25 - The Entrepreneurial Gold Rush | How to Buy, Scale, and Exit Businesses Quickly

Welcome to the Impact Podcast. I'm Eddie Wilson, here to help you visualize what others cannot see, create opportunities where others have failed, and push you to build empires where once there was empty space. Let's embark on this journey together and make a difference in this world. Hey guys, Eddie Wilson here on the podcast today. Super excited to have you, excited for all of you that have been a part of this journey with me. We are dozens of episodes in right now and still kind of adhering to the practice of just a monologue of me teaching and mentoring from the microphone. And excited to continue that. One of the questions that I get asked consistently is, how do I buy businesses, scale businesses, and exit businesses so quickly and so frequently? You know, my career over 125 exits so far and climbing. We have 27 companies now. I have two to three of them right now that are actually in potential for exit. One could be as fast as 60 to 90 days away. And it's an exciting time. But the frequency of how I'm doing it is not necessarily speeding up or slowing down. It's in a consistent rhythm. And so you'll see that number of 125 plus just continue to climb. And so I want to just give you some help along the way, because I think that this is the thing that I get asked the most. So instead of teaching you a philosophy today, I'm going to teach you a little bit more tactics, because I really want you to understand the opportunity that's out there today. The stats are staggering. You have somewhere between 3 million and 15 million baby boomers leaving their place of business in the next seven to 10 years. This is staggering. The number right now is that there are over 12 million baby boomers that own a mid-sized business or smaller. A mid-sized business has any business under 100 employees or under a billion dollars. So you're not talking about just a $500,000 dry cleaner. You're talking about sizable manufacturing companies. You're talking about logistics companies. You're talking about warehousing. You're talking about trucking companies. You're talking about big HVAC and plumbing companies. You've got big, big business that's going to transact, meaning that there is going to be some transition and leadership in the next seven to 10 years. Mark my words. This is the wealth transfer that we're going through. So many people have talked about this wealth transfer. So many people have talked about the rising generation, this generation that's going to get wealth not by working, but by receiving it from people that have worked in generations past. But the real wealth transfer today are small businesses and those small business values are going to transact and move somewhere else. Think about it this way. You've got small businesses all over the United States, small to medium-sized businesses. You've got to just picture with me a dental practice. And this dental practice has a 72-year-old dentist sitting in the chair. He sat there for 40-plus years. He has on average dental practice. He has anywhere from five to seven employees. And he has somewhere between five and 600 customers on his roster. This dentist for 40 years has bought a building. He's bought equipment every five to 10 years. He has kept up on his licenses. He's got good standing in the community. He goes to the Chamber of Commerce. He's got some social media. He's got a good rapport with not just one generation, but oftentimes two and three generations. It's not just this 20-something that is sitting in his dental practice chair, getting their teeth worked on. It's that person's parents and grandparents. And this dentist in the next seven years at some point is going to say, you know what? I've made enough money. I've said enough money aside. I've got enough money in retirement that I'm going to go live life on my terms. And what's going to happen is, is he has not prepared to exit that business. So now he starts talking to his staff. He starts saying, hey guys, I'm going to start transitioning. You probably should start looking for another job. Maybe I'll think about selling it. He gets a postcard in the mail and it says, hey, we'll sell your business. And he explores that, looks at it. He has a business broker that walks in one day and meets with him and says, hey, this business that makes or that does one to two million dollars in top-line revenue. Good business. I could list it for you. He says, I'll charge you a percentage to list it for you. The dental practice then essentially gets listed. And by the way, I think only 10% right now, statistically speaking, only 10% of small businesses are actually going to be listed by a business broker. So now we're in the top 10% a dentist that's got one to two million dollars in revenue. He now lists his business. He's 72 and he is happy that if this business sells, it gives him some legacy because he's already had a conversation with his children who are not in the dental field and have no interest in this business. He's talked to his grandchildren and he's tried to tell them being a dentist is a great job. You should go to school for it, but yet none of his grandchildren have gone to dental school. And so now he has no heirs, no legacy and he decides, you know what, I'm going to move on from my business. He lists it. 10% of all these businesses potentially get listed. So, but he's one of the lucky ones. He found a broker, he gets his business listed. He lists it and the broker tells him, he says, you know, based on your EBITDA, you