5/14/26 Before You Sell: Financial Habits and Exit Strategies

The Moneywise Radio Show and Podcast Thursday, May 14th BE MONEYWISE. Moneywise Wealth Management I "The Moneywise Radio Show & Podcast" call: 661-847-1000 text in anytime: 661-396-1000 website: www. MoneywiseGuys.com https://www.moneywiseguys.com/ facebook: Moneywise_Wealth_Management https://www.facebook.com/moneywiseguys/ LinkedIn: Moneywise_Wealth_Management https://www.linkedin.com/company/moneywise-wealth-management-bakersfield/ Guest: Patrick Collins, Business Broker & Advisor for Collins Advisory https://collinsadvisory.biz/ https://www.google.com/url?q=https://collinsadvisory.biz/&sa=D&source=calendar&usd=2&usg=AOvVaw34QyKZHjVefI_2qEmvVnJW The opinions voiced in this podcast are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which strategies or investments may be suitable for you, consult the appropriate qualified professional prior to making a decision. Patrick Collins & Collins Advisory are not affiliated with nor endorsed by LPL Financial or Moneywise Wealth Management].

• 0:00Speaker 00

  Live from the basement inside the historic Woolworths Building in downtown Bakersfield. Call or text in at 661-396-1000.

• 0:09Speaker 01

  I need a dollar, dollar, dollar, that's what I need. Hey, hey. Well, I need a dollar, dollar, dollar, that's what I need. Hey, hey. Said I need a dollar, dollar, dollar, that's what I need. And if I share with you my story, would you share your dollar with me?

• 0:29Speaker 02

  Securities offered through LPL Financial, member FINRA/SIPC. Investment advisory services offered through LPL Financial. LPL Financial and MoneyWise Wealth Management are independently owned and operated.

• 0:37Speaker 00

  Now, let's start the MoneyWise Show.

• 0:41Speaker 03

  Let's do it. Let's start the MoneyWise Show. Welcome to the MoneyWise Show. We are live from the basement at the historic Woolworths Building in downtown Bakersfield. I'm your host today, Chris Pelster, joined with?

• 0:53Speaker 04

  Seth Perry, so glad to be here on a Thursday.

• 0:57Speaker 03

  Is it Thursday?

• 0:58Speaker 04

  Thursday.

• 0:58Speaker 03

  They all kind of start blending together.

• 1:00Speaker 04

  They are, that's happening.

• 1:01Speaker 03

  Okay.

• 1:02Speaker 04

  You know, school's almost out.

• 1:03Speaker 03

  Yeah, I don't, um, I don't have kids in school anymore, so.

• 1:07Speaker 04

  Got it.

• 1:07Speaker 03

  What are you, what are you talking about?

• 1:08Speaker 04

  Just saying.

• 1:09Speaker 03

  Yeah? Grandbabies haven't started school yet. My kid, actually, I do have a daughter in college, so, I mean, but I don't know her schedule. She doesn't tell me. There's no parent conference nights anymore. It's all over.

• 1:23Speaker 04

  Oh, boy.

• 1:23Speaker 03

  So, yeah, but for the next hour, you are on the news talk 96.1 and 1230 AM KERN, streaming live at MoneyWiseGuys.com. You can always go to our website and stream there and also find places to listen through the podcast, which is typically what we see kind of the most success in or traction in and questions coming in to Stephen. A lot of the times are like two, they're like at 2:00 in the morning when people are listening to the MoneyWise Show through their podcast. But, uh, but yeah, and today we are excited. We have a friend of the show, been on a long time, been on a bunch of times. Mr. Patrick Collins is going to come in today and talk about business exit planning and

• 2:09Speaker 03

  what's going on in his world and, and, uh, and so excited to get the update there. If you've listened to the show for a while, you've heard him, you've learned from him, and we hope to do the same again today.

• 2:20Speaker 03

  Big news on the market?

• 2:22Speaker 04

  Huge news.

• 2:23Speaker 03

  Huge news.

• 2:24Speaker 04

  Huge news.

• 2:25Speaker 03

  Little, little, little, little meeting this morning of a couple of countries.

• 2:28Speaker 04

  Couple of guys getting together for coffee and talking about, um, money and economies and it definitely had an impact on the market, Chris. So today was the big meeting we've all been waiting for with Mr. Trump and President Xi from China. And from all early indications, it was an extremely positive meeting and the market reflects that. Today, the S and P 500 is up almost a full percent. It's up 0.8% year to date now, 9%. So we're tracking for around a 20% year. Not saying that's what's going to happen, but things are looking pretty bright there. The, the one-year look back. It's up 27% the S and P 500.

• 3:09Speaker 03

  Yeah, that's what even with the good news is going to make, uh, you know, doing another 20% this year. Um, that's crazy. So yeah, we always like to do the rearview mirror, you know, um, today the market's up, like you said, eight tenths of a percent year to date, nine. One year, 27. Keep that all in perspective. Make sure your portfolio is invested the way that you should. Make sure that you have confidence that it doesn't have to be a 27% year for you to feel like your account is actually doing good. Um, this is obviously markets are pushing up, momentum is pushing up. AI and technology stocks have pushed a lot of things up, made up for a lot of the growth that we've seen.

