Episode 225: The Silver Tsunami

When you hear the statistic that startups in the United States have a 90% failure rate - what thoughts come to mind? Does it deter you from chasing your dreams of becoming a business owner or entrepreneur? 

On the other hand, Matt came into business as a private equity investor with a firm belief that buying a business is a better strategy than starting one. 

Furthermore, the process may not be as strenuous as one may think - but where do you start? 

Tune in to episode 225 as Matt speaks to how useful the SBA can be along this journey, discusses the flexibility within acquisition criteria and much more! 

For more information:

Website: mattbodnar.com

Transcript

SPEAKER_02 0:00

So before sitting down with Matt, if you would have posed the question to me, what do you think is easier, which would you prefer? Buying a business, starting a business, I would definitely tell you starting a business. I started my own business. We've almost been going for six years now, but I've really thought that there were a plethora of things, both at face value and behind the scenes that went into buying a business. Well, after sitting down with Matt, he will confirm that it's not just as easy as one, two, three, but it may be a lot easier than what we think from when it comes to taking advantage of the SBA loans and just different offerings and resources that they have to really getting down to the nitty-gritty of what MA is. And I'll let you tap into the episode to figure out what that acronym means specifically. But Matt, being a private equity investor, was able to get into all the ins and outs of how he not only buys these businesses, but then how he continues to help them scale and get success just the same. So without further ado, I'll let you formulate your own opinion, but I have mine now. Enjoy episode 225, The Silver Tsunami. What's going on, everybody? Welcome back to another episode of the Down to Business Podcast here with Tamar Turner. So look, whenever you're coming across this episode and listening to this, you it may be a random day of the week for me, for Matt right now. It is Friday. So one, I have to give a big shout out for him taking the time on his Friday when most people around this town will probably be starting their weekends, probably be getting into their extracurriculars or just rest and relax and catching up from the week. Matt is on here talking to me. So I feel very, very special for that because he could have been doing a million different things right now. But very excited for him, man. Very excited. We were just breaking down some things pre-conversation. And so I think, not even think, I know for a fact that he has a lot of value, one to deliver and to bring here today. And he may even teach you a thing or two about an interest. So before we get into some things, before I just let Matt take over and really tell you guys why he's here, everything that he does. Matt, how you doing today? How's everything on your end?

SPEAKER_00 1:58

I'm good, Tamar. It's great to be here. And uh yeah, we're uh we're both uh work burning the uh not quite midnight oil, but the late Friday oil here uh to record this. So I'm I'm honored to be here and I'm excited to jump in and uh uh look forward to chatting.

SPEAKER_02 2:14

Absolutely. And thank you as again. Again, just thank you for taking the time for wanting to be on the podcast for everything and just for the you know, you worked with me through some rescheduling and just some miscommunication and things like that. So I really have to just appreciate your flexibility in that regard. So now, the most important part, why we are here today. So, look, I know that we're gonna have some people tapping in from my network, the down the business podcast side of things. I know we're gonna have some people tapping in from your network, from your side of things, but we're also gonna have some people tapping in who may know nothing about either one of us. And those are arguably my favorite type of people because we love newcomers. We love them, we can we can give the breadth of knowledge to different people and let them kind of go off and see what they do with it from there. So, but I love the fact that people, you know, I want to bring everybody on the same page. I want to bring everybody up to speed and put them on the same playing field. So, in order to do that, I just need you to do two things for me. One, tell us a little bit about yourself, and then two, just tell me what brings you on the Down to Business Podcast today.

SPEAKER_00 3:07

Awesome. Well, Tamar, thank you again for having me on here. Um, quick background on me. So I'm basically uh, and and I almost don't like to use this word because it often has sort of Darth Vader connotations of kind of like, you know, cue the empire music, but I'm a private equity investor. So what does that mean? Um, really, the the simplest way to say it is that most of my focus and time and energy is on buying businesses and and growing the companies that we acquire. Um, and you know, I can tell you all about sort of why I think that's a really compelling uh strategy for folks to look at. And especially in today's world, um, you know, if you think about starting a business versus buying a business, uh, I personally am a huge believer that buying a business is actually a way better strategy than starting one for a whole ton of reasons, which we can unpack to your heart's content. Um but to me, fundamentally, uh what I do is look for companies to acquire. And in, you know, especially now, there's this thing if you play around in kind of the uh the uh acquisition world or the MA world, um, you'll hear this term, the silver tsunami, which talks a lot about all of the baby boomers that are retiring. And and the math around it is pretty nuts. But the the short version of the story is as a result of the baby boomers retiring, which about half of the businesses in the United States are owned by baby boomers, right? So there is going to be millions and millions of businesses that are sold over the next 10 to 20 years. Uh and a lot of them not necessarily sold by choice, they'll just have to sell as baby boomers reach you know their 80s, 90s, and beyond. Um, and for better or worse, a lot of people don't, you know, don't have any sort of succession plan. They're oftentimes their kids don't want to take over their parents' uh, you know, machine shop and they'd rather uh be a TikTok influencer or whatever. And so there's tons of these companies that really don't have uh a home, for lack of a better term. And our our thesis, our approach, our strategy um is to find those opportunities and provide them with a path to you know taking care of their customers, taking care of their employees and their stakeholders, and having an alternative strategy to just saying, hey, you know, we don't really know what to do, we don't have a succession plan, and so we're gonna ultimately close this thing down. So that's really what I do at the end of the day is I look for an interesting companies to invest in or acquire. Um, and uh, you know, my current portfolio is a whole spectrum of things, ranging from uh I've got a manufacturing business, I have a distribution company that uh distributes material handling resources, I've got a staffing agency, software company, an IT services firm, and a few other kind of miscellaneous investments. And so I look at all kinds of different stuff and lots of different business acquisitions. Um, but to me, really, you know, what I want to come and talk about today is uh, you know, I'm a huge believer that buying businesses is a really cool sort of alternative strategy to uh entrepreneurship that a lot of people don't think about, right? And you don't have to be some, you know, big private equity, you know, New York, whatever. And I'm based in Nashville for what it's worth, not New York City, but I did work up there for a few years. But you don't have to be some big Darth Vader private equity firm um to buy a small business. And there's tons of them out there. As I mentioned, millions will literally be hitting the market over the next 10 or 20 years as the baby boomers continue to sort of march towards retirement. And um, there's tons of opportunity out there for folks who are interested in small business acquisitions. And so um, you know, that's something I talk about, write about, you know, on LinkedIn, and I have a newsletter that, you know, I share all kinds of things around sort of buying businesses and how to do it and how to fund them and all that stuff. But really, I just love talking about it. I've been doing it for almost 15 years, and um, you know, that's what uh that's what I wanted to come on and and chat with you about.

