amount of money. So I was kind of hustling even in school to afford to do the things we did on a Sunday. So the hustle part of it was just something I did from a kid all the way through. So coming out of school at 15. And then going into the workplace, again, really fell into bizarrely buying and selling cars, we buy them in one auction, I drive into another. I mean, you could get away with drive when he was 15 in them, that is not anymore. So we were hustling and doing different things. And at that time, I'll go back to about 1979 mountain bikes had just come out. There weren't really mountain bikes before 1979. So at that point, I'm thinking that's interesting. So I'd spotted the first of what would be many holes that I've spotted over the next kind of four decades as it were. So we have the mountain bike shop and had that for a period sold that and thought that's quite cool. You can start it, you can build it and then you get paid that amount. So we've done a few of those over the years, like quite a few of them both across the UK and stateside, where we start build and sell companies, nothing overly sophisticated, just really a case of seeing a hole in the market seeing things that other people don't see. And God you know what, I think there's the we could fill that hole. So fortunately, I kind of retired back in oh six took a couple of years out, recession kicked in. And then the finest I drink when people listen, John, would you come and have a look at this. It's like Jesus, you're on the brink of the Abyss, you know, marriages are kind of Rocky, because of the financial part of the risk and losing the house, I fell into turning companies around. And then from turning companies around the old entrepreneur coming like, I've actually why don't I just take some shares in this one. And we'll build it up, get it to a point. And because quite honestly, like some of these couldn't afford to pay me. And everyone likes to reciprocate, you do something, you get something out of the shop, to be honest with you. They want to repay you back. That's how I kind of fell into doing what we now call we Bose which is working and then they (inaudible) or I won't go down that track. So then why I'm forwards again, a few years I've been doing this for the best part of 15 years now. I then started looking at, okay, why there's a ton of people that are baby boomers that I know because I'm the back end of the baby boomers, myself. And all these characters are looking at retiring. And I've got loads of friends that business and this one's 55 And that one's 65 And whatever they're, like 20 years, 30 years and it's slight time to get out. You've got that whole mindset where they've been going on for years trying to hide how much money they're making their business. And now they want to sell it. It's not worth what they think it's worth, because they've been hiding, making any money. (inaudible). So of course, there's a fundamental change of lens that we need to go through. And funny enough (inaudible) call, literally yesterday afternoon from a guy that I've known this guy for about 20 years, and he's retired once left it to his two sons, businesses, about a third of what it was when he gave it to them ease, jump back into help them back out, is building up and it's a lot harder, because he's been going shoot, riding motorcycles, he doesn't really want to work. 90 more. So now he's coming back and go, Oh, I don't know actually how to trying to build it up to a certain point. So the heads that circle, where I'll sit down with him, and say, Okay, what are we reverse engineering here? What's the end game on this. And that's how well ended up taking a stake in that company to get it from point A to point B. So most of my acquisition tend to be a 24, 36 months sprint, get it to a point I don't really take hold businesses anymore. Because even if they got a management team, you still got to run the buggers. And I don't want to do that. So that's an answer to a short question they're ron.

Ronald Skelton  6:41  
No, that's a great answer. So you're doing partial acquisitions, you're taking equity for a kind of contract for equity with two outcomes, right? One, they bought you back out at the end of it. And the other outcome is, you help them sell it at the end of it.

John Kettley  6:55  
By large, by large. Yeah, cuz, again, I think there's only two business owners, they're, they're either building it to an exit, or they're building a business as part of an empire. So the Empire guys I don't generally get involved with other than if they can't get through the glass ceiling. And then what we'll do is we'll come in and whenever sort of someone says to me, Look, why don't you come in and do a bit of consultancy, and so you don't want me to do that. Because that's going to be expensive. That's like passing a kidney stone is painful. You balance that side of it, and say, Listen, why don't we do this? On the upside, I'm going to charge a retainer. So I can go to the gas station. But let's do this on the upside.

Ronald Skelton  7:36  
So inside of the structure that deals, you're looking for companies who are there not all of them are turnarounds it sounds like they're just they're trying to get somewhere they have a vision and interest. How do you source these deals? What is the sourcing mechanism that you're doing? 

John Kettley  7:54  
I think

it's largely derived. I don't do any prospecting or any much in the way of active marketing social media at all. It's really after thought marketing that I do most of what I get is word of mouth. Last kind of 15 years, I do a lot of networking, but that's because I'm really passionate about business. Business and doing deals to me is like going fishing for some people or shooting or whatever it is that there is love doing deals. And so I network with no real intent other than I've got a massive sponge brain that I just want to go soak stuff up I appear at the weirdest wonderfulest princes and just talk people pull one out of the we went to heli tech couple of seasons ago, which is by helicopter show in Europe and it's it sits in Amsterdam one month, sorry one year, and it's in Italy the following year. And just having a wander around the helicopter show or the development show or went to know what I know about software development you can put on a postage stamp and I ended up in a seminar that was given by the CEO of OKTA, O K T A really quite a cool, cool guy looked like he'd fallen out of the bush. Maybe that's like an image to be seen as like these days. Okay, hang on a second. I can see where the balls going. And it's kind of a Greg Rosette moment is that if you go looking enough or go to different conferences really just for the crack as the Irish say, you will see stuff they don't say. And that's really the name of the game. If you're looking for stuff that is a different angle to everyone else. And you'll have a conversation. Next thing you know someone's telling you about the Arco and Heli tech thing that they make workstations for helicopters so that they don't have to fly the helicopter to get it repainted. They can fly The painters to the helicopter, inflate a mobile paint both paint it and leave for a fraction of the money. That was a real conversation by the way. In fact, the same guy got us turned into an old friend, a good friend of mine. He was the guy that I don't know if you know this, but all Amtrak trains go back to the same point in Alabama to get painted. So now he has a colossal inflatable workstation where they can take that to the train and paint it wherever they're 