• 3:48Speaker 03

  Um, so just make sure you're invested appropriately and that you have confidence that even if, uh, the bubble pops a little bit, or even if, you know, hey, the market loves this new possible relationship or more symbiotic relationship as far as economics is concerned, uh, with two of the largest, uh, economies in our world, uh, which is good. We want everybody to play nice in the sandbox, right? Uh, but that doesn't always necessarily mean. Sometimes we say good news for the economy. Doesn't mean that the stock market is going to just keep going up. The market might've reached a point. Some of these stocks might've gotten to the point. We might see a little bit of a cool off. You need to just make sure that you're invested appropriately for your situation. And if you have a bucket of money that's short-term, you need to be even more cautious, you know, just remember that stuff, but then.

• 4:33Speaker 04

  We're still seeing great interest rates and high-yield savings accounts these days, three to 4%. You should still easily be able to get that. So if you're stuck in a 0.01% Bank of America, Wells, those types of companies, you may want to look at, uh, Some other options to get some more yield out of your hard-earned savings.

• 4:52Speaker 03

  There you go.

• 4:52Speaker 04

  Very hard-earned savings.

• 4:53Speaker 03

  There you go.

• 4:54Speaker 04

  That was the big news on the market.

• 4:56Speaker 03

  Yep. So what we're going to do now is we're going to jump into a couple of questions that came in because these were really interesting, actually, and I didn't know a lot about it, but somebody wrote in and said, I wanted to share a story with you guys, a friend of mine, which I won't share her name, but she is a local business owner and she's been applying to speak on TED stage for an upcoming TED Talk. And after a few applications, they actually called her back and told her she's perfect for a TED Talk. And they would train her on a few small things before doing the TED Talk. At the end, they needed her to pay $30,000 before they can move forward. Just shocked all of us because like everything, it is surrounded by money.

• 5:38Speaker 03

  Love the show and just wanted to share that story with you. So you dove into this a little bit. What did you find out about TED Talks? And is everybody having to pay or do you have to pay to do a TED Talk?

• 5:48Speaker 04

  No, it's not. It's not super clear from TEDx. They're the ones that usually host these events. And on a personal level, I feel like they've gotten a little bit watered down. There's still some really, really good ones, but I feel like they may have overdo it at times. But anyway, what this sounds like to our dear listener is it's probably a company that is coming in and they know, hey, you're going to be a speaker. We're going to, we're going to coach you up. We're going to train you up. We're going to get, you're going to get the most bang for your buck if you hire us as a consultant. So if you give us 30 grand, we're going to make sure you're wearing the right outfit. You're saying the right things and then you blow up on social media because TED Talks can have a huge impact on someone's career or their business, whatever they're doing.

• 6:31Speaker 03

  Our book sales.

• 6:32Speaker 04

  Or book sales.

• 6:32Speaker 03

  Yeah, just notoriety and different things. And I would agree with you where, and even in the comment that came in, just like with everything, surrounded by money. And unfortunately, TED Talks, when it came out, it was the first time that like so many people had access to be able to listen to very talented, very bright, smart people. Brilliant people. Brilliant people in their certain area of expertise and you got to just listen. Like a kind of a synopsis, you know, like you got to listen to somebody's 30 years of experience and knowledge.

• 7:03Speaker 04

  In eight to 20 minutes as they try to keep them pretty tight and they're they're really cool.

• 7:07Speaker 03

  Kind of hear this really great speech and some of them were just really great speakers. Some of them were just really, really smart on their topic. So even if they weren't the best speaker, it was still just so enlightening to be able to watch these talks. And just like everything, like you said, surrounded by money, then Ted blows up and now they're having them in 50 different, you know, you know, cities all across the world. And then there might even be an element of, hey, we can actually charge people to do this, or we can charge to train people to do this. And, uh, and then once, you know, once the, the dollar becomes, uh, the focus and different things. Unfortunately, I feel like you've lost a little bit of the, the pizzazz with, with the Ted talks and what they originally were.

• 7:47Speaker 03

  Um, not saying that anybody that talks now is, is less than, uh, but unfortunately it does kind of feel like it's been spread out. And now they're just going to kind of let anybody talk. And if there's a $30,000 check involved, then they're going to try to get a lot of people to sign up, you know, um, kind of a thing. But kudos to your friend for even, uh, going through that and, and being willing to put yourself out there. I hope it can still work out and maybe without the $30,000 price tag. Um, and you can still get the same notoriety and stuff like that. But like you said, I imagine that there's lots of companies that, hey, if we can help you really knock it out of the park.

• 8:21Speaker 04

  And that's the American dream. They're taking a situation that's getting popular and then, okay, how can we, we can't do our own Ted talks and compete. But what can we do to make some money? So what will train these people up? And that's, that's the American spirit is look to, look to make money when we can.

• 8:36Speaker 03

  Yeah.

• 8:37Speaker 04

  Now, when we make money, Chris, what do we do to cut costs at home?

