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Action Academy | Millionaire Mentorship For Your Life & Business
The 3 Biggest Lies About Buying a Business (and the Truth About What Actually Happens)
00:24:23
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- [00:00]
A
So, Brian, you've helped hundreds of people buy businesses through Action Academy, and I know you've seen some wild stuff. What are people getting completely wrong about business acquisition? Because I feel like there's this, like, fantasy version of buying a business that gets sold online, and then there's the reality you actually live through. And I'm just wondering for you, like, what's the biggest gap between those two things?
- [00:21]
B
So where do people go wrong? Business buying, because this is something candidly we've ran into in Action Academy. Like, we've had some people buy some stinkers, and we were just, like, kind of throwing our hands up, wondering, like, what the heck's going on? And the reason I admit that is because, you know, anybody that acts like they got the perfect answers, like, online, that's a facade. It's false. We all learn and we all grow. And so in the beginning, I thought, like, just the buy alone was the answer. You know, I was like, okay, if we just buy a deal correctly, then great, we're good. But there's one critical part of underwriting that we missed that has tanked two deals. And then there was also a whole other, like, framework and a formula that we missed that will help a lot more people. And now we know how to integrate this and implement this in our business, and it's going to make us freaking unstoppable, and it's also going to help the people that need some help now. So the first thing that we did an underwrite for was what I call just like, no assholes. Let me explain. So the deals were good. The deals made sense, but the seller was an asshole and the seller was low integrity. And especially for a local business, we had one person that bought a. I think it was property evaluations business. And the seller was, like, trying to sue her because she was like, yeah, I got a good deal. And he was so butthurt that she was talking about how she got a good deal that he was trying to sue her and, like, drag her name through the mud. Then same thing happened with another guy. But, I mean, the guy was just like, a huge asshole, and he made a huge stink of it through the town, and he knew a lot of people, and it just was absolute dumpster fire. So, like, my general rule of thumb now is I. I don't care how good the business is if the seller is an asshole. Like, I'm not buying the business, and I'm not one. I'm not wanting any of our people to buy the business. Now there's another sophisticated Person that can come in and take on that challenge. But for a first time business buyer, like, dude, you're setting yourself up to play the game on hard mode. And that's what some of, some of the people are in. You know, like we push through the, the close and then the sellers just trashing the name through the town and just making it uber difficult. It's like an uphill pushing a boulder uphill. They'll make it through and they'll be good. But I mean it's just, it sucked. The biggest issue with business buying that nobody talks about is everyone just seems to casually stop there. Every business piece of every piece of business buying content I've ever seen is here's how you buy it and it kind of stops that. Hire an operator to do the work for you and just go make millions of dollars passively. And that's not true at all. Like, so it's like here's the thing, when you hike a mountain, say that you go hike a 14 or like so in Colorado they have these mountains called fourteeners. 14,000 foot to the PE and say you spend 12 hours hiking a 14. Or to make it to the top, you take the Instagram picture at the top. You're up at the top with the wind whipping for maybe two minutes. But you spent 12 hours hiking the mountain. I would say that's the same thing as acquisition versus actually running the company. Like two minutes is the close where you actually got the company and then the other 12 hours is now you gotta actually manage and run the company. So that's where the passivity comes from is how good you are at that. So my mistake that I made personally was I was comparing me today, um, and give it advice from the context of me today versus me in 2022 where I didn't know my ass for my elbow and I was like freaking out running my company for the first time. It was crazy, dude. Every single little problem that would come up, I was like, oh my God, I can't believe this problem. It's going to take me out. And they were all just like tiny little bitty problems. So I just realized that there's a three step process that nobody's talking about and nobody's teaching and nobody's including in their program. Which is why we're doing an action academy, which is acquisition acclimation architecture. So acquisition is how do you purchase the assets, right? How do you go and buy the deal in the right way, in the safest way possible. There's still going to be bodies Buried. There's no such thing as a perfect deal, but we can at least be able to mitigate for as much risk as we can from what we can see. Right. Then we go into ownership of the deal. So now you're taking over the deal and now there's a 90 day to 6 month acclimation process. So this is both a formal process and getting to know your team, get to know your employees, get to know the processes, getting know the personalities. Like you're on site and you're really rolling your sleeves up, getting into the weeds with them and figuring things out. So that's the formal side of it. It's called like a 30, 60, 90. So month one, month two, month three. But there's also like an emotional side, a mental side where you're having to go from I was just a sales rep working for this company to now I run a team of six in like this plumbing company.