Ronald Skelton  7:58  
(inaudible) 

John Kettley  8:29  
So in terms of deal flow, it's really from networking. And then from networking and talking to this character, and that character. If you're in, I think the M&A arena, you could do worse than describe what you do in a way that everybody gets regardless of who they are. So pretty much if someone says to me, Oh, John, what do you do? I'm a Business investor and tag specialists, I turn companies around, grow them, scale them, sell them. And as soon as you say that, as a handle, they pretty much all say, really. And then they start telling you all about? Well, it's kind of akin to being on holiday, and a doctor doesn't want to tell you as a doctor, because the next thing out of their mouth is I've got this itch. But yes, deal flows is not difficult. And I speak on a few stages, different parts of the world 

Ronald Skelton  11:23  
funny

John Kettley  11:24  
 networking.

Ronald Skelton  11:25  
Funny, you're talking about the a lot not telling people what you're doing. I was an IT for years and years and years. And I actually made it like a family pack that you couldn't tell any of the other relatives I did IT couldn't like I come home ended up fixing everybody's computers, right? Like I can see where if you go in there, like I fixed businesses, and you hang around entrepreneurs all the time. What a problem solvers have, right? If you identify yourself as the guy that solves problems, what does everybody bring to you? The (inaudible) problems. But in this case, I can bring you deals to have to maybe the interesting thing would be to find out what they do. People love to talk about themselves. So find out who they are what they do, way before they will ever tell them what you do. And you can be really selective right

John Kettley  12:03  
now. You're on the man on the money there Ron. 

Ronald Skelton  12:07  
use

to run around with this guy, I say run around with him, I probably would have went out with him when I was single for like when we'd go to the clubs together and like meet people or whatever, I went probably three or four times and that this guy was at least a cent a millionaire about 100 million in assets. He was a fellow for venture capitalists, meaning that they just kept him on staff to keep him from working for anybody else. One of his main jobs is he had a PhD in Biotech, Pirate Biotechnology type of stuff. And the VC would think about funneling money to this company or that company. And his job was to go see if it's a valid idea if their technology was sound. But when we were at places he would meet somebody, like he wouldn't tell them what they did. He was talking to a girl, whatever. Like, what do you do? And she's like, look, what what are you doing? He gets to really find out if you liked her before you ever tell him? I always say I drive taxi cabs, they just like shut the whole idea. I don't think he ever told anybody. I don't have to work if I don't want to he never I never heard out of all the people that we went around and talked to and even when we're at dinner parties with the introduce yourself, you'd never content we never allowed to even tell him. We call him Sparky. But we never could tell anybody what he really did. Right? And so maybe that's the game here is you got to know that you liked their business, and it's not I wash windows before you give them the real scoop of what you do there.

John Kettley  13:22  
Absolutely. Yeah, I will tell people all manner of things, but you just in, in airport or you're on a plane going somewhere. And the worst thing you can do if you're jumping on a plane for five or eight hours, and you're thinking I just really want to gather my thoughts. That's what I use planes for gathering my thoughts normally is so a bit of a social animal, but not on a plane. I'm really not on a plane. What do you do with them people that normally kills it?

Ronald Skelton  13:50  
So let's talk about these deals. Right? What is the conversation like it? I heard some of the presentation? You didn't I want to draw some of that out of here? Because I think we're right in alignment on a lot of things here. What is the conversation sound like when you're talking to somebody when you're trying to figure out? Is this a y bow? Or is I think you call one a wit or something like that work and. 

John Kettley  14:12  
Work into sale?

Ronald Skelton  14:13  
Yeah, working to sell. If it's when you're trying to figure out where they're going. How do you get there? How do you figure out what a business owner really wants?

