“The Transcript Is Auto Generated And May Contain Spelling And Grammar Errors”
Tyler Jorgenson 0:01
You’re listening to biz ninja entrepreneur radio. This show was created for entrepreneurs, business owners, marketers and dreamers who want to learn from the experts of today and drastically shortcut their own success to build a business that supports their dream lifestyle. Since 2011, Tyler Jorgensen has been interviewing business thought leaders from around the world a serial entrepreneur himself. Tyler also shares his personal insights into what’s working in business today. Welcome to biz Ninja, entrepreneur radio.
Tyler Jorgenson 0:38
Welcome out to business entrepreneur radio. I’m your host Tyler Jorgensen and today we get a double threat we get a lot of out and Adriana Smith who are the top female Business Brokers in America. Now I don’t think that means you only broker female businesses. It just means you guys, you gals are females and how did you become The top female Business Brokers in America.
Lana Hout and Adrianna Smith 1:04
Well, you know, actually something that a lot of people don’t know is that business brokerage as an industry overall, is mostly male, like there’s only 10% that are actually female, and then even less than that, that are in our age bracket. So we really are disruptors in the industry, kind of challenging the status quo. And you know, really our backgrounds long and I actually met at USC doing finance degrees. Yes, fight off. And we kept bumping into each other in our finance classes and during interviews for finance jobs, like investment banking and consulting and you know, we were on that track and so I was so we could have been friends or foes really, yeah, yeah. girls that are in that, you know, industry. And there’s only so many spots for jobs. So luckily we decided to be friends. Yes. And so yeah, we became friends and then people started in corporate. So I started at Deloitte doing business valuation transaction advisory. So our our clients for large public companies, and they would buy smaller privately held businesses, and we would do all of the pre deal diligence, post deal compliance, and then long I was also doing the same thing. Yeah, I was working at Duffin Phelps doing the exact same role in business valuation and transaction advisory. And then after about a year there an opportunity opened up in the Deloitte office. So then Adrian and I work together at Deloitte for a few years, and then pretty much the opportunity came for a draw on his father, who has been a business broker for 50 years, 50 years and actually, my father and my grandmother had a brokerage in New Jersey, where we’re from, and so technically I’m third generation broker. And it’s been in my blood. And so I had, you know, interned with my dad during college and worked on some deals. And the company he was with had since grown, and they really wanted to have a presence in Los Angeles. And so they asked us if we wanted to open the office, and I said, you know, at that point, I was in corporate for a while, kind of knew that plan. And I went to my partner in crime launa. And I was like, Hey, girl, do you want to do this business with me? And I was like, yeah, girl, I’d love to quit my corporate job that has a salary to go for a commission only job. Isn’t that what everybody wants to do. So that kind of shows you the true entrepreneur that’s kind of in both of us was we wanted to start a brokerage here in Los Angeles. And essentially our brokerage is, you know, we help clients buy and sell businesses 25 million under across all industries, but really how it became the top female Business Brokers was taking our corporate background and professional service and applying it in the small market place because what we realized is a lot of Business Brokers, we’re not really traditionally trained. And so they didn’t really have that kind of background on the professional training. And so we saw that as an opportunity of how can we incorporate, you know, professionalism are really you know, technical finance background, as well as you know, up the marketing, so to speak, whether it be social media and using technology. And so we’ve used all of those to really make our name and industry.
Tyler Jorgenson 4:29
Awesome. So when I was studying at USC, I was not finance was not my strength. But I was an entrepreneur. In fact of our MBA class of like 70 something people there was only two of us that were really entrepreneurs, maybe another two or three that were thinking of doing something on their own. And so I always respected the people that had the really strong financial background, that end could be kind of a bridge between what the entrepreneur does right and with the business builder is doing and what needs to happen for them to actually turn it into an exit. A lot of would argue that you’re not really an entrepreneur unless you’re trying to exit. You’re a business owner or you’re just building a lifestyle business. I don’t necessarily agree with that. But I do know, in order to get a business ready to sell, it’s different than just operating a business. What are some of the core things that businesses need to do as they think about maybe they want to exit?