• 8:43Speaker 03

  Yeah, we're going to go into the next comment. Hey, money guys, uh, is there a smart way to cut costs without feeling like you're giving up your whole lifestyle? Is there any budget type apps that help, uh, that you guys would refer to someone like me trying to be more money wise? Um, yeah, we'll jump into that, you know, the funny thing I, I mentioned about this though, is, uh, we have a, we have a pretty efficient way usually as people. Um, that, uh, that if, if. If it, if it doesn't cost you, like, we usually get rid of those expenses that we don't like or don't enjoy. We're usually pretty good at that. And so unfortunately, if you're still needing to cut, unfortunately, it still gets into where you are probably having to give up

• 9:25Speaker 03

  some lifestyle. You know, most all of our savings and, and, and investing, it's coming out of money that you could be enjoying today. And it's making that decision to not enjoy today because you want to be able to enjoy later. You know, love them or hate them, Dave Ramsey, live, live like no one else. So you can live like no one else. Uh, you know, you, you make those decisions. You make those sacrifices. Every, you know, I want to put every dollar to use for fun or for smart things or, or fun things or even important things to me right now. But with a financial plan, with setting yourself up for the future, you have to put some things on hold so that you can be ready, uh, when you're older. And I hear it all the time when people come in to start really doing some serious planning.

• 10:11Speaker 03

  I wish I would have started earlier. I wish I would have done a little bit more. Um, because you're starting to see the effects of, hey, I actually have some success, but if I would have just made some small changes, 20 or 30 years ago, that I probably spent money on stuff that I don't even remember what I did, I'd be in a much better situation. Uh, but anyways, did you kind of, uh, think of any apps or anything that people could do to?

• 10:33Speaker 04

  There's definitely a couple of apps. Um, YNAB is a very popular one and it, it provides like a detailed breakdown of where the different categories and how you're spending all of your money. Maybe not a bad idea and start to look at some of these subscriptions. Do I even use these things? And, and cut them out. When you add up all your subscriptions, it's expensive. However, the first thing that came to my mind was my car sitting in my garage, Chris. I have an old Mustang, had it forever, has a lot of sentimental value. It's a lot of fun, but you know what I did recently?

• 11:05Speaker 03

  What'd you do?

• 11:05Speaker 04

  I put it on non-op and I took it off the insurance because I was literally driving it once every two or three years. It's not necessarily safe, though, in the condition it's in to go out and driving. Wife doesn't like it because it's

• 11:17Speaker 03

  You mean those lawn, those lawn chairs that you sit in when you go drive?

• 11:21Speaker 04

  Yeah, that was the first Mustang I had. Um, but anyway, you know, and so I would challenge our listeners to look at, um, maybe things that used to bring a lot of fun and joy. Maybe you had some ATVs or dirt bikes when your kids were younger, but now they've kind of grown and gone. You're, you're emotionally tied to these things, but. You're probably paying registration on them. You're probably paying insurance and then, you know, it sits for a few months and now you've gummed up your carburetor because of California's awesome gas. And so now you have to pay to get it serviced just to go enjoy it. So look at things like that.

• 11:54Speaker 03

  Yeah. And there's two things I'll mention before we go to break here because I'm excited to get into the business talk with Patrick Collins. So we don't want to waste any more time. But remember, most credit cards nowadays, maybe even your debit cards have some of these elements to them where they will give you a breakdown of where your money's going. So you might not even have to subscribe to anything or pay for any kind of app. A lot of your credit cards now will give you a breakdown of like, at least how much money you've spent at restaurants and fast food. I would say that is probably-

• 12:22Speaker 04

  Eating out is the number one, number one offender.

• 12:24Speaker 03

  So, so there you go. At least take a breakdown. If you're, hopefully your credit card or your bank will, will break that down for you or get one of these things like Rocket Money or Monarch Money and then it will break it down for you. And it might even be worth a little bit of money. Because if you just realize, man, we're spending so much money on restaurants and different things. That could save you a lot right there. The other thing I was going to say is remember every time you make cuts, do it for a reason. Sometimes people get stuck in this cut, cut, cut mode, but if you don't replace the cuts with a strategic decision as far as where that money goes, that can be very exhausting because then you feel like all you're doing is cutting

• 13:05Speaker 03

  expenses and you're cutting lifestyle. And then you're not even exchanging it for, okay, now I'm saving a hundred bucks a month or 200 bucks a month. I'm going to start sticking in this account. I'm going to start investing it. I'm going to start doing this with it.

• 13:16Speaker 04

  You can save money too, because if you can cut 1% of your monthly living expenses, you can now bump up your 401k contribution 1%. You're not paying taxes on that extra 1%. And guys, I'm telling you, if you can do a little 1% bump up every now and again, before you know it, you're going to have your 401k maxed out.

• 13:33Speaker 03

  Right.

• 13:33Speaker 04

  And the clients that come in that have the most freedom in retirement are those who have started and started young and got to where they're maxing out their 401s.

• 13:41Speaker 03

  Yeah. And sometimes it makes, it makes help. You can have a hard time seeing the benefit of what you're doing. You feel like I'm just giving up lifestyle and I moved it up 1%. And you're not necessarily seeing this bells go off in your 401k if that makes sense, but calculate it out. I, I, I cut some spending. I increased 1%. I'm putting $2,000 more into my 401k this year. Uh, three years later, if you're still sticking with that, I've put another $6,000 in my account. My account's done 12% a year. So with the growth on that new $6,000, it's 9,000 extra. Do whatever it takes to psychologically show that you're making that progress because I agree with what he's saying here is it can kind of just feel like sometimes you're just always

• 14:22Speaker 03

  chopping lifestyle. Um, and like I said, you have to replace it with a good behavior or all you are doing is stop spending money in one area and it goes somewhere else.

• 14:31Speaker 04

  Finds a place to go.

• 14:31Speaker 03

  You have to tell a dollar where to go.