John Kettley  14:22  
Always run the same structure. So I'll have a temporal conversation. And I can normally get out of that conversation exactly what their dominant motives are. So the temporal conversation normally starts with so tell me when, when did you get into this? I've had the business for like 23 years. Really? What did you do before that? Oh, I was an engineer and so and so. So what made you start the company? So what we get from that is actually a ton of stuff that they don't realize that they're sharing with you. They're beginning to tell you a little bit about how their personality is and how they tick. Because if you can find what the motives are for when they started the business 20, 30, whatever years ago, so a bit of a bounce between maybe two examples, went down and taught to a business owner, quite a young guy, he was only 47. And he's built a really nice business, it's a bakery with a dozen shops, turns over about seven and a half million Sterling, makes about 1.4 in net. And the short version was it really runs like clockwork, and he wants out and he wants out fairly quick. Why don't you want to get out quite quick, because that, for me is an alarm bell, if someone wants out quick, I really need to understand the moment because there could be a whole ton of skeletons that are in that closet that they're managing to contain. And they're going to leap out there within the next two months. So I want to box that off anyway, short version is actually my father started this business and he had stroke 52 years of age, and he's like, 48 years of age. Okay, right. Because I've met quite a few characters that are second generation in a business, and their father had whatever illness that came their way, another guy over in Ireland, his father had a brain aneurysm, 52 or 53. And very similarly, these were young guys that had to take the business over know, any options on that. So this guy's was sucked into the business at 18, 19. And has done it for 30 years. And as far as he's concerned, he's been living in a bakery for 30 years, and with his children now flying the COPE. He wants to have a life. Okay, that's cool. We're getting to the motive of what the drivers are for him. So that part of the temporal conversation was all as told me, okay, so I now know why he wants to move. I know how he's built the business. I know everything that's gone on in there, when things were tough and how he dealt with challenges. We as M&A guys have to really get underneath the bonnet of how the business owner thinks, why they made the decisions that they made. Why did they take any learnings on so bounce to another character, and he had a quite different story. But this goes like 100 miles an hour. And everything is everybody else's fault. He's not taking any of the blame, because this guy let him down. That guy swindled him, this guy did this, this guy did that. And so as you're getting into bed, with that guy thinking, hang on a second, I can't work with this guy, because I'm gonna end up being the bad guy.

Ronald Skelton  17:54  
Right? That victim mentality, I don't do well with I just,

John Kettley  17:58  
Exactly. And so by having that temporal conversation where you've started in the past, and, you know, literally, before they started the business, what do they do before that? What do they do before they're, this is really valuable Intel, for you to be able to put the deal together, further down the tracks. So of course, you then bring the conversation up. So tell, tell me how's it been over the pandemic, and the last couple of years. And if the guy says to Jesus, it's been an absolute road crash, right, guys got no money, the business is upside down. If the guy said well, actually didn't really touch us. He's got money in the bank, and you've got a robust business is what they say between the lines that we are listening out for. So once you kind of get it up to today, then we want to leap over the present and go three to five years down the track. So in going three to five years down the track, so tell me how do you see this thing in five years time? I'm nowhere near it. Okay, cool. So you want to exit that? Okay, what do you want to walk away with? Funnily enough, I've had two conversations today, one in London and one on the zone with somebody up in in Canada, actually. And it's the same deep dive. So one of those characters, the one that I met in London face to face today, they actually don't want to sell it. They just don't want to own it anymore. Do you hear that? They don't want to sell

Ronald Skelton  19:26  
Yeah

John Kettley  19:26  
it alone anymore. That's interesting, what kind of a deal you're going to put together there now that the Canadian one their very sharp edge, three years, they went out and they want X number of million dollars. Cool. I need to know what the motivations are for the future in order to be able to again, put the deal together today. So once we can do that, then we can reverse engineer how we can get them to where they want to go. And then work out how we as the M&A Investor can also pay the guests question and that's why I tend to sit not so much without right acquisitions anymore kind of done those in the past to a degree, but I'm mainly I work into a buyout situation, either they're gonna buy me out if I achieved the goal, or we're going to together build it to a sale. So there's a Pay Day event. So my personal focus, if you like, is a monthly residual, up until a pay day event. And that pay day event, don't really want it to go beyond 24 to 36 months,

So 24 to 36 months, and the Pay Day event happens. Okay. So what type of what's a good industry that like you just totally avoided? Are, are there industries out there you like, you know, just I'm not getting involved with X, Y, or Z?

No, no, really, it's people that certain people, I don't get involved with more than the businesses. I mean, what kind of look my board here I've got from the top, there's quantity surveying company, architect company, childcare company, coffee shops, software developers, IT, media company, there's a myriad, I'm really sector agnostic, it's really about the journey. What's missing there, I do get pretty excited if they're in a sector that is, is upside down and really turbulent, where they're going through a metamorphosis of the industry. So for example, if you take the prints, kind of died on its backside over the last five years, so we kind of picked up a company, we actually had to do a Phoenix to get them into a different place. And now, whether in a different area, are now suggesting to them that we pick up on the print, because you can outsource that to the really big guys get a much higher margin not carry the 700 grands where the Heidelberg print press that they used to have, yeah, outsourced there. And I think print is coming. Not coming back in. But I think there's a big space for print in certain areas of my prayers

Ronald Skelton  22:09  
I've heard that, I've heard that phrase on the training you that I listened to earlier, and you just said it. Now, when you said you've finished a company, I kind of assume I know what it is. But my assumption is that you burn it to the ground and its reward, right? 

John Kettley  22:21  
Yes, 

used to be kind of careful, legally, is so much is that if you've got a company that's, that that's really just about to burn to the ground, there's methods if you like, who to take the assets, to take them out, put them into another entity, let the company that was gonna crash and burn, crash and burn. And then you can rebuffed that thing and buy the IP and buy certain things off of the insolvency practitioner or say that live again, it's not a practice that's, shall we say, seen positively from the bankers world. But what it has done, I've done quite a few over the years, what it has done is it saved a few marriages, and it saved a few people losing their houses. So to my way of thinking, the positives outweigh the negatives to funding house has taken a bit of a hit. 

