Buying 7-Figure Businesses With Minimal Risk

J:
Welcome to the BiggerPockets Business Podcast show number 77.

Elliott Holland:
Sellers will always tell you that their business is great, it’s on the upswing, it’s a market leader, and all of their contracts are long-term and will last five years. So the financial stuff is what you need to understand first.

J:
Welcome to a real-world MBA from the school of hard knocks, where entrepreneurs reveal what it really takes to make it. Whether you’re already in business or you’re on your way there, this show is for you. This is BiggerPockets Business.
How’s it going, everybody? I am J Scott. I’m your cohost for the BiggerPockets Business Podcast, and sitting across from me in a completely different room is the woman in pink, my very lovely cohost, Mrs. Carol Scott. How’s it going today, Carol Scott?

Carol:
Doing really well. Here’s the deal. I just got a calendar invite for something at 10:00 to 11:00 p.m. on a weekday. And I’m like, “What the heck is that?” because anybody who knows me knows that I am in bed by 8:00 at the… okay, maybe 8:15, but that’s even pushing it. But fast-forward, jump along here in this way-too-long, drawn-out story, if I let it become one, I realized it from a BiggerPockets community member in Amsterdam. It just took me a quick minute to be grateful. See, I am so not a technology person. I curse technology every single day. I’m a master of breaking iPhones and breaking computers, and I feel like technology makes me absolutely nuts.
Semicolon, however, really, how awesome is it that we do live in this world where we can connect with people all around the world anytime we want to through these Zoom meetings? Even though some of us are tired of Zoom meetings, I’ve got to tell you it is absolutely energizing that we can connect with people anywhere, anytime. And it turns out that 10:00 p.m. Amsterdam time is like 4:00 p.m. Eastern Standard Time. So it all worked out just fine, just a great reminder that we need to be grateful for all the wonderful things in our life.

J:
Wow. That was a long story about being grateful but a good one.

Carol:
Thank you.

J:
No problem. Speaking of being grateful, I am grateful for our guest today on this episode. His name is Elliott Holland, and he is the founding partner of a company called Guardian Due Diligence. Elliott is an entrepreneur. He’s an expert in business buying due diligence, and in this episode, he walks us through basically everything from what types of businesses we should be focused on buying, which types of businesses we should be staying away from buying, and performing the due diligence process that’s so, so important when we’re buying a business. He specializes in business due diligence. So he basically teaches us everything we need to know to get started in the due diligence process. He tells us about how long it takes, what’s involved, and why it’s a lot more complex than due diligence in let’s say the real estate space. I know a lot of us are real estate investors, and we think of due diligence as a couple-day or maybe a week process. It’s a much, much longer process in the business world, and Elliott jumps all into it and gives us lots of great details.
What else do we talk about? We talk about the seller financing, and Elliott brings up a point about how we can get a whole lot more seller financing than we might expect when we’re buying a business. And when we combine that seller financing with a bank loan or SBA financing, we may not have to put very much, if any, money into our own business deals at all. Here’s a big one. Elliott tells us what we can be doing up front to ensure that, if we have any issues in our business, if we need help from the previous seller, that, whether it’s a week after closing or a month or a year after closing on the deal, what can we do up front to ensure that the seller is willing to pick up the phone and help us if we run into problems after we close the deal? So just a great episode.
Make sure you listen to the very end, or not even the very end, but kind of the middle-ish end, where Elliott gives an amazing explanation for why a seller has a four-time greater incentive to mislead you than you might think. And, yes, I said that, four-times greater incentive than you might think to mislead you about how much the business earns. Anyway, if you want to find out more about Elliott, if you want to find out about Guardian Due Diligence or anything we discuss in this episode, please check out our show notes at biggerpockets.com/bizshow77. Again, that’s biggerpockets.com/bizshow77.
Okay, without any further ado, let’s welcome Elliott Holland to the show.

Carol:
We are so looking forward to an amazing conversation today. Your business is so very relevant to what our listeners are loving right now and the things that are super important to them. So thanks for being here.

Elliott Holland:
Yeah, I’m glad to be here. This is exciting. I’m glad to share some information with your listeners.

J:
Awesome. Elliott, you’re the founding partner of Guardian Due Diligence.

Elliott Holland:
Correct.

J:
So tell us a little about your history, what led you to found Guardian Due Diligence, and what is Guardian Due Diligence?

Elliott Holland:
Sure. I’ll start in reverse. Guardian Due Diligence is a business that I launched to help independent sponsors, independent investors, wealthy families and high-net-worth individuals, or really anyone seeking to acquire a company to help them execute that somewhat complex process by providing a full suite of buy-side services. When I say buy-side, what I mean is anything from deal sourcing to evaluating opportunities to writing letters of intent to what they call commercial due diligence to raising capital to closing and to helping grow the business after it’s acquired, so helping investors both execute transactions. And then, of course, we do investments to make a return. So it doesn’t stop at the transaction. Our services keep going to help people grow the business, and that’s how you get your return.
How did I get to this point? I spent seven years in private equity/independent business acquisition. I started at a billion-dollar sort of family office that masquerades as a private equity firm in Boston called the Watermill Group. They had an amazing experience, amazingly smart but down-to-earth guys that the person who I worked for, his father started bootstrapping deals in the 90s. So they’re still going on today, and they’re very entrepreneurial and no-nonsense folks. It shaped my experience with business acquisition. I then spent six years as a independent business buyer initially with a business partner, and then I spun out on my own.
What I just realized is that it was so difficult in certain instances, particularly with the kind of deals that you and I can do, J and Carol, or anyone that’s listening can do. It’s so hard to get good advisors at that place. There’s no shortage of lawyers, no shortage of accountants, but they’ll charge you $400 or $500 an hour, and they’re not motivated to efficiently get something done. Guardian was created to help everyday people execute amazing transactions with great advisors with the comfort and confidence that they’re working with somebody who knows what they’re doing so they don’t get burned and don’t buy a lemon.

J:
That’s great. I think you left out another important point, and I think you’re probably being humble, but you are a graduate of Harvard. In addition to all the relevant experience, you also have a very great education behind you, as well.

Elliott Holland:
J, thank you for that. It’s so much better when somebody else says it because I don’t want to come off as a jerk. I actually am fun to have a beer with, as well. In fact, I’ll be having some of those with an accounting friend at lunch. But I’m also a reformed engineer. So, for the folks that are super technical in that capacity or have pivoted in their careers, I think we can all sort of understand that we’re not necessarily doing what we were first trained to do.

J:
A reformed engineer with a business degree. You and I are brothers. Okay. You mentioned three words that I want to just discuss before we move forward because I know a lot of our listeners are maybe comfortable with small business stuff, buying an independent business on their own, but you mentioned three things. You mentioned the word sponsors, private equity, and family office. These are words that we typically hear often in the business space, but in the larger business space. So, just to round out your introduction, can you tell us: what is a sponsor? What is a family office? What is private equity? And how do they all relate in the business buying and owning world?