SPEAKER_02 6:51

A lot to unpack there for sure. You answered some things along the way, but you definitely piqued my interest and my curiosity with some things for sure. So I suppose, well, first and foremost, what does MA stand for?

SPEAKER_00 7:03

Mergers and acquisitions. It's just a fancy, fancy way of generally saying buying businesses.

SPEAKER_02 7:09

Buying businesses. Okay, gotcha. All right. So when these companies particularly, as you said, this boomer generation getting to the point where you know they're no longer in position to what they feel sustain the business. As a as a business owner, as someone who has seen success like that, as someone who is now kind of on the brink of trying to figure out the next steps for their company, what options are there really, besides, you know, as you said, just kind of shutting down if they do go the private equity investor route, if they so choose to do that. But for the average, like I, because I kind of think about, you know, my podcast or just my nonprofit that I want to start and things like that, and that eventually these will get to a point in time where I no longer just have the capacity to, or I may want to step away from it, or I may want to do whatever, whether I built a team at that point or whether it's still just me. Now, I hope when I get to that point, it's still not just me. But for for those people who are in that position, who come to that kind of that bump in the road, what what options do they really have instead of just really calling it quits, giving it all up? Are there a lot of things out there?

SPEAKER_00 8:08

So it varies tremendously by what I would say generally sort of the characteristics or the quality of that particular business, right? And so if if we look, if we zoom all the way out, right, and you mentioned, you know, podcast is a great example of this, but there's many, many, many businesses that'll fit this criteria. If you look at there's probably 33 million businesses in the United States as a whole, right? And about half of those, so call it 16 million, are owned by baby boomers. Um, but of those 33 million and change, and like the numbers vary a little bit, but you know, depending on what source you look at, that's sort of an amalgamation of like looking at the SBA and a bunch of other data sources, because private company data is not the easiest to find. But of those 33 million, uh, ballpark, 27 million of them. So I don't know exactly what that percentage is, but the bulk of them are what what they call sole proprietorships, right? So what is a sole proprietorship? A sole proprietorship is basically a business that has one person, right? One employee, or you know, not even one employee, just one person is the entire business, right? And so um, you know, the vast majority of companies fit into that bucket, right? 27 out of 33 million. Um, and most sole proprietorships, as you kind of hit on, um, don't have a lot of the infrastructure or resources to even sell their business at all, right? So if somebody, um, I mean, I'll give you a bunch of examples, but like if somebody's uh, let's say their whole business is that they're a public speaker, right? And they go out and they speak and you know, they teach and all that stuff. Well, when they stop speaking, what is the business at that point? Right. And and in the private equity world, uh, a lot of times we call those businesses dancing bears, which means that as soon as the bear stops dancing, the money stops coming in, right? And so uh dancing bear businesses in particular, or said another way, businesses that don't have any uh sort of replicatable systems and processes, they don't have any employees, they don't have SOPs and checklists, they don't have anything that's really transferable value, those businesses typically have very little value, right? Like a buyer and the vast, vast majority of those are going to close down and never sell, right? Just because there's not really anything to sell. And so um, if you have a sole proprietorship, the question you got to ask yourself is how do I avoid that outcome? Right. And there's lots of different ways to avoid it. Um, the, you know, one way you can avoid it is is even if you don't improve the business at all or change it, you can pursue an exit strategy or a deal structure that might still be able to harvest some value. And I'll give you an example of that in a second. But beyond that, uh, you could also think about how do I actually build uh a business that has some transferable value, right? And so what does that mean? It means it has systems, it has processes, uh, you know, maybe it has uh, you know, either employees that can do certain parts of the business activities or you know, systems that can execute a lot of the business, that makes it much more valuable, right? So if we extrapolate that all the way out to the the far end of this the curve, if you think about like a public company, right? Like if you were to buy shares of Amazon or Nike or something to that effect, right? Like you're an owner of that business in some sense, uh, you know, that's you're like you're a shareholder of that company, uh, but you don't have to do anything, right? Like you could go buy a bunch of shares of Amazon and sit on the beach, and if you had enough, just the dividends and distributions or whatever. I don't know if Amazon actually has any dividends currently. So take that with a grain of salt. But like, you know, you can buy, there are certainly lots of companies out there that do have dividends, right? Um, and you can go buy public company stocks, and if you had enough of them, you could live off the dividends and not have to do anything. So that's the way extreme of those businesses are so professionalized, so systematized that uh you can literally be a hundred percent passive owner, right? And then there's this huge universe of businesses in between that range that whole spectrum. There might be business owners that spend uh, you know, five hours a month on their business. There might be business owners that spend 10 hours a month on their business, there might be, and then there's business owners that are the entire business. And so that whole big spectrum of business types vary dramatically in terms of what kind of exit potential they have. And I I'll I'll stop talking here in a second. But one thing I mentioned is like there's certain deal structures that you could think about um for selling a business if you if you're looking to sell it now and you don't have the luxury, because one of my favorite quotes is the best time to sell like if you want to sell a business, the best time to start getting ready for that is like years before you sell it, right? If you if you want to sell a business starting right now, you're way behind the eight ball. There's lots of stuff you could do to make the business more valuable in a couple years that you should start doing now so that you can ultimately exit it. So um, if you if you had a sole proprietorship, you wanted to sell it today, what would you do? The best way to extract some value from that is to figure out a what I would call like a creative deal structure where you could effectively do a revenue share or something like that with the buyer of the business where they're not taking a lot of risk, but you hand the opportunity off to them. So what would that look like? Um, you know, I was talking to somebody the other day who uh they had a friend who was a dentist, right? And they were closing their dental practice down. They were just kind of a sole proprietor, one person dental business. And, you know, they were like, hey, I'm gonna retire uh and just close down, right? Okay, well, what happens to all your patients? Right. So instead, they convinced them to go to another dental business and say, hey, I will refer my book of business into you. And you, you know, let's figure out a relationship where you pay me, you know, whatever 5%, 10%, 20% of the billings you generate off of this book of business over the next two or three years. And it's a win for both parties because that person goes from shutting their business down to maybe getting some money out of it over a couple of years. And the other business, let's say they have a 20% margin on a given customer, if they pay 10% of their of their revenue to the, you know, the person who referred that business to them, that's effectively found money for their business. So it's sort of a win-win. That's a really small uh microcosm or a really small example of like how some of these creative structures, which can work at much bigger scales too, can help unlock value for both parties. So that's a long-winded answer. I don't we probably went in a few different directions than you originally intended, but high level, that's how I think about some of that stuff.