Ronald Skelton  23:20  
So for

our US listeners, you're on the other side of the pond, you're currently in 

John Kettley  23:25  
Just north of London, 

Ronald Skelton  23:27  
you're just north of London. So in Europe, in London, there's a registry of all businesses, public and private, that is of a certain size, or all of them, where they have to disclose their financials on a regular basis quarterly, semi annually or yearly, right?

John Kettley  23:43  
Yes, a registered limited company in the UK is where the company has limited liability. So the directors of that company have a very limited exposure to if they build a company and crash it and get debt and all the rest of it. But they can be a little bit hands off. What they did in the UK was they restructured some of the regulations for the banking world so that the banking world circumvented that with personal guarantees, which was the whole idea of the limited companies when limited companies were born out of 100. And whatever years ago, 200 years ago, the whole idea was that it will encourage business to flourish, which you did flourish to right across the land. So it meant that you you will completely sort of nosedive out of it. But I mean, no one starts a company to go out of business, 

Ronald Skelton  24:38  
Right.

John Kettley  24:38  
You obviously have scallywags that use mechanism, but those guys are going to do what they you know what they do anyway, the vast majority people they're starting a business to not have to work for someone else, number one, number two to provide something nicer for their family, you know, quality of life. So that's what a limited only does so over here you've got limited companies, you've got C's, which are limited liability, sorry, LPs, limited liability partnerships, couple of different kinds of entities. But by far and away, the largest number of entities are sole traders, there's just over 5 million sole traders in the United Kingdom. So that's similar to Euro LCS, I think in stateside. 

Ronald Skelton  25:23  
The literal thing I was pointed out, though, is you have a reporting structure that like here, if you're not a publicly traded company, your financials are private. Over there, the financials are public. And I didn't know if that was like over a certain like, if it was after you make $500,000 a year in revenue, or if it was public, from the start, like when does it when you have to start reporting to the public house.

John Kettley  25:46  
If you're a private company, you're a private company. And if you're a limited company, or any of those other entities, you have to submit once a year, your accounts now you can put what they call abbreviated accounts. So people can't really see what the total turnover is, but they can see what the net profit is. And they can see if you're carrying debt. So it's enough for people to get a picture.

Ronald Skelton  26:11  
If you're not doing well, and you can't pay your bills here in the United States. You can struggle shoestring take mortgage on your house, there if you start becoming insolvent, there's actually a insolvency division or a group of people who can step in and take control and tell you what to do, right?

John Kettley  26:28  
Absolutely. Yeah, absolutely. There's all sorts of mechanisms. But it said that it, it's, it's not onerous by any stretch of the imagination, no one's going to come in and do those things. What, what tends to happen, and I think this is where I have a bit of a passion for mentoring is that the problem is that anybody can start up a company. That's the problem. Doesn't mean the know how to run a business. And it's what I kind of call the plumbers effect, because Joey joins a plumbing company and does his apprenticeship. And he qualifies as a fully qualified plumber. And he gets a van. And then on a Saturday, he's doing private jobs for his Uncle Sam and his Auntie Shirley. And then he's doing so many private jobs that he decides to go it alone. So then he gets a van. And he does quite well because he's quite good at what he does. Now. He's got someone else working for him. And then he's got five bands, who taught him how to run a business. Nobody. Right? And that happens in pretty much most sectors. I you know, the amount of it guys I know that can't work and abacus highly intelligent guys can't work an Abacus.

Ronald Skelton  27:41  
I would imagine that the books don't look like the brokers books, right? The they don't have really refined what we refer to as your balance statement, your profit statement of cash flow statements, those things aren't polished and ready to send to you in a shiny PDF.

John Kettley  27:57  
No, to be honest with you, I kind of avoid brokers like the plague, or just don't go anywhere. If it's up for sale with a broker is it's got to have been introduced because I mean, the vast majority of businesses for sale with brokers are still for sale like a year or two years later. And they've got velvet handcuffs in so much as that. Even if they sell it directly themselves, the broker legally can get still get his monies. So not a huge fan, not saying they're all, all crooks, because I have met some really good guys. And we're actually putting something together. In contradiction, what I'm saying with a broker who has got deals that they can't, that don't fit nice into nice square holes, so to speak. But they're generally the turnaround ones where they're an older business used to be the market leader of X was turning over and now it's took a nosedive, for whatever reason, and the owner wants 10 times what he was actually worth, so that we're going in for the do turnaround stuff with to directly answer what you're saying, don't really go near the brokers really tend to get them direct. So I'm kind of going to ask answer a question I think you're asking, which is how would you get deals without using brokers? If you're an M&A guy, and you want to go do more deals?

Ronald Skelton  29:21  
That's a great question.