- [04:46]
A
Right.
- [04:46]
B
So now you're the boss, you're the owner. And not only are you the boss and the owner, but now you're working with a team that's scared shitless because they're wondering if they're going to have a job. So now you have to not only have the confidence that you can do it, but you have to have enough confidence that you can do it that your team now, but you know, believes in you and they don't quit or think that they're going to get fired.
- [05:06]
A
What you're highlighting is if we're going to picture these as like lies that are told to people about buying businesses, you're saying lie number one, really is that once you buy a business, it runs itself. And what I want, bullshit, bullshit, bullshit.
- [05:19]
B
I don't care how good the business is. It's abs. It's such big bul. Dude. Oh yeah, I'm just going to go into a passive income business. Day one. If anybody tries to sell me the idea of buying a business as 100% passive, day one, like they are so full of shit.
- [05:32]
A
Yeah. So on that, what does month one actually look like?
- [05:37]
B
So you go to the closing table, you take ownership of the business, they transfer the bank accounts, they transfer the llc, you sign all the documents and then you go into what's called the 30, 60, 90. So your first 30, 60, 90. And this is a process that you're going to follow with every single employee that you hire afterwards. So the easiest way to describe it is, number one, we're not changing shit. You've got two ears, one mouth. That's how we're going to operate the first 90 days. We're going to listen twice as much as we talk. We're going to actually try to talk as little as possible because you're going to want to come in and be God's gift to entrepreneurship. And there's two ways of leadership. So there's one way, which is, hey, here's what we're doing, which is earned, and there is a place for that in my company today. My team actually demands that of me and they respect that of me. Is they're all sitting around, they're like, we don't know what to do. We need somebody to step up and be the leader here and tell us what to do. That is me and my business today. But if I'm buying a company, that is not me day one, because I do not have the trust and respect of the team. How do you earn the trust and respect of the team is you're getting down with their level and you're getting in the weeds with them. So you're going to ask a bunch of questions. You're going to go around, you're going to build rapport. Number one thing is, you're building rapport. You're going to go around, you're going to, you know, bring some donuts, bring some. Do a cookout, do something cool for the first day, for the first week, like, really just break bread with the people. You're not talking business. You're just letting them get to know you. You're getting to know them, and you're letting them freaking voice all the. All the thoughts and feelings they've had over the last five years that they haven't been able to tell the previous seller because for the most part, they've been checked out or they've been completely absent. So you're spending that first week just getting to know them, breaking bread. I would say the next three weeks is. You are learning every single nook and cranny of that business. Like, you're getting on with your reps. You're going to go to job sites. You're. You're in with your. You're doing full days with your office manager. You're sitting there, you're watching them, hey, explain this to me. Explain this to me. Like, I'm a fifth grader or. Or a golden retriever. Like, how do you do this? Like, why do you do this? Like, you know, how long have you done this? And you're just asking them about the current process. And so, number one is we're just figuring out the current processes. Right? So once we have an idea of how the business runs, how do we get customers, how do we service the customer and how do we make money? Then about week three, week four, now we're going to those same customers and we're the same employees and we're saying, okay, cool, now what would you fix? Like, I know, I understand how we do things today, but how would we do them better? If you had, if you could do it yourself, your way that you wanted to do it, how would you do it better? And this is called getting weigh in versus buy in. So instead of you like weighing in on the people and you're telling them what to do, you're getting buy in from the employees. And then so now it's a co created idea.