Elliott Holland:
Sure, absolutely. I know a lot of folks are in real estate. This acquisition and investment piece of the market is not all that different. A family office is just somebody who made a lot of money before you. They’re a source of capital. Think about the Rockefellers. Think about the Coors Light family. Here in Atlanta, think about Arthur Blank. He owns the Falcons, and all the money that he has. So someone or a family that at some point in their history made a lot of money, and now actually investing that money becomes a full-time job. There’s more complex definitions, but really, it’s sort of like when you make a billion dollars, J Scott, do your children go get a job at Coca-Cola, or is their job to invest your money?

J:
Got it.

Elliott Holland:
When it becomes time, when there’s enough money for there to be a job to invest that, that typically is a family office.

J:
Got it, and I think historically, a family office was wealthy families getting together to pool their money with a wealth manager sort of thing. So a family office is basically just a group with a lot of money that’s looking to invest it.

Elliott Holland:
That’s basically it. I think it shows up in many different areas. So the same capital that’s going to private equity deals, which I’ll explain in a second, is going to real estate deals. Somebody has to put the equity up to get the deal done. If you’re buying a commercial building, the equity cash is probably coming from a wealthy family or a wealthy fund. So, on the private equity side, private equity is just acquiring a business using a lot of leverage. It’s become an asset class just like commercial real estate has become an asset class or a thing to do. But at the bare bones, it’s buying a business the same way you buy a house. You put 20% down, and you finance the rest.
So, if you want to buy a $10 million business, you put $2 million down and go get $8 million of debt. Hopefully you can structure it that way, and you sort of have a similar thesis around paying off the debt to increase your return on equity but also hopefully improving the asset and growing it over the time that you own it to increase your return. That’s private equity. Now, there’s private equity funds like KKR or TPG, here in Atlanta, Roark Capital, that have raised $500 million, $1 billion. Those are private equity funds that have a dedicated fund of money.
There’s also a huge marketplace for independent people like you and I that want to go buy businesses that are probably a bit more sophisticated than just folks talking at the local grocery store about buying a business, but have put some infrastructure, have some experience in that environment. What they’re called are independent sponsors. They’re called fundless sponsors, as well. They are essentially individual entities or groups of people that set out to buy companies. It’d be similar to a real estate group that goes out to look in a particular asset class in a particular city. In the private equity world, that ecosystem of people are called independent sponsors.
All of that sounds more complicated than it is. So, as a reformed engineer, and I got into the business world, the thing that frustrated me the most is people try to make simple stuff complex. If you have the brain to go want to buy a company, you can go do it. You call yourself a sponsor, and you go find a rich uncle or somebody with a lot of money. They could be a family office. It could be a private equity group. It could be somebody you know in your family. This is not something that the everyday person cannot do. It’s just there’s a bunch of fancy names for stuff. Anybody who embarks on the process to go buy a company, in my mind, is an independent sponsor.

Carol:
Excellent. A followup on that: for those of us that want to be these independent sponsors, should we be thinking about buying these businesses with private equity, with family offices, or would you recommend people go the more conventional route like borrowing from banks and the SBA? What do you think in your experience makes a whole lot more sense?

Elliott Holland:
I think there’s two paths for folks, and I would say my gut tells me 80% of people, their best bet is to go find a business that they understand, either they understand the industry and have known the business for a while or they actually know the owner through some personal network or relationship and leverage that to go get a SBA loan, which allows you to borrow up to $5 million, I think. It may be a bit higher, but you can borrow that, and the government will guarantee 75% of it. So it becomes a lot easier to get these loans through banks. So, for 80% of people, I would say the SBA route makes the most sense. You’ll still need to put up around 10% to 25% in equity to get the deal done, but some of that can actually be in the form of the seller financing part of the deal. Sometimes that’s considered equity, so that makes it easier for people.
The other 20%, I would say, if you’re more sophisticated, or maybe you have a lot of great relationships with institutional investors, so just private equity funds, hard debt, then real estate estate becomes mezzanine debt and private equity, if you know those kind of folks and you’re in that boat, then it might make more sense to go get private equity or go get institutional capital to make your acquisition. What I would say is an SBA loan will buy you a deal that’s about $5 to $6 million or less. If you want to do a deal bigger than that for whatever reason, then you really have no choice except to go to institutional capital.
But I would say the process going either way is similar except in the SBA lane, you’re going to be dealing with more… Your local bank is going to be your source of doing everything. So the same folks you deal with every time you go get your money out of the bank or need to get a new credit card because you lost it, those folks will be managing that process. If you go the institutional route, then you’re going to deal with a bit more sophisticated of an investor. You should just know that going in.

J:
And I’ll be honest. That was the most concise answer I’ve heard to the question of: when should you be going bank and SBA versus private equity or other investors? I think you stated that perfectly. If the deal is up to about $5 or $6 million, it’s feasible to use SBA financing, bank financing, probably bank financing higher if you wanted to. But that’s kind of the upper limit. So it’s kind of like, if you’re thinking about buying a business and it’s less than $5 million, consider SBA and banks. If it’s over $5 million, that’s when we get into the more private equity and private investors. Would that be safe to say?

Elliott Holland:
That’s absolutely right.

J:
Okay. That is perfect. I’m going to take a step back. This may be an obvious question to you, and we’re talking about it in this regard, but just to clarify for our listeners, we’re talking all about buying a business. From your perspective, what are the benefits of buying an existing business versus somebody going out and saying, “I’m going to start my own business.” Or maybe there are benefits to starting your own business. It sounds like you specialize in people buying businesses. Why should we be thinking about that as a first choice versus building from scratch?

Elliott Holland:
Well, sure, that’s a great question to ask a guy like me. I started a couple of businesses, and I bought a couple of businesses. Then I advised on both sides. I work with a venture capital firm here in Atlanta and think about early-stage investments. Here’s why you’d make one decision versus the other. As optimistic and entrepreneurial as I am, if you just were betting the odds, if you start a business, more businesses fail than continue on for 10 or 20 years, right? What is the statistic, like half or three-quarters fail in the first year? That’s real. So, to start your own business from a logical standpoint, because we all do some things on emotion, but if you’re thinking logically, you’re saying, “Hey, do I want to bet that I’m in that top half or top quartile of people with this business idea and opportunity?” If so, it makes sense to go start. You’ll own more of it, and you’ll probably have more autonomy. If you’re saying, “Hey, I’m a more reasonable bet-the-median, bet-the-average type person,” I would imagine a lot of real estate investors are in that boat, it may make more sense to buy.
Here’s why. If you think about all the complexity of the first 5 to 10 years of a business, the first salesperson, the first new vendor, the first significant fire, the first issue between business partners, the back office systems, the product market fit, so what products to what types of customers in what way, when you buy a company, they’ve worked all those things out to the tune of now they’re doing $10 million in revenue, $2 million in profit per se, just random numbers. Now, when you buy that business, it’s not quite like a franchise where they have a whole operating manual for how to run the business. But you get a light version of that because some set of owners in some real environment have run this business, ironed out the kinks, and you’re taking over all of their thought capital and trying to grow it going forward. So you have a playbook. You actually have an advisor in the current owner, in the current management to help you go forward, and it’s less complex than trying to figure out, “How do I sell manufactured products into the automotive industry in the Midwest?” Some of these things are hard to think about from scratch. But when you see another model that works, buying it can make more sense.
The other thing that happens is, when you start a business, you’re everything. You clean the floors. You do the strategy. You call the customers, all of that. When you buy a business, you sometimes become the CEO, but you sometimes become an advisor. So your role is different. Also, your risk is different. When you start a company, most often you start with a good idea. You’re in your garage. When you buy a company, you start with a lot of money you owe other people. If it works, then you’re going to be very, very, very glad you did it, but you have to be comfortable with living with the debt. So those are some of the things I think people should consider. But the main thing is really the probability of success. I think the probability of buying a company and it being around in five years is way better than starting a company and being around in five years.