John Kettley  29:23  
If that was a question, I would say is, is, is actually quite easy to do. You need to go networking and think about who talks to business owners, bank managers talk to business owners, accountants talk to business owners. CPAs. Talk to business owners. I'm gonna go and get in bed with all of the guys that talk to the guys that I want to talk to. I want to get embedded with all the serial networkers and I'm going to give more than I gain and then the giving more than you gain works really fast. I'm a serial connector. And I put this out. Listen, if you want to connect with someone tell me who you want to connect to generally, if I don't know, I know someone who knows how you can get into X or to Y. Because I've been doing that for like 10 years. That's why I, I don't have any marketing. The phone rings do more deals than I can handle. And I don't mean that in a Oh, look (inaudible) at me why I really don't. It's just I am old, and I have been knocking around for a while. But I think if you are an M&A person that is not getting the deal flow. There's definitely ways that you can significantly change that situation quite quickly. But it comes back to really doing the one on one stuff in getting a really good LinkedIn profile. A really good landing page of a website. Don't make it salesy. Resist all of that 10 yard long lead page thing resist that. It's not hard to do in business.

Ronald Skelton  31:02  
Let's talk about like, what the structured you're in? Do you spend a lot of time on valuations, and we'll go into the next question is like on due diligence, like you're working in a Wibowo. And like a working to sell, I can see where the need for in depth due diligence or the need for in depth, like, other like all the legal paperwork you have to do if you're gonna require the entire thing, just spend time on that like 

John Kettley  31:28  
to worry (inaudible),

and (inaudible) gonna have to do a fraction of that stuff, which is kind of why that I sit with the, with the work in buy out or the work into sale, because I'm taking shares in the business are not taking ownership of the business. And I'm get embed on this. The business owner and I order business owners and I are on the same page. So that comes back to the qualification conversation again, what do they really want? What's their biggest challenges? What's the fastest way for me to get them from point A to point B? So we've established that in the conversation. And in terms of the due diligence side, it doesn't really come about because I'm asking that on day one. If I was saying to Bert or Ernie, tell me about a company. Okay. And how much is it turning over? What's the roof costs? What's the wage costs? What's the cost of sale? What are all the, What are you spending on a month by month basis, I don't even look at the years just on a month by month basis. So then they're saying to me, this is really helicopter numbers for us to put the key in the door to the premises. If I take the rent, and I take the utilities, and I take all the other things associated with that. It's like $8,000 a month. Okay, cool. That's all I need to know. wages. What do you spend and where it alters from this to that, okay, average over the last 12 months? Wow, about 50 grand. Okay, so 50 grand, plus the 10 Grand or 8 grand, whatever the hell that is. I know those two elements, what do you spend each month? Well, probably about 60 grand in product or this? Okay, so one of mine is toe to toe, his four, I've got the roof costs, I've got a wage costs, and I've got roughly what they're spending on a month by month basis. So then the next thing is, how much is selling on a month by month? Well, it's seasonal, and it does it, okay, just average it out. Straight away, I can see they're upside down or positive. So that's as much as my due diligence is out of the conversation. And all the time I'm keeping eye contact, I'm reading them listening to their tonality, how they're forming the sentences. I, are they telling me the truth. So that's as much as I need to know because there's no point that's engaging, unless they they're honest with me, and I tell them that just be honest.

Ronald Skelton  33:56  
How often do you feel that they're not? Right? I mean, is it or they're trying to skim over things, right? There may or may not be totally dishonest. But

John Kettley  34:05  
(inaudible) the conversation is a good point. Most of them start the conversation being a little more economical. And then just by taking the conversation bit by bit, I haven't got anything to prove. And so people can pick that up. Pretty cool. All right, John's got no ego on this. I never talk about money ever, about what I've got on this or that. I, I, I don't ever talk about it. Because I've got enough. Now, that might be a whole lot less than most, or it might be a bit more, but I never talked about it. So because of that. People tend to assume things. And people tend to assume when someone says yeah, oh yeah, I've got the Porsche 911 And I've got the 15 bedroom house and the 72 acres. Okay. You don't sound like the sort of guy. Yeah. So (inaudible) kicks in.

Ronald Skelton  35:00  
Right

John Kettley  35:00  
And the older you get, the quicker that forms. But there's no reason to be asked because I'm helping people get where they want to go. And I think if you're an M&A person, it is about the more people you can help get where they want to go. And it's an old cliche, the easier it is for you to get what you want.

Ronald Skelton  35:18  
How do you there, there's a question stood in my head, I just gotta get it out. How do you avoid? I mean, how do you ensure you get paid at the end, right? You do all this work, you work for 36 months, they say they want to sell and all sudden, little Johnny decides he wants to run the bakery. Right? So I'm not going to sell I'm going to give it to my son, how do you ensure that you get your exit? How do you mean, you just put three years in the grill on this, you created something substantial with the owners help, but it's a lot of your effort and time and energy to

