CWC EP43 | Andy Cagnetta Sits w/ Patrick Flood, Founder of Owners in Honor

Is small business ownership as simple as the internet makes it look? Most people treat business acquisition like flipping houses, but the reality requires grit, long-term commitment, and strict risk mitigation.

In this episode of Coffee with Cagnetta, Andy Cagnetta (CEO of Transworld Business Advisors) interviews Patrick Flood, founder of Owners in Honor. Patrick shares how his background as an Army Special Forces officer and M&A practice director helped him build a unique nonprofit that guides veterans through buying and selling small businesses safely.

We break down the true mechanics of SBA financing, the reality of "dented" middle-market businesses, and the innovative tax structures used to protect a business owner's legacy.

📌 Visit TWorld.com for more information about M&A, Leadership, and Business.

In this video, you’ll learn:
The reality of the "Silver Tsunami" and financing small businesses.
Why Owners in Honor requires a strict 3-year operator commitment.
How to utilize a nonprofit structure to mitigate capital gains tax on a business sale.
The "Three Attorney Rule" every business owner needs to know before exiting.

Transcript

SPEAKER_01 0:00

Younger brother committed so we're getting when they had been just like a lot of business because quite frankly uh you have sort of a life baby more. My brother in the brother get uh thing this is a baby. The community of the service analysis in the way of us to be able to be able to be the fifty one percent development, and then have an investor to be able to come in with unpredictory tournaments that we understand to then ideally maintain the membership within the community and also you know, support defense, you know, the companies that are required for the significant national defense or critical to the national defense.

SPEAKER_00 0:44

Great. I mean it seems like a lot of what you do is trying to assess the risk and trying to minimize it for people. Hey, want to come back, everybody, the coffee with Cagneta, and we have an amazing coffee with Cagneta today because we're talking about exactly what we do, but we're talking with Patrick Flood from Owners in Honor that specializes in helping vets do some acquisitions. And Patrick, first of all, welcome. Thank you for your service. Yeah, thank you so much, Andy, for having me. So um let's talk, you know, it's so funny because we have somewhat of a similar story. I have not served. That's not my story. But my story was is that I was frustrated with the process of buying a business, and that's kind of why you're sitting here and what you started. But let's go back. Give give us a little bit of history about your background and how you wound up doing what you're doing now.

SPEAKER_01 1:38

Yeah. So I got uh commissioned out of ROTC. I went to uh my undergrad at George Washington, Georgetown RTC, and then the army got small and I ended up in the reserves for a while. Uh spent some time there. I had a younger brother commit suicide. And when that happened, just like a lot of you know business owners, quite frankly, you have sort of a life pivot of, you know, do I really want to do this anymore? And I was successful doing what I was doing, but I just felt like I needed to find something that was more fulfilling. It coincidentally happened in 2000 when the army was recalling people voluntarily to active duty before the war, and uh they gave me a 12-month enlistment, or essentially uh it was an officer contract, but for 12 months I came back in, and uh nine months into it, September 11th happened, and I was assigned as a signal officer to uh the third special forces group. So we deployed pretty early in the war in Afghanistan in 2002, and then from there went to um Iraq in 2003 at the very beginning of the war again because there were very few of us studied combat experience, and then went to selection, did you know all the special forces stuff for a very long period of time? Um was I I now look at it as sort of an odd opportunity, but I got injured in 2007, I got blown through a wall and broke my neck, um, which did two things. One, I had to figure out rehab to be able to sustain living so I'll you know, I do a lot of stuff that makes a lot more sense than what I was probably doing to take care of my body before. And then the second part is that it really made me um, I think, do a lot of self-evaluation about what my purpose was and how was I best serving people, and it's kind of been a recurring theme. Uh it also then turned out so after I got out, I uh transitioned through and used an organization called the Honor Foundation uh to be able to to find employment. They helped special operators transition out of the military and uh landed a job at Anderson, formerly Arthur Anderson was uh the director of practice management for uh Southern California. And really, you know, I I'd gone to business school. I was a battalion commander, my last job in the army, and um I knew that it was about time that I wanted to do something different, something a little bit more fulfilling. Um, I think like a lot of people transitioning, I didn't probably do as much introspection as I should have. Um, and just went to the job that paid me the most money and uh did that. Um had the fortune of being at Anderson when we acquired the MA and valuation services from Deloitte. So um there's an assumption, I think, that they teach that at business school among a lot of people. Right. They don't really.