SPEAKER_02 14:22

Nah, all good. I don't, I don't ever feel like it's always funny to me when uh the guests kind of uh want to like feel like it may have been too long or too short or anything like that. Look, this is for for for y'all and for and for the audience, you know, I don't I hear myself talk enough. I'm my head is always just moving in grooving. So now if anything, I want you to talk as much as as else as as often as you can. Perfectly fine with that. But I also do understand that answer to and with that, how depending on the industry, depending on you know the scalability of said business, and depending on just the arrangement of everything, how you have that, because uh you you broke down such a simple example with the dental practice, and I didn't even think about something like that. You know, how you could really just pass off that clientele, pass off those referrals, which practices are looking for all the time anyway, and then you just take a slice of the pie, you just take a piece of the pie over a set amount of time, and then you're good to go from there. So that that's very interesting, and I think it it even begs the question and the curiosity of, you know, again, about just taking advantage of all your resources and taking advantage of what's out there and asking those proper questions because a lot of times, as you said, especially with the baby boomers generation, they're not as, you know, they weren't the ones that were so gung-ho about the business ownership world and the entrepreneurship world and everything like that. But as you said, a lot of them were the ones that are kind of in it now, that are doing things that have kind of worked their way up, that have had these long tenure careers and everything like that. So looking to kind of move and groove in another direction. To be a private equity investor, do you have to, is there a certain type of like licensing or certification process? Did you have to study something specific in school? Like with my background in communication and journalism, sports and everything of the sort like that. Could I then, you know, I'm interested in this episode? I came across it, I'm I hear you guys talking, and now I'm saying, wow, well, I actually have some friends of mine who, you know, we want to invest and we're gonna want to go into some sort of business or venture together. I think that this would be great. None of us have experience in what we would think to be like capital management or funding or anything like that or finance in any, in any totality. Are we just completely disqualified from this, or can we are there workarounds to that? Ultimately, what do you need to, I guess, become what you're doing right now?