Unknown Speaker 5:20
Okay, that’s a good question. million dollar question that everybody wants to know. I would say financials are key. I can’t stress that enough. It’s the most it might seem like the most simple answer, but not having clean books and records can really impact your saleability because nobody wants to buy a business if they look at the books and it’s all a mess. So if you think at some point, you’re going to want to do an exit, I would strongly recommend, get a good bookkeeper, get a good accountant and make sure that you know if you have multiple locations that you have financials by multiple locations, you know, monthly, quarterly yearly that’s all clean because better quality your financials are the better chances of you getting the asking price that you want. And and I would also say you know the strategies of operating a business and especially in our world where the businesses are smaller, versus the strategy of trying to sell it are different in the way you treat your financials are different. So a lot of times small business owners are really they’re not thinking anyone is coming to look or evaluate their business, they run all kinds of personal expenses through the financial statements to really reduce taxable income. Well, that’s great, you know, maybe you know when no one’s looking and you know, status quo, but now that you’re going to have somebody come in and evaluate all the different factors in your business and see a bunch of expenses running through and you know, need to kind of take your word for it, is that true expense or is it not, you know, the, the goal of selling is to make it look as good as possible. And so that kind of stuff is the type of thing that buyers will do. Count you for, especially when a lot of things don’t add up. And they can’t easily trace the cash flow, it creates more uncertainty, it creates more questions and it delays how fast you get a check and how big that check it. And you know, another thing that I would I would just add is keyman risk. I think that’s something that a lot of entrepreneurs, like they don’t really they underestimate that in their business, for example, like if you’re an entrepreneur, and you are sort of the glue that holds the whole business together, the clients or customers only call you you are, you know, you’re so needed in the business that you can’t even go on a vacation. That’s a big risk, you know, people are going to feel like there’s going to be a high attrition, you know, when you as the owner, leave the business. Are there going to be clients? Are there gonna be customers like, is all the business going to walk out the door with you. So making sure that as you’re going to sell, you’re putting management team in place, you’re really building out your business and slowly removing yourself is also really key to having a successful sale.
Tyler Jorgenson 7:59
Absolutely. So There’s there’s two major takeaways I got from there one, from a business owner perspective, the year or two before you want to sell, you may have to pay more taxes, because you’re, you’re running the business a little differently to get ready to sell, then to minimize your taxation, right. And the other one is what you just mentioned, londa, which is having systems in place, have a management team where you’re not the key man, I know a lot of founders especially have a little bit of an ego in their business where they’re so attached to it, that they they almost don’t want it to succeed without them, well, that’s not gonna help you be in a position to sell. Right? So you got to separate a little bit of
Unknown Speaker 8:34
ego. They’re, they’re very proud that the business is all about them. Right? It’s part of their identity. And they don’t realize that that actually been counterproductive to their actual goal of making their business successful and selling it at a high price. And we deal with that quite a bit. Because, you know, a lot of times our owners, you know, they’ve had their businesses 3040 even 50 years and like I said, it is their identity. It’s like them sending their baby off to college. And you know what we’re also calling their baby ugly because it has problems and it’s not worth as much as they think it is.
Tyler Jorgenson 9:09
Right? It’s hard. I mean, when you get ready to sell Yeah, you sometimes oftentimes it’s worth less than what the person thinks. And that that takes a an ego check and a pride check. And then a decision, right? Okay, hey, you either have to accept that this is most likely the valuation, or what are you going to do over the next year? If you really need that exit? What are you going to do to scale the business, improve the books improve the performance, so that you can get the exit you want? And are you willing to make those changes? That seems to be the big challenge with a lot of you,
Unknown Speaker 9:39
that’s the big key there. Are they willing to make those changes? And I think what we see like, like I said, a lot of the owners that we’re dealing with are retiring. You know, they’ve gotten tired, you know, they’ve just been operating at status quo. A lot of times they take their foot off the gas, and then want to sell at like, you know, five years ago and they were doing you know, three times the amount of revenue they want to sell at that price. But now it’s worth, you know, a third of that and they don’t, they’re not in a position physically, mentally, emotionally to want to do what needed to, you know, repair the business and get it to the point.