SPEAKER_00 4:19

Yeah, no.

SPEAKER_01 4:20

So it's a tremendous amount of OJT, which is actually fantastic. So one that's principally how you know Greenberg's or special up special forces guys learn about indigenous cultures is all OJT. So they teach us literally while we're there about stuff to, you know, one build rapport to demonstrate the fact that we're humble to their experience. And it was great because I I learned a ton of stuff. And then at the Honor Foundation, I was at a night and they ended up combining everything because of COVID. Uh, they had an entrepreneur night and the corporate night, I was sort of representing the corporate side. And then the entrepreneur side, there was a a gentleman who stood up and was like, Hey, you know, you've been talking about entrepreneurship. It's always been about startup, but I'm not Bill Gates. I'm not like, how do I how do I do this? Like, I want to be an entrepreneur, but how do how do I do this? And uh it was crickets, and I was like, it's so interesting. Granted, Anderson works at like mid-market at IBO. So I was like, I was like, this isn't relevant to what I do, but there's gotta be a way to do it. And so I then took this person under my wing for about six months, and I was like, maybe I could get you help. And I couldn't, and I was I was really frustrated uh because I couldn't figure out the best resource to be able to get them, and then there was tons of predators in the water, and we've seen more of those as time goes on.

SPEAKER_00 5:36

And did you predators maybe uh it might be a little aggressive, might be hydraulic, yeah. Yeah, but yeah, but but still it's it's certainly not something that people should have to pay a lot of money to do. Yeah, go buy a business to get through that process.

SPEAKER_01 5:54

So I think it's like a lot of other things is that um you know it's the opportunity cost. So you're right, you're paying for ideally someone else's experience to be able to guide you to do something. And unfortunately, even the best like buy-side brokerages um have maybe a 20% throughput rate, maybe even less. And the more expensive ones are you know, $30,000 retainer, $10,000 a month, minimum six-month contract, you know, et cetera, et cetera. And then you don't know what they're teaching you. So you have no background to say, okay, I'm building a buy box to to find an LOI. What does the LOI need to look like? What questions am I asking? When I get the financials from the company, how do I how do I diligence them myself? Usually they're attached to other companies that then, well, for a service fee, we'll also help you diligence this. But again, you don't know what you don't know. So you're, I think a lot of times exposing yourself to a lot of financial risk because you just don't have the background or knowledge, which is normal, you would think, because most people only buy businesses once and they only sell businesses once. So that's a tremendous amount of education to be able to do something that's you know quite valuable.

SPEAKER_00 7:06

Right. So you you you found this imperfect process, you tried to help someone, you realize there's not a lot of opportunity, there's not a lot of resources out there, or at least not a lot of resources that agree on the process. It's still not, right? Yeah, and there's still a pro a proliferation of people giving some good advice. And I'm not gonna bash everybody that's out there doing their thing and uh doing videos and stuff, but there's a lot of misinformation out there, and I think it comes down to where I think you are and why you started your organization, and you could talk a little bit about that. Is you have to trust the you have to trust someone in this process, like you said, it's the first time most people are doing it, right? And they may never never do it again. So they need to find someone they could trust. So why not work with someone that looks and talks and walks like them or has walked in the same path? So tell us how you started, you know, owners and honor.

SPEAKER_01 8:09

Yeah, so then um, you know, during COVID, uh my wife at the time and I had separated. She moved to Houston and then uh with our son. So I moved to Houston to follow her. Uh, we had all been recalled back to office, so I sort of needed to find a different opportunity and had was at a point of inflection where I needed to tell Anderson I was gonna leave or I needed to find something else. Um and uh Anderson's a great company, they gave me a pretty healthy severance package, give me some time to think about it. And then um from that, I talked, you know, I got a job offer from a consulting firm, and it just didn't feel like the right opportunity. So I had a really good mentor who is not a veteran, but he works with a lot of veteran causes, his uh names Chad Faulkner. Um he told me he was, you know, you've been talking about this M ⁇ A thing and doing it for a while. Have you ever considered like buying something yourself? And I was like, I don't like that's not the thing that I think I want to solve for. Like I I understand that I I think I could do it. I think I have um the cash to be able to do it. I think I know enough about doing it, but I what I really want to do is take the experience of that and be able to help other people do it and be able to try to mitigate their risk, which is quite frankly, most of what we do in the military. So it's identifying risk and then identifying mitigating factors, and so and then from that being able to make decisions. So there's no such thing as a non-risky military operation, it's just a matter of risk that you're willing to you know to uh to take on as a commander. And so I was like, I think I want to do that. And he's like, Well, why don't you do it? And I was like, I don't want to do a startup, and I definitely don't want to start a nonprofit, right? And he was like, Well, you know, you gotta think about this. He goes, one, can you figure out, you know, with your move from California to Texas? Can you afford not to pay yourself for a couple years? And then said, which I thought was crazy. And then the second part was, um, he goes, If you and if you didn't do it, who else would? And how would that go? And how would you feel? And I was like, Okay. Um, and he's like, and how can you handle people telling you that this is a bad idea or no? I was like, Yeah, I think I can do all those things. And so I ran the numbers um and was like, yeah, I think with the move financially, I'm not gonna be able, you know, I d I couldn't buy a house, I had to sell my condo in Florida, like some stuff. But I was like, Yeah, I think I think I'm at the age now where I maybe I got one more big chance to to really try to affect other people. And that goes back to I think the call to service that I initially had to come back in. And I was like, I think this is maybe a second calling to be able to continue to be able to serve the community that serves us in a in an indirect way.

