David Barnett is a business brokerage expert who works with entrepreneurs worldwide to help them buy, sell, and organize their small and medium-sized businesses. He is also a speaker and educator. David is the author of several books including Invest Local: A Guide to Superior Investment Returns in Your Own Community, Credit Card Advantage: Understand the Costs and Benefits to Your Business, Franchise Warnings: What You Really Need to Know Before You Buy, and How to Sell My Own Business.
In this episode of the Smart Business Revolution Podcast, John Corcoran is joined by David Barnett, an author and speaker, to discuss best practices for buying and selling businesses. They talk about how David started his business brokerage company, tips to structure a win-win business sale, and how creating online content helps build trust.
Here’s a Glimpse of What You’ll Hear:
- David Barnett’s entrepreneurial projects in his early years
- What David did not like about studying business in college
- The challenges David faced building a finance brokerage company
- The importance of creating content to build trust
- How to structure a win-win business sale
- How the SBA influences business brokerage in the US
- David shares a case of material misrepresentation in a sale transaction
- How the rollover equity business model works
- The peers David acknowledges for their support
Resources Mentioned In This Episode
- David Barnett’s website
- David Barnett on LinkedIn
- David Barnett on YouTube
- Joe Valley on LinkedIn
- Quiet Light Brokerage
- Small Business Administration (SBA)
- Todd Taskey on LinkedIn
- Potomac Business Capital
- Second Bite Podcast
- Ed Pendarvis on LinkedIn
- Sunbelt Business Brokers
- Greg Kells on LinkedIn
- Ted Leverette on LinkedIn
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Welcome to the revolution, the Smart Business Revolution Podcast where we ask today’s most successful entrepreneurs to share the tools and strategies they use to build relationships and connections to grow their revenue. Now, your host for the revolution, John Corcoran.
John Corcoran 0:41
All right, welcome, everyone. John Corcoran here. I am the host of this show. And for those who you’re new to listen to this program, go check out some of our past interviews. We’ve got all kinds of smart CEOs, founders and entrepreneurs of all kinds of companies ranging from Netflix to Kinkos’, we had GrubHub the other day Kinkos’, YPO, EO, Activision Blizzard, and LendingTree, I’m also co-founder of Rise25, where we help connect b2b business owners to their ideal prospects. And my guest here today is David Barnett, and he studied business in school. And for a number of years now, he’s been helping businesses to buy and sell. So basically navigate the marketplace of buying and selling. He’s also a prolific writer, he’s written a number of different books, I’m just gonna list a number of them A Guide To Superior Investment Returns in Your Own Community, Credit Card Advantage, Franchise Warnings, How To Sell My Own Business, Smarter Than a Startup. I think I’ve mentioned all of them there, I might have left one or two out. So he’s done a lot of thinking, talking, speaking about buying and selling businesses. And it’s a really relevant topic right now, with the economic bit of an economic downturn we’re experiencing right now coming off the tail end of COVID at the end of 2022, here, and now, David works with entrepreneurs around the world, helping them to buy, sell and organize their small and medium-sized businesses are really relevant for a lot of our listeners here.
And of course, this episode is brought to you by Rise25, where we help b2b businesses to get clients, referrals, and strategic partnerships with done-for-you podcasts and content marketing. And if you have any questions about that, go to our website, rise25.com. And you can learn all about it. Alright, David, we were chatting beforehand, and I partly grew up in Massachusetts had some snowy winters, they’re not as snowy, I’m sure as you in growing up in Canada. And I had many school day where I had to go out and shovel my parents driveway. And I wasn’t savvy enough didn’t have entrepreneurial chops to go out and offer to do it for money to the neighbors, but you were and so successful that you actually own your own snowball, slow blower by age 13, which those things aren’t cheap. So that’s really impressive. So what age did you start actually doing it for money? Did you go around just knocking on the neighbor’s doors and say, Hey, you want me to do this for you?
