2 Wealth Show S2 Ep19 - How Do You Acquire a Business?
Justin Bogard and Super E discuss how to acquire a business and keep the cash flowing.
Key Takeaways:
Resources and links discussed
Sponsored By: Integrated Health Solutions
We are passionate about your health and wellness and we know you want to enjoy a vibrant, pain-free, active lifestyle, but when you are in pain this seems almost impossible.
In order to be pain-free, move fluidly, and enjoy an optimal level of functionality, you need a personalized yet integrated, research based and clinically proven approach and that’s what we do.
To learn more visit us at
ihsindy.com
cryotherapyindy.com
About the Hosts
Justin Bogard – Note Investor specializing in performing Residential Real Estate Debt. He finds deals and acquires them for his own portfolio as well as educates investors while walking them through the process of owning a Real Estate Note!
Super E – Real Estate Investor specializing in short-term rentals and the management of them. She connects investors with short-term tenants and manages everything in-between.
Connect with the Hosts:
2 Wealth Show S2 Ep19 - How Do You Acquire a Business?
Justin Bogard and Super E discuss how to acquire a business and keep the cash flowing.
Key Takeaways:
Resources and links discussed
Sponsored By: Integrated Health Solutions
We are passionate about your health and wellness and we know you want to enjoy a vibrant, pain-free, active lifestyle, but when you are in pain this seems almost impossible.
In order to be pain-free, move fluidly, and enjoy an optimal level of functionality, you need a personalized yet integrated, research based and clinically proven approach and that’s what we do.
To learn more visit us at
ihsindy.com
cryotherapyindy.com
About the Hosts
Justin Bogard – Note Investor specializing in performing Residential Real Estate Debt. He finds deals and acquires them for his own portfolio as well as educates investors while walking them through the process of owning a Real Estate Note!
Super E – Real Estate Investor specializing in short-term rentals and the management of them. She connects investors with short-term tenants and manages everything in-between.
Connect with the Hosts:
[inaudible] Welcome to the 2 wealth show, a show that shares how you can create real wealth for you and your family. I'm one of your hosts, Justin Bogard And my cohost is Elizabeth Sickles, AKA super E. I am a real estate note investor specializing in performing residential real estate debt. I find the deals acquire them for my own portfolio, as well as educate investors while walking them through the process of owning a real estate note, my cohost super E, a real estate investor specializing in short term rentals and the management of them. She connects investors with short term tenants and manages everything in between. Our show was sponsored by bright path notes and Elizabeth Maora. You can find out more information by visiting our websites at brightpathnotes.com and elizabethmaora.com.
Elizabeth Maora:Everybody. Welcome to episode number 19 of the 2 wealth show. Whew. I'm Elizabeth with Elizabeth Maora.
Justin Bogard:Hi, and I'm Justin Bogard from bright path notes.
Elizabeth Maora:Yes, that's right.
Justin Bogard:There we go.
Elizabeth Maora:Excited to be. We're excited to be with you today. Um, I am onsite at the construction rehab that we talked about in episode number 18 and Justin is in his office, uh, which is a very nice office and what we're going to talk about today, um, for all of our listeners and our viewers is because people have been making so many changes during COVID, whether you've quit your full time job, if you've made pivots to your own business, if you're adding different businesses. Um, another element that we wanted to talk about today is if you are going, if you're looking at or thinking about buying a business, that's already running. So how do you acquire a business? Um, and this is very, um, relevant, whether it's a real estate business or it's some other type of business.
Justin Bogard:So what, what do you do you get in the yellow pages and you look up businesses for sale. Is it, is it on Facebook marketplace? Is it on Craigslist? Do you find it on LinkedIn? Is it through tweets, Instagram posts? What is the best way to find a business to acquire Elizabeth?