SPEAKER_00 10:50

Right. So tell me how does it work? If someone's looking to buy a business and they're a veteran, how do they interact with you? What's the program like?

SPEAKER_01 10:59

Yeah, so there's really uh and as time has sort of matured, we've realized um probably as I continue to like most people do that, I think are decent entrepreneurs, I you know, they iterate, figure out why is what what is the core of actually what we're trying to do. And for us, it's really risk mitigation within the entire mergers and acquisitions process because really there's problems on both ends of it. So for veterans. So if you're looking at the opportunity that typically attracts people to acquisition, it's like, oh, this silver tsunami, there's so much opportunity, can't wait to buy one of these three million businesses that seem to be sold on the street corner. And the reality, the reality is that it the ones that are left, if you're not an institutional investor, are are dented. There's something probably problematic about it. And so a lot of it though can be mitigated through through strong leadership and through strong systems implementation, which is what veterans are really good at. So the ability then is to provide them, similar to what you know, the special operations community is where we come from, is that you know, we don't fly the helicopters for the most part for like, you know, Green Berets. We get conventional helicopters, conventional airplanes, conventional everything. So it's to provide the conventional support to be able to have people be able to do something that's extraordinarily meaningful, not just for themselves and their communities, but quite frankly, for democracy, because it's really the the buoy of the middle class, which is democracy. So it's like doing all these things ended up lining up. And then my personal story was that my dad was a veteran, uh, 27 years in the military, spent time in the Navy as a corpsman and then the army as a PA, and then bought a business. And uh through two different services. Yeah. So that's more common than you think in the in the in the medical profession within the military, because it's you do one thing for a little while and it's the same skill set, just in a different, just a different uniform. Um, and so the I think it was a confluence of a couple different things. So one, my younger brother's suicide, and then both my brother and I, my brother got uh injured uh pro part in Iraq three days before I got a pro heart in Afghanistan.

unknown 13:07

Wow.

