In this episode of the M&A Launchpad Podcast, hosts Feras Moussa and Casey Minshew welcome special guest Patrick O’Connell. Today we are focusing on the role of a quality of earnings (QoE) in the M&A process. Patrick discusses the importance of conducting a quality of earnings analysis when transacting. The QoE is used to verify what the seller has told you about the business verses what is reported in the business. The QoE is a great financial tool to establish facts, rather than opinions, for valuing a business acquisition.
Patrick looks to empower entrepreneurs to buy or sell lower middle market deals. We explore his role in evaluating business financial health and ensuring smooth transactions. The conversation covers practical insights on managing buyer-seller relationships, emphasizing working capital and negotiation strategies. The episode also highlights the importance of experienced advisory roles in acquisitions.
In this podcast episode, we discuss:
- What is a Quality of Earnings?
- How to Verify Business Earnings
- Importance of Mediating Buyers and Sellers
Time stamp:
00:00 Introduction to Today’s Episode
01:59 Introducing Patrick O’Connell
02:05 Patrick’s Background and Expertise
04:05 Deep Dive into Quality of Earnings
12:49 Working Capital and Deal Negotiations
21:18 Common Pitfalls in Business Acquisitions
23:49 Rocket Round
27:20 Conclusion and Contact Information
You can connect with Patrick by LinkedIn or X: “SMB Deal Guy”
Patrick’s Firm: Quality of earnings service provider (oconnelladvisorygroup.com)
Additional Resources:
- Access our archive of video interviews on YouTube
- Checkout our upcoming Conference – https://malaunchpad.com/
- Get in touch with show hosts Casey Minshew and Feras Moussa at – info@equitylaunchpad.com
- Looking to invest in M&A opportunities or partner with an advisor to acquire, scale or sell your business? Visit Equity Launchpad
Transcript
00:00 on today’s episode we interviewed
00:02 Patrick oconnell and really focused a
00:04 lot more on kind of his advisory firm
00:06 and really as a buyer right what are
00:08 some of the things that you should look
00:09 into with a big focus on just kind of
00:11 the quality of earnings what is a
00:13 quality of earnings right what are some
00:14 of the pitfalls what are the some of the
00:15 things that go into putting that
00:16 together and then ultimately really as a
00:18 buyer right and as a seller what are
00:20 some of the conversations that happen or
00:22 need to happen to help ensure a smooth
00:24 transaction gets conducted so Casey what
00:26 were some of your think ways man I I
00:28 think as a as a new buyer or somebody
00:30 that has been in the space but maybe
01:32 didn’t go to through through the private
01:33 Equity world and all that stuff they’ve
01:35 probably never understood what a quality
01:37 of earnings really does or why you have
01:39 to have it and then the idea of getting
01:42 somebody that’s like a partner that’s
01:44 involved with you to help you think
01:45 through why you’re doing what you’re
01:47 doing then it’s it’s it’s it’s honestly
01:49 Priceless yeah no it’s time it’s timely
01:51 too earlier today coin I was having a
01:53 conversation with Casey and one of his
01:54 big mistakes on his first transaction he
01:56 did was not doing a quality of earnings
01:58 right you kind of get enamored and the
01:00 you know the thrill of the chase but
01:02 there’s some mechanical operational
01:04 things that you need to be aware of and
01:05 keep in mind in order to be able to
01:06 complete a successful transaction and
01:08 these things cost money right but it’s
01:10 better than losing money in the backside
01:12 so it’s a su cost but it’s got to be
01:14 part of your repertoire and having a
01:15 good person with you so anyways Patrick
01:17 seems like an incredible guy looks like
01:19 what he does is a huge and great service
01:21 for those of us in the no absolutely and
01:24 so you know if you’re a buyer trying to
01:26 figure out you know Financial Health of
01:27 a business or trying to explain working
01:29 capital to your seller this is a podcast
02:31 for you to listen
02:36 to Hey everybody it’s Ferris with love
02:38 to see you at our upcoming m&a Launchpad
02:40 conference in Chicago October 26th at a
02:43 conference we talk about what it looks
02:45 like to value a business how to buy a
02:47 business how do you manage a team right
02:48 and ultimately we’re big Believers in
02:50 the buy then build concept so we’re
02:51 going to have one of our friends Walker
02:53 Dall the author of buid and build there
02:55 as well as one of our Keynotes and many
02:56 more so we love to see you there to kind
02:57 of get exposure to the space and network