Tyler Jorgenson 10:16
A friend of mine who has gone through several exits in the tech space, which is not my world, he explained He’s like, you’ve got to sell at the middle of the hockey uptick, not in the middle of the plateau or the decline is like you’ve got to sell when it’s going up and and then be able to point to where it’s going and that’s where you can maybe get some improved valuation right, are you going to get a better multiplier or whatever but so let’s do two things. I want to address a little bit more about your guys’s business and with the biz hotlist and what you guys do as part of your branding, and then we’ll come back into some examples of businesses that you guys have worked with, Does that sound good? So, tell us a little bit about the biz hotlist and what you guys do with that as a brand and how you’re, you know, impacting the market with that
Unknown Speaker 11:00
Sure this hotlist is a brand that Adriana and I came up with as a way to be able to help business owners and entrepreneurs grow their businesses like we work with business owners every day. Yes, our main functionality is helping them sell the business. But in part of reviewing their business and looking at their business and getting buyer feedback in different industries, we started to see similar trends and similar issues come up that it seemed like all business owners face and we thought, you know, what, why don’t we use our experience and our knowledge to communicate that and help other business owners, whether they are just starting out their business or whether they’re coming towards the end of their journey and are looking to exit so the biz hotlist is something where we create videos and how tos and lists really just that give information to business owner so that they can better their business and hopefully, one day get that exit that they’ve been looking for.
Tyler Jorgenson 11:52
Awesome. So it’s kind of your educational and your your outreach component of the of the business.
Unknown Speaker 11:57
Yes, educational and Kind of consulting based in that sense, we’ll also do, like speaking engagements, more workshops. And essentially the idea, you know, we felt that if we could get this information out in a more regular fashion earlier to owners, then they could know what they need to know, way before it’s too late, because that’s just, you know, the biggest problems that, you know, by the time they figure out what actually matters in sale and an exit. It’s too late for them.
Tyler Jorgenson 12:27
Absolutely. So are there some key differences between brick and mortar businesses and online businesses in what in how the transaction or how a sale is put together?
Unknown Speaker 12:38
Absolutely. You know, we love online businesses. We love them because people love them. Yes. And people love them because they have typically low overhead. A lot of times, you know, you don’t need to carry your own inventory and take that risk. A lot of times too, it’s, it can be you know, national and then scalable little faster than a traditional business. And so, for all of those reasons, we typically do see those, those businesses that are ecommerce based online, remotely operated, they do tend to sell at higher multiples, you know, kind of all else being equal, you know, with brick and mortar, depending on what it is there are a lot of different challenges. I mean, you know, retail overall has been kind of a declining industry. So, if we’re a retail business when it comes to the transaction, too, we have a landlord to deal with. And so, part of our transactions, like there’s a financial due diligence, but there’s also a lease approval process if there’s a landlord to transfer the lease, and that landlord becomes a third party in all of our transactions, and they have a lot of power. And then especially in Southern California, where, you know, pre COVID you know, rents have been flying high and, you know, and they have been, you know, thinking They’re the best thing since sliced bread and they can get all kinds of fancy tenants and stuff. So, you know, they they would just increase their rent like 50 80% on a new deal coming in? Well, that’s a deal killer. You know that? Yeah.
Tyler Jorgenson 14:13
That changes the books quite a bit.
Unknown Speaker 14:17
Yeah, exactly. So we don’t usually have that in online businesses. So it makes it go. And more of the brick and mortar businesses starting to incorporate online, having some sort of online component, some sort of store, or you know, a way to provide services through, you know, not having people necessarily have to come to the actual brick and store location to get I think that’s actually something that we’re starting to see. And really, you know, people who are looking to buy business, that is a great opportunity when they see that someone’s already taking the steps to build out an online platform for their business that definitely contributes to the bottom line is a business.
Tyler Jorgenson 14:55
Yeah, I recently did a presentation on how every local business should think more like an online retailer. And I also think it goes the other direction. You know, there are some elements of customer service, that brick and mortar businesses just dominate compared to e commerce or compared to online businesses. So there’s also some great lessons that those, you know, anonymous online businesses can learn from the good old days of were walking into tears, and everybody knew your name, right. So I think there’s some great ways to apply lessons back and forth. And a big part of what we do is help people add digital components to their business, you know, continuity programs in your local businesses, things like that. And subscription services. You mentioned COVID, right. Obviously, we’re going through some major changes. And I don’t think this is going to be a short term cycle, right? We’re going to see there’s going to be the short term impact and then there’s going to be the long term economic changes. What would you say are some things that businesses need to be doing as they make these adjustments? Let’s talk firstly about like local brick and mortar businesses.