SPEAKER_01 13:07

We were the only boys left in the family. There's my sister as well, but I think it was a lot for my family to like they almost lost all their boys within a few years. And so uh just like most um sales, you know, has to do a lot of times with family crisis and then figuring out what you're gonna do. My dad hadn't really been planning for a sale or considering one, and so he went out to his network and found a family attorney that felt could prepare the business for him, uh, because he'd done other things for the family, and uh, you know, ended up getting uh I discovered this really sort of during business school when we were doing case studies, got about a fifth of the value for the company. And there's there was nobody to help him. And there he didn't know who to help. And I was like, it's interesting. When you start peeling back the onions, like, why is that? So one, I think it's pretty common. You would I think submit the operators in general don't know a bunch of M ⁇ A attorneys, why would they? Um, they usually don't go to the same social clubs, and so the uh the and they didn't go to a lot of operators aren't business aren't you know, aren't MBAs, so they didn't meet them at business school. Right. They didn't go to law school with them, so they just don't know them. And then the second part is that veterans, particularly my dad's a great example, entered acquisition much later in life. So it was in his late 30s, and so the likelihood that he had had this whole big entrepreneur network prior to that was was low. And that's typical for for most veterans, is they've served, you know, an average of 10 to 12 years, and then they get out and then they go buy something. And so the goal then is for us to create the virtuous circle of preparing people to buy, so attracting people to the program and being able to say, hey, you want to be an entrepreneur, what kind of entrepreneur do you want to be? Do you want to buy? Do you want to build? Uh, if you want to build, there's different organizations that do that. We don't think that you're a good fit for our program because funding's different, building's different, doing all that stuff is different. So, but we want people to be able to specialize with them and we need to work with them. And then the second part is, you know, now that you have run the company, have you considered the fact that you're developing the most valuable asset that you're probably ever gonna have in your lifetime? And what's your plan? And just in this, you know, I'm here in Florida at a conference and I talked to about a dozen veteran business offers over the last like two days, and like the great the greatest story was I was like, So what do you what do you think? And this is a gentleman that is super smart, and uh I've known him for about 20 years, and he's like, Yeah, you know, I left this other company, I run my own company now, I do this stuff. And and I was like, he's like, What do you do? I was like, Well, we help veterans do acquisitions or sales. And he's like, Oh, that's interesting. I'll talk to you in five years. I was like, What's happening in five years? He goes, That's when I want to retire. I was like, That's five years too late. And so he goes, What do you mean? And so I started laying out to him like why it was in his best interest to start getting these things a lot and why a good tax strategist type CPA was so important for him. Because I was like, What kind of accountant do you work with? And he's like, you know, he files my taxes every year. I was like, Okay, that's good to have one of those because it's good to stay out of the clink, the IRS clink. Sure. But at the same time, you know, who is developing your tax strategy to be able to help you sell this company and then mitigate your capital gains tax on sale? And he's like, I uh and I was like, Yeah, so and he's like, I feel stupid. And I was like, absolutely not. Like, there's no reason for you to know that you're gonna do this one time in your life, which is why we're here. So we want to be able to be the people that are the intermediaries that are trusted, that are you know, legacy agents similar to Transworld, where people know who we are and we have a reputation. So when we're in a marketplace, people know the quality of people that are coming out of our program that are going to look. Uh, they already know they're capital ready, they know what they're looking for, they know where they're looking for it, they know their differentiating story. And then secondly, they know that the owners that are preparing to exit are prepared to go talk to a CEPA or prepared to go talk to a broker. Because I know that it's at the front end, it's very frustrating sometimes for brokers to have, you know, someone give you a call and you're like, okay, what size business? Where do you want to live? What kind of business in there? Either too specific where they're like, I need this needle in the haystack that's filled with needles, or uh, I need anything anywhere in any zip code. Yeah, that's that's a tough one that provides $300,000 of uh STE. Right. Like, yeah, I know get plenty of those. Yeah. And so it's you know, comical for those of us who are sort of in the environment seeing it all the time, but for um, because we know how difficult that is. Um, but it's it's good to be able to be the translator to the folks that and and give them, you know, really build rapport and lead with humility and being able to say, look, I'm I just want to be able to help you. And there's a lot of value that we can create together. And by getting a broker, you're gonna get a higher valuation for your business. By getting a CPA, you're getting a higher valuation for your business. Yes, those things cost money, but at the end of the day, and you know, any business owner is really sensitive to to paying more money for anything, but but at the end of the day, if you understand this in the sense of personal financial planning, long-term financial planning for your family and growing generational wealth, then it's a different conversation. And what's great about veterans is that we tend to begin something with the end in mind. And so when you re-remind them of that, that business ownership is the same thing, they're like, oh, and the light bulb goes off, and then it becomes a really easily coachable situation.

SPEAKER_00 18:44

Yeah, I I think coaching is important in this because I think you brought something up a long time ago we were talking about, you know, first of all, a lot of these businesses are dented. I love that. You know, it's it's we're not talking about private equity group add-ons, even add-ons or platforms. This is people looking at small businesses that didn't make it to that level. So they're dented on some level. And then the other thing is you talked a little bit about it earlier, is that the success level in buying and selling a business is still extremely low. Less than 50%. That's right. Yeah. Right. So if you go to sell your business, you have less than a 50% shot of selling it. If you go to buy a business, you have less than a 50% shot of buying it, maybe even less than 25%. Well, there's a lot of numbers out there, but let's just say it's you have more of a chance of not doing it than doing it. So the education and coaching is essential and the preparation is essential for it to be successful and and being realistic. I mean, I I think you brought up the point, you know, and and I'll let's just talk about like it's tough on the buy side these days, right?

SPEAKER_01 19:56

Yeah. I think that's a surprise to a lot of people. Because again, the numbers. Right. So they're like, what? Well, silver tsunami, where are the three million businesses?

