Jude Wilson: I am so excited about today’s episode. I am starting to see a trend among clients that seek our advice. People that want to leave the corporate world from, for one reason or another, either to have the reins under themselves or to try to find greater financial freedom. And today we’re going to be speaking to experts in that industry of how to find the right business, how to structure some deals and really hear some really incredible stories, success, uh, stories of people that have actually done this. So welcome George and George today.

George St Pierre III: How you doing?

George Rosen: Thank you very much. Jude. We’re excited to be here.

Jude Wilson: Oh, I’m excited to have you. And you know, normally I would do a long, drawn out introduction of your company and who you are, but you guys tell the best story about how you actually form the company and what you actually do. So I’m going to turn it over to you to give us a little bit of, uh, uh, introduction of who you are and how do you serve your clients.

George Rosen: Beautiful. May I?

George St Pierre III: Go ahead, George.

George Rosen: Okay. Uh, back in 1990, I got a license to practice real estate and focused on commercial leasing. My background was bars and restaurants back then. In 93, an attorney friend of mine suggested with my accounting background, I could add more value to a business transaction rather than leasing the space if I was focused on business brokerage. So back in 93 I, uh, shopped around. There were only six brokerage firms in town and I found one that actually had a mentorship program and taught me the ropes on how to go about helping acquirers buy small businesses and then turn around and sell those businesses later on. So from 93 to 97 I was all about Main street business sales. In 97 I was asked to step into a role, uh, in the back office and help with the larger transactions and the valuations and the packaging of the businesses. And I was in that firm from 93 to 05 when there was never going to be an opportunity for ownership and I wanted to get my own name on the business and started contango investments in 05 with a colleague, Garyam. He’s a, uh, silent partner actually. And we’ve been doing business sales in that 500,000 to 5 million dollar price range is the sweet spot. We do revenues anywhere from as low as 800,000 up to 20 million. And when we find the right opportunities with sellers who understand what it is that a buyer needs to have to be successful, we put good deals together with the right people.

George St Pierre III: And George, I’ve been in the, uh, financial industry for many, many years. I was in mortgage, uh, banking for 40 years. I’ve known George for over 30 years. And, uh, a couple years ago I decided to get out of the mortgage business. I was kind of over the up and down of the, uh, industry that it’s gone over those many years. So, uh, he asked me to join him and, uh, come along and see if we could work on in tandem with a different variety of, uh, businesses that we could, uh, successfully help people purchase and sell.

George Rosen: And we have another colleague who focuses on value building. That’s taking a company which isn’t quite to the level that the owner needs it to be before they can sell it. And she will work with the owners over a year or two to get the business more valuable. So when they hit their magic freedom point, they have enough value in the company that when they do sell it, they’ll be able to put that with their financial planner and support their retirement.

George St Pierre III: And she basically doesn’t sell the businesses. She’s strictly a consultant and helps them, you know, work on their business plans and get them revised to a point where they’re more profitable and more sellable.

George Rosen: And the business is no longer dependent on the owner. And that’s the secret sauce. If I’ve got a business that doesn’t hinge on the owner’s direct contribution, that they’ve got systems in place and employees that they’ve delegated the functions to. A buyer can understand, well, if I buy that business, this is what I’m going to do. I don’t have to be the expert that the former owner was. I can come in with my business background and be successful and take it from where it is now to the next level. And then when I want to sell, then I’ll have a much better business

00:05:00

George Rosen: to sell.

Jude Wilson: Wow, that’s a great explanation of what you do. And we open the show by saying, uh, I’ve seen a trend among prospective new clients that are coming into our firm that are more interested in leaving corporate America and buying their own businesses. So can you help me confirm whether that’s just something that I’m seeing or are you seeing it in your business that you’re getting more people that are looking for this type of service?