Elizabeth Maora:The best way is word of mouth. Yep. You mentioned Facebook marketplace. Excuse me. There was, um, so I just looked at possibly acquiring a business and it was a friend of this business owner had posted it on Facebook. So one of my friends sent the link saying, Hey, this might be an opportunity for you. So
Justin Bogard:I should shouldn't have said that because I should have known better that anything happens on Facebook with trading nowadays. But I was, I was being, I was joking. I had no idea that was possible. That's a good, that's a good lead into this, the subject
Elizabeth Maora:It's perfect and not rehearsed or anything. And one of the things too, you know, that we really talk about and that we encourage all of our listeners to do is to network because my friend that I'm growing the cleaning business. So that's why they sent me this post. So make sure, you know, your people that you trust, know what you're doing. Um, you know, people that are naysayers are going to tell you, you're never going to run this type of business. I don't encourage you to tell those type of people, especially as you're expanding, but make sure people know
Justin Bogard:Absolutely that. And you're exactly right, Elizabeth, but that's kinda how I got started in the business was more or less just networking and going to conferences and events and expos, and just handing out my business card, talking to, excuse me, potential vendors or business partners, or even investors in, in what we do with, with investing in notes. And even in real estate, when I was investing in real estate, that was a big part of the, part of the gamesmanship, if you will, is to get out there and network and talk and shake hands and just kind of mingle with people. And, and you know, if they'd know you like you and trust you, Elizabeth, what are they gonna do? They're gonna do business with you. They're going to do business with you. Exactly. So that's awesome. So you found this possible business acquisition through a Facebook post that somebody shared to you,
Elizabeth Maora:Right? Yes. And, and get this, the person that shared this initially on Facebook, the business owner that's selling, we'll just, we're going to call her Sally. Sally is friends with this person's dad and they met at a bar. So, um, you know, networking, you know, even when you're doing personal, just being, you know, if you're having a drink or dinner at the bar, um, you never know who you're gonna meet and who, who they're going to tell. So, um, and she's had four calls and that was just, that was as of last week. And actually it was the day after that it was posted.
Justin Bogard:Do you feel like, um, you know, how real estate is kind of a hot market right now for sellers? Do you feel like businesses is a hot market for selling businesses right now? So there's a lot more buyers than there are sellers of businesses. Or have you discovered anything in your, and your findings with this acquisition?
Elizabeth Maora:No, I wouldn't say so. Um, cause I think everything is dependent on that business owners, um, situation. So, you know, whether it be their financial situation or their personal or health situation. So I don't think so.
Justin Bogard:So this, this was a business, I think you, you told me a little bit off camera, what this business was, what kind of business was it again that you were trying to get?
Elizabeth Maora:Sure. So they do all residential cleaning. So, and in my cleaning business right now, we're all short term. Well, we have two residential cleans, but I'm looking to grow that business because that's consistent income that I know. Okay. You know, we have this house every two weeks or every month. And as a business owner, it's really nice to know that you have this consistent income coming in. We're a short term rentals. I mean, three days this week, we don't have any cleans, but then we will have done 25 cleans just in a seven day period, but three days, nothing. So when you're talking about cashflow and keeping your people busy, cause I want to keep my team busy. That's really important.
Justin Bogard:Makes a lot of sense, just like in real estate investing, right? We're looking for a cash flowing investment. If we're in a short term rental game before in the regular longterm rental game or for in the bank or the notes game, we are basing our due diligence on that cash flowing investment. So I guess putting on our real estate hat as an investor really helps with the decision to make on if the business is a viable opportunity for you to acquire, to make, you know, consistently make cashflow. So I assumed you look at the numbers, Elizabeth.
Elizabeth Maora:Absolutely. I look at the numbers and you know, and everybody does have a different situation. So it might not be the cashflow. It might be because they could have a negative cashflow and you see a ton of opportunity. Right. And you're going to make all of that cashflow. So it's really important to know what you need out of that business. And, um, yesterday actually the, so Sally, um, she actually came to my house and we went through the financials and there are a lot of questions just that, that you need to know in the background. Um, whenever you're evaluating business. So, and one of the things too, this just goes to telling people what you're doing and having, uh, a nice network. Um, you know, it's just worked out that my friends have some really cool diverse backgrounds. Um, one of my really good friends, she's already bought a couple of businesses that were already running and it's so great because yeah, it's so important. And so I called her and I was like, Hey, I'm looking at this business. This is, this is what they're asking for it. And I'm thinking, Oh my gosh, like I would have all these residential cleans and you know, I keep my team busy and I'm going to gain more people. And you know, it's a great feeling to be able to provide a career for people. But she said, she's like, well, let me just tell you a few. And which was really important because this business does come with a lot of equipment. And I was like, Oh man, that'd be great. I'd already have all, you know, I'd have all these things. It's just like Elizabeth, if you can buy the equipment for less than what you're going to pay for it, because you know, that equipment most likely has 38 is amortized depending on how they're looking at it. So you want to look at equipment and what it's going to cost you to buy it. Right. And just think if you're buying it, you can maybe buy new actually cheaper. And then you get all those tax benefits. And then also, yeah, so there's all these different little nuances. It's not just surface level. Um, and then kind of a couple of other areas that she said to look at was, you know, these residential cleans. So these clients, they are used to it being cleaned a certain way and you might have a different way of doing things. So you're going to lose clients no matter what you're gonna lose clients. And then also with whenever your, um, when you're gaining employees or even if it's contract, um, contract folks that are gonna be working with you, you're probably you have different standards and you want them trained to a different way and you're going to lose people just because they don't want to clean that way. Maybe they don't mesh with your personality, you know, anything could happen or they just, you know, they, they were used to the old way of doing things. It's really, yeah. It's not just a, you know, a cut and dry type of thing. So these are all things to think about that, you know, you can't put a dollar amount to these things, but it's going to take a lot of time from you. Um, and just a lot of energy from you and the team whenever you're retraining, both clients and teammates.