02:60 on today’s episode we have Patrick
02:02 Patrick welcome to the show thanks for
02:04 having me all right Patrick so you’ve
02:06 done a tremendous amount of transactions
02:08 right and maybe give a little bit of
02:09 just an overie your audience in terms of
02:11 what have you done historically and kind
02:13 of what’s your focus on today yeah so
02:15 for those who haven’t met uh my name is
02:16 Patrick oconnell I am currently based in
02:19 the Washington DC area my mission is to
02:22 empower entrepreneurs private equity and
02:24 small Capital groups buy and sell Main
02:26 Street and lower Middle Market deals
02:28 I’ve had the pleasure of working with
02:30 hundreds of entrepreneurs and great
03:32 business owners successfully navigate
03:34 their businesses via you know an
03:36 acquisition or ultimately an exit so
03:39 you’d imagine like in that lower Middle
03:40 Market space right Define what you call
03:43 lower Middle Market everybody has these
03:45 different definitions right but where do
03:46 you really feel like your value kicks in
03:49 in that world yeah so the uh quote
03:51 unquote sandbox I find valuable and
03:53 where I play um and do conduct most of
03:56 my deals is in that 3 to 20 million
03:58 range and that’s on Enterprise value
03:01 yeah and so you’re an advisory firm
03:03 right and again for you kind of alluded
03:04 to a little bit as of what you do but
03:06 maybe give people just an example of a
03:09 what a stereotypical customer looks like
03:12 right what do they come to you with what
03:13 problem what are you helping them solve
03:15 what have you help them accomplish yeah
03:17 so I am a m&a accountant so our primary
03:21 core offering is through a quality of
03:23 earnings analysis whether it be a buyer
03:25 or seller most of our clients we’ve had
03:27 the pleasure of working with are buyers
03:29 that either are leaving corporate
04:31 America and are an independent sponsor
04:33 or a small private Equity Group um you
04:36 know they may have come from larger
04:38 private Equity Firm stood up their own
04:40 fund and want to buy specific businesses
04:43 in B2B and Technology back companies
04:46 yeah and that quality of earnings is
04:47 it’s just Mission critical right I mean
04:50 we’re we’re we’re going in we’re
04:51 evaluating these companies there’s so
04:53 many different things you’re evaluating
04:55 but at the end of the day the private
04:57 credit lenders the bank everybody is
04:59 going to rely on that quality of
04:01 earnings right yeah and you’re cutting
04:03 yourself short right if you’re a buyer
04:04 and you don’t do a quality of earnings
04:06 and so I think Patrick I mean maybe you
04:08 know give the audience a little bit of a
04:09 deep dive this is not a topic we’ve
04:11 really talked about much we always talk
04:12 about quality of earnings as a thing but
04:15 you know what happens behind the scenes
04:16 right for people to understand like what
04:18 exactly is an accounting team doing
04:20 whenever they’re creating their quality
04:21 of earnings yeah I’d be happy to share
04:24 um at the highest level without getting
04:26 too granular for your audience the
04:28 objective of the quality of earning is
05:30 to trust but verify what the seller has
05:33 told you about the business you’d like
05:35 to buy compared to their recorded
05:37 information how is that achieved it’s
05:39 achieved through various analysis such
05:42 as gaining access to the company’s
05:44 Financial software conducting several
05:46 management meetings and speaking with
05:49 the team and understanding are they
05:51 applying the correct accounting
05:53 principles in order to properly State
05:55 the business because if there are
05:57 pitfalls you may be walking into a
05:59 business
05:00 where it looks profitable if you review
05:02 a Sim or marketing materials but in
05:05 reality it’s actually not making much
05:06 money which could cause some serious
05:09 concerns if you have a personal
05:10 guarantee through an SBA loan or you
05:13 have you know promised uh returns if you
05:16 raise capital from investors so Patrick
05:18 dive into that a little deeper so what
05:20 okay so the business I’m looking at
05:22 their tax returns I’m doing my homework
05:24 and I’m like man this company’s
05:25 profitable it’s making money um you know
05:28 you’ve got you’re talking to the then
05:30 all of a sudden I come to the Q of so
06:32 what what is that example that you find
06:34 where you’re like hey guys it’s just not
06:36 making money yeah so in the quality of
06:38 earnings there’s a few key analysis
06:40 ultimately if there are certain one-time
06:42 events such as one-time revenues or
06:45 onetime costs that’s not realistically