George St Pierre III: Yeah, I think we see a lot of that, um, you know, um, men and women that are in their late 40s, early 50s, that have had a very successful career, you know, maybe have some money set aside in their retirements and, or other assets, um, are looking and feeling like they’ve got the ability to move forward and actually do what they’ve been doing all along, only in their own account, you know, with less overhead, less overhead over their head. Um, so, yeah, you know, we’re seeing that. And, and it’s a, it’s a, actually, it’s a really kind of a refreshing opportunity for a lot of these people because they’re highly educated, you know, very focused and, and, but they don’t know what business to buy. A lot of them have such a general background in finance or, you know, whatever. So it’s very interesting and we are seeing quite a bit of that.

Jude Wilson: And I think one of the trends that one of the things that’s contributing to it is we hear the statistic a lot of the baby boomers and how many will be retiring over the next few years. And at least from my side being a financial planner, I’m seeing clients who’ve worked hard for 20, 30 years and built this business, and now they’re looking to exit. Uh, and many of them, for good or bad, their children do not want the business. Is this what’s creating this opportunity? Right now?

George Rosen: We call that the silver tsunami. And we’ve been promised this for the past 15 years. We’re seeing it now. And these are people in their 60s and 70s who are still going strong, but realize that now might be a pretty good time for an exit, especially if they’ve done the math. They’ve m met with their financial planner and they know they’ve got enough value in their company that on top of the savings they’ve already put together over the years, will fund the next 20 or 30 years without fear of running out of their capital.

Jude Wilson: Yeah, it’s a unique opportunity that I haven’t seen in my, uh, 27 years in the industry. So many people at this point that are looking toward this exit strategy. So you’ve got, you’ve got, you’ve got a wave of sellers, and now simultaneously, you’ve got a wave of people that are interested in starting their own business, but they don’t want to start from scratch. They want to look into something that is a little bit more proven. And a lot of times most people are thinking, well, if I want something more proven, I have to buy a franchise. But that’s not necessarily the case.

George Rosen: Right well, franchises are a great way to get into a business. We sell a lot of existing franchises that the franchisor always has the right to buy back, but they let the seller go out and find a buyer in the market and then they decide, would we like to outbid that buyer and buy the business and take it over to one of our existing franchisees or are we going to let them sell it to the third party? So there’s still an opportunity to get into a business that is a franchise that’s already up and running. You’re going to pay for that goodwill for that cash flow in the existing customer base. But consider that about 90% of businesses that start up are out of business in five years. If you buy a business that’s been around for 10 years and you know your skill set and you do a good job in your due diligence, you’ve increased your likelihood to be around for the next five or 10 years and a much higher success rate for those transitioned businesses.

Jude Wilson: That makes a ton of sense to me. You know, buy, don’t build. Get something that already has a track record and kind of follow a proven, uh, a proven uh, path. So, so let’s talk about some of the success stories that you’ve had. Um, I know you represent both people who are selling businesses and also sometimes represent people who want to buy a business. Let’s start off with some of the success stories that you’ve had.

George Rosen: Well, one in particular I’d like to talk about Eric. Yeah, this was a gentleman who was in his late 30s. He was working for a Fortune 500. He came out of corporate America. He had an industrial engineering background and an mba. He wanted to buy a couple million dollar business that would replace the, uh, quarter of a million he was earning. And he had a half million dollars in his 401k. We looked around, we spent over a year looking at different business opportunities all over Florida. We got into contract three or four times with businesses that for one reason or another

00:10:00

George Rosen: didn’t survive the due diligence process, which is the buyer’s opportunity to make sure everything they were told about the business is true and correct. When he did finally find the right business, it wasn’t a two million dollar company, it was a $700,000 company. The difference was the owner was looking for somebody to teach, he wanted to mentor somebody to take over the business. And those two were very compatible. He bought that business. The seller stuck around for a year and supported him. Eric was able to use 7A financing, which is an SBA loan product that you can come in with as little as 10% down. So on a $700,000 business, he only put $70,000 in. He had the rest of his nest egg still in his retirement account and cash available for any downside and growth. So it was a win win with the right seller. Um, since then, Eric’s bought another business. That first one was a plumbing contractor. The second one was a painting contractor. He called me up a couple months ago and said, I just met with my cpa. I’ve got a big problem. I’m going to have too big a tax bill. I got to buy another business. So now we’re looking for his third business. And George has had a couple of transactions with buyers that the right buyer for the business. You want to talk about the restaurant?