• 14:33Speaker 04

  It's like a wet bar in the shower, a wet soap bar. Is that how it goes?

• 14:38Speaker 03

  I don't know. What do you, what?

• 14:41Speaker 04

  You try to mess with it. It's gonna, it's gonna get lost. Yep.

• 14:45Speaker 03

  Hey, when we come back, we're going to be joined with Patrick Collins, business broker and advisor for Collins Advisory. Stick around. We'll be right back.

• 15:01Speaker 03

  Welcome back. Based on the song, you know who's in the studio.

• 15:08Speaker 04

  Is there a better pump up song than this one?

• 15:11Speaker 03

  Patrick Collins, business broker and advisor, and we were sharing Irish, Ireland stories and visiting, getting to visit there. Seth's been there a while ago. I was there not that long ago and Patrick's been there quite a few times.

• 15:25Speaker 04

  And I'll, and one of them was a long time ago.

• 15:27Speaker 03

  Yeah.

• 15:30Speaker 04

  A long time.

• 15:31Speaker 03

  There you go. Well, welcome back. Welcome to the studio. How are things going?

• 15:34Speaker 04

  Hey, they're going great. Uh, yeah, anytime I can come in here and you guys got all smiles on your faces because the markets are going crazy.

• 15:41Speaker 03

  Yeah. Well, like we said, when, when, uh, when big countries are playing nice in the sandbox, you know, everybody's got to be somewhat happy about that. And, and, uh, you know, sometimes with this presidency and, and, uh, global, uh, things, you kind of never know how a meeting's gonna go and, and what's going to come out of it and what. Headlines we're going to get and and so today was pretty positive and the markets reacted and liked it and the markets had a little bit of a hiccup going into this this this quarter but but have bounced up and then more positive news pushed it up even further so kind of hitting some of those high watermarks and stuff that we've seen on the market so we just always caution people to take a deep breath and remember where you're at but

• 16:23Speaker 03

  but so tell us a little bit about what's going on you've been in business for a long time in this town you've done a lot of different things and a lot of great things why don't you just tell people a little bit about yourself as far as what you're doing now and some of the changes and and what's what you're kind of focused on now

• 16:38Speaker 05

  Yeah absolutely I mean it was about seven years ago when I sold a company that I did own that was a long time Bakersfield company and when I sold that I was approached about becoming a business broker and it was not anything I'd ever thought about but then as I looked over my career what I'd done at different companies be it corporate or small or whatever it is what I was doing I was building value I was hiring firing looking at those expenses just like you were mentioning about you know at home companies need to do the same thing so as I looked at that it seemed to be a pretty good fit and and from a standpoint of being in the community and owning businesses or managing them that type of thing

• 17:21Speaker 05

  it just looked to be a really great fit where I could add value to a business owner just right out of the gate even whether it's for a fee or not I mean just a conversation and and be able to help them in a lot of different ways so so that's kind of where it took me and and more recently I have been doing a lot of advisory work helping companies just prepare plans and not just to go to market and sell it but you know or engage family in your transfer or key employees

• 17:53Speaker 05

  So there's a lot of ways to move through a business, but they, but they all, and you try to find a very customized solution.

• 18:00Speaker 03

  Yeah.

• 18:01Speaker 05

  And I mean, if someone's ready to go, they're ready to go. And that's, that's one item and certainly do that.

• 18:05Speaker 03

  Yeah, I can see how the advisory would be very well needed because one of the things that I see, you know, in, in, in wealth management and working with people, obviously a lot of our clients are, are business owners or they made their wealth through owning a business and running a business. And you kind of get the spectrums. You get somebody that is like, I can't wait to sell my business and sail off into the distance. And then you have somebody else that's kind of like, I'm going to stick around and as long as everything's fine, I'm going to keep, yeah, I'm going to run it forever. And, and in that scenario, I, I could see where advisory would be so valuable because even if you have plans to stay at your business and run it until you're 80 years old, if that's your plan, you should probably talk every once in a while to an advisor and, and

• 18:47Speaker 03

  get some input and make sure just in case things don't go that way, that you have a plan in place. Because a lot of times I imagine people probably wait a little too long to really start having these conversations. Is that what your experience has been?

• 19:00Speaker 05

  That, that happens all the time. And, and what I say is that, you know, everyone's going to exit their business someday.

• 19:07Speaker 03

  Right.

• 19:07Speaker 05

  I can say that.

• 19:09Speaker 04

  Death, taxes and exiting their business, right?

• 19:12Speaker 03

  Yeah.

• 19:13Speaker 05

  Yeah, pretty much. Yeah, that, that's it. That's a given. So if you take that and then go to your example, then yeah, absolutely, there are, there are so many other considerations when you exit. You mentioned one of them, go off sailing into the distance. Well, if literally you plan to sail, that's, that's great, but, but have some ideas about what you're going to do because that's really important to replace kind of what your life's work was.

• 19:40Speaker 03

  Right.

• 19:41Speaker 05

  Just emotionally and mentally and setting aside the financial part. You guys can take care of that part for them. And, and make sure their retirement's covered, but, but how, what am I going to do for the rest of my life?

• 19:52Speaker 03

  Right.

• 19:53Speaker 05

  Kind of thing. And also, as you mentioned, the, you know, being prepared if everything doesn't go the way you want it to go.

• 20:00Speaker 03

  Right.