Carol:
Awesome. Thank you. So, hands down, you have absolutely convinced me that buying is the right way to go rather than starting something from scratch. Elliott, is there a certain type of business that I should be looking for or looking to actually, on the converse of that, staying away from? And the second part of that question is: has that changed at all throughout 2020 in how just the landscape of our country and how the market has changed so dramatically?

Elliott Holland:
Sure. I’ll start with what you stay away from. You stay away from things that are cyclical, meaning that they move outside of anything that anyone understands, like oil field services or oil and gas companies. If you want to predict the price of gas for the next five years, then those are great businesses to get into. I would say 99% of people are no good at that, and that’s probably not a good thing to get into. Chemicals are the same way. There’s plenty of businesses that the profit moves not based on real market forces but just has cyclicality to it. You want to stay away from those.
What do you want to buy? You want to buy stuff that’s in a zone that you actually know. So, for instance, a lot of my friends who have heavy real estate portfolios, they will buy companies that have some real estate component, like a gas station that sits on some land or a manufacturing company that sits on some land or a trucking company that has land and trucks. Other things of that nature exist in the market. Or maybe an HVAC company… I have one client who bought a company that makes the HVAC systems in commercial buildings more efficient. Well, he was able to actually use the company he bought as a customer for his promotional real estate portfolio and improve the odds of his success inside of things that he controlled. So, in the idea situation, you’ll know your industry. You’ll know the business. You’ll even be able to be a customer of the business after you acquire it. That’s the ideal situation. Other situations that make sense are you know the owner, just because you get so much better information if the owner is a friendly person versus you guys negotiating over price at a specific time.
The other thing is sometimes people just understand or enjoy or have passions about certain things. Those are also good industries to get into. So, if you like flowers, you might want to look at a horticulture business or a nursery business. And if you like working with your hands and plumbing and that kind of thing, a small Ace store might be a good acquisition. So I think the best acquisitions are in things you understand. Has that changed in 2002? Absolutely. I think we’ve seen what I call a cutting of the grass. So, if you were exposed and you weren’t taking care of things and you were thoughtful about down markets, you’ve been exposed in 2020. And I think now we’re getting back to a more fundamental view of business.
I use the example of waste because I love the industry personally because it doesn’t change. The demand and the supply don’t change all that often no matter what happens. So, if you were moving trash in 2020, your business probably improved. More people are home eating more food, throwing more stuff away, buying more things on Amazon. Your business went up. If you were a retail store, your business might’ve gone to zero. A restaurant might’ve gone to zero. If you’re not tech-enabled, if your business doesn’t allow for work from home, those things had a really hard time in this marketplace. So I think a wise investor considers that over the course of owning a business, call it 5 to 10 years, you’re more than likely going to encounter a down market sometime during that phase. So you want to buy stuff that doesn’t get significantly impacted in bad markets.
Well, Elliott, how do you even know that? Well, think about how that business did in 2008, 2009, the last major downturn. You can either look at their financials during that time. Sometimes that’s a bit too far back, but you can look at almost The Wall Street Journal and look at how… Go to Yahoo Finance or something and take a look at the biggest public company in the same industry that you’re considering an acquisition in, and see how it did from 2007 to 2010. That’s more than likely, on a macro scale, how your industry will do in a typical downturn. So that’s one way to take a look at it from a data perspective.

J:
This is something we talk about a lot in real estate, and I know a lot of our listeners are real estate investors. So there’s some tremendous analogies. We often talk about, in real estate, as the markets are increasing, we don’t need to have as much of a focus on fundamentals. The market’s going to save us from our mistakes. It’s going to save us from bad decisions. But then, when the market starts to soften, and real estate starts to soften, and values start to drop, that’s when fundamentals become super important. And those who are familiar with the fundamentals, those who follow the fundamentals and do things intelligently survive, whereas those who have basically been propped up by a rising market get crushed. And secondarily, I’ve been saying, because I do a lot of interviews on real estate, my big refrain these days is, “Look at what happened in different markets in 2008 because history is the best predictor of the future.” It’s not-

Elliott Holland:
Yes, the data is out there. It’s easy to find. It’s not complicated.

J:
Exactly.

Elliott Holland:
Here’s the other thing that happens. I’m sure you’ve seen this. In every market, almost in every year, there’s some hotshot that thinks they know better than the last 300 years of data. They’ve figured out some brand new trick on some brand new thing that’s just… You fundamental guys, crazy. You’re missing all of this money. And good markets, they look great. Think about all the people who were Bitcoin hedge fund folks until Bitcoin started going down, and then you didn’t hear them shouting as loud on Facebook. The fundamental folks, the reason and how you’ll find them is that they’re not stressed out when the market’s bad because they knew it was happening. They prepared for it. This is no big deal.
In fact, one of the things I love about investing on the private equity side, and I’m not sure who the equivalent is in real estate, but if you think about how Warren Buffett and Charlie Munger of Berkshire Hathaway think about buying businesses, and the simple thing they say is they don’t buy stuff they don’t understand. They always buy stuff that is very, very, very good to the customer. They bring strong brands, and they also say they want to buy $1 worth of company for 75 cents. So a lot of the trick to this is, if you can buy below fundamental value, whatever your analysis of that is, then you can also benefit greatly. So, for instance, the wise folks with money are out in the market looking for acquisitions right now. As crazy as all this stuff is, as volatile as the market is, the people who buy stuff in 2020 and 2021 will look like geniuses in 2025.

J:
I love that, and your earlier comment made me think about the thing that I laugh at most when I hear it in both business and real estate: this time is different, people who think that, for some reason, today is different than everything that’s happened in the last 250 years of this country and this economy.

