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Unemployable with Jeff Dudan
Why 95% of Business Owners Leave Millions on the Table When They Sell with Matt Uhler
01:01:48
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- [00:00]
Matt Euler
95% of the people that come to me as a broker looking to sell their business, which is typically one of the biggest assets they own, they are not even remotely prepared and they are leaving hundreds of thousands or millions of dollars on the table because of it out at every business is ultimately going to sell or close.
- [00:17]
Jeff Duden
Right?
- [00:17]
Matt Euler
And it's the only two options. A lot of the people who own businesses for a long, long time just literally close them. And it's amazing to me because I'm so active in this world of helping people buy and sell them, but that would be like deciding you want to move to a different home and bulldozing your old one.
- [00:32]
Jeff Duden
Hey everybody, welcome back to the Unemployable podcast. I'm Jeff Duden. If you are a longtime business broker, entrepreneur, coach, speaker and the host of the what's your deal podcast, if you've been self employed since the age of 17 with nearly three decades in acquisitions and exit planning, completed 800 plus deals, analyzed 3,000 businesses and participated in transactions with, with a combined value of more than $350 million, your name can only be Matt Uler. Welcome Matt.
- [01:05]
Matt Euler
Jeff, thank you so much. You summarized that so well, I appreciate that.
- [01:14]
Jeff Duden
Well, you have been a, a, a busy human. We're excited, it's very topical that you're on. So I'm excited to, to get into this is something that we're working with our franchise owners on is working backwards from where they want to end business to be. So my question for you as an opener is should business owners run their business every single day as if they were getting ready to sell it?
- [01:39]
Matt Euler
The answer is yes. And with, with a caveat there, you know, obviously there are stages depending on how new it is and so on and so forth. But in my opinion, and I'm going to say 95% of the people that come to me as a broker looking to sell their business, which is typically one of the biggest assets they own, they are not even remotely prepared and they are leaving hundreds of thousands or millions of dollars on the table because of it. And so it is worth the time, even though it's not real sexy to do that
- [02:09]
Jeff Duden
when somebody comes to you as a business broker and what would be a typical business, a three to $10 million service business or health care, home care business or something like that. Would that be a typical deal?
- [02:22]
Matt Euler
Not typical. So most of there's, there's Main street businesses which are typically considered to be 5 million in revenue and then mid market would go up from there 5 to call it 20 someplace in that range, 15 or 20. And so a lot of the businesses that I work with are Main street and some mid market. So a Main street business can be a business generally that's going to have a discretionary earnings of someplace between, you know, 150 to a million somewhere in that range. And then mid market is generally they're looking at a million plus in discretionary earnings or EBITDA is another term.
- [03:00]
Jeff Duden
Okay. And when you say seller discretionary earnings, I.e. sDE in the, the parlance. So by definition you've got a company, it has net income, they print their financials out of QuickBooks. What do you do to walk that net income that comes right out of QuickBooks to get the seller's discretionary earnings or EBITDA?
- [03:22]
Matt Euler
Yeah, it's a great question and technical answer, but it's so important because really it's critical. Business valuation to a very large extent is driven by how much the business can afford to pay for itself. And so if we can't demonstrate the discretionary earnings, buyers, lenders, their accountants, their advisors can't figure out what it's really worth. And so discretionary earnings as a simple explanation is it's really the, it's the profitability of the business. And then added back to that are any one time non reoccurring or expenses that are very specific to the seller. So as an example of that, let's say there's a leased piece of equipment that's actually used in the business and it's going to be paid off at closing. Well, those lease payments are part of what gets added back to the bottom line or the net profit to help determine discretionary earnings along with owner benefits. And you know, oftentimes company vehicles, I mean most business owners are doing everything they can to reduce their tax burden. And the more creative they get with that, the harder it can be to demonstrate what the SDE is to support a great exit.
- [04:39]
Jeff Duden
Yeah, look, I get that. But I also believe that, you know, two things can be true at the same time. That's one of my favorite, that's one of my favorite learnings late in life is that more than one thing can be true at the same time. So in all of our businesses that we operate, every month we scrub through the numbers and we put things, what's called below the line, that are one time expenses. And small business owners that have not been through a transaction, really, they miss a lot of things. So for example, let's just, just say that you had a one time expense to Send somebody to training and maybe you sent four people and they went to sales training and it cost you $20,000. All right, well that was a one, you're only going to do that one time. It's not going to be an ongoing cost to the business. It looks like an expense, it, it acts like an expense, it smells like an expense. And certainly you write it off for your tax books. Okay, so you're not going to pay taxes on that because it's a straight up expense. You're probably not going to have to amortize that over years to write that off. Right. That's going to be, that's going to come off this year. But you put you, if you're running your business every, every month and you're going, and you see that come in, you're like, I'm putting that below the line. Because that's not an expense that a future owner is going to incur. At least I'm not going to incur that on their behalf. They choose to incur it. It's up to them. So you know that, that and the discipline of pushing things, of analyzing every expense monthly and saying does it go above the line or does it go below the line? Which below the line means the things that you're going to add back. It's an incredible discipline for in the financial IQ of a small emerging business owner.
- [06:26]
Matt Euler
Huge. I mean it's so great you're doing that and you teach people how to do that because very few do. And what happens if a business owner doesn't do what you just described? Then they're either looking to a business broker, an accountant, an appraiser to try to find it. Like, okay, well, it's stuck in cost of goods somewhere. It's whatever. And, and it just, if it disappears, it's really hard to identify. And it's oftentimes difficult to get a buyer or a lender or their accountant to accept as a discretionary earning. And what you just deter, what you just described is discretionary. Right. You chose to spend 20 grand in that example.
- [07:05]
Jeff Duden
Yeah.
- [07:06]
Matt Euler
For training. It's a one time non reoccurring expense. And so. Yes, exactly.