• 20:00Speaker 05

  And that means starting sooner than when I've got one foot out the door and my sails are crumbling.

• 20:07Speaker 03

  Yeah.

• 20:07Speaker 05

  Uh, because I'm tired, you know, and it's like, okay, that's you just what you said. You're, you're getting there a little late.

• 20:14Speaker 03

  Right. Yeah. And so when should somebody actually start planning to sell like, like right away? Like there's no better time than now or five years, you know, kind of, is there, is there a sweet spot? Or what do you think?

• 20:26Speaker 05

  I, I think it's all in the planning so that, yeah, you want to do some very early things. Well, I mean, if you're busy with a startup, that's one thing, but, but you want to be thinking about how to build it for an exit almost from the beginning because there are decisions you're going to make. And if you're going to make them to increase your cash flow, or are you going to make them to increase the value, or you're going to, you're going to make decisions, uh, based on what your ultimate plan is. And, and I've got sellers everywhere from, uh, 28 years old, who opened, uh, opened her own business and then they had a child and they were going to move from town. It's like, so, you know, that's 28 and,

• 21:10Speaker 05

  and had, had done the business for several years, but still, you know, all the way up to, yes, 90, uh, and, and figuring out how to, figuring out how to move that between family members and, and taxes.

• 21:24Speaker 03

  Yeah. Well, this is awesome, uh, to go over this. If you do have any questions or comments about businesses and stuff, you can join 661-396-1000. Stick around. We'll be back after the break. We're going to continue with Patrick Collins, business broker and advisor.

• 21:38Speaker 03

  Welcome back to the Money Wise Show. I'm your host today, Chris Pelster with Mr. Seth Perry. We are joined with Patrick Collins, business broker, advisor, trying to help people to get things together, get ready to sell their business, even if you're not ready to sell your business, start running things in a way that will help you be prepared and ready if things, plans change. Uh, we did have a caller, um, longtime listener, reach out, said, I listen to the radio, maybe I'm old, but I don't know how to listen to podcast apps. Longtime listener, Dennis. Uh, I believe Stephen already helped you out, but I wanted to share your question because if you have that question. And maybe somebody else does and nothing wrong with listening to the radio and that's the way you listen.

• 22:21Speaker 03

  But if you do, one of the easiest ways, if you don't want to mess with apps or anything like that, you can just go to moneywiseguys.com and go to the show page and you can bypass all the apps and just listen from our website. So if you're on your computer or even on your phone, you could probably just pull it up from there. But then yeah.

• 22:40Speaker 05

  How much are they, Chris? Those things have to be very expensive. How much do they cost?

• 22:43Speaker 03

  Yeah, just enter your credit card. Free.

• 22:47Speaker 05

  They're free. You're kidding me.

• 22:48Speaker 03

  Yep. Yep. Totally free for listeners enjoyment. So there you go. So thanks for reaching out with that.

• 22:57Speaker 03

  But yeah, we were talking a little bit about, you know, exit planning and some of these different dynamics. I want to talk a little bit about families and that whole dynamic in a second. But for right now, maybe just help listeners understand what makes, what actually makes a value, a business valuable. And then, then, then how that's, you know, how you focus on that. And then maybe what are some reasons why even a profitable business might be difficult or struggle to sell, even if they are profitable. So help us understand a little bit about valuation or what makes a business valuable.

• 23:32Speaker 05

  Sure. And, and for virtually all my clients know I do evaluation before we get started. And whether that's a strategy or hey, if we're going to implement something new to figure out how to grow,

• 23:44Speaker 05

  did it impact my value? Well, I got to know where I am today. So really one of the very first things is to understand where you're at right now and then what you want to accomplish. And so some of the things, and we call them value drivers, but, but things to, to focus on is put on the buyer of your business hat. And how are they going to look at your business? So step away from your business. And, and if I'm a buyer and I'll use a specific negative example. And I've had one big client that's a big part of my revenue and I've had them forever and they're a great client. Well, for a new buyer. There's a lot of risk in that.

• 24:27Speaker 05

  And it's, we call it client concentration, pretty straightforward description. And, and if, if too high of a percentage of my revenue is bottled up in one or two or three clients that I have the relationship with as the business owner, that's great for my revenue, great for my income, but it puts a big risk factor into it for a new buyer. What if one of them bails? Oh, they'll never leave. They've been with me forever.

• 24:53Speaker 03

  Right.

• 24:53Speaker 05

  That's not how you value the business.

• 24:55Speaker 03

  Right.

• 24:55Speaker 05

  I have to apply a risk factor to that.

• 24:58Speaker 03

  Right.

• 24:58Speaker 05

  So, so in looking at something that's simple, which can be very good for business. And even in the business I owned, we had a client and we worked our way up with them in a big statewide outfit. And they became a very large client of ours to where we started worrying. It was a really big percentage of total. And then they went and acquired another company out of state and they almost doubled their size. Well, really good for revenue, right, for us. It's like, wait a minute, we're not going to not take the business. On the other hand, it created even more client concentration. So even though it was, it was good for cash flow.

• 25:37Speaker 03

  Yeah.

• 25:37Speaker 05

  And good for building my, my revenue and some of those other things you don't want to give up.

• 25:44Speaker 03

  Yeah.

• 25:44Speaker 05

  The, the extra car, the Mustang, whatever.

• 25:46Speaker 03

  Yep.