06:48 expected on a go forward basis so you
06:50 may look at a three-year marketing
06:53 materials where the business is doing $1
06:55 million in reported eida each year if 33
06:58 or 25% of that is from a one-time
06:01 customer you could be at risk for a
06:03 decline immediately in revenue of 25%
06:06 and when I mean revenue I mean strictly
06:09 profitability so that customer
06:11 concentration is where you’re getting
06:12 out on that one right so you have this
06:13 onetime customer this year they made up
06:16 20 25% of your sales and if you don’t
06:19 really dig in and find that you’re not
06:21 going to know that that’s correct and so
06:24 so for listeners so customer
06:25 concentration list is is something you
06:27 provide in the quality of earnings right
06:29 now in addition to that I mean are you
06:30 you guys cross referencing invoices are
07:31 you speaking to customers are you guys
07:34 you know like the real question is how
07:37 ultimately accounting and financials are
07:38 just numbers oriented right and maybe
07:40 the question I have is outside of the
07:42 numbers that are presented that me as a
07:43 buyer I can go look at those numbers
07:45 myself also right what other activities
07:47 are being done outside of that to help
07:49 get a good understanding to the health
07:51 of a business yeah and this will
07:53 contradict um you know my accounting
07:55 background being strictly numbers deals
07:58 are more often than not human in nature
07:01 than financial when I think of equality
07:03 of earnings um you know I’ve had the
07:05 pleasure of doing this for over a decade
07:07 almost all of the significant deal
07:09 findings come through lengthy
07:11 discussions with management and owners
07:14 once you unpack the numbers and you need
07:17 to be trained and have a trained eye to
07:20 ask certain questions over and over
07:22 again to extract you know critical
07:24 information about the business that the
07:26 owner may not be presenting if you
07:28 simply look at the numbers so I would
08:30 imagine in in the discussion so right
08:32 now Ferris and I under Loi we’re going
08:34 through we’ve started our QV with a
08:36 group that we’ve used here um part of
08:39 that acquisition there are no assets
08:42 right it is truly it has a 2025 work in
08:46 progress the whip right it’s got all of
08:47 these components into it but it’s not a
08:50 he it’s more of a cash flow structure
08:52 right so we’ve got to dig in on that Q
08:54 of we don’t but the Q of that we gauge
08:56 is to look at that the work in progress
08:59 look at those contra s all of that good
08:01 stuff so we can understand is that true
08:03 cash flow is it going to be there next
08:05 year right so what do you think in that
08:07 regards in that kind of a conversation
08:08 when you look at a business that doesn’t
08:09 have a lot of assets has a lot of
08:12 contracts big contracts in the future
08:15 when you look at it from a quality of
08:16 earning standpoints how are you digging
08:17 into something like that Casey should
08:18 have told me that we’re gonna get free
08:20 consultation advice so should brought my
08:21 list of questions here we’re gonna take
08:24 we can right yeah and it’s a great topic
08:26 um without scaring you work in process
08:30 you know percent of completion these are
09:32 complicated accounting areas which are
09:34 easily manipulated MH are they
09:36 manipulated in your deal hopefully not
09:39 the way a good qav provider verifies is
09:43 they review how they you know the
09:45 accounting methodology behind it and
09:47 based on the discussions with management
09:49 about how they invoice how they um you
09:52 know will adjust as the projects are
09:54 completed you verify is that actually
09:56 how they record it because there are
09:58 several instances where it could be
09:00 easily manipulated and at at the surface
09:03 level it looks like there might be
09:04 Revenue when in reality there could be
09:07 discrepancies very good and you’re not
09:09 going to scare us we’re we’re we’re
09:10 totally uh we understand completely
09:12 that’s that’s part of the game right you
09:14 know if you go through these things so
09:16 when you work with a client you know and
09:18 you’ve talked to somebody and that stuff
09:19 when you talk to them what is your
09:20 biggest value to them when they say hey
09:23 why would I do QV with you then with one
09:25 of these big accounting firms like
09:27 ernston young or one of these bigger
09:29 groups why would they come and do
10:31 business with your side yeah so there’s
10:33 a lot to unpack I would say the value
10:35 proposition we bring is you get big four
10:39 quality due diligence at a fraction of