SPEAKER_00 20:06

They haven't come out yet.

SPEAKER_01 20:07

I mean, I think they're starting to. So that's that's part of it. And then like the conversation I just had with Mike Shea, who you know and is one of our board members, is that like the 2200 or just about 2200 businesses listed in Florida, 18% are financeable. So if the primary vehicle for most of these veterans to be able to buy these businesses is an SBA loan, then like how do they get purchased? So then you got to back it up. So you're like, okay, that sounds like an impossible problem. Unless you can engage the business owner and say, look, you do have a valuable property, however, comma, here are the things we need to do over the next three years, and we're gonna help you do that. And then you're gonna have a great acquirer and you're gonna have a great exit, and you're gonna be in a much better position. I know that you probably had your horizon set at earlier, but there's ways to be able to mitigate that. And even over time, whether it's an equity earnout, a seller's note, whatever, to be able to one mitigate risk, but then also give you some sort of leverage in the in the leadership of the company as things are being developed out. There's ways to do stuff. It's just that it's not going to be the cookie-cutter stuff that sometimes you hear on like other things that you hear broadcasted.

SPEAKER_00 21:19

Yeah. Yeah, it's it's it's a very fluid process that like has a lot of a lot of different things could come into play. It's a it's very situational sometimes. It's you know, I I think you mentioned you had another word for it before, but it's it's it's a customized approach a lot of times. You know, you just mentioned two different buyers, one that's super focused and he's looking for a needle in the haystack, you know, and then someone who says, I need $300,000 worth of SDE. I don't care. I just need to feed my family. Yeah. It's like, well, where do you want to be? I don't care. I mean, those are like horrible answers, yeah. You know, to try to get to the point where you're gonna wind up buying a business.

SPEAKER_01 22:00

Yeah, and then even you know, partially because of to a d to a degree, I'd and I'd like your opinion on this, uh, it feels to me uh a little bit like ETA right now is has the same uh taint to it almost as flipping homes did. Where it's like, Oh, if I just do this thing and I read this book or I go to this podcast or I do whatever, I'm just gonna be able to figure out and go do the thing and I'm gonna become independently wealthy. And it's and it's like Yes, you may be able to buy something and eventually eventually be an absentee owner, but if you don't have the commitment, and this is what we tell all the veterans in our program, quite frankly, we don't allow anyone to go search if they don't have at least a three-year commitment to being able to be the owner-operator of the company. Because yes, you can maybe over the course of three years figure out a way to get a general manager and you know reduce you know, paying people by growing it's all revenue magic. So it's like, yes, there's ways to do it, but it's not something that you're if you think that there's a turnkey, because this is what's being sold sometimes, is that there's this turnkey thing that you're gonna you know spend 10 hours a week and make a million dollars and live in Cancun. And I wish that wasn't the case, and I wish I was joking because even in the last week, like people are like, Oh, you're super interested in buying a business. How do I do it? I want to buy an absentee at laundromat.

SPEAKER_00 23:19

Yeah, there's no such thing. I was like, we had the we had the laundromat guy here, and he even said, you know, about how hard he works. Yeah. Because he buys a lot of laundromats and car washes, and and it's just there's first of all, I don't think there's such a thing as an absentee business. I mean, there might be businesses you have to work less in, yeah, but there's no such thing as an absentee business. I love, love, love that you're making people commit to a three-year process because you're not going to be able to afford it if you do try to run an absentee, right? A lot of that SDE is exactly what it's called.

SPEAKER_02 23:56

Yeah.

SPEAKER_00 23:57

Sellers discretionary earnings. If you're using that to pay a manager and do pay debt service, that's right. A lot of time there's nothing left for you. So you definitely have to, and a lot of times, if you're buying a dented business, which you described as a dented business, you got to go in there and fix something. Yeah. To make it more profitable or to make it just work better. Yeah. And then which is possible. That's the great news.

