#68: How to Buy an Established Business - Part 1

#68: How to Buy an Established Business - Part 1

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Welcome to Business Talk Sister Gawk! I'm Bekkah  and I'm Ruthie! And today's episode title is,   “How to Buy an Established Business and with  us today we have Daniel Lee. He started his   journey in Corporate America. Decided to do  something different! He has two little kids   that have lots of energy and keeps him  on his toes and actually if you've been   listening to the Resourceful Agent podcast  he was on that podcast recently. And also   I think he sounds like Tom Hanks but I'll let  you decide if you think that's true about him.   Thanks so much for being here with us today! Daniel: Nice intro! I don't think I've ever   been introduced as you know such a wide  span of topics! “Sounds like Tom Hanks.”

Ruthie: She was so excited after she talked  to you she was like, “Man! His caden sounds   just like Tom Hanks!” and I was like, "Okay!” Daniel: I wish I had some quotes! I wish I had   some lines for you know, some Tom Hanks lines that  I could rehearse. I need to have that prepared.  Ruthie: Wilson! Daniel: Wilson! That's probably saying   you know you need to - he says it's so angry. Ruthie: Oh yeah. That’s fair.  Daniel: Yeah, you really  have to get in the character. 

Ruthie: Yeah, but maybe you don't wanna. Bekkah: You know you can maybe send us a   video clip of that and then we'll  share that on our Facebook page. Ruthie: Yeah, well thank you, Daniel, so much for  being here! We're excited to get to talk with you.   Okay. so we've introduced you. Now tell us a   little bit about your story. What do you do? Daniel: Well. I think my story starts out like   many folks start out and work hard,  go to college, get a good degree,   find a good job with a good company, work  your way up. I did a stopover to get my MBA.  

I found myself with a finance degree and  eventually started working for an insurance   company. Really piqued my interest and just kind  of curiosity working in a claims department. So   I handled claims for a little while and then  worked my way into managing and leading a team.   Then into the department. Moved companies once  and the stint that I just left, I led a region   for a major insurance company focusing on their  small business insurance product. It was really   interesting my role was to lead a team of sales  professionals who would call on independent agents   and we would go and sit and talk to those agents.  Well, they are small businesses of themselves from  

a couple of employees and a small office to very  large, large companies. Just talking to the agents   I got a lot of exposure to small business and then  we were talking about and trying to write more   small business accounts. A really interesting  and broad exposure to that so spend 15 years   in various capacities but all of the work that I  spent was majority in leadership, building teams,   and really delivering a product through people.  People were the service. How you executed it in   in claims or you know in insurance we talk about  it's an invisible product until you need it.   Just after I turned 40 last year and I think that  just had my curiosity peaked about what else is is   out there? I began a search to purchase a small  business and completed that search and so that's   kind of my story and so now I play general  manager in my day job and the owner of   a small window, indoor, residential,  replacement company here in Kansas City!  Ruthie: Wow, okay! That's a bit of a transition,  you said that you wanted to acquire a small   business. What was your why behind that.  You went from insurance to this but why?  Daniel: Yeah great question so I toyed around  with an insurance agency because that's what I   knew and I ran - you know I did a lot of the  financials asking what would it take and all   all that type of stuff and I eventually turned  away from looking for an insurance agency because   I thought there could be significant value taking  what I had learned from either an insurance   operations small business from an agency and  applying it to a different industry. How I  

went about searching and deciding and I get this  question all the time “how did you decide on you   know buying a window and door company? You just  must really love windows and doors. You must be   so passionate about that,” and the answer was  not necessarily. It was more along the lines of   “what am I passionate about?” so I spent -  I’d get up at 5:30 and I would spend time. I   read this book it's something about being - “The  Road Less Stupid”. There's a very catchy title by   Cunningham is the last name and so he talked a  lot about just thinking and about just sitting   in silence and thinking. Sort of meditative but  from a business perspective and so I did that for  

probably months. I came to the conclusion that I  wanted to be involved in something that I wanted   to be involved. It's going to be work but it  was a destination to some future. In that future   what really wanted was freedom. Freedom over my  time. That comes with some financial freedom, but   that really wasn't the the driving motivation.  I wanted to do the work that I wanted to do and   in Corporate America, I had the opportunity  to do that quite a lot and certainly there are   hurdles to that because you're  working for another company but   so I just started to think in those early morning  sessions about where did I want to go and what's   the best way to get me there. I found that  business ownership was the way to get me there.   More of - business ownership's my vehicle to some  future versus the goal being business ownership.  