Unknown Speaker 15:56
I think, you know, one of the first things that we did when COVID hit we created There’s some videos as like business resources, and kind of to the point you just mentioned about, you know, brick and mortar, considering, you know, online strategy and or purely online considering, you know, some of the elements of a brick and mortar. And I think the key there is really being diversified, being diversified and how you receive your revenue. And then also if you have, like, suppliers, and you know, and I think people what they saw was the risk of just having one source of revenue that somehow got truncated. And now, you know, business is down like 90%. And so I think, in the go forward, that diversification and the ability to be flexible in this ever changing volatile environment is a big one. And I would also just add, it’s like thinking outside of the box. I mean, I’ll just give you an example. So obviously, during this time with a pandemic, there has been a lot of, you know, businesses being forced to shut down one of them of course, gyms, right? We all like to go work out. Now you can’t go out, you can’t go there because you know, it’s been closed. So for example, with gyms, they needed to start thinking outside of the box, whether that means having an online platform that had at home workouts that people can do, or they can turn their computers on and do that workout, or even like renting out their equipment, you know, like their weights and things like that. So that because there was a shortage of weights, apparently, you can’t get weights anywhere. And so that, but that’s an example of like, you know, it’s not just okay, well, because my business is now closed. There are other things that you can do to bring in different revenue streams, if that means helping people come up with meal plans if you’re a personal trainer. So you really have to start to think outside of the box. And that’s to add on this point about diversification. But also, first thing that every business owner should have been doing during COVID and if they haven’t I really recommend is really looking at your costs and really making sure that if there’s opportunities to negotiate your costs or go to your landlord asking for concessions or You know, whatever you can do to defer payments, like that’s very valuable, you know, you probably won’t get the payments waived, you probably will still have to pay them. But any kind of delay can still help you stay afloat as navigate where your money’s going.
Tyler Jorgenson 18:13
Awesome. So with you know, the biz hotlist and the Teddy’s, you guys are the dynamic duo of the top Business Brokers, the top female brokers in America. What advice do you have to other business partners on how to have a successful partnership?
Unknown Speaker 18:30
I think some of the key things you need to have with a business partner, that I actually think that this is a lot of what’s lacking, and people say they want to get into business with people, but people need to realize that going into business partnership is like a marriage. And so it’s like, how many people would you actually marry? You know, like, think of how many people you might go on a date with, versus like, actually take the plunge and marry. So you need to have a trust and confidence in that person. The same day and that’s something, you know, Laura and I, we built our business partnership first on a friendship. And then we had the opportunity to work together at Deloitte. And so we got a sense of, you know, how is that interaction and we realized that, you know, we have very similar ways of thinking and doing things like we share the same goals, but we also communicate really well and this is what everyone says about any you know, relationship and a business partnership, no different because you know, you need to be checking in and making sure you’re on the same page and you know, when we have our our disagreements, we really talk them all the way out, and we don’t leave, you know, we don’t go home mad and, and we come to a consensus. So what we find is, you know, typically by going back and forth and through the devil’s advocates and the different considerations we wind up best solution I mean, at the end of the day, the goal is to come up with the best solution for the business, right? You know, in terms of, you know, your original question about, you know, who does what? And how do you know who does what you don’t know, until you start the business. And then you start to see each person’s natural strengths. So for example, you know, Adriana can get real technical in with the financial models, and she wants, you know, she in the finances and the day to day of the business and stuff, and she’s great at that. She’s very detail oriented. And I’m detail oriented, but what I really enjoy is also like the marketing and the advertising and how we’re promoting our listings and how we’re communicating. So we’re both strong in both finance and marketing. But what we found is that, you know, each of us has a bit of more of a lean one way or the other. And so, instead of doubling up and Okay, both of us are looking at the finances, and both of us are doing the marketing. What we do is, is we divide and conquer, and that’s what you want. You want to make sure you’re dividing and conquering and we both are responsible for the entire business. But that doesn’t mean we each need to do every single task at the same time. And I think a lot of times people really don’t realize that you really should lean into your strengths and also, like, honor and respect the strengths of your business partner. And the other thing that, you know, maybe gets overlooked in certain partnerships is that sometimes I think most people try to really pigeonhole you into just one thing. Like, there’s the salesperson, and then there’s, you know, the technical finance person. And what we found is that we’re actually both good at lead generation relationship building and the sales aspect. So instead of saying, like, Oh, no, it’s just one of us. We both do that. And then we have our secondary function of like, CFO CFO, yeah, you divide and conquer so because then you’re not being fulfilled in the business. Like there’s something else you could be doing and adding value and you’re not.