SPEAKER_01 24:22

Yeah, I think it's the great news. But and I think that that's partially why, you know, veterans, when you peel off the veneer of it's not as simple as people are making it out to be. Like jumping out of an airplane sounds like all you have to do is fall out of it because gravity does the work, but it's it's a process. Sure. Because it's super dangerous. Yeah, we're done. It's and it's completely illogical. So I would submit that business ownership is similar. It's very dangerous and completely illogical. It makes a lot more sense risk-wise to say, hey, I'm gonna go work for someone else. I'm gonna know where my paycheck's coming. I'm gonna know how to predict things. I know that I get two weeks off. I know all this stuff. Right. To be a business owner, it's completely unpredictable. I mean, you want to build predictability into it, but it's at the end of the day, you have market shifts, you have population shifts, you have a bunch of things that could like you have competitors that you know have different products. All of it is is dynamic. And so being able to say, hey, it's not as simple as falling out of the airplane. Um, and you start acquainting that, and a lot of the stuff, the parallels that we were able to do with veterans because they're very similar. They're very, they're very acquainted to managing risk. And when you connect the dots, then they're like, Oh, yeah, this that does sound oversimplified. And you're like, Yeah. But in the meantime, we have jump masters and we have safeties and we have loadmasters, and we have pilots of airplanes, and we have pathfinders to plot the drop zone. We're gonna try to remove as much risk as we can, but at the end of the day, the risk is yours.

SPEAKER_00 25:51

Yeah, the risk is yours, and I I know Mike, Michael and I, Mike Shay, uh, and I talked about this last night. The grind is theirs as well, because I think the idea of and you brought it up earlier, is being able to run a business absentee and not work is probably the most dangerous thought of business ownership. And part of part of what I my journey as a business owner and part of what I see a lot of people do is if even if you buy a business that is not working well, and you buy a a good business in a in a in a place like Florida or a place like Houston, a place like that's growing, you can make up for a lot of bad things with hard work.

SPEAKER_01 26:39

Yeah. And just because a business has some dents in it, like great example. So the first acquisition um was a five million dollar moving company that could get SBA lending, used a seller's note, um, but was and had $750,000 approximately of SDE. Uh but didn't have a CRM, didn't have really an operating system that they were working on, because quite frankly, the owners were in their late 60s, they'd owned the company for 15 years, and they were like, we don't want the headache.

unknown 27:11

Right.

SPEAKER_01 27:11

Everything's working. So like, why would we add anything? We don't we we have good relationships with our competitors, it's kind of a frenemy sort of relationship. There's no reason for us to do anything. But you know, they also, however, had on the shelf an acquisition plan that they just didn't execute because they were like, that sounds like it's gonna take 10 years and we want to be out of here in two. And so they did a lot of the planning, partially because the the owner of the business had been a FBI special agent for 30 years and understood, you know, sort of operational planning and long-term planning and beating me with the end in mind. Uh, and so for us, we weren't the highest offer, our veteran was not the highest offer, but it the differentiating story, the connection to the community, all of that stuff really mattered. And then the rapport that he'd built with the former owner was one where she was like, You're the things that I would fix if you came in and this is gonna build you value. And and most, I would say most business owners that they're surprised one when they when they go talk to a broker and the broker says, I can't sell this. And then it's a matter of okay, can I get to some sort of exit plan, or do I need to shift my internal view of when the horizon was when I could do this, so I could still get value out of it. And then how do I do that? And then quite frankly, coming into the process, and you know, this is also challenging sometimes, is that with with realistic expectations of valuation, so that then someone can actually buy your business. So if you overvalue your business, no SBA, and part of the reason we use the SBA is that it gives you a conservative valuation for the business based on actual market metrics versus emotion. And so when we go to the, you know, we work with the three largest SBA lenders in the country, and they usually them plus local banks will do an evaluation. They're almost all within like $500 of each other. Right. And so it's like the they give it to the owner, and sometimes the owner is like, well, that's I was told I was gonna get 8x or whatever for this. And then that's great. Now you're gonna wait, and eventually you're gonna become unsellable to an individual. You're gonna have to sell it to an uh to a institutional investor. You may or may not get the money that you want from it, and you're definitely not gonna get help from them to be able to help you sell this. Uh, but we want to be able to meet them in the middle and say, hey, the goal is for us to steward your legacy. It's not for us to just turn it over, turn the keys, and start making money out of your, out of your, out of your legacy. But it's actually to continue to build your legacy because that's what we do in the military. Like the military's been around for a while. Um and I, as they say, I'm completely replaceable. All of us are replaceable. But when we lead, we also lead with the consideration of the person behind us, succeeding us. So we know that there's gonna be 10 priorities and there's gonna be about 50 that are gonna come along the way, and we're gonna get to about three of the ones that we actually thought were important when we got there, but that through humility and through the ability of wanting to steward something for someone else, you'll tell the person after you. And a lot of times it's you know built within the process then that we will elicit the information from the person leaving, saying, Okay, what is what you know, what are the skeletons in the closet that I need to deal with that uh that you weren't able to get after? And hey, this. And so it's a great way for I mean, veterans, I think, especially comparatively speaking to some other maybe intended buyers or the communities that they come from, I think are are very good at building rapport with people that do hard work. Right.