know, of a 200,000 dollars a year, $250,000 a year, we might be able to get somewhere in the neighborhood of $7,000 to $800,000 out of this business, maybe a million if you're lucky. The person looks at his business, he evaluates everything and he says, you know what, $800,000 to a million dollars on this dental practice, it's better than me just walking away and at least my employees are going to keep their jobs, at least my customers will keep the location coming back. And he says, let's list it. Now, here's the more staggering stat. Less than 2% of all businesses being listed today are actually being purchased. So now he's the top 10% because he actually listed it, but less than 2% of businesses actually sell. So then it goes one year, two years, three years. He has a couple of crazy offers, you know, people that are rolling up dental practices and he gets an offer of 100,000, 200,000, 300,000. He's just not interested. So he keeps working. So now he's 75 years old and he has some young person walk in who's excited, wants to build something. He doesn't want to sell it off to some corporation, some roll up. So here's, his person walks in and says, hey, I see your businesses for sale. I'll make you a deal. Instead of me putting a bunch of money down, I'm going to actually set aside some money to run the practice, run this office that you have and I'll give you a residual income for years to come up until we pay you a million dollars. The dentist thinks about it, realizes it's the best play for legacy. It's the best play to avoid a big tax event by selling this business for a million dollars cash and he decides this might be the easiest thing and because of the zeal of this person that's in his business, I'm going to sell it. This is how businesses are sold today. So many of them are not being purchased by SBA loans or cash. They're being owner financed because less than one or less than 2% of businesses are actually selling. So if they've sat in the market for long enough, the business owner is just frustrated. They don't know what to do and that's what's happening all across America. The massive wealth transfer that's going to happen is going to happen just like that and it may be an SBA loan that buys it. It might be equipment financing that buys it. There's a lot of different ways to buy a business but this is how businesses are being sold today and you are missing out on the gold rush if you are not purchasing or looking at these businesses. So this is what's happening and businesses are being sold everywhere but less than 2% of businesses that are being listed today on the market are actually transacting. So what does that mean? What that means is that if you just look at kind of economic structure, that means that this is a buyer's market and will be a buyer's market for the next 7 to 10 years. If you would like to get in on the gold rush, you must consider buying a small to medium-sized business. So this is what I've been doing and I've been doing this for the last close to 8 years now and this is why I've bought and sold so many companies. That's why so many people, Cody Sanchez, other people like that, you've got acquisition.com, you've got all these people that are teaching it because they know that there's this big group of people that are coming into the space but even more than that, it's the amount of inventory that sits on the market. But I'm going to give you some secrets today as I try to help you do this because for me, this is something that I believe that everyone should consider. Every entrepreneur needs to consider this. Why should you consider this as a Vierna entrepreneur? Because it is so much easier to buy a business that already has customers, has equipment, has a location than to start from scratch. Startup is the hardest thing in the world to do. You start from nothing. You have to create a logo. You have to create a website. You have to go out and create customers. You have to make sure your product and your services and in the end, you're growing. It is so much easier to buy a business than to start a business. Let me just give you some tips along the way here for those of you that say, hey, this could be me. First of all, there's a business site. I'd love to point you to it's BuyBiz Cell and you can actually just go look at online business. There's a few marketplaces out there, but start looking. Start looking at what's out there. Look at what interests you and look in your local area and just see what's available. Understand that the listing price on these sites are not the actual price. The financing they're offering is not necessarily how you have to do the deal. You can get as creative as you want to. I've literally bought businesses by looking at the equipment that's unleveraged in the business, getting an equipment loan on the actual equipment in the business, then paying the person based off the equipment loan and then taking the business and we're off to the races. There's a hundred different ways to buy a business, but here's the things that I want you to consider. If you're going to buy a business, which I actually think is the easy part, the hardest part is then the operation. What do I do with my business now that I've bought it? I believe that anybody listening to this show could go buy a business and I believe that you could probably do it with no money down. You've got this business now and what do I do? There are five pillars to every single business. This is where you actually have to start. The five pillars are leadership. Where am I going? What's the purpose of this