10:40 the price with no red tape um you know I
10:43 spent the bulk of my career in those
10:45 large transaction firms learning from
10:47 the best and brightest unfortunately
10:50 gaining access to those National firms
10:52 comes with a significant cost yes dead
10:55 dead deal fees are serious especially in
10:58 times of uncertainty you know there’s
10:60 never a guarantee deals will close so
10:02 ultimately you know that’s our value
10:04 proposition and you get that direct
10:07 access into a specialist who focuses on
10:10 those B2B and Technology back companies
10:13 really you know to best serve your deal
10:16 no I think it’s great because you’ve got
10:17 to have you know every deal is a little
10:20 I mean every deal is different the
10:21 structures are different how we look at
10:23 the difference um but having that
10:25 Arsenal to know that most people are
10:27 going to lead you if you’re going
10:28 through your first quality of ears are
10:30 going to say oh man you need to go to
11:31 this big firm and you’re going to pay
11:34 you pay for pay out the nose and um we
11:37 were fortunate on our first transaction
11:39 we did together last year uh $20 million
11:42 acquisition we did the quality of
11:44 earnings with a with more of a regional
11:46 based group and and still it’s it’s
11:48 quite expensive so if somebody’s doing
11:50 their first acquisition or as an
11:52 independent sponsor they don’t realize
11:54 that this third party due diligence is
11:56 is very serious cost right you know it’s
11:58 nice to have that person that or that
11:00 group that they can go to and know hey
11:02 you know it’s not going to you’re not
11:04 going to knock their head off right but
11:05 you’re going to come in and you’re
11:06 really going to act as a consultant on
11:08 their side to help them uncover all of
11:10 that uncertainty around the financial
11:12 stuff yeah and maybe I’ll expand that a
11:14 little bit to you right big big four
11:16 they’re going to be very crisp as to hey
11:17 here’s exactly what you’re getting
11:19 versus with a boutique shop or a smaller
11:21 shop right it’s more about hey helping
11:23 you you know buy the right business and
11:26 understanding what you’re buying right
11:27 like the big four does not want to give
11:29 you gener feedback like hey I spoke to
12:31 the management they all seem very shady
12:33 right like that’s but that’s something
12:34 that you know Patrick you probably would
12:36 tell a client right you’re ultimately
12:37 there as kind of almost a fiduciary for
12:39 your client and you’re trying to give
12:41 them you know everything you’re
12:42 assessing versus the big four are going
12:44 to be very stringent on like what they
12:45 want their staff to say or not say so
12:48 something yeah and you know you’re you
12:50 you’re absolutely correct like my value
12:52 proposition is to be that Dynamic Q of
12:55 Provider who acts more like a non-equity
12:57 deal partner you know I have several
12:60 tough conversations with clients where I
12:02 break down the numbers and say look
12:04 you’re not going to be able to meet your
12:05 debt service here is how much you’re
12:07 going to pay if you use an SBA loan the
12:10 business is not generating enough money
12:12 um you know we can either walk away from
12:14 the deal restructure it so not only am I
12:17 doing quality of earnings I’m doing
12:19 purchase price agreements working
12:21 capital discussions at close so I like
12:24 to think of myself as that deal advisor
12:27 with that CPA hat to conduct your due
12:29 diligence
12:30 yeah so so let’s so actually give some
13:32 examples right of things that youve
13:33 tough conversations you’ve had with
13:34 clients right why what happened and then
13:38 the next thing I kind of wanted to dive
13:39 in on is outside I mean we kind of
13:41 obviously Focus this so far on quality
13:42 earnings but outside of that right what
13:44 are the other tangible benefits that
13:46 you’re able to provide in kind of
13:47 steering a deal yeah so where I had the
13:51 most value is in those working capital
13:53 discussions um on a deal I worked with
13:55 an excellent buyer in July of 2024 you
13:59 know right now it’s about October 1st of
13:01 of 24 um the working capital he
13:04 negotiated was not going to cover the
13:06 business needs on day one of close how
13:08 did I unpack that through five or six
13:11 discussions with the the current owners
13:13 and understanding what is the cash flow
13:16 needs of the business look like on a 30
13:18 60 and 90day window ultimately it was
13:21 determined that the business needed
13:23 about
13:23 300,000 in working capital to continue
13:27 the business operations on day one as