George St Pierre III: Well, you know, again, you know, you have people, uh, who are out there that are looking for, you know, moving in certain spaces. And, uh, we had a restaurant that was on the market. They were very successful. Um, had been in business for about two and a half years. Uh, when you looked at their financials, they were on a complete incline. I don’t know which way you want to look at that, but they were. Their income and their growth and their net income was going up, you know, each and every, uh, month, you know, so if you looked at a graph, they were in a complete growth pattern. Um, buyer came in. And it just so happened in this particular situation, the seller, um, had some personal issues that they needed to. Felt like they needed to go ahead and sell the restaurant. Um, they had been in the industry up in Maryland for several years. Uh, so they decided, you know, maybe it’s time that they move along and take their nest egg out of the business. We found the right buyer again, somebody that had some experience in the restaurant business, and they made the right offer, you know. So we got them, both of them, uh, put together. Luckily, in this particular case, um, the, uh, uh, new buyer was pretty well off and did not need actually any outside financing. He actually came in and bought it with cash. Not a huge transition, but it was. It’s one of those situations where you find the right people that are leaving and right people that are coming into the marketplace. It was quite compatible with everybody. Everybody was great at, uh, you know, trying to teach the other one what was going on in their particular restaurant. And, uh, it turned out to be fantastic for everybody involved. You know, I’m still getting called from the seller going, thank you, George. And so, you know, it’s a great situation, but you Know, it’s all about finding people. Uh, and they had really good financials. So you know, everything that we told them financially was accurate, was something that could be verified and something that um, everybody felt very comfortable with.

Jude Wilson: Yeah, I kind of hear two themes in what, in these stories that you’ve told is one, the due diligence that you’ve put together. Sure, people could go out and try to look for businesses to buy on their own, but there’s a level of due diligence that you do that is valuable in helping kind of go through the woods and the forest to find the right opportunity for the right person because it has to truly be a good fit. And the other thing that I hear from you, which I’m seeing on my side of the business is, is that people are in various stages in their life. I’ve seen the 40 somethings that they’re just sick of corporate America and they’re not ready to retire. They really just want an opportunity to use their skills and magnify the benefit that they get from using their skills and their hard work. I’ve seen the 50 something year old that is thinking toward retirement and wants to find something that they could put their money into to build that equity to one day retire in 10 to 15 years. And then the last group are people who’ve already been wildly successful and they’re at the verge of retirement but uh, they don’t want to sit in a rocking chair. These are people that have usually been leaders in the company that they’ve worked for and now they don’t necessarily need the money but they want to, to put their stamp on something. So from the buyer side, those are the three that I, that I’ve seen. Tell me what you’ve

00:15:00

Jude Wilson: seen.

George St Pierre III: Go ahead George.

George Rosen: Very similar, um, there’s uh, something called a searcher and that’s somebody who’s young, uh, fresh, mba, doesn’t have a whole lot of business experience, but they’ve got somebody who’s willing to bank back them and bankroll them for a business acquisition. They’re typically looking in that one to five million dollar transaction size and they actually have a track record of being very successful in growing businesses faster than is normal. There’s what you described the uh, same as my uh, client who’s got the tax problem needs to not buy another business. Now he’s in his early 40s and he’s growing a business. He’s gone from a personal worth of 450 odd thousand dollars to now he has a uh, couple of businesses worth A couple million dollars in a couple of years. And he’s got free cash flow that he’s able to put away for his retirement and think about expanding through additional acquisitions, which if you’re very careful about what you acquire, can be the best way to grow. Then of course, we’ve got the high net worth individuals who are looking for those younger entrepreneurs that they want to bank bankroll and they’re looking to buy the business and put people in place to run the business. Uh, so those are the searchers that are backing the young MBAs. And it’s a spectrum, but it’s about getting the right people together. When you get the right company with the right buyer, they understand it, they know what they can project, how they’re going to take over the reins. And we’re matchmakers. When we do it right, it’s easy. When you got the right people together, everything seems to come together.