- [07:12]
Jeff Duden
Yeah, so. And then, so somebody comes into you as a business broker, they've got their $4 million business, they're making 15% on the bottom line, they're making $600,000 now. And that's just straight out of QuickBooks. What they sign you, they, they like what you're, they're, they're ready to sell. They like what you have to say they sign you up. What's the process look like from the day that they sign you up all the way Going through a sale? I mean, I'd love to just walk through this because for us, I mean we, you know, our clientele is a lot, it's a lot of the franchise industry, it's a lot of franchisees, it's a lot of small business owners. And if you haven't been through a process, it's, I, I, I say, you know, I, I sent my oldest to school and encouraged him to do finance because finance is like Russian. If you don't know it, you don't understand it. And so many independent business owners pretend they speak finance and they go out and they try to negotiate their own deal but they actually have no idea what they're talking about and they leave money on and that's what we call a stupid farmer. And they don't make much of them anymore. But I mean people that don't understand how the finance works inside of a deal, they undervalue their business and then somebody gets a, it gets a good deal and that's not what you want. You want to get the best outcome for your client.
- [08:39]
Matt Euler
Yeah, for most people it should be ideally a life altering exit. Right. That's what they put their heart and soul into for a long time. So yeah, let me walk you through step by step because it's a great question and most people have not done it before. And so that creates an opportunity for mistakes or just concern for fear of the unknown. So number one is if you're going to be using a broker, which I highly recommend, it's choosing the right broker. And they are not all the same, unlike a lot of real estate agents, even though they're not all the same. That industry is much more refined. The sale of business opportunities is not as refined. And so it's not really regulated, is it? It's a great point. It's depending on the state. It is not regulated. So in some states you need to have a real estate license, but that does not include training for how to be a business broker and how to sell what's most often personal property as opposed to real property. So huge distinction there. So choosing the right broker is important because once you're committed to that broker, you're, you're there and, and it's very difficult to eliminate that relationship. So, or terminate that relationship. So number one, choosing the right broker. And then for me, when somebody comes to work with me, it's financial analysis. Now I want to understand all the operational aspects of the business as well. But you'd be amazed what three years in a, in a financial statement will tell me the business. And it's not uncommon for me and my team to spend two, three, four weeks analyzing the financials and trying to extract and identify the discretionary earnings numbers and document that and going back and forth with the client to ask questions. So part of the reason that's so important for your audience is because the last thing that I think a seller wants to do is find a good buyer, start going down that road and then there's some mistake in the analysis.
- [10:34]
Jeff Duden
Yeah, the numbers change, it loses. They say every dial, every deal dies at least three times and it'll die the last time. If, if people find out that they, if they don't believe what you've told
- [10:49]
Matt Euler
them, well then they're looking for more of what's wrong as opposed to looking for what's right. So yeah, so the financial analysis is crucial and it's, it's very important because ultimately that's going to be a huge factor in what the valuation of the business is. And so then the broker in this example is going to come back to the owner and say, listen, here's what I think. And sometimes I'll give somebody a very specific number, but I'll also give them a range because a lot of business owners are like, listen, this is my life's work. I don't want to leave one penny on the table. I don't care if it takes a year or two. That's different than somebody who says I've got a terminal illness, I just need to be done, you know, so those factors come into play when it comes to what's a business worth. So once the financials are analyzed and the operational attributes of the business are clearly identified, I mean, is the owner and their spouse working 80 hours a week or is it 20 hours a week and they've got five key people? I mean, all of those things help to add value or hurt value. In the first example, I have a question.
- [11:57]
Jeff Duden
During that preparation phase, you identify something that you're going to say, well, it's my brother in law and we pay him, but he's not really that critical to the business. We just, we keep them here because we keep them here. Would you say, okay, we're going to take the brother in law, we're going to keep them employed and we're going to put them below the line. Are you going to say it's going to look better if you make that Change now before we go to market so that the business is more in the form and shape that you're going to want the buyer to acquire the business in.
- [12:32]
Matt Euler
Yes. You had mentioned there's a both. Yes, twice. Right.
- [12:36]
Jeff Duden
Yeah.
- [12:36]
Matt Euler
So if somebody's like, I need to list it now, then we're going to work with the brother in that situation.
- [12:42]
Jeff Duden
Okay.
- [12:42]
Matt Euler
If somebody says I've got two to three years, then we want to clean up their financial picture as much as possible before anybody looks at it.
- [12:51]
Jeff Duden
Yeah.
- [12:51]
Matt Euler
And I would attribute it to, as a simple analogy, I mean, if somebody goes to look at a car and they've got one car that's they're going to buy it and it's perfectly clean and well maintained, that presents an image. And if they go look at another vehicle to potentially purchase and it's clearly not been taken care of and it's just a mess and it's, well, which one are they going to gravitate to? And same is true with the business. If we can, we want the best foot forward. We want everything clean and concise so that a buyer feels good about moving forward.
- [13:22]
Jeff Duden
Yeah. How much do you look at a business and say, look for growth levers. And of course, if the current owner hasn't pulled on a growth lever, like expanding their commercial business or some something that you know is looks like low hanging fruit, are those things that you're going to memorialize in a deck that you put for somebody or you know, and say, hey, you know, we see in, in studying this business, here's the opportunities that we see and show them a path to grow the business or do you just basically present it? This is, this is the trailing 12, trailing 24. This is what it is. And here's the number.
- [14:07]
Matt Euler
Yeah. So we tell, ideally we're telling the story. Right.
- [14:10]
Jeff Duden
Okay.
- [14:11]
Matt Euler
And most buyers of Main street businesses are looking at history to determine value. Now, I met with a client last week whose history is great, but the first quarter is down like 50%. Oh, well, that's not great. Right. So that diminishes the history. But a lot of buyers will not buy potential because it's an untold story. So there's an element of that that is, that adds to value and, and should be taken into consideration. But it's hard to put a dollar on it unless you get real creative. And we could get in the weeds if you want. But earnouts and there's all these ways to try to capitalize on what the future might bring. But for the most part it is a Consideration. So if there's a business that's the seller's just tired and they're turning away work every day and they've got an opportunity here that just don't have the energy for it, that's great for a buyer to know.
- [15:06]
Jeff Duden
Got it.
- [15:07]
Matt Euler
Or prospective buyer.
- [15:08]
Jeff Duden
Yeah, yeah. How long does it typically take for you to get a business sold?
- [15:15]
Matt Euler
So we use a term that's seven months. And the, the, the fact is that usually when a business is listed within the first 45 days, we're going to get the most activity we're going to see.