Throughout the years I had several leadership  assessments, 360 feedback from employees,   when I do interviews or when I am being  interviewed I just take notes and notes and   notes and just write about things and so I catalog  those over the years my strengths assessments, my   leadership style, feedback from my direct reports,  and all that type of stuff and just kind of found,   “Alright. What do I do well? What have I done  well?” and I identified I had done well working   with people. I always enjoyed having a close-knit  team. My direct reports were always close-knit.   We would do things like - we do things afterwards  not so “friends” but just a very tight-knit team.   I wanted to be around people that I enjoyed and  shared similar passion. I had always delivered  

results through people. Never this awesome  product or the product was the collection   of people working together to achieve an outcome.  That's what my success was and my StrengthsFinder,   a Gallup survey, says that what I do well  is strategy and strategy being defined as   I take a whole bunch of data whether it be  physical data or data coming at me through my   senses and I can quickly analyze and develop  alternative solutions. I wanted the ability to   steer my own ship and if I want to go a different  direction, I could do it and I didn't feel   constrained. When I really found out what type  of car that I wanted to build. I wanted to get   into this, and I'm using the analogy of a car, I  wanted to get into this car and it was the type of   business that I wanted to get in. That's kind of  how I started. I developed this target statement  

of “I wanted a service-based company with I think  I had four to six hundred thousand in seller   discretionary earnings that had an established  sales process and in need of operational   efficiency.” My two roles in Corporate America was  a manager of a department of claims and I defined   that's more customer service operation and I did  sales for three years. I wanted a company that   had - I felt stronger in operation - so I wanted a  company that had an established sales routine and   where I could come in and add value and there was  a role for me to play to improving operational   efficiency. I chose to buy a business versus start  a business for just a couple of facts. First of   all there's stats like 1 in 10 startups succeed or  last 5 years but there's incredible statistics on   businesses that are established for 10 to 15 years  having a tremendous success rate. Businesses that   earn revenue of over a million dollars have a  very high success rate. Well, those businesses   ironically are started and owned by the Baby  Boomer Generation. Baby Boomer generation is  

retiring at or turning 65 at the tune of 10,000  people a day. So there was an opportunity of the   folks in the country that own the businesses are  at an age in which they're transitioning out. I   had learned from my insurance experience that many  of either the businesses or the insurance agencies   did not have great succession plans. I really  thought there was an opportunity to one find an  

established business that had a perpetual stream  of income and somebody was ready to move out.  Ruthie: Okay! Daniel: That's   how I got there! I mean I could keep going  and going and going but I just feel like   there should be a producer in my ear  saying, “Wind it up! Wind it up!”  Ruthie: Well, we'll do two episodes and then  people can get all the information from you,   but as you were talking you said that you had  strategic as one of your StrengthFinders and   it just made me - I grabbed my little book and  was looking at the of the description here and   as you were talking I was like, "Yep, yep this  is all him!” One of the things that it said is   that “the strategic theme enables you to sort  through the clutter and find the best route” and   that your theme at work is you're “always asking  what if and then you select and then you strike.”  Daniel: And then I go! Yes, the flip side of that  you know, use your strength too much - you bring   a hammer when you need a screwdriver is I have  a difficulty - I'm impatient when others don't   see the order through the chaos as fast as I do.  That's something I constantly work on especially   in a leadership position I'd find myself  sitting in a conference room with a bunch of   other folks that were on the team and as the  leader if I demonstrated that impatience it shut   everybody down, but what really made us great  is we had everybody's strengths so that was   just something - while it is my strengths it was  something that I always tried to be very cognizant   of. I can't say I was amazing at it but whether  or not I was able to produce it or not I was very  

aware of my impatience of that. Which is just -  anybody's weakness is their strengths overplayed.  Ruthie: Okay, so let's get into the how a  little bit more here how did you prepare to   purchase the business that you ended up buying? Daniel: Well, it was a 18-month process. I started   on March 23rd, 2019 with a friend of mine. He and  I were just meeting and talking. We just declared,   “Today we're declaring today ‘we're done day.’”  We just put a marker in the sand said, “Alright,   within three years we're going to purchase and  buy a business.” Then the next step I started   to do is I shared it with some close friends.  I went on a golf trip with some college friends  

and I shared that with them and putting that out  there publicly was the first time I'd ever done   that. That just created some accountability and  then I just started reading about topics that I   did not normally read about about running a  business. I read a lot of leadership all that type   of stuff. I've got a lot of titles that have had  a tremendous influence on me. I started reading   things about marketing. Believe it or not I got my  old accounting textbook out from my MBA and I read   it like a big nerd that I was, but I was going  through all these topics of business ownership.  