SPEAKER_00 30:38

So tell me how a veteran engages with you. What's the best way?

SPEAKER_01 30:42

Yeah, so I mean it's uh it again, it's either sort of side, either the sell side or buy side. And then contact us through the website. Uh there's literally seller link, buyer link. You come in, we do an intake process where we validate that someone is a veteran or military family member or service member. Um, and then we get them to an interview. The interview then does an assessment to determine how ready they are to potentially buy something, and then we give or sell something. And then from that, we then either on the on the buy side, we get them to modules that we believe are gaps that they have uh to be able to prepare them to go to market. And then once they're finished with the modules, then we do a buy buy box exercise with them. And then that comes with an interview and also a evaluation of the buy box exercise. Sometimes it's great. Sometimes we're like, hey, go back and do some work because we're not gonna go to market with that because you're not gonna be able to buy anything. Uh, our goal is to be able to present prepared buyers to the market on the buy side. On the sales side, it's you come in and we triage you to determine is it 18 months or less, then we got to get you out to a broker ASAP, um, figure out if we can get you sold, uh, try to get you as much information as fast as we can. Um, but ultimately leveraging our networks, whether it's TransWorld, Sunbelt, Murphy's, whatever, the major ones, and then some of the independent brokers to be able to be like, boom, you need to get out quickly to be able to start getting these things together. If they have a little bit more time, you know, less than five years, then we would typically say, hey, we have a big network of CEPAs across the country through the Exit Planning Institute. We're gonna get you out to one of those. They're all vetted. Um, and then from that, they're gonna start helping you prepare to exit your company and you're gonna get a higher valuation. If they have a little bit more time, which is ideal, then they come into our program and then we educate them through the modules that we have about selling your business so that they understand that they may need three attorneys, um, which shocks people. Like it was it's one of my most fun things to talk about with veterans is that like, oh, I'm ready to sell my company, right? How many attorneys do you know? Like, well, I have one. I was like, Yeah, you need two more.

SPEAKER_02 32:48

What kind of attorney do you have?

SPEAKER_01 32:50

They're like, Do you have an estate attorney, a tax attorney, and an MA attorney? No. Well, then you're probably losing value somewhere. Right. Because none of those things should do the other thing. Right. And if they're saying that they can, then it's probably the not the right attorney.

SPEAKER_00 33:04

Right. So it's a great process. I tell us about owners and honor. You know, what are your future plans? Like how, you know, what are you looking to do? Grow, keep it.

SPEAKER_01 33:13

Yeah. I mean, for us, it's really, you know, we're looking at um partnerships with institutions. So like the SBA, Small Business Administration. So there's uh the original creation of the Small Business Administration in 1953 was specific to help veterans actually buy businesses and it drifted over time, which is why the veteran business outreach centers were created. So the goal, I think, really for us to be able to work within the SBA system is that to make sure that the veterans of the 300,000 businesses that are veteran-owned businesses over the next five to seven years that are exiting, that they have an avenue of education. Because right now there really isn't one. And that's free. And so making sure they get the education for free and then get them out to someone who's vetted who's going to be able to help them that we could trust. That then we could also hold accountable. Um, and then second to that is really to coalesce around some of the financial institutions, really. So I just was at the global uh Milken Conference and talking about the gaps of financing some of this stuff. So if we want to really meet the need, uh again, going back to the foment of democracy being a dispersed ownership class, then the best way to do that is to be able to close some of those capital gaps. So one is in the businesses that can't get traditional financing. So, how do you find impact funds or SBICs that are interested in being able to help us with diligence, help us do things that are going to be probably much more in depth and much more like a private equity firm than something else? And then the second gap is really that $5 million to $25 million range where an individual can't buy it through an SBA loan anymore. So who's their partner? And if they don't get a partner and it's not, you know, still a veteran-owned business or a service-disabled veteran-owned business or woman-owned business or a minority-owned business, they're going to lose valuation of the business typically because they have contracts that are tied to those certifications. And unless they sell it to someone who looks exactly like them, they're going to lose them. So our goal is to be able to prepare buyers to be able to be the 51% owner, but then also develop the network to then have investors be able to come in with non-predatory terms that we understand to then ideally maintain ownership within the veteran community. And also, you know, help support defense, you know, companies that are required for the significance of the national defense or critical to national defense.