Jude Wilson: So, wow. This is kind of like a business dating service, if you will. I kind of like that concept, except you’re weeding through all of the frogs so that, uh, your clients can maybe kiss a couple of princesses. I don’t know if that analogy works, but I’m gonna go with it. So we’ve talked about some success stories. Let’s talk about the DIYers, the people that are trying to do it on your own. And not necessarily saying that people can’t do it on their own, but what are some of the pitfalls that you’ve seen from people that don’t have the 30 years of experience that you provide?

George Rosen: It’s a great question. It goes back to when the Internet was nascent technology. When I started out in 93, the World Wide Web was in its infancy. And I recognized that brokers were going to be pivoting from being the sole source of the information. If you wanted to know about that business, you had to talk to this broker to. All of a sudden, business opportunities were available on the Internet. Buyers were calling in and asking about a hundred different businesses. And our role switched from being the sole source for the truth to being the filter to find the right opportunity. And you can spend a lot of time and waste a lot of time, uh, with that young man. It took a year and over 100 businesses we vetted. We were under contract three or four times with deals that didn’t pan out. And that was a lot of time, effort and energy that he was already out of corporate America and spending his life savings. That was opportunity cost and hard money cost trying to find the right business. So we were able to leverage our resources and our relationships with all of the brokers and there’s 900 of us in Florida and we all cooperate with each other. There’s some that are not inside of our trade association but for the most part when you’ve got experienced brokers, we know who each other are and we share. So if I’ve got the right buyer and he’s got the right seller, we want to get them together. Yeah.

Jude Wilson: In any specific situation that, that, that you’ve seen from uh, from a dy’s perspective, um, you know, either getting into a bad deal or, or even using AI. What, what are some of the, the, the stories that you’ve seen that just did not pan out for people?

George Rosen: It’s so easy to put into chat. This is what I’m looking for. Chat does not uh, have access to a lot of the back end databases which are proprietary that I spend $8,000 a year for the various databases to know what’s for sale and who’s got the opportunities. And everything is protected with non disclosure agreements. Um, if you’re out there relying on AI to get you introductions to the listing broker or the seller direct, you’re missing a lot of the great opportunities that by the time they’re out there in the general databases, business owners don’t want their fact that their company is on the market released. That’s detrimental. Their customers are going to find out, their employees are going to find out. So everything is very tightly controlled inside of our business brokerage community. If you want to get to the good information and be the first early one in there to get the good opportunities,

00:20:00

George Rosen: you’re going to go through the path of least resistance, which is the systems we built to protect the confidentiality and to filter to make sure we get the right buyers to the right businesses.

Jude Wilson: I think we’ve laid a really good foundation uh, in talking about the trend that’s happening for people that are looking for businesses. What makes um up someone who uh, really has the highest probability of being successful and talked about some success stories. I think uh, for this episode it’s a great way to summarize uh, everything. But I believe our viewers and listeners are also going to want to learn how do you do what you do? And I think we should probably cover that next.

Marc Killian: All right, that’s going to do it this week here on the Roth Guide. Join us for part two with the Georges as we talk about more of the logistics of how to buy or sell a business as a retiree or a pre retiree. We’ll continue that conversation on the next episode of the Roth Guy.

Walter Storholt: Financial planning and advisory services are offered through Prosperity Capital Advisors pca, an SEC registered investment advisor with its principal place of business in the State of Ohio. Centris Financial Strategies and PCA are separate, non affiliated entities. PCA does not provide tax or legal advice. Insurance and tax services offered through Centris Financial Strategies are not affiliated with pca. Information received from this podcast should not be viewed as individual investment advice. Product discussions and illustrations are hypothetical in nature and will vary based on many factors and including but not limited to, age, health product, insurance carrier and product design. You should consult the Insurance Carrier website and policy for detailed information. For information pertaining to the registration status of pca, please contact the firm or refer to the Investment Advisor Public Disclosure www.advisorinfo.sec.gov For additional information about PCA, including fees and services, send for our disclosure statement as set forth on Form 80V from PCA using the contact information herein. Please read the disclosure statement carefully before you invest or send money.

00:22:12