Elliott Holland:
Yes, and the slow and steady guy wins the race… or gal wins the race. The amount of money that people are putting to work in some of these real estate transactions, private business transactions… I mean, if you get 3x on a million-dollar investment, that’s life-changing money. If you get 3x on a $10 million investment, that’s life-changing money. And one of the things that’s really cool about business acquisition that’s harder to do in real estate is the returns can be higher in a private equity transaction, on average, than they would be in real estate. A 10 to 15, I mean, 8% to 15%, even 20% return in a real estate transaction is home run. A lot of times in business acquisitions, you can see 50%, 75%, 2x. Now, the risk is different, but I would be remiss if I didn’t mention so is the reward.

Carol:
Excellent. Okay. I want to follow up on this a little bit more. Let’s say I decide to listen to you fundamental folks, and I identify a business or a few types of businesses that, A. I know a little bit about the space. I may know some people in them. They’re interesting to me, and I want to be seen as one of these geniuses in 2025 who did the right thing and bought the right business. So what is my first step in going about looking for this business to buy? Where should we be looking to find these businesses that make the most sense?

Elliott Holland:
Sure. The first thing, I think, is to think about the process to buy a business. This won’t be where most people recommend, but for me, having been in it for over a decade now and just seeing people try and be successful and try and fail, the ones that had a idea of what the process looked like were able to sustain and be more successful. What does that mean? I’ve had people call me and say, “Hey, Elliott, I want to buy a business, but I need to get a job in five to six months. So I really need your help to help me find something, do diligence on it, and close it in four months or so so I can not have to take my job in six. Can you help me?” And I try to tell them that that timeline just doesn’t make sense. Business acquisition can take longer because you’re going to have to look at 25, 50, 75 companies. So you want to have a year, really two years to manage this process. So, if you say, “Hey, I want to be smart in 2025,” I think what you say is, “I need to dedicate at least a year to this.”
Then you need to go find companies that are available for sale. The way you would do that is go to International Business Broker Association. IBBA is their acronym. Go look them up. Find a list of brokers in your area. Call them, email them, get in front of them. Tell them that you want to buy a business. Tell them how the business looks. You’ll start slow, but over time, you’ll have three deals you’re looking at, then five, then 10, then 20. Being an engineer and a bit of a nerd in some contexts, when you get to 31, all of a sudden, you’ll have a bell curve of opportunities. Now you’ll know the top 10% of deals in your pipeline. You might not know if you have a representative pipeline of all the deals in the world. But you’ll know, “Hey, these at the top 10% of my portfolio of opportunities I’m looking at are way better than the bottom 90%.” And you’ll naturally be able to spend more time on the ones that make more sense.
After you get some opportunities, here’s, I think, where you have to make a decision. Do you go it alone and just be independent, figure out how to manage your diligence process? Do you know how to look at financials of private companies? Do you know how to interview sellers/ Do you know how to raise capital? And if those things are things you’re comfortable with, then you go it alone. You plan your resources. You plan your attack, and you go. For a lot of people, because of the complexity of this marketplace, it makes a lot of sense to get an advisor that knows the process to help you through.
Here’s why. When you look at private company financials, you’re looking at, typically, QuickBooks put together by somebody who’s not a CPA, who oftentimes is a child of the owner or the owner’s partner, and not saying that that’s a bad financial person. Just saying it’s not the smartest financial resource in the city they live in doing their books. Their taxes are typically optimized so that they don’t give Uncle Sam any extra love at the end of the year. And if you don’t have a great ability to look through monthly financials in QuickBooks and sniff through what’s real and what’s not, if you don’t know how to compare those to taxes and then, really, if you don’t know how to link all of that stuff to bank statements because what I tell people all the time… And I’m an owner. So I’ve used QuickBooks to do my financials. I can tell stories in QuickBooks. I can tell stories on my taxes. I cannot tell stories through the bank. The bank won’t misrepresent the truth for me, for you, for anyone. So the bank statements become sort of the crux of the analysis.
If that’s not stuff you feel comfortable doing, particularly thinking that, “Hey, I’m going to maybe put up $100,000 of equity and get $900,000 of debt that I’m personally responsible for,” so taking a million-dollar bet, you may want to spend a little bit of money to make sure you’re doing it correctly. So I think you have the go-it-alone process which, look, we’re entrepreneurs. A lot of people do it. Then there’s the get-help work stream, and I think for the size of bets that people are making, if you’re not experienced in this market, it would make sense to get an advisor.

J:
Okay. You’ve now jumped from the buying into the due diligence. This is your area of expertise. So I’d love to jump into the due diligence. Let’s fast-forward a little bit. Let’s say we found a business that we think is interesting. Maybe we know the owner, or we’ve worked with a broker to find the business. We have run the numbers based on the data we’ve been given. So maybe it’s just a T12, so trailing 12 months of financial data, and we write up a letter of intent or even a contract. We get the business under contract to buy, and now we have to start this process of actually verifying that everything the seller told us was true and verifying all the things the seller didn’t tell us for one reason or another. They forgot. They don’t want us to know, whatever. In the real estate world, this is the make or break. If you do good due diligence, then you’re likely setting yourself up for success in the project. If you do bad due diligence, you’re going to find surprises that are likely going to eat into your project and maybe even cause you to lose money.

Elliott Holland:
That’s right.

J:
So this is what you specialize in. Walk us through… Let’s say yesterday I got a business under contract. What am I doing today? What are you going to help me or tell me to do today to start that due diligence process? What are the big pieces we should be thinking about?

Elliott Holland:
Sure. The first thing you need to understand, in my mind, is that due diligence is a painful process for a seller. So you have to prepare your mind and their mind for a process. For instance, my understanding of real estate due diligence is that it’s in the magnitude of weeks. For business acquisition due diligence, you’re talking three to six months with the same rigor. So, typically, when you write your letter of intent or contract to buy a business, you say, “Hey, I’m willing to buy business at this price with this structure. But to do my due diligence, I need the 90-day right to have exclusivity to look at this business. You cannot solicit other offers. And even if you solicit other offers, I need the 90 days to look through your business to see if I want to buy it, and other people cannot buy it during that period.” That the first thing, is recognize where you are. Then you need to sit down and go through a due diligence checklist. You can find them on the web. You can find them on my site, guardianduediligence.com. Go through the financial stuff that you need, the legal stuff that you need, the operational stuff that you need, the ownership structure stuff that you need, and the then industry data you need to feel comfortable having a picture of the business.
So, after you provide this list to the seller, they’re going to provide you some portion of it. And you guys are going to spend weeks going back and forth on, “No, I need more specific here, more specific there.” What I advise my clients to do is look at the list as here’s the laundry list of things you need to understand. But, J, you asked me where to go first. The first is the financial picture. Here’s why. Sellers will always tell you that their business is great, it’s on the upswing, it’s a market leader, and all of their contracts are long-term and will last five years. But if you get into there and you find out that their profits are not strong, they’re declining, none of this work is contractual or the contracts don’t have any volume promises, so they’re not actually enforceable in any way, you probably will stop your diligence process and look at a different deal. So the financial stuff is what you need to understand first.
I think, once you understand that, in my mind, the legal… You need to make sure the person you’re talking to actually has the right to sell the business. You need to make sure that there are contracts with customers, that they’re not contracts that will block your acquisition because sometimes those contracts will have change-of-control provision. After you do financial, legal, then I think you’re in the context of operational industry and all the rest. So, if you go through in that sequential order, what it allows you to do is to stop. So, if somebody says, “Hey, I have $1 million of cashflow.” People buy businesses, traditionally, as a multiple of cashflow. So they say they have $1 million of cashflow. You look at their financials, okay, but that’s QuickBooks. You look at their taxes, okay, that’s QuickBooks. “Hey, send me your bank statements. Wait. I only see $700,000 of deposits here. How did you get to $1 million with only $700,000 of deposits? Help me understand this.”
At that point, you would’ve spent a week or two in diligence as opposed to 90 days because, at that point, if it’s that much less, you probably aren’t going to want to do the deal. So you look at financials first, then legal stuff, then operational things. You do it sequentially so you can stop. And you make sure that you have rigor because here’s what happens. You ask the seller for financials, and they send you trailing 12. But you want to know at least a couple of years. “Hey, I need three years.”
“Um.”
But you’re the money. So the deal doesn’t happen until you’re satisfied. So you have to push back. “I need this.”
“Hey, I need bank statements.”
“Oh, I don’t want to go talk to my banker,” or they’ll print them out, scan down so you can’t convert them to Excel and send you 10 out of 12 months. Right? And you have to be strong enough to say, “This is not what I need. I need them direct PDF so I can actually convert them to Excel and do my analysis.” So you have to push just like in real estate. Diligence is where the money’s made. Diligence separates the novices from the experts, the folks that are getting maximum return versus those that are losing their money.