SPEAKER_00 16:30

Yeah, well, I think there's a couple uh sort of layers uh to the answer that question. The regulatory or like licensing layer is pretty simple. You don't need any any meaningful sort of licensure. I mean, you need probably a business entity ultimately, but that's like a couple hundred bucks to set up here in the States, right? So um, you know, you don't need to be some sort of licensed professional to buy a small business, right? And and in fact, thousands of people every day in America buy small businesses without any kind of, you know, they don't need like a Series 7 license or all these securities things. Now, if you're a registered broker dealer and you're, you know, buying and selling securities and all that kind of stuff, sure, you need some licensing. But um to buy a small business, right? Like, I mean, if you were to go, let's say you found uh a blog, right, that sort of related to um the topics of the down to business podcast, right? Or maybe it was like a subsection, you're like, hey, this audience for this blog would be perfect for uh for me. And that blogger makes $3,000 a month, right? Of of ad revenue or whatever, right? If you were to strike up a deal with them where you took that business over and you paid them, you know, I don't know, 30 grand for their blog, right? And you figured out, hey, if I bought it, it's gonna add this much revenue to my podcast and it's gonna bring in this new, you know, opportunity for sponsorships and it's gonna add to my email, like all this stuff, like that's private equity, right? I mean, you're buying, you could buy a Facebook page, right? You could buy a podcast, you can buy a pet store, you can buy anything and everything. So I think that's why I said at the beginning, like, I don't like the term private equity because it's like it's really loaded phrase that comes with all these connotations that I think are way beyond um the scope of like what a lot of small business entrepreneurs and investors do every single day, which is like you can buy a business. One of the great things about living in the US um is the the this thing called the SBA 7A loan program, right? So it's like the small business administration here in the US provides incredibly attractive financing for small business purchases. Um and they do that to encourage small business ownership, right? Um and so 10, 20 years ago, you didn't have to be sort of a, you know, a well-heeled like Wall Street private equity executive to buy a business, but it sure helped a lot in today's world over the last 10, 20 years, the democratization of buying businesses has has really accelerated. So between the SBA program, um, there's this whole sort of community or ecosystem of folks uh that in the searcher world. So you might hear that term searcher, like self-funded searchers or funded searchers, are like people who are actively out there just trying to buy businesses. There's like this whole ecosystem of websites and blogs and all kinds of stuff in the searcher world that didn't exist 10 or 15 years ago. Same thing, there's another um uh another word you heal a lot of times, which is uh ETA is sort of the acronym people use for it, but it's entrepreneurship through acquisition. And the idea is again, is you can go start a business, right? And like um, I'll give you a little case study here that will kind of illustrate this to some extent. So um you can go start a business and you can bootstrap the start of a company, right? Like you don't have to go raise hundreds of thousands of dollars of investor equity and do all this stuff. Um, you can also, you know, it's difficult, but it's possible to buy a business without any capital invested, right? With the right deal structure. We in fact just talked about an example of somebody buying a dental practice without putting any money down to buy it, right? So, and I can give you tons of case studies of deals like that that I've done and I know other people who've done. But suffice it to say, it is possible, though not the normal case, that you buy a business without any capital invested, right? Um, so I'll give you an illustration. So you can start a business without any capital, you can buy one without any capital. But generally, in most cases, an average startup will have some investor money in it. And an average business acquisition similarly will have some investor money in it, right? So if we just use the placeholder of like, let's say $300,000 of capital that was raised, right? Whether that's seed capital for a startup or equity capital for a for a business purchase, right? In either of those scenarios, if you took $300,000 from either your bank account or friends, family, whatever, everything you could kind of raise, um, what do you get in both of those scenarios by putting $300K on the table, right? So if you're doing a startup, let's say you go raise 300k and spend it, what's the you first of all, startups have a 90% failure rate in the US, right? So uh there's a high probability that it's gonna implode. But even if it doesn't, uh what's like a best case scenario for a startup that's raised a couple hundred grand, right? So you have to start, you have no customers, you have no revenue, you have no product, you have no product market fit, you don't even know if what you're building your customers are gonna actually want. And so, best case scenario, 300 grand buys you what, a year or two, maybe three years, depending on if you have co-founders and you're paying yourself salaries out of the business and all this other stuff. So at the end of that, you might have a half-baked product, you might not even have a product built yet. You might have best case scenario, a couple customers, you likely probably don't have any customers. You'll have like maybe best case scenario, a couple thousand dollars of revenue. You might not even have that, right? And many, many startups have raised that much money with absolutely no revenue. And you may have a couple customers, you may not. You may have a couple employees, you may not, right? So, versus if you take 300k, um, use The SBA program, the SBA will give you 90% of the purchase price of a business that you buy, right? So in that scenario, you can take 300K and you can borrow, let's just make it easy, uh, $2.7 million to buy a $3 million business. So what does $3 million get you if you're buying a business? Well, uh, it varies a little bit, and we could talk about business prices and stuff, but back of a napkin, um, you know, a business doing, let's say, $750,000 a year of profit priced at a four times multiple on earnings would be worth about three million dollars. So $750 times four equals three million, right? Just basic math. So you could buy a business that's making $750,000 a year for the same $300K, right? And so what does that look like? Um, obviously it depends, and every business is different. But if a business is operating at like a 20%, 25% profit margin, it's making $750K, it's probably doing three or four million dollars a year of revenue, right? Which means you probably have like 20 or 30 employees, which means you probably have hundreds, if not thousands, of customers, right, already. Um, and you already have product market fit. In fact, the company might have been around for 10 years, 20 years, 30 years. It has a presence in the market. People know it. People go there and they buy, you know, their garden hoses every quarter, or they go buy their hats there, or they go buy, you know, their whatever, their medical supplies there, whatever the business is does or sells, you already have people who know, like, and trust you and do business with you. So for the same dollar investment, you can either have a business with effectively no customers, no revenue, no product market fit, no employees, or you can have a business with millions in revenue, hundreds of thousands of dollars a year in profit, 10, 20, 30 employees, hundreds of thousands of customers. And the crazy thing is, a lot of those businesses are also massively underoptimized, right? So we talked about 50% of the businesses in the US are owned by baby boomers. Okay. Well, many of these baby boomer business owners have done virtually nothing to improve the quality of the business, right? In fact, if you're making 750 grand a year and you're 70, what you're not gonna go figure out social media marketing. You know what I mean? You're not gonna go figure out, you're not gonna go aggressively staff up to try to conquer a new market. You're you're just gonna cash your checks and like live your life, right? And so, uh, I mean, we've bought businesses, like I bought a couple of years ago a 51-year-old company that the entire business, they were doing three or four million dollars a year of revenue, very similar kind of characteristics to the whole thing I just described. Um, their entire marketing budget was a TV commercial from the 90s that didn't feature any products that they sold, right? So we said, hey, instead of spending our marketing dollars on that, we're gonna cut that and we're gonna spend it on digital marketing, right? Not rocket science. Hired an agency to come do digital marketing, 30% revenue growth year one, right? So um for the same spend, we didn't increase it, just the same amount, we just repurposed it. That same business, the entire company operated with pen and paper like sheets that they would hand fill out and like stack them up and like pass them around and stuff. We digitized all of that stuff, right? Which made the business way more efficient. So it's like not only can you get way more bang for your buck using things like the SBA program, uh, but you can take all of that like the you can take all of that kind of entrepreneurial energy as a younger business buyer and contribute it towards building something. And instead of starting from scratch and like clawing your way to a couple hundred, you know, a couple thousand dollars of revenue and then tens of thousands of revenue and then a hundred thousand dollars of revenue, like just start with a couple million and go from there. It's a whole lot easier. So that's my that's my theory about why I think buying businesses is so much more interesting. Um, and you know, you don't have to, um, you know, you don't have to go use the SBA program and all that stuff, but I just think it's uh it's a really compelling um vehicle for entrepreneurship, for value creation, for all that stuff. And, you know, if you if you live in Germany, the SBA program doesn't exist, right? So like being in the US, I think we're uniquely advantaged that we have this program. Uh some ext to some like looking at it in a different way, it's basically a government subsidy that makes it cheaper and easier for entrepreneurs to buy small businesses. And all the people taking out SBA loans, like in fact, you will get disqualified for an SBA loan if you're like some big, you know, institutional private equity firm. It's for individual business buyers, not for big institutions. And so it's designed specifically for small business buyers. Uh, you know, I mean, you need to like qualify for that loan, right? So, and there's I I mean, I'm not like an SBA expert, and there's certain things you have to do there. So, coming back to your question about licensing, like there's some things you need, um, but you don't need to be like some, you know, you don't need to have a a degree from Princeton um to go buy uh you know a local um you know machining business, right? Like whatever, like you can, or to buy a podcast or a website or any other small business.