- [15:27]
Jeff Duden
Sure.
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Matt Euler
Because there's pent up energy in the market and there's way more buyers than sellers most often. And so if it's not, if it's not under contract within the first 45 days, then typically we're looking at 712 months.
- [15:39]
Jeff Duden
Got it. And the market's a little tired.
- [15:42]
Matt Euler
Yeah. Well, and it gets hard to. Again, how prepared is the business? Well, we could, and we don't typically do this, but about 70% of our deals we arrange the financing for.
- [15:52]
Jeff Duden
Okay.
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Matt Euler
Well if the business isn't prepared well, we could spend six months just negotiating with lenders and trying to work through issues like, well, is the brother really an employee or not an employee and are they key and why are we adding them back? And yeah, so momentum is our friend in this industry. I mean if we come in strong with a clean file and we find the right person and we, and we start with the right person, which is something we may want to talk about, then typically the process can be done in 60 to 90 days.
- [16:26]
Jeff Duden
Right.
- [16:27]
Matt Euler
From the time the buyer decides they want to buy it.
- [16:29]
Jeff Duden
Yeah. Do you ever, what's your position on recommending to your sellers that they hold some financing and I guess along with that transition participation. Is it vary from deal to deal or is there a standard that you recommend to your buyers and sellers?
- [16:53]
Matt Euler
Yeah, there is a standard. And so from a seller carryback standpoint, most of the business owners that I represent as sellers, they don't want to carry a note, they're not interested in investing in somebody else running their business, that they generally believe they ran better than anybody can.
- [17:09]
Jeff Duden
Right.
- [17:11]
Matt Euler
So that's deemed as risky. However, I do coach them that oftentimes 5 to 10% seller carryback is customarily requested by buyers. And the reason it's customarily requested by buyers is because the buyer wants to know that the seller has some skin in the game that they will show up for the transition period, that they will pick up the phone if they call them six months later with a question.
- [17:36]
Jeff Duden
Right.
- [17:37]
Matt Euler
So from a seller carryback standpoint, that's the norm because most of the businesses I represent, I can obtain financing for the buyer. So there's no need for the seller to carry back a huge amount.
- [17:49]
Jeff Duden
Okay. And that doesn't. 10% doesn't maybe help towards the down payment or the loan to value ratio. Ltv.
- [18:01]
Matt Euler
It can. Yeah. So it can. There's certain criteria and it changes all the time, but there's certain criteria with SBA lenders, which is how most of these transactions are financed, where a seller carryback note in a, in, in a certain structure can part. Qualify as part of the down payment funds.
- [18:18]
Jeff Duden
Yeah. Do you have, do you represent buyers that are looking for specific business as well?
- [18:25]
Matt Euler
I do, but there's a caveat with that. So typically if somebody comes to me where they've actually found the business and they want help securing it and closing it, then that's something that we can do very effectively. Us trying to find a business for a buyer five states away or something, it. That gets very difficult and it's, you know, sometimes we'll assist buyers with that and then we find it and call them that, well, I just took a W2 job. I couldn't wait anymore. You know, so it's, it's hard for us to represent buyers unless they actually have a target that they're clear on.
- [19:02]
Jeff Duden
Yeah, yeah. 30, 60 days after the deal, you get a phone call, something's gone horribly wrong. What are some things that owners need to look out for that could turn into a horror story in hindsight?
- [19:21]
Matt Euler
This is such a great question. And I'll. When people buy a business or a franchise. Right. Part of what I love about franchises and people buying a business as opposed to starting one, is there's a recipe there. Right. There's a formula for creating the result. And one of the things that I caution people against is that oftentimes they buy a business and they want to change it. And when they change it, they mess with the recipe. And so from a buyer's perspective, one of the very first cautions is if you're buying a business, you bought it because it worked. And so to the best of your ability, until you have the experience to make wise decisions related to the recipe, try not to make them.
- [20:12]
Jeff Duden
We call those genius attacks.
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Matt Euler
Right. Well put.
- [20:17]
Jeff Duden
Yeah. This business has been operating for 30 years. You've owned it for 30 days. I think I'm going to change everything.
- [20:23]
Matt Euler
Oh, my gosh.
- [20:25]
Jeff Duden
Right.
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Matt Euler
So usually When I get those calls, Jeff, I'm like, okay, we need to sit down with the seller. And we sit down with the seller and say, okay, well, what's going on? Well, we're not getting the install rate that we used to. Okay, well, that's weird because the install manager, I mean, he was phenomenal. And what's going on? Well, we terminated him because my brother needed a job, and so he's the new install. And it's just one day at a time. They make one change at a time, and before you know it, using the recipe analogy, they got a whole. A whole different cake. It tastes horrible.
- [20:58]
Jeff Duden
Right.
- [20:59]
Matt Euler
And they're not getting the outcome. And so ideally, they're able to get back on track with what actually worked, because the owner of the business spent years developing that recipe, and the franchisor spent years figuring out how to roll that wheel. And so it's very important.
- [21:17]
Jeff Duden
Yeah, I had an investment banker and a deal that we sold, and I had some visibility into it that the buyer was. Didn't seem to understand how to weight some of the. The. Some of the. Some of the services that were provided. And they were for. Not even for economic reasons, just making changes that were kind of dismantling the secret sauce a little bit. So I called my investment banker. I said, hey, this is what I see. It's not my business anymore. They certainly haven't asked me. And he said, well, he. I said, do I call somebody? And he said, you know, sometimes there's a method behind the madness that you might not be aware of, but most often it's just madness. I would stay out of it. And, you know, and so I did. And then, you know, so who. Who knows, you know, what happens. But I mean, it's. It's. Yeah, but I think, to your point, I think a best practice would be maintain good founder relationships. But also, the founder isn't responsible anymore.
- [22:32]
Matt Euler
No, they're not.