Justin Bogard:Yeah. If you think about it, it's, it's, it's absolutely actually vital that the cleaning is done to the manner at which the client is used to having cleanings done because somebody is coming into their home and their home is, is their happy place. Right. They have personal belongings there, they have things, their security there's that know like, and trust factor about, you know, who's in their house cleaning. Cause if it's a different person every week from week to week, that might not be a good thing. Right. Because it's theirs, you lose that trust trustworthiness because like, okay, who's in my house now, what are they doing? As opposed to having the same person with the same process and that they go about it the same way and they move things to one spot and they put them back in. It's just like the person in the house understands that. No. So I can totally appreciate understand the fact that it's, it's crucial if you want to retain those clients to make sure that the cleaning process is done exactly the way it's been done. Right.
Elizabeth Maora:Absolutely. And you know, also just, and these are things that you can also think about as you're running your own business or you're looking at starting your own business. And one of the things is that Sally has never increased the prices and she's been doing this for five years. So I actually, yeah, I can't claim for those prices, just with the product we use and, and with the processes that we have. So, you know, I'm coming in, I'm a totally new person to this client, you know? And Oh, by the way, you know, I'm going to raise your price 20, 25%.
Justin Bogard:Right. That's not cool.
Elizabeth Maora:That's not. So you might think, Oh, Hey, you know, I'm going to get a hundred residential properties, but what are you actually going to retain? And then what's the benefit that you have to growing organically. So for me, like I know all of our clients, whether they're our hosting and property management clients or project management clients and our cleaning, um, our residential cleaning clients that we have right now. So we know now I have to, just to your point, Justin, go back and build all of those relationships. And the thing is, it's at a drop of a hat. If you buy a business that's already existing.
Justin Bogard:Yeah. So, so there are pitfalls to watch out for. So you are doing your due diligence with an potential acquisition of another company. That's a part of the company that you're building organically anyway. So you're still doing a cleaning business. You're just, Oh, I can add on a piece to this by, you know, just investing in something that's already cash flowing while I'm building this other part of the business as well. Like you said, there's a gap in time to where you need the cash flows to come in and why not buy something that's already set up and moving along, but you've done your due diligence. And you've found out through that process that, Ooh, there's a potential red flag here that might not fit what I'm trying to do, or to make sure that I'm going to be a profitable business because we all don't want to buy a business. That's not profitable. Right. Because then we can't pay the people that help us run the business.
Elizabeth Maora:That's right. And you know, it's kind of interesting because when I left corporate, so in 2016, uh, no, in 2017, when I actually moved to Indianapolis, I looked at buying a ups franchise that was already in existence. Um, and man, when I went through the numbers and I thought about it and I was like, man, if I buy a franchise, I have to go by their rules and I just left corporate cause I didn't want to follow their rules. So, you know, those are other things to think about, you know, and if you are looking at a franchise that works for some people and that's, that's fantastic, but it wasn't going to work for me. And for what I wanted to do,
Justin Bogard:I agree that the franchise model does have its place and its merits for definitely certain investors, a certain people, because it's kind of handed to you on a silver platter, but there's a catch, right? You're on a short leash, so to speak and you owe it usually in perpetuity, I'm a part of your business or part of your, your profits every, every year, every quarter or however it works out to be, which is why a franchise model is great for the frame. If you're the, if you're the CEO of the franchise, right. But not necessarily the franchisee, you don't get those benefits, but that's, that's great for the people that run the franchise. So, um, the best franchise I can think of is Chick-fil-A, it seems like you don't have to know anything and you put up a Chick-Fil-A and you're pretty much golden. Right. Cause I, all I see is customers revolving around that door and it's never stopping. I can, I can see it's probably a, an issue, a nightmare to run the operations of that. But it seems like if you're the owner of a Chick-fil-A, it seems like it's a pretty, a pretty solid investment with pretty low risk. Right.