• 25:46Speaker 05

  I mean, you're creating cash flow there, but there's a price that you pay. And it's in that concentration deal because your business is more at risk as well. If, if something, what if one of your clients gets acquired?

• 26:00Speaker 03

  Yeah.

• 26:01Speaker 05

  By somebody else and, and they're not going to use you anymore. And it has nothing to do with you not being good at what you're doing.

• 26:07Speaker 03

  Yeah, I love, I love that thought of, of when you're going to sell of putting yourself in your buyers.

• 26:12Speaker 05

  That's great.

• 26:13Speaker 03

  You know, where, where his hat or her hat or whatever. Because one of the things that happens a lot is, is one of the things, one of the questions I had about, if the owner does everything, is that a good thing or a bad thing? And so a lot of times that's why there's conflict. When somebody goes to sell their business, they might have a lot of pride or satisfaction in how much I've done for the business or I do for the business. Business, but as far as business valuation, is that another risk that if the business owner does everything?

• 26:40Speaker 05

  It's a monster risk.

• 26:42Speaker 03

  Right.

• 26:42Speaker 04

  They're buying you. A lot of times they're buying the relationship. You know, the, the, the customers are, they, they want you. They're working with you. So if something happens to you as a business owner, what are some things that you do to put in place to, to help in that situation?

• 26:57Speaker 05

  So a couple of things that, that come to mind and, and some of them are very hard. We were talking about this between things with a business owner. Some things are really hard to communicate, even if it's true. But if I, if I start looking at what I'm doing and what can I get someone else to do? Is there another employee I can grow into a role? Do I need to hire another person? Oh, I don't want to do that because my cash flow is going to go down. But you start making your enterprise worth more because if it all walks out the door with the owner, unless there's some ironclad long-term contracts, which I don't see very often, that, that the relationship that you just mentioned, Seth, if, if the relationships are

• 27:41Speaker 05

  built around one person, another huge risk factor.

• 27:45Speaker 03

  Right.

• 27:46Speaker 05

  So that, that revenue, if I'm a, if I'm a million dollars a year in revenue and I've got a thousand clients or a million dollars in revenue and I have three, which one has less risk? Which one would I like be more interested in? And that impacts the value. So same revenue, same industry, same everything.

• 28:09Speaker 04

  We see that with a lot of, probably the majority of small business owners here locally. They have maybe one or two big oil or ag contracts. And we see the moving around that's happening right now, even with oil and smaller companies getting bought out and that's scary.

• 28:24Speaker 05

  So, yeah, so it, it's as, as I explain and discuss with people, it's like, that's not something you can change overnight. That's something that's a strategy. So that's something I want to think about pretty early, not, not when I'm ready to sell, because then you don't have time to, to run it up. The companies that have a standard operating procedure on how they do things, huge.

• 28:50Speaker 03

  Yeah.

• 28:50Speaker 05

  If it's just kind of, hey, today, uh, today you're going to go out and take care of it and tomorrow Seth's going to go out and take care of it. This depends on what you're working on. Not a good transferable value.

• 29:03Speaker 03

  Right.

• 29:04Speaker 05

  So again, it's having, and it could be as simple as an org chart and it doesn't have to be a complicated one, but you should have one. So we all know if I go in and buy that, I know where those things go. And it's the best way to retain your employees, which most buyers are anxious, generally speaking, to retain employees if they're, if they're good and it's working and that kind of thing.

• 29:31Speaker 03

  Yeah. So let's talk about a little bit about the whole family dynamic and passing the business on within the family. And I think everybody kind of understands that there is a little bit of a changing world across the board, but maybe you can share locally or what your experience has been. Family succession would, would, would seem to be like, that's what a lot of people would maybe want to do, but maybe the kids aren't wanting to pass or take on the business. So why is passing the business to kids often harder than expected? Or what are you seeing out there?

• 30:02Speaker 05

  Well, I think you just hit on the thing that I probably see most frequently. Now, sometimes families are doing transfers and it's all built into the, the cake mix, right? It's in the recipe. That's how they built it. And, and so those aren't going to necessarily show up at the marketplace per se. But what I do see a lot of, and, and literally somebody coined a term silver tsunami, referencing all the boomers who are now getting to where it's time to sell a business.

• 30:31Speaker 03

  Right.

• 30:32Speaker 05

  So, so that group, what I do see is a lot of people that built their businesses for their kids and the kids don't want to have anything to do with it. And, and so that was their exit strategy, but they didn't really keep refining it. They didn't keep working on it and, and kids fail for, not for any bad reasons, but, but sometimes it can be unfortunate things. It could be disputes with the family over other things. And so the, the primary deal there is to, number one, understand who controls it today and how decisions are made today. And, and, and then

• 31:12Speaker 05

  based on that, sort of decide just you, you, me and the fence post, let's put it on an eight and a half by 11 and jot down what we want it to look like. I mean, what are we thinking we want to accomplish here? Because where we run into

• 31:28Speaker 05

  Issues or discussions is that, hey, there's multiple kids and, and there might be married kids, in-laws, outlaws.

• 31:40Speaker 03

  Yeah.

• 31:40Speaker 04

  Yep.

• 31:41Speaker 05

  So you, you really need to understand that dynamic and, and get all those things out on the table before you say, okay, we're going to sell it to our kids.

• 31:52Speaker 04

  So I've, I've heard it said that the best business is run when you, as in the owner, aren't there. Do you agree or disagree with that? And you're kind of helping to build that, that, go ahead.