13:29 the new owner assumed duties in the LOI
14:32 after I reviewed it they actually only
14:34 negotiated for 150,000 so when we neared
14:37 closing I I brought this up with my
14:40 buyer and said look if the seller is
14:42 unwilling to negotiate and give you a
14:45 larger amount of working capital you
14:47 need to have a line of credit ready
14:49 before you close because often you know
14:52 as I’m sure you guys know after you
14:53 close it can be challenging to get
14:55 access to those funds and I’ve actually
14:57 spoken with Searchers um who who have
14:60 gotten into that cash Crunch and some of
14:02 the businesses have folded in the first
14:04 90 days because they just ran out of
14:06 money no it’s huge point and and I’ll
14:08 tell you one of the number one
14:10 conversations that we had on last year
14:12 on our acquisition we closed it was
14:15 networking Capital it was the discussion
14:17 I mean we we went to the table 10 times
14:20 and the quality of earnings did Define
14:22 for that we did a working capital
14:24 analysis and we all agreed on that the
14:27 current deal we’re working on it’s the
14:29 same thing right it’s like I will only
15:31 give you guys 10% Trail trailing 12
15:34 sales number okay great but let’s
15:37 validate everything with the quality of
15:38 earnings right let’s let that settle and
15:41 I think that that’s a great point
15:42 because anyone and everyone doing a deal
15:44 it seems like working capital is the
15:47 most difficult part of the negotiation
15:50 it’s really hard to forast like for for
15:52 a buyer we get hard to forecast like
15:54 what we think our performance is going
15:56 to look like we may not ask the right
15:58 questions to uncover that hey oh my God
15:01 150 is not going to get me there I need
15:03 300 and so that qov is like Mission
15:05 critical and then to have somebody on
15:07 their side to be able to be looking for
15:09 those things because that first 90 days
15:11 is absolutely critical yeah and the
15:13 thing I think for listeners to realize
15:14 too most sellers are not sophisticated
15:17 they probably don’t even understand what
15:18 work and capital is right so it’s about
15:21 not only you as the buyer trying to
15:23 educate them right which again you’re
15:25 going to be biased that’s how the seller
15:26 is going to look at it it’s having
15:28 professionals to kind of explain it I
15:29 mean even in our transaction even the
16:32 guy the person’s attorney was really
16:34 like not getting what working capital is
16:36 and it took a lot of Education to get
16:38 them all aligned on hey this business
16:40 needs a lot of cash sitting in it just
16:42 to even operate dayto day and so again
16:44 it’s a very very important point but
16:46 just realize you’re probably working
16:47 with someone unsophisticated and you
16:49 know you have to really explain it to
16:50 them and get someone like you know like
16:53 an accountant with a qov to help walk a
16:55 seller through it and explain what is
16:57 working capital why isn’t Neary to stay
16:60 in the business what happens if you
16:01 don’t leave it in the business and then
16:03 you know how does it tie to the
16:04 valuation of the business so it’s a sunt
16:06 cost like you’ve got to spend it like it
16:08 doesn’t matter if you’re buying a small
16:10 business the littlest thing or whatever
16:12 I mean you got to do it and and I did
16:15 not do it on my first acquisition I did
16:16 in 2019 I did not know a quality of
16:19 earnings and boy man it might have it
16:21 might have been a GameChanger for
16:23 everything if I would have done but when
16:26 we did our deal you know it was required
16:28 by the bank it had a lot of these other
16:29 stuff but when I did a small SBA deal it
17:32 was a $5 million purchase no one
17:34 required the qve right so we did our own
17:37 financial analysis we did our stuff man
17:39 we missed so much and a q would have
17:42 given me a lot of day you asked me today
17:43 what happened on where were some of the
17:45 challenges I’m like that was one of them
17:46 I did not I tried to to to not spend the
17:49 money upfront and that upfront money
17:52 would have saved us tons in the back
17:54 yeah and you guys say a lot of points um
17:57 you know obviously I agree with them and
17:60 you know my goal of sharing findings is
17:03 not to cram the quality of earnings down
17:05 people’s throats I certainly understand
17:07 these things are not cheap but it’s more
17:09 of a risk reward standpoint if you’re
17:11 personally guaranteeing a business I
17:14 mean your entire net worth is on the
17:15 line so what’s that worth to you A lot
17:18 of people have different definitions you
17:20 could buy a business without a quality