Then I think it was the December 2020 - no.  December of 2019 I read a book called “Buy   Then Build” by this author named Walker Deibel and  he's advocating exactly what I was thinking, but   he had gone through it. I really used that from  that point as a playbook and it really refined my   search. One of the biggest pieces - two pieces of  advice that he said, “Ggo to a business broker.” A  

business broker is a for those of people who don't  know business broker is just a real estate agent   for businesses. You don't see them advertised out  there as much but the businesses that the business   brokers have - if you use the home analogy -  it has been cleaned up. Their books are clean,   they have it ready for sale, they've prepared  them for what the value of the business is.   That was one really great piece of advice and  so I developed this one page sheet. It had my   photo on it had my target statement I shared  earlier, had a little snapshot of my net worth,   had a little snapshot of the team: lawyer,  accountant, etc. People that I'm working with   and who I am professionally. When I sat in front  of a business broker - think of it as a resume but  

what's important to a business broker? Closing a  sale. W business broker might close one two sales   a year but yet work on a lot of them. I wanted to  convey to them that I was serious. I was capable,   I knew what I wanted, I was financially able to do  it, and they should see me as a viable candidate.   I would sit down, I called all the business  brokers in town, essentially. Probably not all of  

them but many of them and took a meeting. I shared  my document with them and said, “Here's what I'm   looking for. What type of listings do you have?”  The process is if you want to list your business   you're going to take it to the business broker.  They're going to spiff it up, but then they're   going to go first to their close clients. I think  in real estate they call it a “pocket listing”  

and then after that they're going to send  it out to maybe their email address and   they might post it on some online sites. Going  through that process and looking at businesses,   when you look at a business this is just their  financials, a write-up, some little bit of the   store you can go look at them online. You  have to sign a non-disclosure agreement   and I got a sense of what was  out there. I would run financials   and I start kicking the tires on this opportunity  that opportunity looking at as many as I can   and found my way into the business  that I ended up purchasing. 

Bekkah: You mentioned so many things! First of all  I also just learned about you that you kept your   accounting textbook for over 15 years because  that's how long you're working in insurance!   But my question is while you're doing  this process and you had kind of shown   your resume is that typical to bring  to a business broker or was that   just something you thought up on your own? Daniel: I don't know if it's typical. As far   as I know, I created the one pager - that template  that I created. It's based upon what's important   to the business broker. The business broker  represents the other side of the transaction.   I was trying to understand that the business  broker probably does a lot of transactions a year   that don't actually go through. I wanted to  demonstrate - so I wrote this down in my journal   this is the takeaways, when I walked out of that  room I want the business broker to say, “That   guy's got his stuff together. He knows exactly  what he wants. He has the experience to do it   and he can close the sale.” I put my credit score  on there. I put you know assets minus liabilities  

and you could see my net worth. I used an SBA  loan to purchase it so I've got good credit.   You see I can put a down payment. I could secure  - good terms with my credit score. So the business   broker is thinking this. Now that's the same thing  as you want with a resume but the resume talks   about your professional qualifications and what  the business broker would care about is more than   your professional qualifications. I bet there's  a lot of folks that - just like any real estate  

agent - a lot of tire kickers, fewer buyers.  I think the piece of paper that I put together   might have been uniquely mine but the idea  was just simply trying to tap into what   this role is concerned about. They're going to  be my gatekeeper to the business owner. Well,   then now the business owner sees this thing just  like, "Oh, hey!” and this is a small you know it's   kind of like marrying - I think of it like as a  parent having a child and marrying off their kid.   I'm gonna give this to somebody else to take care  of! I wanted them to see this and be impressed or,   at the end of the day when I actually got  to the owner I wanted to create the sense   the owner wants me to have this business.  That's kind of where it all started from.  Ruthie: Okay so you had this resume  that you gave for people to vet you   and you said earlier that you kind of  just like went to all the brokers in town   but how did you kind of decide which brokers that  you wanted to work with? How did you vet them?  Daniel: Yes, so Google search! Simple as that.  That means one of my methods. The probably more  