SPEAKER_02 27:23

I think now I'm gonna just have to be like Thanos and just start collecting podcasts like on my like on my globe now and just you know, yeah, there you go. Build a media company, right? For sure, for sure. Okay, so the the more the more you talk, the more interested I get, man. This is just so cool. And it's it's really timely because I was actually just talking to this with a few of my friends who we eventually want to go into business together, want to adopt and explore different ventures and things of the sort. All right, when well, before I get to that, let me talk about this. Earlier in the episode, you talked about the plethora of businesses that you have within your portfolio, you know, just different niches, different industries, and everything of the sort like that. For someone like myself, let's just say, after we get off this call, I just decide, hey, let's let's do it. Let me pull up the SBA website. Let me and no, for those of y'all who are not too familiar with the SBA website, I'm not no expert or no guru, but what Matt is saying is definitely true. There are so many just options and resources to exhaust when it comes to funding and just man, they have something out here for everybody, and you would be surprised until you really read it that sometimes the criteria is very null, it's very nothing to it, and the money is just there for you. So I definitely encourage you, you know, to take advantage of that, definitely be diligent and intentional with it, and it could definitely be a uh a resource and a benefit to you and your business. Now, with the plethora of businesses that are in your portfolio currently, for myself, for someone who may not necessarily know, okay, where I want to start or what field I want to be in, or where necessary, you know, I know that I'm based in Tampa right now, but I know that I'm leaving soon, and so possibly I don't want to acquire things where I'm not at per se. Now, is there like a database or is there like a website or is there like a Google search or something that you can do to find these businesses? Like, how do you know what businesses are kind of on the brink of exiting in a sense? How do you know kind of what's going out there? Is there like a system? Is there something that you use? And then I would guess the the second part to that question is are you, and this may this may just be specific to you, but I'm very interested with private equity, with investors, with people who are buying businesses, do you find the commonality of them sticking to the area that they are? So is a lot of your portfolios a lot of what you're doing within Nashville in the Tennessee area, or does it kind of just depend on, you know, where it is after you kind of make sense of things, weigh out the pros and the cons?

SPEAKER_00 29:42

So these are big questions, and there's the the answers are like quite lengthy potentially, but I'll answer the questions in reverse because I think it's easier to answer the second one. So the short version is your the the fancy term we use for it is like your acquisition criteria, which is just like what kind of deals are you looking for? It can be whatever you want, right? It's a choose your own adventure. So like I personally try to find stuff that's somewhat close to me geographically, just because I don't want to fly to California for a deal, right? I'd rather have it be local if I can. But if I'm hunting mostly locally, that might constrain the types of opportunities. And maybe I need to be more flexible about something like looking at different industries, right? Whereas some people might say, hey, I'm only looking at IT services businesses and nothing else. In that case, and and typically you'll also see uh like a size criteria, right? Businesses, I'm only looking at IT services companies that are at least five million of revenue or whatever the number is. In that scenario, um, you know, you might have to be a little more flexible in terms of geography, right? Like you might have to say, hey, okay, well, in that case, I'm looking across the whole country because I need to have enough deals for it to make sense for me to find a deal that's really a good fit. So uh your acquisition criteria is very fluid. It it's you define it, it can be whatever you want. There's people who focus on the geography, there's people who focus on industry, there's people who focus on um even like neither of those things, but like there's, you know, it's a whole ecosystem and not necessarily one you'd want to jump into initially. But like things like there's people who focus on like distressed companies only, right? So like they don't necessarily care about industry or geography, but what they're looking for is a company that's distressed, and that's like their whole thesis is like distressed investing, right? Which again, that's a way deeper pool that I wouldn't recommend starting in for a variety of reasons. But there, I I share that as an example just to say like people's criteria can vary widely. So the second question you asked is like, well, how do I find deals? How do I find opportunities? There's two big buckets of activity. Um, and and broadly, I would I would also say like if you want to learn more about finding deals specifically, or just like MA as a whole, I write about it, talk about it, I have a free newsletter where I go super deep into the topic. So selfishly, I think that's a good starting place. Um, but beyond that, um like if you want to find deals, there's two big buckets of activity, right? So one of them is broadly what we call on-market deals, and there's lots of these. So these would be deals that are actively being listed by people like business brokers who go out and sell companies, right? So there's tons of these, right? So you can go to uh like a good place where a lot of folks really start kind of cutting their teeth is the website BizBySell. And there's a bunch of these Empire Flippers, Flip Up, BizBy Sell, um, you know, lots of these kind of online business marketplaces. Uh, that's generally where folks begin when they want to kind of start the journey of looking at companies to potentially buy. And you can go on any of those right now and see a huge spectrum of uh deals that are actively for sale, right? The next place would be beyond just what's on market, you can go to the websites of specific business brokerages, which are like kind of like a real estate broker who sells houses, right? There's business brokers who will go, they might have a portfolio of 25 businesses that are for sale, and they go find the sellers and get them ready and take them to market. And, you know, it's a lot easier for you to find those as a buyer. The flip side is if it's on market and there's a broker, there's other buyers looking at it, right? And so maybe it's a little more competitive. Um, but you can go to, I mean, some of the big ones would be uh like generational equity is a huge one. Trans World Business Advisors is another one. Like if you Google those or look them up, you can see they have thousands of listings and you can slice and dice them by geography, size, industry, you know, whatever you want. Like you can look for HVAC companies in Tampa, or you can look for, you know, manufacturing businesses in Idaho or whatever, uh, you know, whatever you want to drill down on, you can find it, right? On some of those big brokerage websites. So that's kind of where to start with on-market deals. Um, but if you want to find stuff that's what we call off-market, so i.e. find businesses that aren't necessarily for sale today, but maybe the seller wants to take it to market eventually, or maybe you can be the only buyer at the table, which oftentimes those are the best opportunities that are a lot harder to locate. Um, and that's really an entire uh, I mean, that's like a whole you could teach a class on how to do that, right? But it's, I mean, it's it's effectively sales and marketing strategies, right? So, you know, I mean, I've I do all kinds of cold outreach, email, direct mail. Part of the reason I like to go on podcasts is to talk about this stuff so that somebody will be like, hey, my uncle wants to sell his business. Um, and I, this Matt guy was like talking about buying businesses. I'm gonna call him. Maybe they bring me the deal, maybe I cut them in on the deal, or we figure out a way to do it together, or I can flip it to somebody else I know, and we can both get a finder's fee. So, like, there's tons of ways to find and source these off-market opportunities. Um, and you know, I like one of the things I have like a free training that's out there for my newsletter subscribers. It's like 23 different ways to find deals. So there's tons out there, and I can throw you the link if we want to throw that in the show notes or whatever. But the short version of the story is there's lots and lots of ways to find deals. Um, and it's you know, it's all about like at least my approach, my strategy. I want to do anything and everything I can to get deals, you know, in the pipeline. Um, because as you touched on, uh it's it's really it's it's a function of like opportunity is a function of volume. It's how many at bats do you have, right? Like you want to take a lot of shots so that you can find the best deals. And then if you do that enough, eventually over time, you'll really set yourself up with some great opportunities. So high level, that's kind of how I think about it, if that makes sense.