David Barnett 2:56
Well, I think I think I used flyer delivery route profits to buy that snowblower. And even before I remember how much I paid for it, it was $80. And I mean, this would have been 1987 ish. So 788. So it was used, and it didn’t work very well. But my dad grew up on a farm and he could do anything, right, because it’s farmers have to learn all the skills. And so we went and checked it out. And it was you had a hard time starting it with the pull cord. And and he said, Yeah, we should get this. And then it took him like, I don’t know, an hour to get it running like great, like really well. And then I use that thing for three winners. And I had a regular list of customers now go around after every snowstorm and the going rate back then was 20 bucks to get your driveway. Yeah. So why the return on investment? Yeah, incredibly good. And so I did well with that business. Yeah.
John Corcoran 3:50
Yeah. And did you ever get to the point of hiring other kids in the neighborhood to do it?
David Barnett 3:55
Okay, never. I never did I never I never got to that level. It was gonna take me another like 10 years before I got to the point where I was employing other people.
John Corcoran 4:03
Yeah, but nice ROI on that. That’s really impressive. And that wasn’t your only entrepreneurial endeavor in college. You got this idea and take your University logo and put it on a Zippo lighter, lighter, right? And I’m telling you that was
David Barnett 4:17
the 90 So of course a lot more people were smoking cigarettes back then. And there was a for a brief period of time where was very fashionable for the people that I knew to have these Zippo lighters, and a lot of them would have these different logos and crests on them. So I contacted the Zippo company, I believe they were in Michigan, and I called them and got the pricing and I sent them my my university’s crest. And I said I want 100 of them with this on it. And as soon as they got it they kind of looked at it and said Hmm, I think this looks like a copywritten image to me. And so they so they got back to me and they said look we need we need to see evidence that you have permission to use this. And so I went to the school administration and they had a policy about their logos and imagery. And it basically said that, you know, only members of the university could use the logo. And as a student, I was a member of the University. And then it said, for any commercial purposes, they actually had a licensing policy. And so I was able to pay a percentage of my cost is zippo, I paid that to the university to officially licensed the logo. And I had 100 of them made. And
John Corcoran 5:25
it must have been hard a hard sell. Because it’s not like people working in academia are like, Oh, how can we make money off of this logo? You know, was it was it was it a hard sell? Do you remember,
David Barnett 5:35
it wasn’t hard at all, because they you’re right, they don’t have the time or inclination to go looking for ways to make money off of their logo. So when people show up at the front door wanting to pay, they’re more than happy to take the money. So I paid the university the fee, and then they wrote me a letter. And they gave me you know, a really high quality copy of the image that gets sent down to the Zippo people. And then I got this box of 100 lighters. And in here’s the fun part is I sold about half of myself just directly, you know, in the dorms and things like that. And when I got to the end, I’m like, What am I going to do with these, I ended up wholesaling the balance my inventory to the university’s own bookstore. Nice. So not only that, I licensed the logo from them, I became a supplier to the university. And then they sold the balance of them out of their out of their case with the fancy pens and everything.
John Corcoran 6:24
Nice, nice. I love that. Now you go you studied business in school, and you say that it took you 10 years to unlearn what you were taught in business school, I’ve always felt I went to law school. And I always felt like you know, now I feel like I kind of wish I’d gone and got my MBA instead or studied business. I was an English major in undergrad. So tell me why I shouldn’t be envious, that you went and got a business degree?
David Barnett 6:48
Well, you know, I know today that there are some more innovative programs about entrepreneurship and running businesses. But back in those days in the 90s, I mean, you went to university and you studied business so that you could become a middle manager at General Electric, or one of these other big fortune 500 companies. And so we would sit around, you know, examining case studies of whether, you know, Westinghouse should enter the Saudi Arabian market or something like that. And I was just thinking to myself half the time, like, I am never going to be sitting anywhere where I’m making a decision like this.