J:
And the seller has an incentive… I don’t want to say to lie, but the seller just-

Elliott Holland:
Tell a story.

J:
To tell a story. Can you explain why $1 to the seller, if they can get you to believe that the business has made $1 more than it has, why that $1 is more valuable to the seller than it is to the buyer?

Elliott Holland:
Oh, for sure. You said you had a phrase that you use. I use this one often because people buy a business as a multiple of cashflow. So, for businesses that most people are going to be looking at, just to call it four times cashflow is generally it. If the seller convinces you that they had $1 more of cashflow, you’re not going to pay $1 more for the business. You’re going to pay $4 more for the business. So each story the seller tells, he gets a multiple benefit for it. That’s why you really have to be good here because that’s probably the time in the seller’s life or a person’s life where they have one of the highest incentives to lie. Right? Because it’s not like my lie gets me a dollar-for-dollar benefit. It gets the multiplier effect, and the reality is as soon as the transaction occurs, there’s no givebacks. There’s no mulligans. There’s no oops. The requirement and the burden of due diligence is on the buyer. So you have to be really good because some stories sound reasonable but are very hard to check, J and Carol.
For instance, a lot of times you’ll get people that say they’re a absentee owner. They have a office in the business, but they, “Oh, I’m never there. I play a lot of golf. I go fishing. My office manager runs that thing. Don’t even worry about it. Take me out of the expenses because I’m really not heavily in the business anymore.” So that representation would take $100,000 that actually was an expense to the business, if, say, that they made $100,000 last year, and it’ll take that from cost into cashflow. So now you’re going to pay a 4x multiple on that story. Well, how do you check that, J? So a lot of people will believe stories like that. Or, “Hey, I have a market-leading product. I have very sticky customers.” How do you check that?
So getting good at realizing that there’s a huge motivation for people to tell stories and then a huge motivation for the work of getting the data necessary to understand the answer can be tough, as well. That’s where you have this graveyard of people who have made bad acquisitions and wish they had spent more time in diligence, wish they had dealt with people, advisors or otherwise, that knew the industry better, or wish that they had spent a couple more days testing things. So, yeah, you get a multiplier on your story as a seller.

J:
Yeah, and that may be the single most important point when it comes to buying a business that our listeners should keep in mind. If the seller can convince you that their business makes even a single dollar. For every single dollar that they can convince you their business makes more than it does, that’s $4 more that you’re paying for that business than it’s worth.

Elliott Holland:
That’s right.

J:
So I think, if our listeners do nothing more than keep that in mind, that their risk is four times as high as the seller’s incentive or to lie or misrepresent… I don’t want to say lie, or tell a story, that’s really going to save us a lot of money because we’re always going to go in with that attitude that the seller has a huge incentive to inflate that number because it’s going to get them four times, maybe more than four times every dollar that they can convince us.

Elliott Holland:
And J, I like your refocus on the four times. That’s true, also. The other reality in business acquisitions is that the seller is represented oftentimes by a business broker. And the business broker is motivated, as well, because they get a percentage of the purchase price of the deal side. So, if the broker or the seller can convince you of $1 more of value, they’re both incented to do so. So the broker will say things that don’t show up in the numbers that the seller will try to support as best he can to get the purchase price the broker advised him he could get in the market. And you, as the buyer, need to make sure you’re not paying four times on a story.

Carol:
Awesome. I want to know even more, Elliott. This is so fascinating to me. I’m thinking about these stories that can be manufactured and spun, however necessary. So, twofold question: what does somebody like yourself, somebody like your firm, how do you go about uncovering the truth behind those stories in everyday, real life practice? How do you get to the bottom of what’s really happening as part of diligence? And also wondering if you have any case study stories you might be able to share with us.

Elliott Holland:
Sure. So the way that you get to the bottom is that you’ve seen so many different plays being ran, stories being told, and you check the data on them to know how to quickly get to the facts so that you can quickly move from story to verifiable piece of data to believability yes/no. So what does that mean in abstract? Then I’ll give you a case study example. In abstract, I often find people say things like, “I have a market-leading product. I sell widgets into manufacturing, but I have a market-leading product.” So, once I hear market-leading product, what that means in business is I’m able to sell my product at a higher price than my competition because their market-lagging. That means my gross margin should be higher than the industry average. So now, seller, let me see an income statement. Let me look at your gross margin. Is it higher than the average in the industry? You can look at IBISWorld or other datasets to figure out what the average gross margin.
And if it’s not, the seller told me it’s market-leading, the financials don’t prove that out, now I don’t necessarily kick the deal out. But I know that this person is willing to say things that aren’t qualified in the data. So I’m on one side of the world, and this is fine. Whereas if somebody tells me a bunch of things and I check a bunch of things, and they all come out true, I feel a different way. How does that work in practice? I was helping two guys in Connecticut who wanted to buy a business a couple hours south of Atlanta. One had worked in public market investing. So he had looked at Coca-Cola or Home Depot’s financials, so sort of understood that. The other one was a teacher and so not very familiar. They were buying an HVAC company, and a lot of the things that I’m talking about came up. The seller was the owner/CEO. His wife was the bookkeeper. She said she was part-time, but we had to check to see what part-time meant because part-time meant… Were we allocating her full salary to cost, or half? So we went through that process to see, well, if I can call her at 8:00, at 12:00, at 2:00, at 5:00, and she’s always at the office, that’s not really part-time. So you check it to see if it’s true, and then you adjust your idea of profit and cashflow commensurately.
Another issue that we had, I think, was we were told that a lot of their business was contractual and repeat. People always use the word recurring. Whenever I hear recurring, I’m like, “Show it to me.” So we went through the numbers. It was repeat, meaning people did business with them on a repeat basis, but it wasn’t like a SaaS company online where I’m paying Spotify $5 a month. It wasn’t a machine of that nature. So those kind of things had us go from let’s call it x dollars of cashflow, and we adjusted to some 0.8, 0.9, whatever percentage of cashflow. And the purchase price ended up being lower as a result of some of the diligence that we were able to help the customer do. They also felt more comfortable because looking at the financials and understanding the seller mentality in these type of deals requires a decade of experience. It requires somebody who’s been around the block because keep in mind who you’re questioning.
It’d be like me questioning J and Carol about this podcast. They know so much more than I do. If I’m a first-time person doing this process, there’s no way I’m going to get to know your business enough to be able to buy it the first time doing the full process. Now, the 100th time I’ve talked to sellers about their company, now I’m very efficient and good. In fact, at this point, I just have conversations with sellers for a day, and I’ll go through a 50-item checklist and never ask a direct question or a sequential check-off next, next, next. Then I’ll go home, and I’ll be able to answer the 50-question checklist, but the seller will feel like it was just a conversation. So that’s how you do it and then an example of how it’s done.