SPEAKER_02 35:39

And it's a shameless plug, y'all. I I I uh something I like to do, man. I think ahead on the podcast. I obviously knew that Matt would not be in this industry without having something to offer to y'all. So why not have him plug his side? You know, I'm just Tamar thinks ahead now, but on a very serious note, you know, I would uh I could see how someone who may know nothing about this industry could feel kind of left out in a sense or kind of in the dark and not really know the resources or kind of where to go, or hey, do I just have the word of mouth? Do I just have to kind of walk around? Do I need to be around business owner entrepreneurs? Where do I really get my start with this? So, and I could also, in my head, before I even ask the question, I was just like, you know, I want to make the safe assumption that there are obviously resources out here, almost like a Craigslist or like a Google search or like a YouTube that you can kind of do for just businesses in that regard. But I love kind of how you ended it with the specific deals around, you know, people who may not necessarily be ready right now. Because I think that that's kind of cool too, the fact that you can kind of the fact that you can kind of follow someone along their journey in a sense, and it may even give you more of an inclination into how operations work, into what you can do, into how you can finagle things in a different way. So that way when that time comes, you're that trusted source, you're that trusted buyer, and they would be more than willing to pass things along off to you. Another curiosity of mine comes to the actual buying and then the turnover part. So, and I could imagine that this could vary, and it could be dependent on the situation and how the you know, how said business owner entrepreneur is looking to move away from the business. When you buy, when you take over, when you acquire, are you considered like the acting CEO? Because you know, I heard you mention earlier about how you you took over the company, y'all bought in digital marketing, y'all took out what they were doing, and y'all kind of went from there. So, are there just certain decisions? Do you kind of just become like a C-suite level exec? Are there just decision-making things that you enter on? Is that something that depending on the agreement, it'll depend on your involvement and the kind of the decisions and everything. What does that look like for you when acquiring? How much, I guess, ownership or how much decision making do you have with that?

SPEAKER_00 37:41

Yeah, so the high level is typically we we focus on and look for opportunities that have what like the fancy word for is like we want to have existing management in the business. So um, we talked earlier about like sole proprietorships and dancing bears and all that stuff. We typically don't look at deals that fit that description because they're too small and there's just too much headache, right? And that's why there's not a lot of buyers for those businesses, because why would somebody want to buy your job from you, right? When they could just go get a job and not have to pay you anything, right? And so, um, and I mean you'll see that I I looked at a deal the other day that was um, you know, all things considered, when you baked it in, it was like after you bought it, you could make like 60 grand a year for taking out like a million-dollar, you know, purchase price, whether that's a loan or whether you put it, it's like, or I could just go get a job making 75 or 100 grand a year and not take out a million dollar loan, right? So it's like you don't necessarily want to look at deals like that, but we look primarily for opportunities where there's some management in place. Now we've brought management in the into deals, right? We've sort of brought in, hey, we're gonna bring in this person who's really good at X. They're gonna kind of come with us when we start. But usually we want to see uh somebody in the business, right? So if we're buying a business that has 20 or 30 employees, now the seller might be the kind of, you know, uh the president, the CEO, they might run the business day to day, but maybe they have a right-hand person, or they have two or three kind of talented executives that can kind of carry the torch. Um, or they may want to stick around, right? Maybe they don't want to sell entirely. And this is very common, um, especially for uh in certain industry sectors in the in the private equity world, where a seller will, you know, what they the term for it is like roll equity, which basically means they'll, you know, maybe they sell 60% of their business, but they keep 40% of it in. Um and they keep that in so that if they sell it again in five years, it's worth even more, right? And they call that the second bite of the apple. So it varies wildly, but generally, you know, I don't want to be, I don't want to run the businesses that we acquire. Uh, I want to find a business that has a quality management team in place that can keep the wheels on, answer customer calls, make sure all things are happening at an operational level. And really, we focus our efforts on adding value to that team. So we want to be value added. We want to help them with, you know, hey, we know these five people who are really good at sales, or, you know, this is the team that's phenomenal at marketing, or these guys helped us save $100,000 a year on our freight expense or whatever it is. We want to bring those resources to the table. We want to support them, um, but we don't want to be like calling the shots for them, if that makes sense.