effective method was I started networking  with - to prepare, I went to a lawyer,   "Hey! Can you draw - are you familiar with  these transactions?” “Yes,” a business lawyer   and, “Who do you know that does these? Do you  know business brokers?” “Yes,” so they gave me   this name. I sat down with an SBA lender  prior to doing any of this to understand   what would it take to secure an SBA loan ? Showed  him my one pager. I think I called it my buyer   profile, is what I called it. My buyer profile and  had the SBA lender, "Hey! Could could you take a   look at this? Would you - I mean would you lend  to me?” There's no such thing as a pre-approval   like you would think about with a house but  had him give me some information that, “Yyeah,   you look like a good candidate!” “Okay, great.  What do I need to do to prepare? Who do you   know?” and he referred me to somebody else.  And then I need a CPA to help me do some due   diligence on the business. I went and got some  referrals for a CPA and I asked that person. At  

the end of every conversation, I would ask, “Who  else should I speak with?” Now a business broker   is not going to refer me to another business  broker, but essentially that's how it happened.   If you just come in as a random Google searcher  I think they're going to be a bit skeptical,   but oftentimes I would ask my connection to give  me an introduction to somebody. It's a little   easier maybe to go to a lawyer. There are a lot of  lawyers and talk about the transaction, “Would you   be willing and capable? How much would you charge  for this?” Hey! Who do you know about this?” So   that's really how I think the most successful  part of getting to the business broker would be.  Bekkah: "Oh my goodness! We've gone  through so many things so far and   I feel like you're so good at answering  questions we wish we would have also asked   and clarifying those things so thank you! If you  guys are enjoying this you need to tune in next   week because we're going to be doing the second  part of this with Daniel. Just really quickly  

how are ways that people can connect with you? Daniel: Well, a couple of ways. I think   if you want to check out what our company does our  company website is windura.com w-i-n-d-u-r-a.com.   We are also out there on social on Facebook  and Instagram. If you want to connect with   me directly probably the best way to do  that is find me Daniel G. Lee on LinkedIn.  Bekkah: Awesome! Okay so we're going to transition  into the Sister Gawk portion of this episode   and Daniel shared with us something  that we just thought was like, "Oh man,   we need to talk about that!” Because this is  very unique not everyone has this experience   so you probably are one of the few people I  know that has delivered a child it sounds like!  Daniel: I did! and I had no formal training  and it was unfortunately it was my well I   guess the formal training was it was my second  kid so I had been through a childbirth before   and I'm sitting in a meeting and I get a buzz from  my wife and I look at it and she says I think I'm   going into labor so I not speed home second kid  and we get home and her water break no no she   we get home and she decides we need to go we  get in the car and her water breaks in the car   and we we live in the suburbs we are not but  three to four miles from a from a hospital we   jump in the car we turn left and we go down the  street and she tells me this baby's coming and so   we're at an intersection it's red light there's a  fire station right there so I honk the horn and I   run this red light pull right into the fire  station just we're gonna be saved I think and like   well this is a satellite fire station and they  are out on a call, "Oh, no I'm trying to dial 911   and you know you don't ever dial a number in your  phone I can't dial 911 and then I walk walk around   to the passenger side where my wife is and we've  got no choice baby is coming out so we deliver   the little fella right there and we sit there for  eight minutes waiting called on one sit there for   eight minutes waiting for the ambulance to come we  ended up getting the recording of that the ladies   they gave it to you afterwards well it's public  record so part of my insurance knowledge knows   that you know 911 calls are all public record  so we called and got the record and it's it's   and we listened to it on January 2nd which is his  January 3rd geez which is which is his birthday   but you know what's so so interesting is this  kid's personality it like makes so much sense   he has the personality of someone  who was born in a parking lot   and I think later in life when he tells that story  they're like ah that explains a lot I recently   my our one of our younger brothers  there's seven kids in our family but he's   in the military right now at boot camp but he  before he left I don't know why but he was like,"I   need you to watch this video and I was like,  “Why?” and he was like, “Because we have a lot   of sisters. Someday you might need to  help birth a child.” and so he made me   watch this video on how to prepare for birthing a  child so I would not be much help but I would at   least have a video to pull up for you are ready  I mean you can youtube anything these days yeah   yeah well you're not alone in that this actually  happened to my brother-in-law and sister-in-law   like a couple this last November or October so and  we'll have to talk about that some other time but   thank you so much for being with  us today we really appreciated it   you are welcome thank you for having me yeah and  if you guys enjoyed this episode you should stick   around for next week's episode and also give  us a review on apple podcast have a great week.

2021-06-08 01:48

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