John Kettley  35:44  
Exchange on day one. So do share exchange on day one I'm gonna take. And I'm a huge fan of the 80, 20 rule in more ways than one. But generally, that's how about the 80, 20 rule. I want them to have the lion's share. Sometimes it's 50, 50, depending on how in the hallway are or what's going on. But there is roughly from 50, 50 to 80, 20 did a deal with a guy probably about seven or eight weeks ago, where we did a 60, 40, he thought he was keeping the 40. And we were keeping the 60. And I could see that in his face and nana, you're the 60. And you could just see this all the blood and return to his face. Because I want them to get the better part of the deal. Because if they get the better part of the deal, and I don't care about what I get, and it's kind of the same speech I give to everyone is look. Tell me what you want as the end result, if I get you there, do you care? What I? Well, depends. No, no, no let me reframe that. If you get what you just told me you wanted 10 million, 20 million, 4 million to underground, our debt doesn't matter what it is. If I get you there, and I get you there within 24 months, do you really care what my end is? No. Okay, well, then this is that. So this is how it's gonna work. I'm gonna take 20% of the shares not gonna cost you any monies, because their shares, it's just a transfer of the shares from your name to my name. And we'll hang that in a very simple share agreement. And the share agreement has a get out clause. So if we run 12 months down the line, and I can't work with you, you may we just revalue the company, third party, we know what it's worth today. And you'll just pay me the up lift. And that's in a very simple English contract. All of my contracts are like two pages max. Yeah. And the law is really about intent. So what's the intention? Well, and that's where I kind of got the question, what are we setting out to achieve? How will we know we've achieved it? How long do you think is going to take and what will it cost? So just keep it that simple. Because it's very difficult. You go into a court of law with a very simple, I said this, he said that the judge looks at it and says, Well, you're smoking. That's how it is.

Ronald Skelton  38:19  
I think the more complex you make these contracts, the longer you make them. And I've seen some of these mergers and acquisition contract for our roll up that was 76 pages, right? Like you're handing somebody something they can't even read on their own without their own set of attorneys. And

John Kettley  38:35  
You say the thing is, attorneys are paid by the hour. So of course, they make two pages into 200 pages kind of a deal. Yeah, it always pre frame that in the meeting, because I've never, I've said this to hundreds of people over the years, where you do a contractor. It's just how I do business. So you're telling this to a solicitor, a lawyer or an attorney, whatever you want to call them? All right, they're gonna make more hours out of it. So let's do this on like one page or two pages. So it's so English. And believe it or not, I've done multi million deals on a piece of A4 paper, where I've written those four questions, what are we setting out to achieve? How will we know we've achieved it literally written it on an A4 piece of blank photocopy paper, got to the bottom of it and said, turned it round and said, so we're setting out to do this. And these are the KPIs. This is going to tell you and this is what the is, then I've pulled it back round, signed it, turn the paper round again, he signed it done as it and then we've got a by row contract between the turbos, and then we just typed that up. So it looks more official than the by row. And that's it.

The deal was done.

Ronald Skelton  39:56  
 By row. What does that stand for? It's not a US. 

John Kettley  39:58  
Sorry, sorry.

That is is a brand of a pen.

Ronald Skelton  40:02  
So it's a simple one to two page contract. The reason I asked the question is I come from the real estate world. And it's interesting. I've encountered more often than once where we bought a house and decided we weren't going to be the one that flipped it. And the person we were selling it to we were given them a heck of a deal. But when they seen how much we made, they were like, why should you make so much on this thing? And it was a problem, right? I'm selling a guy a house at 60 cents on the dollar. And he's mad, because I'm taking a $40,000 check offers like that, you know, he thinks part of that should be his to, like, go find your own house, right? I would never sell to him again. If you play this game with me, once you're on my list, I don't care if you come to me, and offered twice what the house is worth on the next one, I'll probably tell you to kick rocks and get out the door. Because I just if they're playing to play games with you on the first one, they're gonna play games with you on every one or later on. So I was just curious on how do you ensure you get paid? It's I love the simplicity of a one to two page contract. Both parties agree. And are you taking? Like if you take a 20% equity, are you doing a solid equity on the uplift? Right, the 20% equity of the company or 20% of the difference?

John Kettley  41:08  
20% equity of the company? If we terminate before achieving the end result, it's the uplift.

Ronald Skelton  41:17  
Okay. I love that. So a lot of sense.

John Kettley  41:22  
Yeah. Again, I think I always think that when I do that deal, does it make sense to me? Is it logical to me? Would I take that if someone was offering it may, to me? By doing it that way, and being fair not just don't be greedy? Yeah, if, if you're not greedy, people will see you're not greedy. And I think if you can just be comfortable in your own skin, and just be you. People see that, as in, you tend to think of M&A guys or finance guys as these sharp shooting. And I'm not. I'm a little fella from a new town in England, I think those guys find it more difficult to do deals than should we say, three people, because they get it. And the funny thing is normally, the first thing that a business owner, it's almost like they're interviewing you to buy their business or to help them with their business. So I normally do my best to get that onto an evil, an even keel. And then they say, Who have you done business with before. Unfortunately, in that respect, I just pointed to LinkedIn, I'm pointing to a website or pointing to LinkedIn. So look, you go to LinkedIn, type in John F kettley and go down to the recommendations. And you'll see like 50 Different companies that I've worked with over whatever period of years, and they're all different companies. And I can't print that I can print whatever testimonial recommendation on my own website, because I can, is my website, but I can't do that on LinkedIn. So go and have a look at that and throw in any of them. That's quite a powerful thing. So that's another thing that I would say when you're on the M&A side of it is due, if you've worked with people over the years, just ask that they'd be kind enough to give their honest thoughts on there. And not just he's a really nice guy. Right? What did I do for you? Put that down? What did you get out of it? Yeah, that's a massive credibility stone to stand on.

Ronald Skelton  43:40  
So what? You've done so many different industries and stuff, is there a go to growth strategy? Like you get in? I know, you got a lot of strategies for cleaning up and stuff. What's your go to? Is it go to growth strategy acquisitions? Or what's your go to? Or is it different for every company? You go in and you grow them to get to their extra point? Is there a go to that you normally a model you follow?