John Corcoran 7:19
So you knew you weren’t attracted to working with business. At that point,
David Barnett 7:23
I knew that my my heart and my interests were in the businesses that I saw every day when I was driving around, you know, in town, and I would I would sit in, I would sit in different businesses or visit different businesses. And I would, I would immediately see the things that were not efficient, I would say, You know what, they could do this better, they could do this better. I remember once going to a drive in. And in my mind, the way they were preparing food, that the concession was very inefficient. And like a lot of drive ins around that period of time, they still had poles in the ground where the speakers once would have been back in the 60s or what have you now. And of course, they were using FM radio at that time. But I thought to myself, hey, wait a minute, if they put numbers on the polls, people could place an order, and then they could come back and deliver it to your car. And you know, today that same drive and could get an app that you could use on your smartphone, you could order food right to the poll number, right. And so my mind is always thinking about better ways to do things, innovative ways to do things. And so I really lucked out, John, when I graduated university, because I started a business with a with a partner, and he left town to chase a girl somewhere. And I ended up using that experience in that business that was a publishing business, to get myself a sales job with the yellow pages. And that, to me was the golden period, because my job is selling to businesses, right, I had to go and visit all those businesses that I was interested in and talk with them about how they made money, what kind of customers they want it. And it allowed me to create, you know, develop knowledge about all of these different kinds of businesses that we see every day when we’re in our towns and cities. Yeah.
John Corcoran 9:04
Now, I don’t know what years you were working for the yellow pages, but not exactly a thing anymore.
David Barnett 9:09
Well, I started there in the fall of 9097, or 98. And I was there until oh, five or five. So
John Corcoran 9:20
a lot of technological change in that period of time.
David Barnett 9:23
Yeah, when I left there, if you typed plumber into Google, you would no matter where you are in the world, you get a plumber in California. They hadn’t figured out local searching, but you could tell it was coming. And so the writing was on the wall. And that was one of the reasons why I decided I needed to make a move. And I left Yellow Pages to go start a business on my own with a partner. And after about a year and a half, I realized it and what my heart wasn’t in it. That was the first time I got involved in the sale of a business and it was so it was a business that I started I ended up selling it and I learned a lot but I still didn’t get into the world of business brokerage at that time I sold. Yeah, I got into finance brokerage. So if you recall around that time, we’re leading into the great financial crisis. Yeah, so I was brokering commercial debt, operating leases, factoring facilities, things like that to businesses that needed money to grow. And that was an interesting business because it opened my eyes to a lot of the problems that some of these small businesses have with respect to money. I started to meet people at that time who were looking for money to buy businesses that were already operating. And when I saw what was going on with those people, and largely, it was very bad deal making being put together by intermediaries that didn’t really understand what they were doing. That’s when I realized there was a gap in my local market for business brokers. And then the financial crisis hit, which basically put half my sources of capital out of business. In a few months, a bunch of those people closed down. And that’s when I made the move, I decided to join one of the big franchise names in business brokerage, because it gave me access to training. And I became the owner of a local business brokerage office. Over the next three years, I helped sell three six other companies for other people. Eventually, though, I had to get to that two, because John, business brokerage is really exciting. And it’s a really terrible business to be in. Because it’s entirely driven by contingent revenues.
John Corcoran 11:32
So you’re gonna look at pages for business doesn’t sell. Yeah,
David Barnett 11:36
exactly. And so one of the first businesses I listed for sale was a fried chicken franchise. And the last business I sold was that fried chicken franchise, I had that file for three years over the three year period, I sold it three times. But the first two times didn’t complete, because of something that happened. Usually by someone who wasn’t the buyer or the seller, it was either the banker or an attorney, or an accountant or somebody would bring something up, and the deal would go askew. And so I had to go through the whole thing three times before it finally sold. And then I got my paycheck. And I remember the seller, he was like, wow, he’s like, that’s a big check. And it was like, his name was Tony, I said, Tony, the person who works for you at the front counter has earned more money since I’ve met you. And, but highlighted the fact that, you know, people look at something like business brokers, and they go, Wow, you know, you sell a business, you get a big commission check. It’s very easy, but it’s not you, if you want to draw the analogy to real estate. You know, in real estate, you have a realtor that finds a buyer, you have an appraiser that determines the value of the home, you’ve got a mortgage broker that helps the buyer get financing, the world of business brokerage, we’re operating in a confidential method, we don’t want it to become public that a business is for sale. And so the broker has to evaluate the business to figure out what it’s likely going to sell for two recommended asking price, they then have to find the buyer, and then work with the buyer and help arrange the financing. So I would do Analogously, wearing a lot of hands, those all three of those jobs that are in real estate,