17:23 of earnings and it could be fine I would
17:25 say the chances are more often than not
17:27 that won’t be the case and my opinion so
18:30 you’re better off you know you would
18:32 hardly ever buy a home without an
18:34 inspection it’s effectively buying five
18:36 homes without five inspections yeah it’s
18:39 odds game you’re more often than not
18:42 going to be worse off if you did not get
18:44 it yeah lender’s not going to give you a
18:46 commercial real estate loan without a
18:48 without a you know a a c you know an
18:50 maai appraisal like there’s all these
18:52 things that you have to do in order to
18:54 get there in this space especially if
18:56 you’re buying with an SBA loan these
18:58 things aren’t required right you know
18:00 that you you think in your mind okay the
18:02 lender’s done their due diligence
18:04 they’re giving me a loan they must have
18:06 seen the numbers they must have looked
18:08 at it no they’re checking boxes right if
18:11 you don’t dig into that stuff and do
18:13 that homework it will come back to bite
18:15 you and like you said you’ve seen people
18:16 go bust in 90 days after
18:18 close yeah I mean there’s so many
18:20 Dynamics and I guess to to your first
18:23 point about these sellers um a lot of
18:26 these sellers and you know selling your
18:27 business is scary like we need to think
18:30 a lot of switching back to the personal
19:32 level like these deals are scary you
19:35 need to give them comfort and empathy
19:37 throughout the
19:39 process just because they don’t
19:41 understand what working capital is if
19:43 you partner with a good advisor we jump
19:45 on the phone and and I talk about it you
19:48 know it’s not over email they could be
19:50 in person because these are serious
19:53 discussions and if you don’t get them
19:54 comfortable with the idea of what’s the
19:57 end goal you know you can explain what
19:59 working capital is without even using
19:01 the words it’s effectively what is the
19:04 money I need to fuel the business in the
19:05 first 30 days if you get pushed back and
19:08 say you know oh I don’t understand and
19:10 you would say if you were buying a
19:11 business wouldn’t you want some Runway
19:13 to continue the growth like how am I
19:14 going to pay the employees so partnering
19:17 with someone experienced in the space in
19:20 my opinion is just tremendous value yeah
19:22 I know I think 75% of a transaction is
19:24 just getting comfort with a seller I
19:26 mean literally we had that on a deal
19:28 resing you know as Casey likes to say we
19:30 have to go belly to belly with a seller
20:32 right and just really spend the time and
20:34 not even talk about the business just
20:35 build rapport with these people right
20:37 because that leads to trust and that
20:39 leads to being able to bring in an
20:40 expert and that person is trusted it’s
20:42 not like because you know sellers go in
20:44 it’s the big most sellers it’s the
20:46 biggest transaction of their life easily
20:47 right bigger than house bigger than
20:49 anything else they’ve ever done in their
20:50 life and so they’re going to go in with
20:52 shields up right and you have to figure
20:53 out how to slowly disarm that and kind
20:55 of work through it and really get
20:57 alignment and then you can start to
20:59 edate them on some of the mechanics and
20:00 so yeah we’re also the group that spends
20:03 we’ll spend as long as we need to
20:04 spelling out the Lois right like we’re
20:06 we we just want to make sure that
20:09 everybody can agree on how it’s going to
20:12 work right or even to the seller go we
20:14 go like hey you realize if you’re seller
20:16 carrying right this is the first Lane
20:18 you know our Equity sits here we have
20:21 you know we go through and spell it out
20:23 because the last thing you want to do is
20:24 close sign paperwork and go oh you
20:27 didn’t disclose this to me right yeah
21:30 and you guys are stealing a lot of my
21:32 good lines I always say the deals will
21:34 take as long as they need to take in
21:36 order to come around it could be one
21:38 month it could be six months these
21:40 things should not be rushed because once
21:42 it’s signed it’s a lot more complicated
21:44 to get out so true man this requires
21:47 patience it’s not s I’m used to
21:48 commercial real estate and it’s very
21:50 transactional you know you get an Loi
21:52 you get a PSA sign a week later and then
21:54 60 days are closed versus in this space
21:56 I mean even the LOI doesn’t really mean
21:58 much right and so there’s just you have
21:01 to be patient and I I say that to
21:02 everybody that’s looking to buy I mean
21:04 being patient and not rushing things