- [08:14]
A
Right?
- [08:14]
B
And now they feel seen, heard, and appreciated for the first time. Easiest way to build instant rapport. So now you're taking this from the employee and now you're like, okay, cool, that's a really good idea. Let's implement that. And not only are you getting ideas from these employees, but you're also figuring out, you know, what are their goals in the company, what makes them tick, how do you work with them? This is probably the first time ever sometimes, best case, best first time in a long time that somebody sat with them and created like an actual plan of like what they're doing, what their goals are, what their dreams are, like how they operate, and you can be able to like tie things to their goals. So this is the first 30 days is literally just this process. You still haven't changed anything. I don't care if it's a company that's been going 20 years, five years, two years, like, same process. So that's your entire first 30 days. You're just collecting information. Like you're just asking questions for 30 days.
- [09:05]
A
Yeah.
- [09:06]
B
Then the next 30 days now you're like starting to figure out, okay, cool, like, who are my rock stars, who are, who are my A players, who are my B players and who are my F players. There is no C. It's either an A player, B player or you're, you're fucking fired. Um, and so now the second 30 days is you're figuring out, okay, who really runs the show here, who's, who deserves more responsibility, who's doing good enough to keep trucking, and then who are the people I need to let go of? And that's, you're doing your second 30 days. So now you're doing like kind of performance stuff and you're Just watching off in the distance. And then going into your third 30 days, you're kind of into your month three now you can start to make a couple of changes and maybe start to get that wheel running and wheel turning. So if you see some people that you're going to fire, you're kind of like already setting up the job description. You know, you're setting up the things in motion in the background and you're getting things ready to implement. So at the end of that 90 days, you're getting together with the team and you're like, okay, cool. So from all the feedback that we all got together, that like, Linda, you had this idea about payroll and about ar, about calling them, like, that was great. John, you had this idea like, Eric, you had this idea and you're giving them all credit. So business is a cash and credit business. You know, like, I get the cash, you get the credit, you have the credit to everybody else, you don't get the credit, you get the cash. So now everybody's got weigh in and buy in. And then now after day 90, then that's when you start integrating and implementing all the things that you just learned. And now you've got a team that trusts you. They're bought in, you're bought in with them. You know the processes, you know how the business works, you know where the bodies are buried. And now you have like a roadmap to actually integrate and double the freaking thing.
- [10:39]
A
99% of content that talks about buying businesses doesn't address that. The majority of content, social media or podcasts, they don't talk about what that actually looks like. Can you just leave it out in 5, 10 minutes? Exactly what someone needs to do.
- [10:54]
B
If they did exactly what I just.
- [10:56]
A
Heard of I don't to do if I buy this.
- [10:58]
B
Yeah, they did exactly what I just said. They'd probably double the business within 24 months. Yo, what's up, guys? One sec. You're listening to a podcast right now, and I frickin love that. But this is not making you more money. What makes you more money, more wealth, more equity, is being in the room with the people that you're hearing on today's episode. If you want to be around hundreds of other people like you leaving corporate America, doing big deals in business, commercial, real estate and land, check out actionacademy.com, go in the show, link the show description, and click the link to book a call with our membership director team. We'll give you the resources, the connections in the community to actually pull off the stuff that you're learning about on this podcast. And we'll hold you accountable to the actual implementation of the information that is actionacademy.com now let's get back to today's episode.
- [11:47]
A
Let's move on to this next lie here. I see a lot of no money down business acquisition content.
