David C. Barnett
speaker
164 appearances
1 recordings
1 series
first heard Nov 2024
last heard Nov 2024
David C. Barnett’s voice in public audio — every appearance, attributed to the second.
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Appearances
So I'll give you an example of where people fall off the wagon with this. If you are a successful and profitable business, I saw this once with a fireplace business, like a wood stove business. They were very profitable. They did very well over the years. And they were always going out and installing these new wood stoves in people's homes. And they had these various stove pipe fittings.
So there was like a 90 degree angle and a 45 degree angle and a three foot piece and a two foot piece. And all this stuff kind of plugs together. When they install these wood stoves. And you have to sit down and make a plan of the person's home and what pieces you need.
And so if you don't have the pieces in stock, you then have to make a plan of what you're going to need next week so you can order it and have it delivered. That takes work. So do you know what you do, Charles, if you have a lot of money? You just order a pallet of every part there is. Right. And then your technicians just wander into the warehouse and just pick up whatever they need, right?
But while that is easy, what it also does is it then creates this huge investment in inventory. And from the look of your financial statements, it now appears that the business requires 70 or $100,000 of inventory to operate. When in reality, you could be ordering these parts the week before you need them, right?
Und so wird ein Verkäufer dieses Unternehmen anschauen und sagen, oh, es gibt dieses große Inventar-Investment, dieses große Handelskapital-Investment, das Teil der Funktion dieses Geschäftes ist. Wenn in der Realität, wenn du diese Inventar entfernt hast und angefangen hast, mehr von einem Zeit-in-Zeit-Mechanismus zu nutzen,
and you did this a couple of years before you sold, you could then demonstrate that the business is very nimble and does not require a lot of operating capital, right? And so laziness ends up making financial statements look worse off than they could be Because people choose the easy way. Same thing with receivables. If you don't need the money, you don't get on your customers.
The receivables get later and later. I've seen businesses operate with 45 days of average day sales outstanding. New owner comes in. They based all of their decision making and deal making on that 45-day DSO. They come in and they tell the customers, from now on, we're only accepting credit cards within five days of invoice.
People who were paying with a Visa card in 45 days now start paying in five days. Just because of a policy change. The seller could have done that. If the seller had done that, they would have been able to harvest all kinds of operating capital out of their business before it was sold. It wouldn't have affected the value of the business.
In fact, it would have made it look more valuable because it could be operated with less operating capital. So there are balance sheet things that people get into. Was that four? Are you counting?
Yeah, we got one more. I got one more. So one more thing that people need to do, you know, to make their business easier to sell is they have to be able to show a buyer how the buyer will know how to operate it. So this is your written operating manual, your procedures. And don't think it has to be a big binder with 500 sheets.
It doesn't have to look like the McDonald's operating franchise guide or whatever they have over there. So an operating manual could simply be a spreadsheet with the different function areas in a business. with links in there to Google Drive folders where you keep the different things that you use for that part of the business.
But you have to be able to sit down with a prospective buyer and say, oh, marketing? Here's our marketing calendar for the year. Und hier ist der Folder, wo wir unsere Fall-Promotion-Flyer aus den letzten zehn Jahren haben. Und jedes Jahr machen wir einen neuen, aber Sie können die letzten zehn Jahre schauen und Inspiration bekommen und sehen, was wir vorher gemacht haben.
Und das ist, was wir jedes Jahr für den Valentinstag auf der Radio machen. Und hier sind die letzten fünf Jahre von den Ads von der Radio, die wir hier in diesem Folder haben. Und Sie zeigen ihnen, das ist der Plan. Das ist, wie wir es machen. Und hier sind die Materialien, mit denen Sie arbeiten können. You know, here's all the people we talk to. Here's the radio guys phone number.
Here's the designer that we have on Upwork who did our ads for the last two years and would be happy to continue doing them for you. Like you need to show them this is how you run the business and it's not all in my head. Because if it's all in your head, that's freaky. The people are terrified that they're going to buy the business and then you're suddenly going to become uncooperative, right?
And so if they're worried you're going to become uncooperative, the way around that, this is what I tell buyers, is if you're worried about the seller, you need more seller financing. And, you know, all kinds of stuff is created online about how, oh, you know, I bought this business, I got an SBA loan with a seller note for 5 or 10%. That's bull.
Like most of the time when you're doing a small business deal, you want a material amount of seller financing to make sure that the seller is engaged with you and has a reason to continue to support and offer advice and guidance to you. So like deals should be 25, 30, 40, 50% seller financing. And I see deals like that all the time and people don't believe me. But here's the thing.
A lot of this content is driven by people who are involved in one way or another with deals that involve SBA financing. When you talk to people who are doing deals without SBA loans, you hear things like, I bought the business by giving 50% down and the seller carried the other 50%. Right. And that kind of deal happens all the time.
And those sellers actually have a better note because there's no bank lien. It's just, you know, they can apply their own lien against the assets of the business and they're in first position. And this is something that, you know, sellers often don't think about. But you need to have conversations with your broker, your attorney, your accountant, etc., Verstehe das.
Verkaufen eines Geschäfts ist nicht wie das Verkaufen eines Hauses. Du wirst wahrscheinlich involviert sein in einem Art von multijähriger Art und Weise der Entwicklung dieses Verkaufs. Und ein großer Teil der Grund, warum jemand dein Geschäft kaufen will, ist, weil sie sehen können, dass du ihnen beibringen kannst, wie es funktioniert.
Und dass du vorhanden und vorhanden sein wirst, zumindest für einen Telefonruf, wenn etwas passiert und jemand deine Hinweise und Guidance braucht, weil sie wissen, dass du der Experte bist. Du hast es seit Jahren gemacht.
Showing 141–160 of 164 · page 8 of 9
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