21:06 including like not pressuring the seller
21:08 right there there’s you have to be very
21:10 tactful with Sellers and help get them
21:13 to come to the conclusion that you want
21:14 them too right but it’s not going to be
21:16 done by forcing them so shift in Gears
21:18 maybe one last question before we kind
21:20 of get to to the end Patrick I mean what
21:22 are some of the other big pitfalls you
21:23 see people make that just just if you
21:25 kind of you were list out hey here are
21:26 four or five other common mistakes
21:28 people make that they should just keep
21:30 in mind right if they’re listen to this
22:31 podcast yeah a lot of common mistakes
22:33 are we just touched on it rushing
22:35 through the process it takes a long time
22:37 to fully analyze who is the owner that
22:40 you’re buying the business from what’s
22:42 the business look like and are you an
22:44 equipped owner or Capital group that can
22:47 buy this business and scale it no one
22:49 wants to buy a business and have it go
22:50 bellied up you know there is no any good
22:54 business purchase has been an equitable
22:56 trade from buyer and seller so rushing
22:58 the process is definitely one two is
22:01 doing this alone you know I’ve spoken
22:03 with Searchers um who have bought a
22:05 business completely on their own and
22:07 they just miss things two heads are
22:09 better than one 10 heads are better than
22:11 two align yourself with a partner
22:14 advisor maybe not a significant other
22:17 because they may be biased but that
22:18 independent third party who can shake
22:20 you if you’re going to make you know a
22:22 big mistake or you’re just overlooking
22:24 something because you have biased
22:25 towards the investment yeah I’m going to
22:27 add to that one and it doesn’t have to
22:29 be somebody that’s going to agree with
23:30 you right you want somebody that’s not
23:32 going to agree to you because on my
23:34 first transaction I did I did solo and
23:36 the couple people I went through in the
23:38 advisory were more like soft like I
23:40 think it looks great good job but no one
23:42 really said hey let me tell you what the
23:44 worst part here or what this problem’s
23:46 going to have and it would have been
23:48 best to go find somebody that had been
23:49 in that space like an adviser like those
23:51 things are hindsight um but very
23:54 critical I I couldn’t agree with you
23:55 more this is a big investment and most
23:57 people’s biggest investment they’ll ever
23:59 make not their home you’re buying a
23:02 business I mean it’s so true you know to
23:04 that point I love the entrepreneurial
23:07 Spirit of buying businesses and kind of
23:09 charting your future you know I’m an
23:10 entrepreneur by nature but I often will
23:13 present a red flags and key findings
23:15 report which is not positive you need to
23:17 know the skeletons in the closet before
23:19 you buy the business to the extent
23:21 possible obviously once you assume
23:23 duties as a new owner you’ll have that
23:25 full lens but I like to lay out all the
23:28 facts to you know some of the wonderful
23:30 entrepreneurs I work with and arm them
24:32 with as much knowledge as possible to
24:34 say hey is this the business for me all
24:37 right love it man that is great advice
24:39 and again before we jump into our we’ll
24:42 get all your information all that good
24:43 stuff for everybody because it’s a it’s
24:45 is a very big piece of this deal of all
24:47 the deals yeah know thank you Patrick so
24:49 let’s move on to our rocket round we’ll
24:52 ask guest the same three questions so
24:54 you ready Patrick yep let’s do it all
24:57 right first question what do you like to
24:58 to do in your free time free time uh
24:01 relaxing at home and uh either that or
24:03 I’m on the golf course I see that the
24:06 golf see I I do not know anything about
24:09 golfing and I need to because I’m
24:10 clearly in the wrong industry if I don’t
24:12 I’m on the golf course every weekend but
24:13 it’s not me playing it’s my daughter so
24:15 I I get to live vicariously through her
24:18 that might be better some some bad golf
24:20 days you know being being that parent
24:22 that’s like frustrated for your it it’s
24:24 so tough It’s emotions everywhere you
24:26 feel it for them all right second
24:28 question so what’s your most memorable
24:30 moment in your business Journey my most
25:33 my most memorable moment is when I left
25:35 Corporate America and launched okon
25:37 advisor group um you know jumping into
25:40 entrepreneurship is a scary thing uh
25:42 about two two and a half years later
25:45 it’s been the best decision of my life
25:46 for my family as well as you know I get