- [11:55]
B
So with businesses, it's easier to buy no money down because you can negotiate that with the seller. Just because you can doesn't mean you should. You know, I would much rather somebody buy a business 10% down and use a capital partner and give up some equity than do this whole process of, you know, trying to creatively negotiate and finance. Look, if you're somebody that has creative finance and negotiation skills, by all means, go do it. If you've been creatively negotiating real estate for the last 10 years and now you decided you want to buy a business, absolutely, go fucking wild. Like, go, go create a finance seller finance and off market business for sure. Go try it. For most people that are getting started, I'm like, dude, you don't even know how to underwrite a business, let alone negotiate a business. It just comes from reps, dude. And like, you have to remember who you're on the other side of the table with. Like, these people aren't rocket scientists, but they've ran their company for 10 years, you know, so they understand their company to a degree that you're not going to understand their company and, and they're going to be able to have the upper hand on you and take you to the fricking woodshed so easily. So it's like, even if you buy a deal like through the SBA and you have somebody that's like purely passive and they've packaged it up and you've underwritten it a bunch of times, it's like, of course they're passive. They're not actually lying to you. They've just framed the business 10 years. So of course they passive. And it's just going to take you time to get that good at the business to be as passive as they were. So look, it's like you can negotiate seller financing on a business with any way that you want to do it. I mean, I, I don't really know too many sellers that don't want some skin in the game. And to the contrary, it's like every single business deal I've done has some seller finance negotiations in it, you know, because you want to have some type of seller carry because it keeps the seller honest in the transition, because they have some Skin in the game. It brings us to an excellent point, which is most people don't know. How do you know you could actually trust someone?
- [13:44]
A
Right, yeah.
- [13:45]
B
How do you know you could trust someone? Especially in business and in investing? And people are like, oh well, we have history, we have shared values, you know, friends, family, cousins, you know, somebody I've known for years. Absolutely not. That's not how you can trust someone. The only way that you can truly trust someone in business and investing is if you have aligned incentives, period. As a million dollar piece of advice, the only way that you can trust because the person that will fuck you is your best friend of 20 years or your person that's in your family that you're partnering with, your cousin, your brother. Like those are seen time and time and time again. You have to have aligned incentives. And when you're buying a business, the way that you align your incentives is what's called an earn out. So you do an earn out, a carve out, clawbacks, add backs, all this different stuff. Well, add backs is a different one. But basically what earnouts are is, hey, I'm going to buy this company from you and then I'm going to pay you out portions of that proceeds at certain revenue milestones. And if you say the milestones are what they are, we should hit them at this point, this point and this point. But it's not dates, it's milestones. It's like normally financial milestones. And so that also incentivizes the seller to stay on with you and make sure that they're like a good Sherpa, guiding you through things. But like business, you can negotiate and you can structure anything. You can structure your employees comp plans, you can structure your partnership agreements. Everything has to be aligned incentives to where if somebody gets fucked, they get fucked too.
- [15:17]
A
Yeah, well, so. And have you seen anybody get burned by. By no Money down?
- [15:21]
B
Yeah, yeah, thousand percent. Like I've seen a bunch of people get burned and fricking scammed out of, out of really crappy deals, trying to be cute and creatively financ to negotiate them. They got taken to the woodshed, they didn't know what they were doing and they were going against a freaking pro, you know. So if you don't got experience doing creative finance and negotiations, like last thing I would do is go buy a fricking business that you're signing a guarantee on. Yeah, no, that's fricking terrible idea. And then also where most people get burned is partnership. Yeah, most people have the worst partnership Agreements. Most people have the absolute worst partnership agreements I've ever seen in my entire life. Like, your partnership agreement shouldn't be like, most people's partnership agreements in a business are like, oh, my God, here's how we're going to split the profits. You know? You know, here's how. Here's how we make decisions in the business. This person is going to run it more than this. Hey, you do sales, I do finance. There we go, dude. Your partnership agreement should have every single thing that could go wrong possible in the business. Your partnership agreement should be where you go to. So my favorite quote about agreements in business and investing comes from Gary Keller. He goes, they should be called a disagreement because the only time that you're going to get in front of it is when you. You're fighting with your partner. So it's not even an agreement, it's a disagreement. And so what he talks about is like, you need to know how you break up.