business? What's the end destination? Next, it's operations. How do we functionally operate? Do we have a system? Can we replicate that system? Are we cross-training our people? Next is personnel. You have to know the strength of your personnel. Are the people that you've acquired people worth keeping? Can you help them along the way? If you've got a 75-year-old dentist in the chair, do you also have a 75-year-old receptionist that's not really interested in staying much longer? You have to understand the personnel. You have to understand finance. That's number four. Finance. That's fundamentally like, do you actually know your numbers? Lastly, we group sales and marketing together. If you understand these five pillars of business, then you understand the gaps that are in these businesses. In those five pillars, you will find gaps in every business and that is where you focus. Let me give you a hint though. All of these businesses you're going to buy, the way that you're going to fundamentally get out of them more than the previous operator, is operations. You can increase sales. You can increase marketing. You can increase leadership. You can hire better people. But in the end, if you do not dive into operations, you're going to miss the efficiency and the opportunity that comes with growing that business. Let me tell you how I do it because this to me is the secret sauce. Not only do I buy a business, but I have what's called fractional people that are ready to go off the shelf. In my business, let's say I go and I buy that dental practice and I buy it with another dentist and I say, hey, I'm going to help you buy this business and I help buy this business. The first thing I'm going to do is I'm going to do the five pillar assessment. I'm going to try to determine where is the deficiency in those five pillars. What I'll tell you is that almost always it's in operations. I have what's called the empire operating system I built this years ago. It really is just a greasy wrench that I pull off the shelf. It is a product that helps businesses and we have over 3,000 companies globally that are on it. But I didn't build empire to sell a product. I built empire so that when I buy a business, I have a fundamental principle that I could put into that business. So what I do is I have what's called fractional people that fractional positions that are already trained and ready to go under the empire, let's say consulting brand. I have fractional COOs. We have access to fractional CFOs, chief financial officers. We have fractional, by the way, COO's chief operating officer. We have fractional CIO's chief information officers. We have fractional CRO's chief revenue officers. And so what I do is I look at this business and I say, oh, fundamentally, these are the gaps that I have. The biggest issue of the business is that then you have to determine how much revenue can it generate, right? And can it cover its own? Well, the problem is that oftentimes in those five pillars, I see a deficiency. And usually the way to overcome that deficiency is to hire somebody to jump in there. Well, the problem is, is I want to hire a rock star. I want to hire somebody at the highest level. I want to hire a rock star CFO or COO or CIO or CRO. I want to hire somebody that is amazing, right? But I don't necessarily want to pay $250,000 a year for that person. So what I have is I have a bunch of fractionals and I will tap the shoulder of a fraction and say, hey, I need you in this business for the next three to six months. So let's just say in the beginning, I almost always take a fractional COO, chief operating officer, and I put them in and they're fractionalized, right? So I can now afford it like the lowest it's it's almost the cheapest employee that I have in that business. But what they are there for is to increase my efficiency and ultimately productivity, right? So if this business is making $50,000 or $60,000 a year that I've purchased, I want it to make a hundred. And that's my goals. How do I take this fractional person that I'm paying three or four grand a month for, right? Come into the business and fractionalize it and help me grow in efficiency. Then once I actually have the foundation of operations, I want to pour gas on the fire, right? So then I have fractional CROs, chief revenue officers that come in and help me determine where it are the opportunities to grow revenue in this company, right? Where are the areas? Let's say in dentistry, maybe it's the cosmetic dentistry side, maybe it's going deeper into adolescent dentistry, maybe it's doing all the other things, right? Like maybe it's acquiring another orthodontic practice. And this is where the CRO is going to fit in. But I can literally hire three fractionals for the price of one executive. And they're not employed. So at any point that I'm finished with them, I can say, okay, I'm done. Thank you very much. I don't need you in the business anymore. And what they're going to do is they're also going to train the people are in that business while creating the systems, the processes, the revenue, so on and so forth. So that is how I do it so quickly. So I buy a business, I pull fractionals off the shelf, and then I put them in the business, I create a fundamentally sound business, get it into what we call the viability phase. And then I determine what do I want to do with it? Do I want to go scale it? Do I want to potentially exit it? And that is how we operate businesses. So now I've got these five pillars, right? You're going to see the deficiency in it. I pull a fractional off