John Kettley  44:03  
Yes. Yep. The first thing I do is I have got a process that I go through. So the first thing that I do is we create the business canvas. So on the business canvas is you're looking at how everything is wired up. So it's just a jigsaw, okay, you just want to make sure everything's wired to everything else. What's the core offerings of the business? Who are the clients, the avatars that what? Who are they? What are they? How do they look? So if you pulled out funny enough, I've got a motorcycle shop that works in a particular niche, alright, and I'm an avid motorcyclist. I've been riding these things since I was a kid so their, their client base tend to be this age, that buy one every year, or if they're that age, they kinda buy it every three years and those guys abided by it and never spend another nickel in the store. You Look at your avatars, it's okay, we want to have our marketing tilted towards X, Y, Z. So if once you've got your key offerings and who the people are the buyers, and what's the methodology between getting that offer in front of those people? So you're literally, you know, a Business Canvas works, you're literally going by the numbers from there is a real Okay, so what sort of relationships would we need to have in order to facilitate that whole thing? And then from that, what are the key revenue streams, and other key revenue streams congruent with what you're saying is your key offerings and who you're saying other people who buy it, they all in sync, and then you move to the back end of it, and you kind of get the picture. So once you've got the business canvas so that everything linked up, you can generally see where the wastage is, or the things that they're not doing. And so to turn a company round, that's been running for 20, or 30 years is actually pretty simple. If you're coming from the outside, because they have been in there for 20 to 30 years, they don't realize that there's a whole ton of stuff. It's been like you and I, if you went into our loft, how much crap is in the loft?

Ronald Skelton  46:19  
Yeah (inaudible)

John Kettley  46:21  
Yeah, because we just put it

out there and forget about it was so many businesses, businesses have their own lofts. And there's normally cash lying all over the place in old stock outdated stock, if it's a product based company, or you've got had Harry's been with a company for 20 years, no one really knows what Harry does. In fact, Harry's isn't really doing anything with less release Harry into the wild, and a few of the other Harry's. And straightaway, we just made a fiscal staving. So I can generally bolt money into a business almost immediately by seeing stuff that they've gone blind to. And then you look at especially if a company's like 20, 30 years old, there's a ton of money sitting in their database. They do not they spend all their energy getting new customers, and you go, but do you talk to your old customers? This is real business 101. Right, you'd be amazed, like nine out of 10 doesn't have a strategy to talk to their old customers. So we've done quite a bit with gyms, you know, gymnasiums, where they do sell memberships for students in my area, those guys spend a ton of money on marketing, to people they don't know. And virtually nothing for client retention. So their attrition ratio is horrible. But they don't put any energy into it. Because they don't want to contact the people that aren't going to the gym for the last eight weeks in case they cancel their membership. It's like really, why don't we just contact and say after a week and say, I haven't seen you for a week? Can we help you in some way? Keep you on the track? Maybe their attrition rate wouldn't be horrible.

Ronald Skelton  48:04  
Interesting,

John Kettley  48:05  
Yeah. Is the business canvas, then I go to the business playbook. Then I go to the sales playbook. And the last thing that I look at is the marketing playbook. And I want to make sure that we're robust with all of those things, generally speaking, you can double, even triple, the net profit of a business in months, that it doesn't have one off basis. 

Ronald Skelton  48:05  
What

it look like when you start? Like, if you're looking at 24 to 36 months, and they're wanting to, to sell at the end of it, there's a whole slew of other stuff going on, right? Like standard operating procedures, all this stuff, the buyers gonna be wanting to look at accounting practices, trying to change your accounting, from tax savings to showing off revenue and profits, those type of things, is that all part of the strategy? 

Or do you

John Kettley  48:53  
As part of the financial engineering part? So that, that's really getting the reporting structures, right, so that it reports the right way. We had a, a business recently where it's took nearly seven weeks to get fairly simplistic numbers, which is, as I said to you before, what is the roof cost on each of these locations that you have? One of the ways really simple, it took us about seven weeks to produce that. So you've got to get the reporting structure, right. So that you know where the cash is, and where it's all leaking out the sieve, so to speak. And then what I tend to do is we actually, kind of, generally the goal was in probably about half to two thirds of the time that we thought because most businesses aren't running well.

Ronald Skelton  49:47  
A lot of these businesses are just doing what their dad taught them what their granddad taught him. And they just haven't looked at what's available. Now. You know, what's out there? Right? And they're there. These aren't Princeton or Harvard grads, or what's the Ivy League over there. What's the, what's the

You know? 

John Kettley  50:03  
Yeah, yeah, yeah they're not uni.

Ronald Skelton  50:05  
They're not MBAs, right? Yeah. Yeah, they're not MBAs there. They basically they own the business. They run out they have an MBA in business in their own right blood, sweat and tears MBA. But as far as being groomed business owners or running a business that particular way, especially what a buyer would look for, they're just not I can see that. What are like, we've been going at it, we're almost at an hour. Now, we've asked a lot of questions stuff, what do we miss? Like, is there something we should be talking about or through?