SPEAKER_02 40:22

No, that makes a lot. And I I love that because it was so it's so many different ways that you can go with this. I'm so, I'm like so interested in this right now. Not to say that none of these other episodes were just caught my eye or caught my eye, but I'm literally sitting over here, like I feel myself just getting comfortable because I'm like, wow, like I'm ready to start today, like right now. Like and like I said, the time the timeliness of everything is that we were just talking about this early in the week. So I almost want to say that this interview needed to be rescheduled. It was it was destined, it needed to, you know, I hated to waste the time, but it needed to, it had to be, as we said, but that's so interesting, like just the so many, and I guess it too, your preference and how you kind of move with this will change or kind of alter as you kind of get more experience with things, as you have things that work out, as you have things that don't work out. Because you know, something that I want people to also understand and listen to with this episode is that Matt is not telling you that everything is just gonna be peachy, it's just gonna be a walk in the park, that you're just gonna get on these websites and read his newsletter and go through the videos and you're just gonna be good like that. No, but there are certain things and there are certain trials and tribulations that he doesn't want you to have to go through or just hoops and hurdles that you could avoid. But naturally, it's just gonna come with the business, and it's not even to say that you're gonna follow his exact route. So naturally, if you are even to go another route, there are different problems, there are different learning experiences, there are different things that you even don't know. So I want people to also keep that in mind. You know, we talk a lot about these successes here and what people have done and how long they've been in things, and I think sometimes people don't see the back half of that, you know, for 15 years, for just the struggle of everything like that, to stay steadfast to something, to not always have things you're going your way, to have made mistakes, to have learned along the way, to have, you know, even had some things that didn't necessarily go the way that you wanted to, but nonetheless to still keep the end goal, the mission in mind, and really just want to serve people. So that that this is just so like this is really just amazing, man. Now, when you look at your industry, even as you said, you didn't even really want to put the phrase private equity investors together just because of how loaded it is. What have you found to be some common misconceptions around what people think it is that you guys are really doing?

SPEAKER_00 42:24

Hmm. I mean, I think the biggest common misconception, and it's one that I had for a long time, was I can't do this until I, you know, am a grown-up and I go raise a $100 million fund or whatever the thing is, right? Like I told myself, hey, one day when I we uh you know, when I make it, I want to buy businesses. And what I learned is like, hey, there's this whole ecosystem of resources and people and communities and things like the SBA. And it's like you can actually do it now, right? You just got to think about it a little bit differently and approach it in a different way. And, you know, the whole, uh, you know, I mentioned a couple of these things, but the whole sort of ecosystem of people in like the ETA world, entrepreneurship through acquisition, searchers, like all that kind of stuff. Um that whole ecosystem has massively increased over the last um, you know, five, even like three or four years, definitely five years, definitely the last 10 years. But you know, that stuff didn't used to really exist. And it was just like the wild west of like figuring this stuff out. Now a lot of it's really well defined. And you know, it's something that if it if buying businesses is a topic that's interesting to you, I would say there's never been a better time uh or a better place for somebody who's interested in it than right now, you know, especially here in the US. Like it's just like with between the SBA, the silver tsunami of retiring baby boomers, like there's just a lot of really positive trends right now in that whole world. And like the the silver tsunami, which again is the phrase for like retiring, you know, the wave of retiring baby boomers that's gonna hit the market over the next. 20 years that's not going anywhere for a while, right? I mean, like literally millions and millions of businesses that will have to either close or sell over the next 20 years. Um, and just to give you a sense from like size-wise, currently uh numbers vary a little bit, but somewhere between 20 and 30,000 businesses a year sell in the US. Right. So when you start to add even like a couple hundred thousand dollars of business sales on top of that, it starts to stack up, right, in terms of the opportunity flow. So personally, I've kind of planted my flag and said, hey man, I'm I'm gonna just sit here with a bucket and try to catch a few of these. But part of the reason I, you know, I I like to go and talk about this stuff is like I can only do so many deals myself, and I only want to do so many. Um, and I want to find folks who, you know, bring me opportunities or want to collaborate or want to send me deals or whatever. And so um, you know, that's why I like to go out and talk about buying businesses and and share some of my feedback and perspective.

SPEAKER_02 45:01

We will be in touch for sure. We're already in touch, but we will definitely, yeah. This is uh I I love just the flexibility with this. And I love how, you know, with certain things, with certain industries, with certain jobs, you have to kind of really be tunnel vision. But with this, like, yes, I do think that there has to be a sense of tunnel vision to stay steadfast, to get to that goal, to make sure that you're being diligent with the deals and everything like that. But you can go so many different ways with this. Like you can, you know, as you said, you can really build from it. You can really build, have people around you that really help and facilitate and do and automate and everything like that. And you can really be very strategic with this. You can stay local, you can branch off, you can figure out what that that criteria I think will really depend on where who you are, what type of industry, and maybe even background that you've come from, just the same. I I love this, man. And I'm I'm I'm excited. One, because this has been a podcast of nothing but business owners and entrepreneurs and serial entrepreneurs and creatives. So I could imagine that even as I go through these episodes, there could be some people within there, kind of, you know, thinking maybe even not right now, but as you said, in the future, because it doesn't have to be a present moment thing. So it's always something that you could be working towards, working on, and keep continuing to stay diligent.

