E54: Navigating Business Acquisitions: Insights from the Trenches

Cache Flow

Dive into the high-stakes game of business acquisitions with our insightful speaker, who sheds light on due diligence, financial pitfalls, and leveraging government loans. Whether it's about vibrating excitement from snowboarding trips or critical business strategies, this episode is a treasure trove of knowledge for aspiring entrepreneurs and seasoned business buyers alike.

Here are a few of the topics we’ll discuss on this episode of Cache Flow Podcast.

• A deep dive into the acquisition process.
• Exploring SBA loans and financial models.
• Unpacking due diligence best practices.
• Navigating seller relationships and trust.
• Leveraging government loans for growth.

Resources:

• New Image Leasing
• Curotec

Connect with Will Wilder:

• LinkedIn

Connect with our host, Brian Dainis:

• Linktree

Quotables:

• 22:44 - Yeah, I mean if you look across people looking at business acquisitions, there's a million different ways you can slice it. I think the most important thing is upfront, being really clear about what's gonna work for you. You know, some people will have a very specific business thesis. So they came from software development at, you know, wherever and that they think they have a competitive advantage there.
• 26:41 - You're gonna spend a lot of time like the diligence process from issuing an LOI to actually closing for me was three months and it was like a month and a half before the LOI from when I first heard about the business to actually having an offer that was signed and on everyone's plate. So I mean that's even kind of fast I think, right? Yeah, that's relatively fast. So I mean that was four and a half months combined. But if you end up with a seller that's not gonna sell, you don't believe 'em for whatever reason, there's a big potential that you spend five months, six months chipping away at getting a deal done with someone that's ultimately never gonna happen.
• 41:15 - Most of the cash would come from these investors. They would still largely do lending for 75 or 80% of the deal, but the other 20% would pretty much all come from investors. Those deals would typically be the CEO would get 8% of the company upfront, another 8% based on performance, and typically another 8% on at the backend at sale or other performance levers. So start at eight and potentially go up to 24-ish percent. All of that is negotiable between you and your investors. So not fixed in stone, but that's one model of it
• 50:39 - And those deals can be fantastic. You don't have to have the expertise, you can bring in systems that you've developed elsewhere to help grow the business. You've got a guy running it that really knows it well. So there's a lot of reasons why you would wanna do that. The SBA won't let you, you can have the seller stay on for up to a year. There has been some changes to this, but that's still generally the rule. And really as an employee though, stay on as an employee or even a contractor. And within that year it really has to be focused on transitioning the business.
• 59:58 - So you need to figure that out and there's a bunch of ways that you can work around that, but you don't wanna find that out when you close, you'll wanna see if you have any major customer concentration. That was something that we dealt with here and a lesson learned from me was beyond just getting comfortable that yeah, we have a high, high customer concentration, but they either are contractually obligated to us or there's a reason why they're using us or it'd be really hard for them to switch. You can get comfortable with that. What I didn't do enough about is I really needed to actually get down to all of the leases, individual house leases with that customer. And if I'd done that, I would've understood, great, these guys are awesome, they have a great relationship with us, they're gonna keep using us.