• 32:04Speaker 05

  No, absolutely. That, that it's not necessarily that the best business is when I'm not there. The best businesses can, can run when I'm not there. It doesn't mean it's up or down. I've built an infrastructure that can support it. So I can take a vacation and not have the thing crater in my absence or get a call. So if I could build my business up to a way where I've built an organization, I've built a structure and no one has to call me on vacation. You've done a really good job building your business.

• 32:37Speaker 04

  If you're a business owner out there and you're listening, that's a good litmus test is, hey, can I leave for two weeks and not have to answer my phone? You know, and if not, you might want to make a call.

• 32:46Speaker 05

  You, you probably have a pretty good structure, right? I mean, you're, you're comfortable in that environment when, and it doesn't mean that they can't call you or the place is burning down or something. I mean, whatever. But, but generally if that, if that organizational management piece is in place, there are answers to all those solutions. And yeah, if it was something really severe, yeah, it still might be you, you own the business. But if I set it up the other way, you know, or some of the other ways is start bringing in family members or employees in certain roles and have.

• 33:24Speaker 05

  Percentages of ownership. Now I've got a team of owners and now everyone should be rowing in the same direction.

• 33:32Speaker 03

  Right.

• 33:32Speaker 05

  And, and so there are multiple ways to approach that, but, but to do those things does take some time.

• 33:39Speaker 03

  Yeah. Do you see some people wait too long to sell their business? Like maybe say they're, they're getting close to retirement age and probably in a good spot for retirement. And, and maybe even dynamics in their sector, like they've had a good few years and, and like it would probably be a great time to, to sell maybe because things look really well. But, but then they just hang in there because things aren't bad. And so they stay around where it almost makes it worse for the sale of the business. Do you kind of see those dynamics or do you think people that hold in there can still kind of end up exiting well?

• 34:13Speaker 05

  I, I would probably say about half of the people I meet with wait too long.

• 34:21Speaker 03

  Yeah.

• 34:21Speaker 05

  And, and that may not mean that you have to sell right then. I don't mean that, you know, but they come in, they go, we're done. I'm done. I'm tired. I'm through. Uh, you know, I'm ready to move on. It's like, that's great. That's good. You know, what are we going to do? What do we got here? Uh, and as long as they've stayed in the business and built some of these things, that's okay.

• 34:44Speaker 03

  Yeah.

• 34:44Speaker 05

  But a lot of times they do, they wait too long. They miss a market, uh, they miss a market swing. I mean, and, and you know, the extremes would be, okay, I own a restaurant and it's doing really well. And then that little COVID thing came along. Well, okay, that, that's, you know, but that stuff's going to happen. We don't know what the next one looks like.

• 35:04Speaker 03

  Right.

• 35:05Speaker 05

  But, but for something that, that, you know, that's that extreme, and I'm not really talking about that. You should be in your business. And if you had a little more energy, and I have this conversation with all my business, with all the people I'm talking to. It's like, okay, so say you were 10 years younger, what would you do to grow your business? Because that's what the buyer wants to know. Most people aren't buying it to babysit. They're buying it because they want to own it. They want to run it and they want to grow it. So, so let's talk about, you know, don't talk about what you're too tired to do and not things that are expensive. It's like, no, you can't start spending the buyer's money before they get there. I'd say, no, you can be rich and famous, but it's going to cost you another

• 35:49Speaker 05

  500 grand in addition to the purchase price. But if you're, if you're set up, so you're thinking about it again, back to the initial deal about putting the buyer's hat on.

• 35:58Speaker 04

  Yep.

• 35:59Speaker 05

  Uh, that, that, that they're gonna, uh, every buyer, there's a handful of things, but every buyer wants to know why you're selling.

• 36:06Speaker 04

  Do you, as, as part of what you do, do you play matchmaker also in pairing up buyers and sellers? Or are you just focused on the seller, getting them ready for market?

• 36:15Speaker 05

  Typically, I'm doing both, uh, in, in different ways. But then a lot of times also with especially the family and employee ones, all the players are kind of at the table. So it's more being, trying to help them put a deal together based on what I've seen. Uh, I mean, I still, everybody, I still get a lawyer involved for both sides, get an accountant involved for both sides, make sure to talk to your retirement guy on both sides or gal. But, but the point is, yeah, I'm there to say, okay, this is what I've seen. This is how it could work. Uh, now go figure out, you know, maybe that's a really bad avenue based on your taxes, how you've done your taxes. Uh, you know, do you own a C corp,

• 36:58Speaker 05

  S corp, LLC, sole proprietorship? Those change can change drastically how you might structure a deal.

• 37:06Speaker 03

  Yeah, let's go ahead and take one more quick break before the end of the show. Uh, we had a question come in or a comment come in about the beautiful building here at Woolsworth. So we'll give you a little update about that when we come back and we're going to finish up with a couple more questions with Patrick Collins, business broker and advisor.

• 37:24Speaker 05

  Bill McGee.