the shelf to solve the issue inside of those five pillars. And then I look at now creating what we call enterprise value, enterprise value. So this is the last step in this journey. So I'm going to buy the business, I'm going to fix the business fundamentally, you know, get it into viability. And then I'm going to look at enterprise value. How do I know if I want to scale this business? How do I know if I want to exit this business? Well, now I'm going to take you to the three things that I've been asked on every single exit of business. Number one, they're going to ask you what is your EBITDA, your bottom line, your net, they're going to ask you your financial numbers. If you don't know your financial numbers, you don't know what percentage of profitability you have, you don't understand what it fundamentally costs to operate this business. And you're going to sell a business off of one or two things. Number one, you're going to sell it off of EBITDA, right? Or you're going to sell it off of a top line revenue stat. Now, small percentage of businesses actually transact on top line revenue. Those businesses are more like SaaS companies, typically they are infused with some sort of technology. And they may sell off of top line revenue. But by and large, these businesses that you see list on a website are selling off of a multiple of EBITDA. And so now I'm going to know my numbers. And I'm going to architect those numbers. Number one, I'm not going to load my expenses into that business, right? Like I'm going to keep my owner's expenses low. I'm going to make sure that I've pulled all fluff out of that business so that its EBITDA can be as large as possible so that my multiple on that is going to give me a potential bigger exit or bigger valuation. So numbers are number one. Number two, do you have an operating system? The reason I built the empire operating system is as I was exiting my businesses, these private equity firms and others wanted to know, what's the playbook? How do we actually operate this? Because if I don't give them the playbook, the system, here's how we do it. Here's my procedures, here's my process maps, here's how I actually run it. Here's my people, here's their functions, here's the system. Then what they're going to ask is, can you come with the business and run it? And that's what I'm not interested in. So I have to have an operating system. So number one, you have to know your numbers. Your numbers will dictate the multiple. Number two, your operating system, how efficient you are at your business, will dictate the multiple. But number three, here's the biggest thing and that's your IP, what actually sets you apart. What is fundamentally different about you? And so we need to be documenting our systems, our processes, but also we have to document how we do things. What's our technology that supports it? If you can build unique technology to this business, you'll get a much larger multiple on the exit. How do you curate your data? What are the things that set you apart from the competition? That's your IP, right? And so those three things get asked every single time of exit a business. And if I check the box of every single one, my revenue is in order, right? I'm making money, I'm profitable, I'm profitable year over year, right? Number two, I've got a system, here's the manual, essentially on how to run the business. Number three, I've got very unique properties inside of this business that make us unique, whether it's technology, it's data, it's systems, it's how we do things, right? Now I've got the recipe for getting the largest potential for exit. When I do that, then I determine, is it better to sell now and gain, right? That potential value in the exit, or is it worth putting the time, effort, and resources into scaling, going at minimum 10 times what it is today to get that multiple on the exit? And then I'm basically doing that as an equation to determine, should I exit now or should I exit later after I scale? So that is fundamentally how I buy a business, how I value the business, with the five pillars, I see where my issues are, and ultimately how I'm exiting the business. That is the fundamental piece that I believe that most people are missing. Now, there's a lot of foundational pieces there that you would have to expand on, right? Like how do I purchase the business in a proper way? There's lots of information out there on how to do that, lots of people that sell courses, there's lots of programs. How do I create an operating system, or how do I use an operating system? You could definitely use mine, go to empireomforoperatingmodel.com. You can see mine. There's groups out there like Traction, Scaling Up, you could do Six Sigma, Kaizen, right? Like there's a ton of operating systems out there. I believe that mine's fairly unique because it is agnostic to any type of business, and it takes you through the five phases of business. Lastly, how do I sell my business? How do I X my business? I would say number one, you start with making sure that you understand those three components, and then you can engage a business broker, and you can be one of those top 10% that actually find a business broker. If you have those three things that I just talked about, you're more likely to be in that top 2% of businesses that actually sell because when you have a system, you have IP, and you know your numbers, you're very, very attractive for acquisition. Here's what I want you to do. Here's your homework. I want you to go to some of these sites. I want you to actually look at some of these