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Jeff Duden
So if you can get into a mentor, mentee relationship, if you can find a way, if they do roll back or stay in the deal just a little bit, kind of as a figurehead, the wisdom accumulated over the decades of building that business have real value. And that doesn't mean that to grow the business, you might not have to change a few things. And so a lot of times, if the buyer is an individual, it depends on their sophistication. It depends on their experience. Do they really have a plan to grow the business? Is it something they did before? If you're talking about private equity, they're going to make changes, by the way. And it's going to be driven from a spreadsheet a lot of times. But like there's, it's like anything else. There are some incredible private equity firms that have incredible track records in our industry of franchising. And just everything they touch, it just is a winner. And then you have new private equity firms that come in and don't have franchise experience. They've got great experience, but in direct businesses. But they, you know, the franchise space is very nuanced and it's a game of influence. It's a game of relationship with franchise owners. It's understanding the cultural undertone of, of why the business works, how it works, what, what the practices are, and really, I mean, going to the contract when you have to. But ultimately, you know, there's a way that you work with business owners because you can't fire these people. I mean, you're, you, you, you, you know, our attorneys say it's not a partnership, so don't call it a partnership. Don't say franchise partners. But man, it is a partnership. I mean, it is not in a contractual way, not in a legal way, not in a tax way, but I mean, it is. Success is just intertwined. So, you know, we, we need collaborative franchise owners that are going to resolve conflicts in a healthy manner and work together and sometimes put their individual gripes aside, you know, for the good of, to understand what we're trying to do for the good of the network that's ultimately going to help them from a unit economic perspective, a customer acquisition perspective, whatever it is. And then as good franchisors, they never forget that the franchise owners are at the center of everything that they do, bottom line. I mean, like if, if you care first and foremost about their success and you, you, and if you do that, ultimately you build a healthy system. It has low churn, it has organic growth. And, and you will, you will make your money from the, from the scale.
- [25:14]
Matt Euler
Yeah, and I, I agree with everything you just said. The distinction when it's not a franchise is just that that relationship has got to be key with the previous owner because everything you just shared is ideally what happens with the previous owner. Where, yeah, we, I've got a situation. I helped my oldest son and wife buy a business about a month ago. And so it's interesting to look at it from that perspective with them. And there's. The previous owner is, is AD tired, just tired. Had some physical issues that were preventing him from doing some of the things that he would have liked to have done. And yet he's a wealth of knowledge. So even though my son and wife and we're discussing changes they want to make, we're typically running them past the previous owner for his input and, and having regular meetings like how are you feeling? How are you doing? What do you think? And, and even though it's clearly challenging for him to see somebody come in and, and be ready to take this to a whole nother level, he's appreciating being part of it and that it's his legacy that we're carrying forward. So that relationship is very, very helpful. If you think about not having it, it can be devastating.
- [26:28]
Jeff Duden
Yeah, yeah. Because the, the tribal knowledge is just, it's not available anywhere else. Yeah.
- [26:36]
Matt Euler
Especially specific to that specific business. Right. I mean the, I'm sure you see it, a franchise, a specific franchise in one town can be totally different than another town just because of the dynamics and the demographics and the culture and all of it.
- [26:50]
Jeff Duden
So yeah, you know, we do our best to keep the hamburgers tasting the same everywhere but.
- [26:57]
Matt Euler
Right.
- [26:59]
Jeff Duden
How often or, or have you gotten calls where there's non compete issues that have arisen? Whether it be from the founder going back and competing with a business that they sold maybe in, in a way that wasn't anticipated, or key employees maybe trying to, you know, step out the door with some of the, whether it be customer base, intellectual property, things like that, put up a competing shingle. You know, I mean, these are dicey. Right. So because now, especially now, there's been a lot of new regulation around non competes. Are they valid, when are they valid, when are they not valid? What professions are they excluded from? How, how far, how wide, how deep can you have a non compete. But as a buyer of a business, you bought the people, you bought the process, you brought, bought the know how you bought the customer base and you know, and, and then if people are disenchanted with the ownership change for some reason, some people might try to walk out the door with some of the things that you just paid a lot of money for. How do you deal with those situations?
- [28:12]
Matt Euler
Well, fortunately, it doesn't happen very often.
- [28:16]
Jeff Duden
Oh, you mean they get away with it?
- [28:19]
Matt Euler
No, usually when I'm working with somebody, if they're done, they're done. Right. And they don't want to get back into the business.
- [28:26]
Jeff Duden
That's fair.
- [28:26]
Matt Euler
If they wanted to get back into the business, they might as well just keep what they have. So the few occasions where I've seen that show up one was just total, total Fraud and manipulation. But the others were people ran out of money and all they knew how to do. The previous owner ran out of money. All they knew how to do is what they had done before.
- [28:47]
Jeff Duden
Right.
- [28:48]
Matt Euler
And so they get back into it. That's a whole different animal than key staff. And this is important for buyers of businesses to understand is because it's very, very rare to get a key employee to be able to sign a covenant not to that's enforceable because they're not a principle in the operation and they haven't been compensated not to compete. Unless you get real creative with how you do that and it may still not be enforceable. So for me, when I'm buying businesses or working with buyers of businesses, I'm looking at is there somebody in the operation right now that could step out tomorrow and just devastate us because of their brand knowledge and competency and all of those things? Sure. That's a consideration if you're going to buy a business. And yet it's also part of the value. Right. A lot of people who buy businesses want somebody who's able to run the day to day. So it's a fine line.
- [29:40]
Jeff Duden
Well, concentration risk is real with customers and with employees. If you have. And for the audience, if you have a business and 60% of your revenue comes from one customer that has a contract but can break it and you buy the business and for some reason they break the contract, you just bought 40% of a business that you paid 100% for. And it's the same thing with employees. If it's a highly skilled situation or to your point, key salesperson, business runner, the entire business relies on one or two head headcount. And I mean, it could be that they leave or walk out the door. It could be that they have a heart attack. So in those situations, I've seen that really impact the multiple that somebody will pay for a business.
- [30:32]
Matt Euler
Yeah. I'm working with a client right now who's we've got the buyer and we're working on the sale. But his key employee of 10 years passed away in October.
- [30:41]
Jeff Duden
Oh my gosh.
- [30:42]
Matt Euler
That's a factor. I mean, devastating for he and his family. And from a business perspective, that's a factor.
- [30:50]
Jeff Duden
Yeah.