Tyler Jorgenson 21:52
Yeah, that makes a lot of sense. Yeah. It’s kind of like you guys dated in college, you know, got engaged during working together, and and Then got it finally said, Okay, let’s jump in. We got this. Let’s do.
Unknown Speaker 22:04
Look at the we’re best friends. Yeah. So when you’re best friends with someone, I don’t think every best friend duo should go into business let me just
Unknown Speaker 22:12
Unknown Speaker 22:13
but I think that if you find a business partner and like they’re your friend and you guys have good communication and understanding and you have your goals are aligned, it can be great because I get to go to work with my best friend every day. Not to say that. But you know, it’s not to say, you know, even though we’re talking about all the great things, it’s not to say there aren’t disagreements and challenges, but instead of letting things grow, we tackle them head on so that we can just defuse it and move on so we can focus on growing our business.
Tyler Jorgenson 22:41
Weird. So basically, maturity. That’s good. Yeah, it’s nice that you bring that to the business. That’s important. What? So let’s dive in with our remaining time to a couple of like cool examples. So give us give us some case studies of some businesses that you guys have helped sell or help people buy recently.
Unknown Speaker 22:57
So one of our favorite deals. Yep. was the sale of a nutritional supplement company. At the time when the owner came to us. The business was only around like four years and had like double digit growth and even like 30 40% each year, it was a ecommerce and direct mail company. So that’s the channels they sold through. And the owner had other businesses before. So the business was well prepared in terms of Yeah, like the financials, and they had a CFO and everything was prepared, and they had reports and they had a CMO and, and the owner knew how to set it up, even though it was a young company. But you know, she had started it just kind of on a whim, like oh, this could be kind of cool extension of what she was already doing. And then that company grew bigger than she wanted and she was like, you know, kind of getting ready to retire. So we ended up taking it to market and we entertained a few buyers. We had so many people hits on this business because of the growth and, and also what was great about their supplements is that they were plant based and they weren’t Fatty, or like a fad, right? Because that’s what people look out for in that market. And a lot of the customers had, you know, been ordering consistently for such a long time. Not a lot of good bids. We had one buyer fall out in the middle of the process, but then ultimately, we ended up selling it at full ask 6.2 million. And that was a great sale. Yeah, that’s great. So I love those.
Tyler Jorgenson 24:32
Okay, so on that one I do need if I do need to follow up because people are going to ask the question, I understand you can’t disclose the company, but what was revenue to get a $6.2 million exit?
Unknown Speaker 24:42
That’s how we sold they were just under 10 million. Okay.
Unknown Speaker 24:46
And what about they are about 1.4 million of EBIT. Ah,
Tyler Jorgenson 24:51
okay. Cool. Awesome. All right. You got one now, Ilana, what do you got for us?
Unknown Speaker 24:58
Well, you know what, I actually had a situation recently that I really enjoyed a transaction I worked on, I was working with a specially product manufacturer, and it was a client that had been the company had been around for over 50 years. And they produce really rubber stamps. So they were a rubber stamp manufacturer, and I working with them, they’re lovely, lovely filming to work for and they were just getting ready to retire. And when I took the listing, I wasn’t sure you know, Oh, is this so specialized, you know, will we be able to find buyers and then I ended up finding a buyer who was in the industry and did a lot of other you know, focused on kind of those Office products space manufacturing, and we put the deal together in under three months and got full ask for that business was much smaller business. But what was so great about that is the seller was able to continue the family’s legacy and be taken in by a another, you know, competitor really essentially was able to take that on and for me, I think one of the joys of what we do It’s like well it’s great to sell you know to sell get our Commission’s Don’t get me wrong we love that we are in the business to make money but I think when you’re able to help someone who maybe didn’t think that they could get an exit and you’re able to achieve their exit and put money in their pocket for their retirement I think that’s the best part of what we do and so yeah I think sizes but that’s definitely something that I I really enjoy.
Tyler Jorgenson 26:23
Very cool so highly encourage everybody to check out the biz hotlist COMM And biz brokers la get to know Lorna and Adriana find them all over the web on their socials and continue to learn from everything they share. Thank you so much for coming out and all my business is out there it’s your turn to go out and do something.
Beau Crabill 26:42
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