J:
Yeah. And it’s just like due diligence with everything else. I know I always go back to real estate, but a lot of our listeners are real estate investors. You walk into somebody’s house. If they have a stain on the carpet, it’s a lot easier to hide that stain if you’re the seller than it is for you to find that stain because what are you going to do? Are you going to move every piece of furniture? Are you going to look through every drawer in every cabinet? Are you going to open every door and every drawer? Well, in real estate, maybe we don’t do that because to replace the carpet isn’t that much, but in business, this could be the make or break. So you do have to move every piece of furniture. You do have to open every drawer. You do have to look in every space. That’s why, for business, like you said, due diligence can be a three, four, five, six month process versus in real estate, where it may be a few days, maybe a week.

Elliott Holland:
Yeah, and to make an analogy, the carpet may or may not break the deal, but if the foundations are shifting, then that’s different. If the house next door is about to be condemned and that will change the value of your real estate, that’s significant. There’s certain things that I think, even in real estate, are so fundamental to the value that you have to check them. The other thing… I compare myself to a home inspector if you’re doing residential real estate or a good appraiser on the commercial side. That person’s worth their weight in gold because they’re the one that’s like, “That smells like something different in the house. I’ve smelled that before. Show me the furnace. Oh, the furnace is on its last leg.” But I may not have been able to do that. But that person did it right away. Or, “Hey, this feels a little faulty. Let me go check the foundation here.”
So it’s worth its weight in gold to get someone who understands those things very, very well because you’re right. In due diligence, you get such a small window relative to the history of the business to determine if this business is what you say it is. You know that you can tell a story about your house. Let’s even go to cars. I’ll use cars as a great analogy. You could tell a story all day about your Chevy Impala that’s got all the records in the dashboard and the brand new tires. Look how clean it is on the inside. But a real good person, in diligence, will be able to pop the hood and take a look at the engine, which is really what’s driving the value of this car and be able to critique. You need to be sure that you can do that or you work with somebody who can do that.

J:
Elliott, this has been absolutely awesome. One of the topics that our listeners absolutely love and, again, always goes back to real estate, but we talk about this a lot in real estate, is seller financing. So, for buyers that are buying a business under the $5 or $6 million mark where they’re probably using some of their own cash, they’re probably using bank financing or SBA financing, but they want a leg up so they don’t have to come with as much cash. The bank or SBA might be financing 75% to 90%. What about seller financing? What about getting the seller to contribute equity that they have in their business to the deal to reduce the amount of cash that the buyer has to come with? What should we be thinking about with seller financing? What percentage of a deal can we typically get seller financing on? How should we be talking about a business seller about seller financing? Anything you want to share about seller financing, I think our listeners would love.

Elliott Holland:
Sure. In acquisition talk, people spend a lot of time on structure. How do you structure your deal? And when they talk about structure, they’re talking about what J was speaking of, the capital structure. If you need to buy a $5 million business, well, where is the $5 million coming from? Specifically on seller financing, you want to be in the zone of 20% to 40% in some way, shape, or form if you can. Sometimes the SBA will limit some of your flexibility in that, but there’s some fancy ways to sort of get around some of those things. If you talk to the right lawyer who understands how that works, you can make sure, but 20% to 40%.
So, Elliott, why is it 20% to 40% and not 70% or 10%? Here’s the logic from having been in this for a decade. That actually comes to bear. If I’m putting up $5 million on your company to take it for the next five years to get my return, and let’s just say it’s you, J. You’ve known this company for 20 years. It’s your baby. You understand it. You put all the processes in. The reason I want seller financing is because I want you to be betting on my ability to run your company for five years for you to get your money out because you know the asset better than me. So, if you wouldn’t bet 20% to 40% of this purchase price on me running your business, then I actually shouldn’t be buying it because you’re smarter than me on this business, right? So, to me, that’s the logic around seller financing.
How does that really come up? One of the things that happens, you typically have a six months’ to two years’, sometimes even longer, employment agreement with the seller after close. And I have you have the academic schoolboy thought, “Oh, I’ll pay the guy $5 million in purchase price, and then I’ll pay him $75,000 for a consultant for five years. I have it all figured out.” Does a guy who took home $5 million show up for $75,000? No.

J:
That’s a really good point.

Elliott Holland:
Not when it gets tough, not when you need him, right? Your number one customer leaves. He’s on the beach. Is that guy showing up? No. But if you still owe him 20% to 40% of the purchase price, he’s taking your call on the beach. He’s in South America hanging out, but he gets back to you on the same day. So that’s why you want to have seller financing, because it ties the seller to the future outcomes of the business. It also becomes an extension of diligence. You asked a finite set of questions in diligence. You’re not going to be able to ask an exhaustive list. That would take until eternity.
So you may have not asked a question two months into your operation of the business. A customer calls up and says, “Hey, J told me he was going to give me 20% discount on your services for next year because this thing I did last year. So I’m going to pay you 20% less.” Well, I need J to pick up my call to get on the phone with this guy to say he’s lying so I don’t have an argument with my customer. So all those things are wrapped up in the logic around seller financing and the importance of it.

J:
Love that. Absolutely love that. You put that absolutely perfectly. You hand a guy $5 million. Is he going to show up for $75,000 a year after that? And seller financing is literally the best way to ensure that the seller picks up the phone, whether it’s six months or a year or two years after you purchase the business when you run into a problem. You want to know that the seller is going to pick up the phone and help you, and literally the best way to do that is for the seller to know that he still is owed money and that he has to help you because, otherwise, he’s putting his own money at risk.