25:49 to meet so many just excellent people I
25:51 probably would never have come across
25:53 like you guys in Corporate
25:55 America I mean yeah you’re you’re in a
25:57 very much a shell in Corporate America I
25:58 mean that’s that’s what I love about the
25:59 space there’s a lot of cool people doing
25:01 a lot of really cool things and being
25:03 willing to share and help and partner
25:05 and you know it’s hard to partner with
25:06 somebody whenever you have a day job
25:08 right like you can’t you’re you can’t
25:09 get you have to get the whole company’s
25:10 partnered and that’s its own problem so
25:12 definitely feel you on that and so last
25:15 but not least what is your favorite tool
25:16 or resource my tool or resource uh in
25:19 the business buying Community would be
25:22 leveraging other entrepreneurs you know
25:24 I’m pretty active on X which is new for
25:26 me there is a ton of free resources just
25:29 by speaking with people and you know the
26:30 content shared I always say you could
26:33 probably learn more being active on
26:35 social media and learning from business
26:37 buyers or entrepreneurs than getting an
26:39 NBA for you a cost of Z and
26:42 Z yeah no we we’ve and there’s been
26:45 several of our interviewers that have
26:46 said X there that’s one of their places
26:48 it’s a great Community I’m I’m off and
26:51 on um but I I I’m a LinkedIn guy um but
26:56 it’s just not as active you know what I
26:57 mean so got to dive in like you did so
26:60 did you just did you just jump in and
26:01 start getting into it recently yeah so I
26:05 would be lying if I said I wasn’t
26:06 encouraged by a client he told me about
26:09 it about in January of 24 he said hey
26:12 man I’ve seen your stuff on LinkedIn
26:13 you’re wasting your time you need to get
26:15 on to X you know this is kind of the
26:17 place for you for that just that deeper
26:19 connection again you know these
26:21 businesses buying businesses are scary
26:23 you need to get off of the surface level
26:25 and really dive deep into people’s
26:28 personalities um you know so anyway long
27:30 story short been there for about nine
27:32 months and I’ve met hundreds of great
27:34 people ni yeah know it’s I mean it’s
27:36 it’s interesting to me how OD or how
27:39 maybe how big the the audience is on X
27:42 specifically for small and medium
27:43 businesses right that space it’s just
27:45 the community lives there it doesn’t
27:46 live in any other channel platforms it
27:48 lives there and you know talking to
27:50 people like glint Fior who built a whole
27:51 audience and his whole following just by
27:53 doing that and doing it well and so you
27:55 know for any of those listening I mean
27:56 there’s a very very very rich EOS system
27:58 on X or Twitter so definitely go check
27:00 it out yeah and to your point I did a
27:03 xace um which is just a soft platform
27:06 almost think of it like radio for for X
27:09 with Bruce Marx and we had like over 300
27:12 listeners just on a random Wednesday at
27:14 8 pm it’s awesome very awesome the space
27:18 is exploding awesome perfect well
27:20 Patrick great advice thank you very much
27:23 for kind of all the information so I
27:26 guess if someone from the audience wants
27:27 to get a hold of you what’s the best way
27:29 yeah so the best way you can connect
28:31 with me on LinkedIn or X my handle is
28:34 SMB deal guy love to connect with you if
28:37 you’re an entrepreneur looking to buy a
28:38 business or if you’re a business owner
28:40 thinking about hey you know I need an
28:42 exit plan I need an exit strategy I
28:44 would love to work with you and uh you
28:46 know very very active on both platforms
28:49 and I would love to hear uh help where I
28:52 can awesome fantastic well Patrick man
28:55 I’m really excited that you joined us
28:57 today it is uh been uh very
28:59 knowledgeable I hope listeners got that
28:01 I mean it’s just that it’s the one thing
28:03 we’re talking all the time is like we’ve
28:06 how do we validate the numbers what do
28:07 we do I mean it’s it is the nature of
28:08 the business couldn’t agree more um you
28:11 know all right I love partnering with
28:13 entrepreneurs in their journey and
28:15 really it’s a trust but verify just to
28:18 buy excellent businesses you just need a
28:20 little bit of help y Big Time absolutely
28:22 perfect thank you very much Patrick
28:24 we’ll see you on the next one thank you
28:26 so much have a good one
28:28 thank you for listening to the m&a
28:30 Launchpad podcast if you’ve enjoyed
29:32 today’s podcast and would like to
29:33 support us please leave us a rating and
29:35 a review after you listen I’m Casey menu
29:37 and I look forward to talking with you
29:38 next week