businesses. I want you to think about what you have uniquely that you're qualified to insert into some of these businesses. I want you to consider something like an empireom.com product where there's fractional services where you can pull them off the shelf, fractionalize this help, take what you need, right? And then lastly, I want you to start thinking about what you could do unique in a business that would create a unique selling proposition, not just for a customer, but for a potential business acquisition later on. That's how you buy, scale, and exit businesses. Perfect. Love it. I have a quick question. So obviously, I lean more towards the creative background and design, graphic design, etc. I've been looking at wanting to open up a studio. Like, does what you're talking about apply to me? Do I need to be thinking about this? How can you help me actualize that or walk through that for me? Sure. Yeah. So I actually started a studio from scratch, and I'll say that it's really, really hard. However, what I do know is that I sold my studio. And with selling my studio, I would have gladly sold the equipment with the studio because it was so uniquely fitted for it. So I would actually say is if you actually are interested in doing that, really consider looking at an existing studio today. While their equipment might not be the greatest, it will give you some infrastructure, right? Finding a location that already exists, finding a location that actually has equipment. Now, one of the unique things about something like that is you can actually get equipment financing. If they have purchased, what I know is that these businesses usually buy their equipment cash because they use it as a tax write-off. So like, let's say they've got switchers and cameras and lights and all this stuff, right? You can actually go get equipment financing for the equipment in the business. And you know, it might be a little bit more difficult in the studio, but there's people out there that'll do it. And you could actually go get the equipment valued through this equipment kind of program. And you can actually then get a loan on that equipment. Now, what you do is you take the loan on that equipment, then you pay the owner for the purchase price of the actual business, right? So you're actually getting a loan on the equipment that you don't even own. As a part of the purchase, you take this cash, you buy the entire business, right? So let's say you get the location, you get the equipment, but more importantly, you get the customers. The customer is the hardest part, right? Like, you go finance new equipment, you go buy new equipment, but in the end, it's just customers or her customers that you want. So now you get the customers for free. So think about it this way. When you buy a business, what's the most expensive thing that you will do? It's customer acquisition. So think about it this way. If I can get all this equipment financed, but I get all their customers for free, right? It's still a really, really great deal. So I would evaluate their equipment. I would evaluate their customer base. Like, do they have consistent reoccurring customers? How many customers have they served? Can I, they have a base of people that I can go back after, right? And then I would look at all of their social collateral, right? Because now, not only do you have something that pre-exists a relationship, you know, social relationship with their customers. If you could take that over, now, all of a sudden, you've got customers for free. You've got online presence for free, right? Which is most likely the biggest value that a studio has. So I would just look at it outside the box, and I would look at ways to potentially buy a business without starting it, because if you can get customer acquisition for free, right? Then how much more valuable is the actual equipment in the studio itself? Okay, I'm going to be straightforward. What I'm trying to discover is like, where does this break the principles you said? Like, who does this not apply to? I have a cousin who's in hospitality, they're buying hospitals. I have another cousin who's a dentist. You use the dentist, so obviously it's going to work for him. I'm trying to convince him to move here. But like, who shouldn't be doing this, I guess? Is there anyone in, or does this apply to everyone? I think that the people that it is really difficult for are people that, let's say, really love their corporate life and corporate job. People that struggle with corporate, it doesn't matter if you're analytical, or you're a maverick, anymore sales, it really doesn't matter. Because fundamentally, that's why I can pull the fractional off the shelf and operate, right? So if I bought the studio, I would try to look at, okay, what's fundamentally broken? I'm probably most likely going to pull a fractional COO and say, hey, can you systemize everything we do? Can I get more efficient? I might then later pull some sort of marketing piece off to go get more customers. But for the most part, I'm going to make it very, very efficient. But the people that really struggle with buying small businesses are the ones that love the big corporate function. They love their one job to do one task because they sit in a big group of people. They're the ones that struggle. And I know that in a lot of these courses that are being sold out there on buying small businesses, they're the people that get fundamentally frustrated. They worked in a corporate office of 600 people. They had their one task that they did and they did it well. And now they think, oh, maybe