SPEAKER_00 35:36

That's great. I mean, it seems like a lot of what you do is trying to assess the risk and trying to minimize it for people.

SPEAKER_01 35:44

Which is quite frankly what being in the military is. Yeah. So it's like, hey, you know, not to bring up anything too political, but like Iran, like in it's for us, it's not a political thing.

unknown 35:54

Right.

SPEAKER_01 35:54

It's a this is how we this is how we can win. Right. And do we want to or do we not want to assume the risk to be able to to win? Right. And that's fine. At the end of the day, we're gonna give the best advice possible to mitigate risk and be successful.

unknown 36:08

Right.

SPEAKER_00 36:09

Yeah. It's uh it's a business. It's a business at the end of the day. And and and this is a business. And uh and so why nonprofit?

SPEAKER_01 36:19

So a couple different reasons. One, there's a tax advantage. Okay. Uh so sure. Um when I was at Duke, one of the things that we're asked to do is to create a thesis of how do we do well by doing good, or how do we do good by doing well? Say it backwards. And uh one of the things that I noticed is that it's really difficult for veteran nonprofits, and there's a lot of wealth right now within veteran nonprofits that's sort of being held because of the fear of emotion, of the sick cyclical events of emotion that great, you know, the big ones that are helping disabled veterans or wounded veterans are getting a lot of capital right now. But when we're not in a shooting war, they tend to starve. And so they because no one cares anymore. And so it's the how do you create a revenue generating form to be able to then have it be self-sustaining? So for us, one of the big tax advantages is that during the um during the uh 20% capital gains exposure, one of the best ways to be able to mitigate that is by donating to a nonprofit. Typically in the past, it's always been given to an endowment, like a university endowment, some other thing with DAFA, and then the DAFA you know distributes it, however. If the buyer or if the seller distributes it to us as common shares, then we can hold up to really quite frankly, up to five 10%, but we only hold up to five. And then that can then be sold back to the buyer at cost of sale. So it ends up being that the buyer doesn't have to come up with quite as much capital. When he does have more cash flow, he can then buy it back. And then in the meantime, it creates an evergreen cycle for us to be able to continue to pay people into the future. So that long term, you know, ultimately we're still a charity. Um, so we still do fundraisers, we still connect to the community because I think that's incredibly important. Right. Because most of this stuff, and you would probably attest to this, like business buying is community buying. And so if you can't commit to a community, then you're probably not the right person for the community. And I think that's big, a big problem coming from the aggregation is you're getting a lot of people from not from the community making decisions in a community, and it frustrates, I think, a lot of Americans. Um, but uh, and that doesn't matter where you're from, San Francisco, Cincinnati, it doesn't matter. Everyone's frustrated with somebody not from there making decisions. Um, and so the uh, and then you know, from that, then we have the ability to to self-fund and long term uh you know, be able to really align things values-wise. So I think as a private company, of course, you want to be as transparent as possible. As a nonprofit company, you have to be transparent. And so, and so for us, I was like, I think that's one of the biggest factors coming into this is that we need to develop trust and rapport. And if we are giving people the sense that we're doing something that is hidden, then we're not gonna be able to do that. We're not gonna be able to do it as a legacy company for a long period of time. Like we have to be able to be have our bedrock in trust and and accountability. It's great stuff.

SPEAKER_00 39:18

I I really want to thank you for coming in today. I mean, it it's it's fascinating. And uh it's a great model. Uh obviously, you took your your operational knowledge that you got from the military, your smarts that you got from Duke and from Accenture uh Arthur Anderson, sorry. And then and then uh applied it to the nonprofit world, which is fascinat fascinating, and our our industry as well. So I I really appreciate you coming in. What's the best way to get in touch with you if somebody wants to learn more about owners in honor?

SPEAKER_01 39:54

Yeah, so it's our website, which is ownersinhonor.org, uh, or reach out to me on LinkedIn. I'll do my best to get back to you directly.

SPEAKER_00 40:02

Yeah. Well, you do a good job of that. Thanks. And I appreciate you coming over here today. Thanks for all you do. Thanks for your service again. Really appreciate it. Yeah, appreciate what you do too, Andy. Thanks. Thanks. All right, everybody, owners in honor today. Uh, don't have my coffee mug, but uh certainly uh look out for ownersandhunters.org. Check them out, give a donation, support the cause. Thanks, everybody, for coming.