SPEAKER_00 46:09

Yep. Yeah, I mean, some of the best opportunities too, uh, usually the best business buying opportunities are not the ones that you go and hunt down, but they're the ones that come to you through your friends, through your network. You know a, you know, you know somebody who's thinking about selling, or you have a friend who you know really is burned out and they're trying to get rid of their business or their podcast or whatever, those are the deals that are the best deals, usually, right? But you have to have your kind of radar on to be thinking about and looking for them. Um, and if you don't, you miss them, right?

SPEAKER_02 46:43

Gotta stay vigilant through it all, absolutely. For before we wrap things up, we leave people with the call to action. We tell them all the places that they can find through newsletter, tap-in, everything of the sort. Do you feel like there is anything that we have not touched on that you want to leave the people with? Whether it be last words, whether it be advice, whether it even could be something that they could look forward to. Because you know, there are going to be people coming across this episode that are following along with you now, that are following the journey, that are tapping into the newsletter, that are watching the videos, the content, everything that comes with it. And they may kind of want to know what's well, what's next? You know, the year is almost over, we're pushing through Q4, like it's no tomorrow. And 2025 is practically here. And we all know most business owners, entrepreneurs, creatives, we're already planned for Q1, Q2 of next year. So is there anything that you um any last words that you want to leave the platform with?

SPEAKER_00 47:32

I mean, I would say if buying businesses is interesting to you, it's probably more accessible than you previously thought it was. And if you want to go down that rabbit hole, come say hi to me. And I'm happy to, I'm happy to lead you deeper into the journey of uh of Wonderland.

SPEAKER_02 47:52

Y'all, if y'all haven't learned something from this episode, if y'all haven't really realized the money-making opportunity that is here, and even I'm talking to my business owners and entrepreneurs and and folks who are always looking for that next venture or that next stream of income or that next, you know, sometimes we like to challenge ourselves and just throw as much on the plate as we can and then complain about it later, you know. But I really do think that there, one, there's a breadth, a breadth of knowledge here. It's just it's a plethora of it. And I also do feel like this could also introduce you and help you understand different niches and different industries and demands and everything of the sort. So I feel like there are a lot of transferable skills with this on top of making money. You know, I I I don't know too many people who have come across this or come across money to be made, and and they're upset about that. So I love that, but I'm very also too interested just to see this is very, as you said, this is not something that's going anywhere tomorrow, going to be here one day, going the next. There are millions of businesses out there, there are millions that are gonna get started. Even I'm curious to see 10 years from now what the numbers look like, what the acquisition rates are like, and what people are kind of doing. I'm curious to see what industries are kind of your top competitors and everything of the sort. So there's so much, there is, as I said, there is no, while there is tunnel vision here, it's more so the tunnel vision that needs to be kept in order to get where you want to go. And not necessarily that once you get in here, you have to do this, you have to say this. No, Matt has clearly shown us that you can branch in different ways, that you can make money this way, that you can do this this way, you can learn this way, you can make deals this way. But it's also about you have to put yourself out there. As he said, he's made cold calls, he's had to go word of mouth, he's had to talk to people, he's had to network, he's had to start from ground zero in a sense, hence why the newsletter is what it is today, hence why he's able to kind of get on here and speak it and get things out the way that he is because of the work and because of the foundation that he built. So, Matt, big shout out to you. And again, just thank you for the time and thank you for joining us on this platform today. Now, before we close, though, you said a lot of important things today, but to me, arguably, this is the most important, the call to action where we see if people are really ready to put their money where the acquisition is. You know what I'm saying? So let's really make this happen. So, for everybody listening, for everybody tapping into some capacity, wanting to find out more information about you, heard you mention the newsletter, heard you mention the resources to buy and everything like that that we're gonna put in the notes. What are the best places to reach you, to contact you, to follow along the journey to learn more about what it is that you and the company are doing?

SPEAKER_00 50:06

Yeah, the best place is just my website, mattbodner.com. I have a free newsletter where every single week I break down deals and talk about fundraising and finding opportunities and all that kind of stuff. And I have a whole basically free course on MA that gets dripped to the people who subscribe to that. So um that's the easiest place to start if you want to kind of go deeper on the MA journey. It's a topic that I, you know, have spent a lot of time thinking about and talking about and doing and um something I like. So if uh if it's a topic that's interesting to you, that's the easiest place to begin.

SPEAKER_02 50:39

Perfect, perfect, perfect. Well, Matt, again, I would not have rather spent my Friday evening doing anything else than learning about acquisitions and how to make money. So again, I I thank you just for the time. I thank you for coming on here and for sharing with my audience. But I'm really from down to business to what you and the team are doing. We are wishing you guys nothing but the best, nothing but success. And we're obviously we're tapped in now, we're here to follow along the journey. I will definitely be tapping in with you closely and offline and just, you know, even giving you some of my curiosities and some additional questions and things that I'm thinking. But I'm really and highly encouraging everybody and anybody, even I'm sending this raw file to my two business partners because we're gonna listen to this episode and we're gonna figure some things out and make it happen. So you possibly will be hearing from us very, very soon. But I really just encourage everybody, you know, we really have amazing individuals on here, real life industry experts who are on the ground doing the work, who are making themselves available to you and have no problem being a resource and helping out. So, why not make money together? Collaboration is always better than competition because there's so much out here for everybody. So, to those of y'all who continuously tap in, man, listening to the episode live, catching it at a later date, coming to events, showing us love on the page, everything of the sort. I love y'all. I thank y'all. This has been another episode of the Down to Business Podcast. Here we're Tamar Turner.