it would be great to go buy this dry cleaner. And they buy this dry cleaner, they buy a laundromat or whatever it is. And then they get in there and it's like, oh, I have to do everything, right? Like I have to do sales, I have to do marketing, I have to do operations, I have to... And so people that are so used to big corporate, that's a big transition because you go in big corporate from fundamentally doing one thing to then as an entrepreneur doing many things. Now, if you're already an entrepreneur, you're already used to doing a lot of different things. Like it's not a big thing. It's not a bad transition. But I would say the people that struggle the most are the ones that actually love their corporate job. They love the security of the corporate job. They love the paycheck of the corporate job. They love the individual functionality of a corporate job. They're the ones that have a hardest time transitioning. We kind of mentioned it earlier, but if you're not willing to risk or get out your comfort zone, you're not willing to miss the gold rush. The greatest part about this is that I believe it actually limits the risk, right? I think 50% of small businesses fail, but the stat that's worse that the SBA put out is that 70% of small businesses fail without ever reaching profitability. 70%. Well, if you can buy a business that's already profitable, even if it's profitable by $1, you are now on the top 30% of business operators, right? Well, why wouldn't I take that chance? So just looking at it from a mathematical standpoint, it's like I avoid risk by buying a business that already has profit, even if it's only profitable by $1. I have so many questions I could keep going on. Is there anything I'm not asking I should be? No, I think that the biggest thing is people need to start immersing themselves into this. They need to start looking at it. It may not be right for everyone, but one last suggestion, something that I'm contemplating with my second son, is that we put our children into college for the purpose of learning and typically learning to do business, right? And I think that we have to start looking at our children a little bit differently. Am I a person that's anti-college? No, I'm not. Do I think that college is for every child? No, I absolutely do not. But I'm not emphatically like college is bad, right? I'm not emphatically college is good. I'm middle of the road. I think that I am emphatic on our children need a unique path to success, and we better start learning and figuring out how to get them to success. So my oldest son, great in college, ended up starting his own business. He's a firstborn, so his very regimented. He kind of has his natural path does really well. My second son, the thing that we're contemplating today is like he's a freshman in college is college necessary. If he really just wants to be a small business owner, he wants the freedom of owning a small business, why would I not take the money that I would put into college and go buy him a business where he's going to learn 10 times more in operating a business than actually buying him a college education? College education for him is just going through the routine. I think that sometimes we can get some maturity in college. I think that we can learn more of a better social construct than high school in college. I think that you can, you have a better friend group typically in college. I think your beliefs and values are challenged in college. So there are some good things about college. But there's also some fundamentally bad things about college. And that is most of the professors sitting there teaching you business have actually never run a business. And so I went to an Ivy League school and most of the professors were not business professors had never run a business. And so what is the best way, the best learning path? And I think it's doing. So if I can buy a business that's cheaper than buying my child's university education, why would I not consider that? I heard Dean Grazios, he said one time on a podcast, he said, and it logged into me anytime somebody gives you a tip on child rearing. It's like as a parent, it's like it lodges. One thing that he said was he said, instead of sending my daughter to school, he said, what I actually did is I told her that you go find the person that's doing the exact thing you want to do. And you go tell him, I will work for free for you for two years. He said, and I'll pay you your living expenses and what you should be making there. And he said, and work for that person hand in hand. And I think his daughter was into interior design. So she went and worked for an interior designer for two years while he paid for her to essentially live and work. What better college education is there than that? You know, to work with somebody who's already successful. That's the problem with college is you're typically being taught with someone who is not actually successful in the field. They understand the field, they have the principles for the field, but they haven't been successful in the field. Your child is so much better next to someone who has won at something who is succeeding at something rather than being just taught the theories of something. So I would also consider that if you're a person who's trying to look for, how do I help my child? Maybe consider buying them a small business. Thanks so much for being a part of the podcast and for listening today. Love to connect with you further and you can connect with me on social media at Eddie Wilson official on any of the social media channels.