- [30:52]
Matt Euler
And it happens.
- [30:53]
Jeff Duden
Yep. Keep them healthy.
- [30:55]
Matt Euler
Yeah. Right.
- [30:59]
Jeff Duden
Matt, what was your first entrepreneurial experience?
- [31:03]
Matt Euler
So my first entrepreneurial experience was when I started my first business. I was 17 years old. And prior to that I had worked as a janitor. I came from very modest means as a family, and so I worked third Shift through high school over the weekend as a janitor. And as I was trying to determine what to go to college for, knowing that I would be paying for it myself, my parents weren't in a position to help with that. Teacher came, you know, as I was talking with him, he said, listen, why don't you just start a cleaning business? And I didn't think there was any way I could. I mean, I just. It seemed insurmountable to me. But he. He guided me through it. And, you know, it's not super challenging. It's vacuums, it's equipment, it's some insurance, business cards. And so I started that when I was 17 years old and then built it up to 40 employees before I sold it at 26 years old. And so that was my first entrepreneurial experience. And it's also how I saw the power of being able to help people buy and sell businesses and buy them and sell them myself. Because the gentleman who bought that business was a corporate executive with five kids, very successful. And it honestly puzzled me at the time, but he wanted to pay me for my job. You know, in the day after we closed, he made money and because of his background, was able to turn it into a much bigger operation than what I had at the time. So that was my first. My first sticking my toe in the. In the pond.
- [32:40]
Jeff Duden
So obviously somebody thought that you had the chops. They recommended that you do it. Did you have side hustles before that were of these kids that just had a rag in his back pocket and was selling. Selling anything, shining. Anything. What, what, what. What was Matt like growing up?
- [32:58]
Matt Euler
Yeah, it. Good question. Again, I came from humble beginnings and. And a lot of unhealthy beginnings. So Matt growing up was just a kid who learned how to work hard from my mom and I. I mean, there were times I'd shifts, I'd work 26 hours straight. And so I would say tenacity probably exceeded anything else that I had at that time, but just a willingness to do what I said I was going to do the best I knew how to do it. And fortunately, people liked that and then hired me more and more and more, and I was able to scale that.
- [33:36]
Jeff Duden
How did you get into brokering?
- [33:39]
Matt Euler
Well, it was. So after I ended up selling my business, which is. There's another tidbit here that we could get into. But after selling that business, I was so interested in the process and so disappointed by my broker that I decided there might be room in that industry. Now, you can imagine as a 26, 27 year old young man, that was a tall order. But again, tenacity. I mean, I, I would talk to six, seven, eight different business owners a day. When I started just getting reps in and doing everything I could to help anybody who wanted it and talking with anybody who would talk with me and got good at it as a result. I think I had a knack for it anyway. But I had lived it, I mean, 40 employees over that many years. I had, I had learned a whole lot about business. Maybe not all of the different industries, but I certainly knew customers and profit and loss and employees got it.
- [34:38]
Jeff Duden
And then how did you find your way to wci?
- [34:41]
Matt Euler
Yeah, so WCI was the first firm that I started with and I was there. Well, I literally just found them and started out as an independent agent. So I got some training from them for a short period of time and they just set me free up in the woods of Northern Arizona to figure it out. And after about nine years, I was there. I was their top agent for seven out of those nine years. And so it became time for me to move on. And part of me moving on became we kind of carved out a territory of wci.
- [35:16]
Jeff Duden
Okay.
- [35:16]
Matt Euler
And so, so I, with, with the team that I had worked with in the Northern Arizona part of the state, I then owned that office and all of those agents, and we had a collaborative relationship for many, many years. Got it between the two offices is what I mean. Yeah, yeah.
- [35:35]
Jeff Duden
So you're swinging deals and hustling, and you're also investing in businesses along the way. You've owned over 35 businesses and you've created multiple revenue streams that way. I think you currently are active in 20 of these businesses. So talk from somebody who. And a lot of our listeners are maybe they're starting their first business. A lot of our franchise owners, not only is it their first business, they're the first ones in their family that have started the business. And I make sure to point out to our business owners that other than all the tax advantages and the be your own boss and the standard out of the box stuff that a business gets you, it gives you two other things. Number one, it gives you the freedom to pursue your own curiosities. Meaning if you know to build a business and to scale a business, you need capabilities. So as you decide, okay, I have sales capability or I've got finance capabilities. As the business grows, you recognize the business needs capabilities that you don't have yourself. So now you have the freedom to say, do I pursue these capabilities myself or do I Buy these capabilities. Who do I become? But you have the freedom to kind of pursue who shaping yourself as entrepreneur, as a business builder, as a business owner. And then the other thing that it does is it's just really a statement of impact because most people that are successful entrepreneurs have an early entrepreneurial experience. And that's why I asked that question. And be prior to people having an early entrepreneurial experience, they usually only have that because they were exposed to a business owner. So when you get right back down to it, if you're the first one in your family that has owned a business, think about your children, your nieces, your nephews, your aunts, your uncles, your other people like you are impact. Everybody's watching to see what's happening with the business, how you work. My dad had an engineering firm. Didn't go great. I mean, he slugged it out for probably eight or 10 years, but it didn't really grow. He had a couple of partners and I mean, they made ends meet, but like they were doing the work right. They were drafters and architects and structural engineers designing things and, but I watched him, I watched him seven days a week go into the office and do the things that he needed to do. And he, when I was a, I was an oversized kid and you know, he put one, I mean, he would, if he had clients coming in, he would put me in a sport coat and make me go sit in the cube in the back. And you know, when they were in the conference room, I would just go out there and raid the snack box, you know, snack boxes. It's like, ah, I think your draftsman's over there eating all the crackers, mister. But, you know, you know, but I mean, ultimately I sat there and I watched my dad like prepare the meeting room, talk about clients coming in, you know, have a sales pitch, you know, talk about debrief after the meeting to see what they were going to do. So, you know, because, and I think so many, so many people, I don't know that that's true, but like, I know that there are people that protect their children from the, the rigors or the, the, the, the dead truth of building a business, like how hard it is, hey, we got stolen from today. Somebody stole something out of somebody's, you know, all. I was so transparent with my children because why would I go through all of this and not and then have them go into the world as adults and miss all of the experiences that I had to prepare them for the next level, right? So, you know, so I, I just think it's so as. So people that are getting into business for the first time, they underest that they're going to have on the people that are in proximity to them.