- [16:44]
A
So it's like a prenup. It's like a prenup.
- [16:46]
B
It's exactly like a prenup. You need to treat your partnership agreement as if you guys are sitting across the table. This is before you buy the company or before you start the company, you need to be sitting across from each other like you are breaking up today. How are people getting paid out? You know, what are they getting paid out on and what value are they getting paid out? Huge, huge deal. I have friends that were dragged for millions and millions of dollars for years and years by people that started, like, bought the company with them at like 2 million, then they scaled it to 6 million. And let's say then they bought it at 2 million at a 2x multiple, but now they scaled it to 6 and now it's worth like a. A 6x multiple, right? And now the, the partner is wanting to get like 6x their return, and they're just going to sit around and do nothing until you pay them out. And then just going to sit there and let their lawyers battle it out because they don't care. They just know that they're going to get their money. So in your partnership agreement, you need to be seeing, here's how, here's how we break up. Here's how, here's how you get paid. Here's the amount you get paid, here's the valuation you get paid at. And also here's the responsibilities for every single person. And if you're not doing these responsibilities, here's what the process looks like to fix that. You know, verbal warning Written warning, like, you guys have a meeting and you have a vote. And if somebody's not doing stuff, like, you need to have a process for removing them from the company. Because, like, the biggest issue in business is business partners that aren't pulling their weight. And now how do you get them the hell out of your deal?
- [18:09]
A
That's so good. I think that's a whole other thing in and of itself, because I think there's so much in there between the capital investor and the operator and how those conversations happen and what that looks like.
- [18:19]
B
But, well, dude, even in my partnership agreements, like, as a capital partner, like, there are some where we have to. We have to show, like, just for me investing capital, I'm guaranteed this return. But on top of that, there's some advisory roles that I'm doing for the extra equity that if I don't do this monthly call or if I don't make this content or if I don't help with this, like, they're able to dock my distributions.
- [18:40]
A
Yeah. Yep. Let me ask about this, though. I do think there's a lot of people that think they can just high on biz by sell, find a deal, handle everything themselves. I'm just wondering, for your perspective, is that naive that they can handle everything yourselves? Just do it all and just get it done.
- [18:55]
B
Dumb, dumb, dumb. Dude, look, you can go watch the YouTube videos. I mean, dude, there's enough podcasts. Business buying content on my podcast and YouTube channel. But why? Like, you're playing the game on hard mode. Like, if you buy a business that's too small, you're playing the game on hard mode. If you buy a crappy business, you try to fix it. You're playing the game on hard mode. If you try to buy a business by yourself, you're playing the game on hard mode. So you can just play the game on easier mode. By A, like, being around other people, buying businesses. B, having mentors that have already been there, done that, gotten the T shirt or coaches, and then see having business partners or multiple business partners. Like, dude, you should 1000% use a business partner for your first business. And like, you guys go and buy it together. Thousand percent. Like, I way more recommend that every part, every business deal that I've bought has got partners operating it and they have complimentary skill sets and they're able to, like, be with each other in the trenches. Even the one that I'm buying, that's the gym where it's one guy. It's him and his wife. So his wife is his Partner.
- [19:51]
A
And on this, though, the other part about that, that not enough people talk about is the ego drop. Because, like, when you're the founder and you're supposed to be the guy and you own 100%, you're like, it's my thing. It's all me. Versus when you're thinking about it from a partnership perspective, and you're like, I'm a capital partner. I wear a role, and I'm getting X. And every person on the team approaches it, we're like, I bring this to the table and I take X out versus oh, it's just all me and my ego and I'm a nice little founder.
- [20:18]
B
I feel like, yeah, yeah, I'm a business owner now. I'm like, okay, dude, that's cute. Like, go do that. I mean, I did it, dude. Like, I started my own company. I own 100% of it, you know?
- [20:28]
A
Yeah.