Elizabeth Maora:And a fun fact about that. Justin is, and I don't know the exact number, but I knew the numbers last year. You have, it's only like 8% of applicants to Chick-fil-A actually get accepted and you have a better chance at becoming a CIA agent than becoming a Chick-fil-A franchisee.
Justin Bogard:That is a fun fact that I like to hear.
Elizabeth Maora:So yes, yes.
Justin Bogard:Like a badge of honor that they were like on a sash or something that says I'm a Chick-fil-A owner, they're like the cream of the crop there.
Elizabeth Maora:That's exactly right. Um, and you know, so I, I do just want to encourage you if you are, if you're thinking about buying an existing business or a franchise, um, definitely make sure that you're looking at things that are, that are just beyond the finances and okay. What, what fits with my model, what fits with your personality and with your team? Because what I realized after I met with Sally yesterday was, you know what, this just, she runs a great business. Absolutely. But this isn't for me and kind of a nice way to turn it too, is if you're on the other side. So to flip it over, if you're running your own business, whether it's your own or you're doing a franchise to make sure that you're keeping a good set of books. Um, so, you know, sometimes there can be a lot of things that are maybe categorize as an office expense or meals, um, and things like that. So when, whenever you're running a really good set of books, you have the true numbers in there because you never know what what's going to happen in your life. If there's something, you know, like COVID, and there's a huge business change, or if there's a personal issue, whether it's a good issue, if it's a bad issue, you know, if you get married and you have a baby or somebody gets sick and you say, Hey, you know what? I need to spend a hundred percent of my personal time with my family or, or friends or whatever that is. So if you're running that good set of books, um, you don't have to worry about it. You can say, you know what, Hey, I want to sell this business here, my books, and I'm ready to talk.
Justin Bogard:Absolutely. It makes it easy. It's like, here's, here's the balance sheet. Here's the statement of cash flows. This is, this is everything you need to make a decision. And then a, an investor can come in and just be like, yep. That makes sense to me, everything looks good. Otherwise you probably do want your books to be good anyways. Even if you're not buying or selling, because it just makes things easier to understand, like, am I making money is more going out than what's coming in, right?
Elizabeth Maora:Yes, absolutely. Absolutely. And you know, we laugh about it, but there are a lot of entrepreneurs that, and it's okay if you don't understand how all that works in that case, you want to make sure that you have a great mentor or your bookkeeper slash CPA can help you understand the numbers. I mean, you don't have to be a math genius by any, by any means to run your business. But just a little bit of knowledge will take you a long way.
Justin Bogard:Absolutely. I mean, I think it's both of us really didn't know, understand numbers when we first started getting into the business. So it's perfectly fine if you're just like, well, I don't know what this means. Well, I didn't either. And I still don't know to a certain degree. Right. But that's why I have a bookkeeper. That's why I have monthly conversations with the accounting people that, you know, um, I outsource to so that they can explain to me, like, what are the things, or what are these anomalies or what are these charges or how do they get categorized? Like you brought up meals and entertainment and, and office expenses and things like that. It's like, they keep you down the right path of understanding. Like, okay, if you don't categorize this correctly, it can be looked at from the IRS, his point of view, as something that you shouldn't be doing to charge as a business expense. And so that's, what's great about that. I mean, they know the book, the book is like, you know, it's like so many pages thick, like 10,000 pages thick. I don't know what it is. The IRS
Elizabeth Maora:That's probably pretty accurate, just a plug for, They would have to be, um, like a Mensa or, um, what's the person that everything they read, they, they know it. I can't think of what's that's called yes.
Justin Bogard:Something like that. Oh, you got somebody in the background. Do we have a visitor back there?
Elizabeth Maora:It is. Our, it is our, um, our guy from episode number 18, Patrick Grayson is in the house wearing the same shirt.
Justin Bogard:It's what happens when you film onsite?
Elizabeth Maora:That's right. That's the big question. Awesome. There we go. Speaking of possibly buying business in this case, he's buying a house that will flip, flip the house. Okay.
Justin Bogard:Oh, this is, this is the Patrick Grayson right here.
Elizabeth Maora:Yes. StolCo Design Patrick Grayson.