- [39:15]
Matt Euler
Yeah, absolutely. It's a. It's something that I've always wanted my kids to understand because I think the resourcefulness of being able to create your own income when you need to is. Is important, especially maybe now more than ever. But to, but to answer your question, it's about why I started creating what I call a mutual fund of small businesses. It was really driven by something that touches my heart because I watched my mom, as a single mom, raise my brother and I. And you know, we've all, We've all heard the, this. The resource. We all have the same of is time. And my mom worked seven days a week for seven years to put food on the table, and she didn't have any more time. And every time, every occasion where somebody got. She got sick, my brother got sick or whatever, and she had to miss work. She was behind. And so as I became a successful business broker, I made a great living and was blessed to have that, but it was transactional. And. And as I tried to figure out how to diversify my income by investing in the stock market or whatever, it just was a game I didn't understand and it wasn't. I didn't see the rewards from that. And so I decided to start investing in small businesses and small again. And, you know, 12 million in revenue or down, I mean, they can be all different flavors, but if I saw an opportunity with the right people and the right business and they wanted me part of it, then I would invest in that. And so over the years, I've done that over and over, and it's become one of the greatest joys I have now is the people that I'm partnered with. I wouldn't be with them if they weren't great people. And I enjoy them. And I love the team sport of us working at this stuff together. And some of the, the. Some of the times I'm most proud of are when we took a hit in some business and we rallied together as a team and got to the other side of it. I mean, to me, that's. That's what it's all about. So. So that's how it started for me. And over the years, that's accumulated to a lot of. A lot of what I call faucets. You know, one might be off because of a bad year, but the other one's full speed. And so I've got all these faucets, you know, providing me with income that are not tied to my day to day activity.
- [41:34]
Jeff Duden
Right. So what makes a good deal for you when you come across an opportunity and are you participating like in a sidecar? What I mean by that is let's just say you represent a seller and when you're going through the sale of a business, you become pretty intimate with the buyer and the seller. Like you're, you're, you know everything about them, how they can operate the business, who's going to be involved, what else have they done? So you can size up the buyer pretty well. You've also done an in depth market study and a deep analysis of the quality of the asset. Like is there, what's the quality of their earnings? What's their concentration risk, what's their team? Is there upside in the marketplace? Did I identify levers they're going to be able to pull it? So now if you match up a really good underlying business that's priced fairly to a really solid buyer that has a track record of success, are those the deals that you get into?
- [42:36]
Matt Euler
They are. So that's where it starts. But the other aspect of it is I need cooperation. Right. If most often when I go to the seller, the owner of the business, and I say, listen, you've hired me to sell this for you and I found a good buyer, usually the buyer doesn't have enough money or there's some reason that they might need help. I go to the seller. And so this would change our relationship. But if you want, I can talk with the buyer about helping him get it done. I would become part owner. And if that's something you would like, I will do it. And usually they just say, I don't care what you do, just get me out of here. Right?
- [43:14]
Jeff Duden
Yeah. Right.
- [43:16]
Matt Euler
And then I talk to the buyer and I get to know them and we, we put to the test, you know, before we partner up, is the relationship going to work? What are some of the rules of the road? Do we share similar values? What are our roles going to be? Because one of the biggest things I see partnerships fail because of is lack too many cooks in the same kitchen.
- [43:36]
Jeff Duden
Right, right.
- [43:38]
Matt Euler
Not clear guidelines about who's doing what. Yeah, so, so anyway, that's usually how it starts.
- [43:44]
Jeff Duden
Yeah, I think clarity in those things. Partnership, bad partnerships are like sinking ships. You got to avoid them both. And you know, one of the, one of the things I do with my kids is I say, before you ever get into business with somebody, find out how they make their money because how they operate in the past is generally going to be their default, how they operate in the future. And there's no good intent or bad intent inside of that. But, you know, I identified at least five ways people make money. There's team contributors, which are great employees who want to be part of a team. There's individual contributors. A lot of times those are like your IT people. They're going to be employed. They're, you know, they, they have a skill, but they, they're not necessarily a great team player. But this is a skill that people need sometimes. Your, your salesperson, like your top salesperson, might be an individual contributor because they just close everything. They sell everything. They're not going to do the paperwork. They're gonna, they're gonna hit 120% of their budget. They're gonna be. If you call them on a Wednesday, Thursday and Friday afternoon, they're at the golf course. They're gonna pretend they're not right. And that's. But they, but, you know, they, they grow your company and they just, they're, they have a high goal orientation. They're, they're people people, and they just like to close, win, count the money and, you know, go do their thing. And like, that's fine. You know, as long as they don't break the values of the company and you know, and, and as long as they're not as disruptive as they are productive, then you're going to be fine with that. And then there's creators who, these are your artists, these are your writers, these are maybe some of your marketing people and things. Like, you've got your creative people, right? People make money being creative, even influencers, social media people. Now in all of the things, and, and then now you get down to, okay, transactors, you're a business broker. You're. You're transactional in a way because you get paid when the deal closes. So you need, you need a funnel, you need a process, and you need flow or Matt doesn't get paid. So that's right. You know, so it's a transactional business. But then also, too, as you're getting into business with somebody, you've got to be an enterprise builder or a wealth builder. Right? You got to be a company builder. And that's another way people make their money. So, you know, I've had businesses that like, so in franchising, it's a highly relational business. And if we get into somebody that's too transactional, they're not willing to invest in the Business for the things that it needs long term in a franchise model because they want to make money as a franchise or in day one. And that just doesn't happen. We get paid after franchise owners get paid and collect their money and we get pennies on the dollar. So when you're building the franchise company, it's like, like it's a long way to profitability. It's, it's very servant leadership. I mean, it's, the franchise owners have to be successful before you ever start making money. And you know, if you're a transactor, like, it's like, no, but I have to make money in every transaction. And it's like, well, that's, that's, that's not the model. The model is you're building something of great recurring value. You're, you're building something that's going to be very durable because you have families that are going to fight like hell to, to stay open in all in 100 or 200 or 300 markets across the country. And you're going to have residual income from that. It's going to be very, it's, it's going to be recurring and it's going to be, you know, on, on 10 year contracts and that's going to be very attractive to a buyer. And the margins will be good at scale, but like not today. So, so you know, when you're, when you're evaluating a partnership with people that you haven't known for more than four or six months, like, how do you, what are, how do you evaluate that partnership?