• 37:25Speaker 03

  There you go. Welcome back. Like I said, we had some question come in about the building, so I just wanted to share that. Miss Emily Waite even gave us the answer because some of the stuff going on in this building, I just, I just work on the second floor. I don't know. So have you guys decided on what we'd be doing on the third floor? My nephew was one of the bands that recorded up there before it was open and it sounded great. Any upcoming events? And by the way, if you haven't heard them, I think if you search on YouTube Woolworth Sessions, I think they were called, there was a handful of artists that went up there and played in that space when this building was first purchased. No construction had even taken place and they do

• 38:10Speaker 03

  sound really, really cool. And so maybe we'll see some more of that. But Emily said an answer for this. The third floor is a beautiful, open industrial space with a great view. It was previously used for storage for all these years. We have already utilized it for a pop-up flea market, photographer rentals, and pop-up events. We plan to utilize it more for those, if you're interested in attending or throwing an event up there, please reach out on our social media, website, or events@[email protected]. So there you go. That's the official update on the third floor as of right now.

• 38:52Speaker 05

  So we were having a great discussion on break. I've got two questions for you.

• 38:55Speaker 03

  Okay. One, what are the costs? How are these business owners? What is it? A fee? Is it hourly? That's question one. And maybe a ballpark of what it might cost them. And two, how do people get in touch with you?

• 39:09Speaker 05

  Okay, so number one is there's a range of different fee structures based on the role that I'm going to play. In a typical arms-length, third-party marketing type of a deal, the typical business sales success fee or commission, as people refer to it, it's, it's, it's a lot like residential real estate or commercial real estate. It's got a set fee based on the value. And, and typically that's up to 10%, up to a million dollars in value. And then it starts stepping down from there without going way, way too far into the weeds. But it's typically 10% on the business value. And if there are, if there's an outside broker, a cooperating broker, that fee gets

• 39:51Speaker 05

  split, much like what people are used to with real estate. And we are licensed under the Department of Real Estate as business brokers.

• 40:00Speaker 04

  I didn't realize that.

• 40:01Speaker 05

  Yeah, it's not the most logical place to be. They don't really know we're here, but that is, that is our license. So we do have, I do have a real estate license. So, so there's that type of fee. If I'm doing a valuation, that's a fixed fee. And again, that's based on the total revenue of the company. And that's just a one-time fee. And we sit down and take a look at all their books and kind of come up with a range of valuations.

• 40:26Speaker 04

  That's like a must have for a business owner because they may be way under where they think, or probably more often, maybe way over what they'd actually get for it, right?

• 40:34Speaker 05

  Not even probably more often.

• 40:36Speaker 04

  Yeah. Yeah. Give them, give them some reality. I know you're paying, you're paying for that, but it's going to help you do your long-term planning as, as an owner.

• 40:43Speaker 05

  It, it helps, it gives you your jumping off place. If I'm going to hire somebody to grow my sales. Okay. I want to grow my sales to build the value of my business, not just sell more stuff. I want, I want to become more profitable. So how do I measure that? Well, I start out with a baseline.

• 40:58Speaker 03

  Yeah. I feel like my experience with business owners or people out there in the, in the marketplace, it's the, the, the chasm is, is wide, meaning people very overvalue what they think their business is worth. Or then I'll talk to other people that have kind of a little niche, you know, market or whatever, or they're doing something and it's, it's kind of impressive. And I'm like, you know, if you play your cards right, there's value here that as you exit, you can either hire somebody and make a little bit off of the cream off of the top, you know, as far as, as you're exiting to retirement. Or if you package it right, there might be somebody interested in giving you X amount of dollars and then you can carry the note or whatever. But you kind of see that where people are

• 41:41Speaker 03

  usually not close to what their value is actually at?

• 41:44Speaker 05

  I mean, the, the people that pay attention are, and the people that run their businesses well, are, are usually pretty much in the ballpark. I don't get very many, when I get through with my valuation, they don't look at me and go, what in the world? The problem today is that you hear it advertised on the radio, that you got these big outfits that are going, say, hey, your company could be worth 10 times your, it's like, yeah, it could.

• 42:11Speaker 03

  And is that a lot of times private equity? Like, like they're just trying to get you to?

• 42:16Speaker 05

  Trying to, it's a solicitor, they're trying to get a, you know, get a listing, get a business for sale. And, and then, but if I hear that, if I have a million dollars, a million dollar company, I hear somebody say 10 times, and I'm making, let's just say I'm 15% profitable on a million dollar business. Okay, so I'm making 150 grand. Well, there is a multiple that will get applied to that, but it's not 10.

• 42:38Speaker 04

  Yeah.

• 42:38Speaker 03

  Right. Yeah, and then they get that in their mind, and then it's hard to probably get a lot of business owners to move away from that, because then they're, they're doing the numbers and they're like, well, I'd love to sell it for that. Well.

• 42:48Speaker 05

  That would be selling that million dollar business for more than the revenue.

• 42:53Speaker 03

  Right.

• 42:53Speaker 05

  Which is, i- i- in small businesses, a little bit rare.

• 42:57Speaker 03

  Right. Well, thanks, Pat, for coming in and, and educating everybody on all things business. Really, really appreciate it. So if you are a business owner out there, you can get ahold of Patrick, 661-342-3436. Email him at [email protected] if you want to get ahold of him. You know, hopefully that helps get you moving in the right direction. Really appreciate listeners, the questions, the comments, keep them coming, 661-396-1000. Send that in here. And as always, be smart, be safe, be money wise.

• 43:49Speaker 02

  Securities offered through LPL Financial, member FINRA/SIPC. Investment advisory services offered through LPL Financial. LPL Financial and Money Wise Wealth Management are independently owned and operated.