Justin Bogard:I thought maybe you were talking about me at all.
Elizabeth Maora:Awesome. So, yeah. So, and if you're, you know, definitely if you are looking at buying a business, you know, you can also hire a CPA. You can hire people. There are brokerages that are buying, selling companies that will represent you as the buyer or that person as a seller. So just make sure that you do do your homework. If it's a really big purchase, even if it's a small purchase that you have somebody else that's looking out for your best interest.
Justin Bogard:Absolutely. And that was a good topic today. Um, so kind of switching gears a little bit, I thought we would also tie into, uh, not only keeping a good set of books, but also continuing to educate yourself in your craft. So, um, what happens more frequently around this fall to winter timeframe is that in our business, in the note business, we'll have more conferences and expos and events like that. That'll be more focused during this time period for whatever reason, cause there's not really a down or slow period during the note business. That's just, that's where most of these conferences start happening is like right now all the way through February. Um, just, I think it's just because people would rather be other places and doing other things in the spring and the summertime. Right. So, um, but I don't know about, about you, but we, we definitely have several big events coming up and they've, unfortunately they have been, um, push to virtual only, which, you know, trying to be safe and do the right thing. And hopefully one of these days we'll have some more in person, uh, bigger conferences, but I know in a couple of events coming up, Elizabeth, we are virtual only. Do you have any conferences coming up?
Elizabeth Maora:Absolutely. We've got, um, three conferences so far that I know of. Um, actually I just talked to my coach this morning. I was already signed up for it, but um, where do my business coaching through? And they run, their meetings are so well ran even virtually, uh, so I'm super Katelyn will be on with me on that call. So, um, or those meetings, I guess I should say. So I'm actually, I would much rather be there in person. Um, but I just, I echo what Justin saying about continued education. We're huge, huge on that. Um, we're actually getting ready to be safety certified. So at least part of my team will be safety certified to go and look at houses and certify them for short term rentals specifically. Um, that's over five hours of online training, um, to do that. So we're excited for that.
Justin Bogard:That's awesome. And being live at the conferences, just to tie in what we're talking about before, about networking and building a rapport with people and making connections. I mean that, that's the unfortunate side about having some of these virtual conferences is that you don't get those opportunities to be able to talk and to network outside of the core conference hours. Right? Cause that's where a lot of deals and a lot of partnerships are made because of that opportunity. When you get one on one time with somebody that, that you always want to have a conversation with or learn a little bit more about something and just take some, some nuggets, if you will, from each and every person that's, that's what I miss the most about going to those things.
Elizabeth Maora:Absolutely. And you know, still there, there is opportunity to meet somebody, even if it is virtually, if you say, Hey, did you hear about that? Just in Bogard dude in Indianapolis. Yeah. You never know. So just keep that in mind. And you know, even maybe if you're going through a tough time right now, either with your business or personally, and you might say, Oh, well, never know, okay. Whatever, that's what everybody says, but it really is true. So, um, you know, just keep, keep your head up if you are going through a little bit of a tough time, because things will come around, um, you know, you'll have an opportunity that you never thought you would have or, um, so both personally and professionally
Justin Bogard:Fantastic. Well, Elizabeth, we're just about out of time for today's episode number 19. So everyone listening to this, don't forget to check out the video cast of this on BrightPath notes, YouTube channel or Elizabeth Maora's YouTube channel as well. So when closing thoughts I had today, Elizabeth is due diligence is by far your best insurance policy and whatever you do. And if you are uncomfortable doing due diligence or don't feel like you're doing it the right way, or don't understand anything, you need that mentor, you need that partner. You need somebody else in the business of whatever it is you're doing acquiring an asset like you did, or I'm sorry, acquiring a business like you did. And you talked to a friend that does that. That's perfect way, or you're investing in real estate or investing in notes or trying to be in the short term game. You've got to find somebody, you know, in the business and get their advice and take on it. So you don't make a mistake. Absolutely. Yeah.
Elizabeth Maora:All right. Well, everybody, thank you so much for being part of our audience. We appreciate your support and we look forward to more episodes.
Justin Bogard:Absolutely. Until we meet again, I'm Justin Bogard with bright path notes
Elizabeth Maora:And I'm Elizabeth with Elizabeth Maora.
Justin Bogard:All right, bye. See you next time. Thank you. The 2 wealth show was produced by Justin Bogard and super E sponsored by BrightPath notes and Elizabeth Maora. Thanks for listening and watching for our show.