- [47:31]
Matt Euler
Well, it's, there's so much there. And I think part of what you touched on that I want to touch on as well, is that, you know, a lot of people, especially these days, you know, the sprint is so attractive, right? Everything's a sprint and instant gratification. And in my opinion, the marathon is really where it's at. And so by, you know, having the mindset that this is a longer term objective, it helps me to stay consistent. I mean, you can't at least. I know I can't sprint through a whole marathon. I can't do it right. I'll run out of gas. And so I can sprint for periods of time. And I think in business that can be helpful for somebody who's trying to build generational wealth and all of that. But back to the partnership question. For me, I'm constantly looking at who is the person, right. And what are their core competencies? Because if they don't have a core competency in the area that the business we're going to buy needs then. Then we've got a huge gap.
- [48:29]
Jeff Duden
Yeah.
- [48:29]
Matt Euler
So number one would be skill set, core competency. Can they com. Can they fulfill the objective, the role? And quite frankly, even if they can, if from a. From a value standpoint, we don't see eye to eye, I just, I'm not. I'm not interested. It doesn't matter what's on the table financially. I learned that the hard way, of course, fortunately, only a couple of times. But I want somebody who's going to have my back if I need my back covered, and I want to cover theirs.
- [48:57]
Jeff Duden
Sure.
- [48:58]
Matt Euler
And I will do whatever it takes because I'm part of that team, and we're going to take the high road whenever possible. And as a method of doing business, I mean, those are just things that are important to me. So those are the things that I look at. And just one tidbit for your audience. The way I test that is the operating agreement. It is amazing to me. I. I'm helping a client right now on a private client arrangement work through a partnership issue with no operating agreement, no lease, no. And it. It is creating serious stress for their family because they didn't do those couple of things that are easy to put off up front.
- [49:38]
Jeff Duden
Right.
- [49:38]
Matt Euler
And the reason I use it as a test is because the operating agreement that I use is filled with all kinds of things that nobody wants to talk about. How can you be fired? What happens if somebody gets divorced? What are you allowed to do without permission? And what are you not allowed to do without permission? What do we need to vote on and what don't we. And those conversations, having them up front, help people to determine if they're on the same page or not. And if they. If those are the rules of the game that they're willing to play by. So I use that as a great method for me to really dig into the weeds and have difficult conversations with people, because we're going to have them later anyway.
- [50:15]
Jeff Duden
Sure.
- [50:15]
Matt Euler
Might as well have them now, see how we do. Adam.
- [50:19]
Jeff Duden
Well, good agreements up front head off bad disagreements down the road. And other things that you need to talk about is, you know, is there any operational obligation whatsoever? Because let's just say that the business is missing numbers. And maybe you're. Let's say you're a 10 or 15% owner. I don't know what size deal you typically do, but, you know, let's say 5 to 20%, you're in there somewhere. You're below, below 20%. So you don't have to sign any bank guarantees because you're, you're not a 20% owner. You, you know, so, so what are the obligations if the business starts tanking other than being a board member and an advisor? Like, are people going to say you need to step in and help? You know, you're an owner of this business. And that needs to be clearly spelled out because if you own 20 businesses at a time and you can't do it, it. The second thing is how does the money flow? And if, like, whose money comes out first? And is there a carry? Is there, is there? You know, are you, are you clipping coupons along the way, meaning every month, you know, because of your investment, you're going to get some few thousand dollars out. If the, if the business needs money, can you be capital called or are you absolved from that? So, you know, when you really get down into playing out, what are all the things that could. You have to have an answer for that in the operating agreement and your particular operating agreement for what happens in those situations, because that's where things, that's where partnerships go bad. It's like, this isn't going well. And you know, you're a. I mean, I, I had one where I was a. What was I? A 16% owner in a business or something like that. And you know, I was there as an advisor and these people didn't listen to me for, for three years. And you know, there was, there was a bunch of. There was three. There was three. Three minority shareholders all had different agendas. They all made their money differently, kind of by the ways that I did it. And, you know, I was the one with the franchising experience, per se, and I said, look, you got to do it this way, and here's why. And here's why. But, like, I didn't win that. I didn't win that argument. So three years down the road when they were up against a wall and they're like, well, you need to come in here and do this and you need to come in here and do that, and you need to pay. And I'm like, no, that's. There's. I have no obligation to come work in this company. I have a job, you know.
- [52:48]
Matt Euler
Yeah.
- [52:49]
Jeff Duden
So those are situations.
- [52:51]
Matt Euler
Well, and everything you brought up is part of the difficult conversations that need to be had up front. And it's part of what I enjoy teaching so much about how to have effective partnerships and how to multiply streams of income. Because without agreements on some of what you just described, it Just becomes train wreck and years of pain. I mean, it's just not worth doing. But there are ways of dealing with each one of those things that works and then, then that recipe is there. Right. The recipe's in place and you follow it and for the most part you get the outcome. So that's how I've been able to duplicate so many businesses and activity in so many businesses with, for the most part, harmony and success. And I love it.
- [53:35]
Jeff Duden
Good discipline. You have a business called Amped?
- [53:39]
Matt Euler
Yes.
- [53:40]
Jeff Duden
And I imagine what we've just spoken about are some of the things that Amped helps people with. Tell us about the Amped business and who does it work with.