John Kettley  50:34  
I think there's probably a conversation around the M&A community in this small and medium enterprises. And the fact that whilst there is a massive opportunity at the moment, with literally millions of businesses that are coming up for sale, that that are not say already, number one, that will never realize the owner, the amount of money that they think they want for it, there are not enough experienced, knowledgeable a guys to do business, the vast majority is going to upset a ton of people that's probably listening to this, the vast majority have come out of the corporate environment. And they're taking a corporate mindset or corporate lens to SMEs is different. It's a different place. SMEs, small medium enterprises, businesses can have up to about 25 million. owner operated, owner operating businesses just do not work. Like the corporates, they have a completely different thinking process. So that's why a lot of the hundreds and hundreds if not 1000s, of M&A guys are struggling out there. And they're struggling because they can't talk business owner, they talk corporate. And that's why they're not doing the business. And they've never they've not learned how to negotiate. And it is a bizarre thing. I've been training pay on teaching people how to negotiate for 30 plus years. And I learned from I was really, really lucky to have learned from someone who was probably the best guy I've ever come across in the sales arena. And I gotta say I was training every year at this stage again, do I learn anything new? Not really. But oh, here a way that someone frames something? Or I'll hear a framing of Sunday, I think wow, that's really cool the way they come. I mean, you listen to Chris boss on never split the difference is coming at it from a negotiating with terrorists perspective. So that's where you're negotiating with someone who is hostile or to say the least. And funny enough, we're business owners, they are hostile, they're protective of their, the thing they've been, they get gave birth to, it's like a child I've added for 20 years for years for years. So to learn how to negotiate with someone who's a bit hostile to help them get where they want to go. That's what's missing in M&A People don't know how to negotiate properly. And then they don't know how to tweak it once they've got it. And it's funny, I've spoken on a few stages over the last kind of year 18 months, (inaudible) of a few 100 M&A guys that almost didn't want to listen to this old guy talk about working buy or working to sell because they want to buy the whole business outright on day one. And I must have had, I got probably the best part of 30 to 40 deals that are actually in the ether. I can't touch because I ain't got the time. Whether just switched on said, You know what? If I take the business on, I'm responsible for it. If I do a Weibo, he's responsible, she or they are responsible. I got shares in this. So let me just blow the minds of a lot of M&A guys out there, just supposing you did a dozen deals where you got 20% in one to $5 million businesses. And they only paid you 1000 bucks a month in a retainer. There's 12 grand a month, right? That's enough for most people to pay the gas station and the grocery store. Right. And if you realize just for them a year that you pulled out as little as a couple of 100 grand you gain to the gut, the guts of seven figures, four deals a year that realize you two underground a pop is 800. And you'll find that it they're averaging between two and 500. If you're focusing in the right areas, it's not hard to earn seven figures, you just got to have an angle that you come in now. That's a lot less hassle than going for outright sales. I'm not saying don't do that. I'm just saying for me. I don't want the responsibility. I don't want to run the companies. I want to just get in help them turn that around. Get it to a point over maybe 24, 36 months. Minority roll ups is the direction that we're doing more and more of so I'm jiving with M&A guys all over the place as Deepak Choudry out in, in Silicon Valley, Deepak and I have JV together with CWW. We're also in the, in the midst of putting together a roll up where we've got seven entities totaling about $100 million. Pull them into a virtual roll up. We've got a target that's interested in buying those already. So 

Ronald Skelton  51:28  
is that the IT thing

John Kettley  53:54  
you think outside the box, sorry, 

Ronald Skelton  55:34  
is that the technology one? The it one? 

John Kettley  55:36  
Yes,

I think people should be learning more constantly listening to podcasts, listening, going on courses,

Ronald Skelton  55:46  
if you like, like Chris Voss, look at my podcast, I had Derek on here, Derek (inaudible). He's one of Chris Voss, his coaches, I reached out to Chris Voss and tried to get him on the show. And he sent one of his top coaches on here, he has his own book Ego Authority, Ego, something Authority. Looking at my other screen here, see if I can figure it, but he's got his own book out, Derek got. He was he's one of Chris bosses, Black Swan coaches and stuff. So we had him on here. I'm a huge fan of their method. And so I appreciate it or cut it at time. Now, let's make sure but just how to reach out to you. What's the best way for people to reach you?

John Kettley  56:16  
John F Kettley at LinkedIn. Or you can email me at John, at John F Kettley.com. Funny enough, we're going to be over in Orlando, the end of the month for IT Serves Synergy. So if you're doing that conference, I think Bill Clinton's the keynote speaker on that one, if anyone wants to learn on the negotiation side and what to do afterwards, we're actually running a two day training, I think 31st October, 1 November in Orlando. That's interesting. We'll share the knowledge and give you access into to our community of Wibowo, Wits,  and roll up.

Ronald Skelton  56:57  
Sounds great. Well, I appreciate having you on here today. hang out for a few seconds afterwards. And do you have anything to add before we go?

John Kettley  57:04  
No, that's it. I'd love to connect, help more people. Go do this.

Ronald Skelton  57:09  
Awesome. All right, guys. That's the show. 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 million to 30 million 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 and the Salesforce space. If you have an IP 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 introduce first in Napoleon Hill's famous book Thinking grow rich with accountability partnering where your peers help you ensure that you set goals take action and get results. If you want to scale 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