- [20:29]
B
But now my. My. Yeah, my team helps me, but they're all economically aligned.
- [20:35]
A
Yeah, I guess you've. You kind of addressed, you know, three of the. Of the biggest lies that people might see on social media about buying businesses. What's. For someone that's thinking about buying their first business, what's the one thing you want them to remember from this episode?
- [20:51]
B
If somebody is buying their first business today and they're watching this episode, the one thing that I want them to remember is like, you are not God's gift entrepreneurship. Like, don't try to be. Don't. Don't. You know, like, you have your friend that goes and dates, like, the toxic women or the toxic men, and they're like, I can fix them. Don't do that. Don't buy a crappy business and try to make it good. That's dumb. You'll go bankrupt. Buy a business that's succeeding in spite of itself, you're like, I don't understand how this business is as good as it is, because I see all these areas of opportunity, and they're already doing millions of dollars. The kitchen hood cleaning company, I was doing zero marketing, zero sales, Just inbound leads from restaurants, doing millions of dollars a year. I was like, are you kidding me? I was like, dude, we can come in and just build a marketing and sales team and just like, triple this thing, which is what we're doing. And so it's ridiculous. Like, don't be God's gift to entrepreneurship. Like, buy something stupid simple and make it better.
- [21:45]
A
What's the difference between someone who succeeds at this versus someone who fails?
- [21:49]
B
The difference between somebody who succeeds and who fails at business buying and entrepreneurship in general is somebody that's waiting for somebody else to save them. No one's coming to save you. Like, you have to figure it out. Like, figureoutability is, like, the biggest indicator of success. Like, can you just sit there and be like, I have no idea what the hell I'm doing, but damn it, I'm going to figure it out. Like, if you're waiting for somebody else to come give you the answers, you're toast. Like, you're done. You got to figure it out. It's not about your resources. It's about your resourcefulness.
- [22:16]
A
And if you could go back and tell yourself one thing before you. You. You had your first acquisition. So not the ones you built yourself, but before you had your first acquisition. What's. What's that thing that you would tell yourself.
- [22:28]
B
If I could go back from my first acquisition, I would say, go bigger. Go bigger sooner. Like, buy something a little bit bigger. And. And also I would say, like, invest more into training for your people.
- [22:40]
A
Talk to someone. They're sitting in their car, they're driving back home from work, they fucking hate their job. What do you think is actually holding them back?
- [22:47]
B
I mean, it's just somebody isn't taking action. They haven't experienced enough pain, or they don't have a clear enough vision for the future. That's it. Everybody, for any reason, like, the reason that anybody isn't doing anything is because, a, they haven't experienced enough pain to drive action, or two, it's like, they don't know where they're going. So if you're crystal clear, dude, like, look, you can control one of them. You can control the vision. Like, I was comfortable, dude. I was making a quarter million dollars a year as a single guy in my early 20s. Like, I'm good. I had no expenses. I was living in the basement of my house in Atlanta, Georgia. I'm good, but, like, I had a crystal clear vision for where I was going, and so I didn't have to sit around and wait for the pain. Like, I was. I was good enough. I had my own fuel, which was the pole motivation. And so I knew where I was going, and so that pulled me where I wanted to go. Boom. Thank you guys so much for listening to another episode of the Action Academy podcast. My one ask real quick before you go, if you enjoy this episode, if it brought value to you, please share this episode with one to three friends that you think could get value from it. This is how we grow the show. And at minimum, if you could leave us a five star rating and review on Apple podcasts, Spotify or whatever platform you listen to that would mean the world to us is how we get in front of other entrepreneurs. If you're done sitting on the sidelines, you're done listening to the podcast. You want to be the freaking guest on the podcast? Go into action academy.com, go in the show description, the show link, and book a call to speak with our Action Academy community. We have hundreds and hundreds of people just like you buying businesses and commercial real estate with full coaches, full mentors, full support, full capital. Everything. ActionAcademy.com is where you'll find us.