Elliott Holland:
That’s right. I mean, one of my favorite business books is How to Win Friends and Influence People. It’s helped me so much in business because you need to always be thinking about: what are the incentives of my counter-party? When you think about a $5 million check and how important a $75,000 check is after a $5 million check, if I put my head in the seat of the seller, $75,000 is a rounding error. I’m going to pay more in taxes. And there’s a lot of instances where, in this process, you really have to almost stop, take a step back. I’m not Elliott anymore. Now think about I’m the seller. How would I perceive this? How would I think about this? What are my incentives? Because a lot of people get excited about the concept of buying a business, but not truly thinking about the complexities of a business and also the incentives of the seller both during your diligence period, which is going to be really intense, but also the year after you close the deal. You’re going to need a lot of help from that person.

Carol:
Excellent. Okay, great. So I would really like to know… Elliott, I’m just an everyday, regular person. I’m a mom. I invest. I juggle a lot of different things. This idea of buying a business is awesome, but it’s also pretty darn scary and frightening. I mean, there are so many different components involved to make sure it’s the right one from finding it to the initial review to funding and financing it to a very daunting and extensive diligence process. How do I, as just a regular, everyday person become comfortable going down this type of road that I’ve not necessarily done before?

Elliott Holland:
Absolutely. That’s a great question. I’m glad you asked it. How does a everyday person get comfortable? I think what you do is you study this game just like you study any other games. There are resources to actually get you comfortable. There’s a book called Buyout by Rick Rickertsen that’s amazing. Walker Deibel has a book, Buy Then Build, that’s pretty good. You want to immerse yourself in people who have successfully done it. There’s a lot of everyday people, I call them main street folks, that have executed amazing transactions that, two years ago, were a mom juggling a bunch of things, considering other investments just like you.
Here’s the other thing. A lot of people manage their advisor relationships based on trust, and I totally get that. But in the game of buying buss, you really want advisors who are experienced in this particular complicated thing because you want a transaction attorney that’s actually done business transactions. You’re going to want an accounting group person that’s done transactions. And not only is it important because they’re familiar with the concepts and what’s going on, but here’s where it really comes to bear. If you get advisors who are not comfortable with the acquisition process, they’re going to perceive $1 worth of risk as it being $5 worth of risk. But what does that mean for you as the buyer? What that means is you’re going to spend five times the amount of money on your lawyer because they’re getting comfortable with things. They’re uncomfortable with this, when a seasoned transaction advisor will say, “Oh, that’s an issue, but that’s $5 worth of risk. Let’s not spend $250 an hour on me to solve it. That’s an okay thing. Move on.” I think you do your studying. I think you find advisors that’ll help.
Guardian Due Diligence, my business, was specifically made to help bridge the gap between a person who may not be experienced in this particular process and helping them execute an amazing transaction, helping them do this process, so finding good lawyers, finding good accountants. Sometimes, as a investor, you just have to make a bet. There’s this amazing thing that you think can double, and there’s a bunch of information you’ve looked at. But at the end of the day, you kind of have that clenching feeling of like, “Am I going to put $100,000 of my money in this thing? Am I really going to do it?” And I think sometimes the services that we provide at Guardian just help people get comfortable with that risky decision and helping them say, “Hey, the last five people who I’ve seen in this similar situation did this, and this is how it worked. The other five people who didn’t work out all that well did these things and went like this.” So, given this data set of 10 years of being in this business, I can help people make these decisions easier. But you should absolutely feel comfortable. This is not something that’s out of reach.
In fact, to put it even more close to home, the market is moving towards the everyday person buying businesses. You can read about it, but also just think about all the Baby Boomers, the 60-year-olds, the 70-year-olds that came back from World War II and started businesses. Those folks are holding on to companies that are their retirement. That’s how they get to Florida. That’s how they get to the Bahamas. They only get there if they sell their business. Well, how does a main street guy or gal sell their business? They sell it to another main street guy or gal. So people are perfectly positioned to do this. They should not feel intimidated.

J:
Okay. This has been absolutely fantastic. I now want to jump into the segment of the show that we call Four More. That’s where we ask you the same four questions that we ask all of our guests, rapid-fire format. Then the more part of the Four More is where we’re going to let you tell us where our listeners can get in touch with you and find out more about you and your business. Sound good?

Elliott Holland:
Awesome. Let’s do it.

J:
Okay. Let’s do it. I’ll take question number one. Elliott, what was your very first or very worst job, and what lessons did you take from it that you’re still using today?

Elliott Holland:
Yeah. I won’t say the company name. It was a company that rounded up a bunch of high school folks or wayward souls and put them on painting jobs on houses and promised $14, $15 an hour. And you go up here, you’re painting your first house, and you’re on a ladder. You’re feeling like, “Man, I can’t wait to make these $14.” But when you actually realize what it was, it was a job-based payment program that only netted $14 if the company assessed the job correctly and the manager of the job allocated the dollars on the job appropriately to you. So I ended up getting my first indication of what I was going to get paid, and it was like $4 an hour, not that $14. So I’m fighting bees and up on ladders, and needless to say, I stepped away from that job.

Carol:
For good reason. That is crazy, crazy.

Elliott Holland:
Yeah, it was crazy.

Carol:
Oh, my gosh. I have two different questions I want to ask for the second one. J, I might just make this a part A and a part B. I’m curious to know, Elliott, when did you first realize, because you’ve mentioned that you’ve started a couple businesses in addition to Guardian, when did you first realize that you had the entrepreneurial edge?

Elliott Holland:
I think it was right after finishing Harvard Business School, when I had an amazing job in Boston doing business acquisition with some just amazing people. But for a lot of reasons, I didn’t enjoy Boston. I think you guys have made some decisions to get to warmer places. I had moved my family from Michigan here to Atlanta. So I moved to Atlanta, and there just weren’t as many opportunities in the field that I wanted to embark upon here for me to go get a job. So, as a result of me choosing some personal things in my career that mattered, it forced my hand to be more entrepreneurial. So probably a year or two after Harvard Business School, my hand was forced, and I think, for me, I wanted to create a life that I wanted to live in. I had been in many jobs where, as I looked up at the partners, I didn’t want that life. So, if doing well at this current job is going to put me there, I don’t want to be there. I want to create a machine I actually want to drive. So that was sort of when I knew.

Carol:
Love that, love that. The followup, part B to that question is: what is the best piece of advice that you have for other entrepreneurs or other small business owners that you haven’t shared yet today?

Elliott Holland:
Yeah. So it’s a piece of advice that a mentor gave me before I went to business school, and it felt so trite, like, “Aw, that’s easy.” But it really does determine how I look at businesses on the first pass. The advice was: when you look at business opportunities, the things you have to look at are profitability of the business, growth of the business, and ownership. How much do you own?Really, it was funny because it was before business school, and then when I went to business school, I’m learning all these fancy things. The price of a stock… Do you know what drives their price? Profitability, growth, and then your share is the ownership. So it becomes such great, simple way to evaluate. I don’t want to be in a 5% margin business. I don’t want to be in a business that grows 1% a year. Those are things that I can figure out easier now.