- [53:48]
Matt Euler
Yeah, so Amped Success is a company that I formed a couple of years ago with a couple of partners. And the purpose of the company was to bring. I've been transactional, as you, you referred to, for 28 years. Right. Right in the middle of the deal. And what I'm noticing is social media these days is, is minimizing the significance of what it's like to buy a business or you just go buy an H vac company or car wash or whatever. No big deal. However, I'm on the end of hearing devastation from people who have done that, financial devastation and other things where they didn't, they weren't prepared. And so Amp Success is about helping people to learn what it is they need to do in this area of buying small businesses or medium sized businesses effectively and how to sell them effectively so they get what they want and it doesn't turn into a financial catastrophe for them. So I provide coaching, training, speaking engagements, education on the things that I've lived, you know, for 30 years now. And it's a real passion of mine. You know, we also have a podcast called what's your deal? And it's one of my favorite things to do. You and I spent some time on that show not too long ago as well. And it's just when you get to pull back the curtain to somebody's life and really dive into what are they doing and how are they doing and what works. It's fascinating and most often we just see superficial now. So that's what Amped Success does. And really it's a, maybe it's a new phase of life or a new chapter, but I'm real excited about helping people when I can.
- [55:29]
Jeff Duden
Is the low hanging fruit for people that are looking to be active in the space or learn more to enter through the education side of your business?
- [55:37]
Matt Euler
I believe so, yeah. So most, a lot of the buyers I work with, an example, they've never bought a business, so they don't know what a personal financial statement is or how to obtain financing or what they should say to the broker or how to even get a broker to return a call. And then the sellers I work with, they're not sure how to calculate sde. I mean, I just worked with a client. Literally, there's probably, I'm going to say, $250,000 of their discretionary earnings that I cannot support with a lender or with a buyer. I mean, so they're leaving significant money on the table just because of what they've done. So I like to guide people through that process. And then, of course, because we've been financing deals for so long, we can usually get a deal that is unfinanceable, financed simply because we know what we're doing. So those are the areas. Education, I think, is a place to start to even decide if business ownership is something somebody wants to get into.
- [56:35]
Jeff Duden
Yeah, I've heard people say that we are in the time of the greatest transition of wealth that we've ever seen in this country from people that have built businesses that their kids maybe don't want or can't operate, are transitioning from the baby boomers to their children or to a third party. And a lot of it is in private business ownership and real estate is. What trends are you seeing in terms of the transfer of wealth and what opportunities do you get excited about within that?
- [57:09]
Matt Euler
Yeah, there's a lot there. The reality is that the baby boomers are ready to stop working to a large extent, and that is coming. And so what that's going to mean for the market is way more inventory of businesses for people to buy. And for as long as I've been in this industry, there's been way more prospective buyers than there's been sellers. So inventory is going to be beneficial for people that are interested in getting into business. And it's a funny dynamic that, you know, if you think about it, every business is ultimately going to sell or close, right? I mean, it's the only two options. And a lot of the people who own businesses for a long, long time just literally close them. And it. It's amazing to me because I'm so active in this world of helping people buy and sell them. But that would be like deciding you want of move to a different home and bulldozing your old one, just like, well, I'm just gonna.
- [58:00]
Jeff Duden
Yeah, there's no other asset class where you just, you know, walk Walk out of your house, leave the door open and just drive away.
- [58:08]
Matt Euler
But people do it with businesses all the time because they don't know what to do or they just don't think it's saleable or who would want my job or whatever. So it's a fascinating time and it's. I, I personally have been served very, very well by being self employed, you know, my whole working life. And I think it's a great opportunity for people who are ready to put their head down and want to create something with their initiative. The freedom like you started out our conversation with, the freedom and the opportunity that comes from being able to call your own shots and decide how you're going to spend your time is very, very powerful.
- [58:42]
Jeff Duden
Yeah, absolutely. Matt. I've got a curveball and a fastball straight down the middle to wrap up our show today. But before we do that, tell people how to get in touch with you and what to look for.
- [58:55]
Matt Euler
Yeah. If simply our website, Amped Success. Amped Success.com and on social media, YouTube, TikTok, we're, we're on all of the channels so you find us. Also Mattyler.com will bring you to me as well, which is.
- [59:11]
Jeff Duden
U H L E R Matt Euler AMP Success. This has been fantastic. I think people get a lot of tactical information about that and hopefully some people will reach out to you and or reach out to us at home front brands to get the ball. If you don't have a business reach out to us, we'll get the ball started. You build your business, we'll call Matt, Matt will sell it for you.
- [59:33]
Matt Euler
Perfect.
- [59:34]
Jeff Duden
How about that? We got the whole. We get the entire solution here. All right, here's the curveball for you, Matt. And this is going to be really interesting. Gun to your head. You have to start a new business in the next 30 days. It can't be something that you're currently doing. Where do you see the opportunity in the marketplace today?
- [59:56]
Matt Euler
The snag with that is that I don't currently do because I'm involved in so many, but really service is where it's at. You know, there's a lot of concern about AI and what that's going to mean with certain industries and so on and so forth. But what I am seeing is that service is lacking and I mean high quality service. Right. The work ethic that you and I grew up with, Jeff, has changed some. And if somebody's willing to demonstrate the work ethic and do what they say they're going to do and do it Well, I think there will always be. There will always be a need for that in the future so that I would dive into some service industry if I had to start all over.
- [60:36]
Jeff Duden
Yeah, we're in a do it for me world. And, I mean, there's businesses that wash your trash can for you do. They'll raise your kids, cut your hair, wash your car, cut your grass. I mean, just like we don't do anything anymore. I mean, I. I haven't moved off my couch in seven years. I just. There's an app for that, you know. Right. There's an app. All right, cool. All right, last question. Fastball straight down the middle, Matt. Here it comes. Load up and squish the bug hands inside the whole thing. All right, for all you baseball players out there, that was hitting instructions, but here it comes. If you had one sentence to speak into somebody's life, make an impact, what would that be?
- [61:25]
Matt Euler
Do what you say you're going to do and pay it forward to somebody else.
- [61:32]
Jeff Duden
Perfectly said.
- [61:33]
Matt Euler
Thank you.
- [61:34]
Jeff Duden
All right, we'll end it right on that. Matt, thanks for being on.
- [61:38]
Matt Euler
Yeah, Jeff, thank you. It's been a great conversation. I appreciate you.
- [61:41]
Jeff Duden
Yeah, it's been fun. All right, I'm Jeff Duden here with Matt Euler, and we have been on the unemployable podcast. Thanks for listening.