J:
Love that, love that.

Carol:
Great.

J:
Okay, question number three, and I know that you’ve already mentioned three books that you love, How to Win Friends and Influence People, Buyout, and then Buy Then Build. We actually had Walker on the show a couple months ago. He was fantastic.

Elliott Holland:
Oh, excellent.

J:
Are there any other business books or any books? I’m not going to limit it to business. What’s your favorite business or book out there that you would recommend to our listeners that they may not have read?

Elliott Holland:
Sure. For me, this is going to be a bit personal. That’s just how we roll. There’s a book about Reginald Lewis, who’s the first Black man to buy a billion-dollar business. He came from meager beginnings and went to an HBCU and finessed his way into Harvard Law School, worked on Wall Street as a lawyer for 10 years, and then acquired a business. But it took him many years. It’s one of the best books about overcoming adversity and making it through some very tough waters to be successful and then to understand how your first success can lead to future successes. The book has a weird title. It’s Why Should White Guys Have All the Fun? People tend to have all this reaction to the book, “Oh, my gosh,” and, “I’m not getting into that broader discussion.” I think we have enough understanding of diversity now to realize that we all should have an ability to have some fun. So Reginald Lewis’s book, Why Should White Guys Have All the Fun? would be the other one I would recommend.

J:
And the book is both about Reginald Lewis, and he wrote the book. Is that correct?

Elliott Holland:
He had another author write, I think, most of it. I forget. I met the guy who wrote the book, but I can’t think of his name, and that’s terrible.

J:
Blair Walker. Blair Walker, and I didn’t know that off the top of my head. I’m actually looking it up right now.

Elliott Holland:
Computers are so great.

Carol:
It is awesome.

Elliott Holland:
I met Reginald Lewis’s wife, Loida Lewis, at an event in Chicago last year, and it was just earth-changing. No matter what color, creed you are, it’s really how can you have some fun? Whether you’re a woman, and you’re not the typical buyer, whether you’re Indian or Asian or short or poor or not from rich beginnings. It kind of walks you through all of that.

J:
Why Should White Guys Have All the Fun?: How Reginald Lewis Created a Billion-Dollar Business Empire, if anybody wants to get a link to that, we’ll have it in the show notes.

Carol:
Awesome. Okay, cool. The fourth question is a fun one. What is something, Elliott, in your personal or work life that you have splurged on along the way that was totally worth it, whether it’s a material thing or an experience or whatever you consider a fantastically awesome splurge?

Elliott Holland:
I splurge on vacations. That’s where I overspend. For me, finding really cool boutique hotels either in major cities or in the mountains is sort of my thing. Some people have a bag or some luggage or a car. I didn’t really go there, but I’ll find fancy places to stay in the mountains or outside of cities. I just love the charm of a boutique hotel. It’s such a independent instance of somebody putting together this perfectly curated thing for people to enjoy. I get a kick out of finding those unique places.

Carol:
That is very cool. Just a funny side note, talk about just a personal thing, last night we were in the car with our kids on the way to ice cream. Out of the blue, our 10-year-old says, “I have a weird vocab word this week. It’s bespoke.” And we’re like, “You know what? Bespoke is such a cool thing.” Bespoke is so big right now, like your hotel experiences, right?

Elliott Holland:
Yes, yes.

Carol:
And we were explaining to him, they are these things and experiences that are very particularly thought through and beautifully curated. That is bespoke. So it sounds like you enjoy those bespoke hotel experiences.

Elliott Holland:
That’s right. That’s right. I really do enjoy that. So that’s where I splurge.

Carol:
Very cool. Love it.

J:
Wow. Wow, a business podcast that you can also prepare for your SATs. I love it.

Elliott Holland:
Yes, multiple points of value.

J:
Exactly, exactly. Awesome. Okay, Elliott, this is now the more part of the Four More. Can you tell our listeners where they can find out more about you, where they can find out more about Guardian Due Diligence, and how they can connect with you, and anything else you want to tell us about?

Elliott Holland:
Yeah, absolutely. I am very active on LinkedIn. You can find, Elliott Holland, two Ls, two Ts. I’m very active on LinkedIn and will reply there quickly. You can also visit my website, guardianduediligence.com. There you can set up office hours with me. You can also get a view of our services. We like to say we basically participate as a private equity deal team available to help you on a part-time, fractional basis. So, if you have any needs in your business acquisition pursuit, that’s what we do. You can also email me or call me. My phone number and my email are on the bottom of the website, and I’m very responsive and would love to hear from anyone who has any questions about the business buying process or a deal you’re looking at or a valuation you’re struggling with or, like J said, you’re in the middle of a process, but you want to sleep better. You want some more comfort. Give me a call.

J:
Awesome. Elliott, this has been an absolutely fantastic, tip-filled episode. We really appreciate you, and we thank you for coming on. We look forward to talking to you again in the near future.

Elliott Holland:
I love this. I’ve enjoyed it. Your energy has been amazing. I’m looking forward to experiencing how your guests enjoy the podcast. Thank you for your time today.

J:
Absolutely.

Carol:
Thanks, Elliott.

J:
Thanks, Elliott.

Carol:
Have a really great day.

Elliott Holland:
See you later.

Carol:
J, seriously, how awesome was that episode? Elliott had so much great information. Remember how, before we got started, I was talking about being grateful for technology? What an amazing example right there. Because of this awesome technology, we get to connect with people like Elliott, people around the country, around the world who are connecting with other people to help them make the right decisions in buying businesses, in creating a better life for themselves. So, Elliott, thank you for all that great information. And listeners, I really hope that you got as much out of it as I did. There are so many great tips in there, and I really feel that Elliott took a lot of complex subjects and broke them down in a way that was really relatable for each and every one of us.

J:
Absolutely. My favorite tip… not my favorite because there were so many great tips, but one of my favorite tips was just his point about seller financing and basically how to ensure that the seller of the business is willing to pick up the phone if you ever have an issue. The way he stated it, which is basically, yeah, you can have a consulting agreement with the seller for a couple years. But that $75,000 or $50,000 or $100,000 a year that you might be paying him to help you with the business pales in comparison to the $5 million or $3 million or whatever you paid him to buy the business. So, if you really want to keep the seller vested in the success of the business, seller financing is the best way to do that. I love that tip, and so many other great tips in this episode.

Carol:
Agreed.

J:
Yeah. Thanks, Elliott, for being on. All righty, are we good for this week?

Carol:
We are so good. Let’s wrap it up.

J:
All righty. Everybody, thank you so much once again for tuning in. We appreciate you, and have an amazing, happy, and healthy rest of your week. She’s Carol. I’m J.

Carol:
Now work with a great advisor, and get on your business buying journey today.

J:
Nice.

Carol:
Thank you. Everybody, have a wonderful week. Thanks for tuning in. Thanks to Elliott for an awesome show, and we’ll see you next time.

J:
Thanks, everybody.