Monday, February 26, 2024

Lessons from the auto repair industry.



New Livestream guest-> Murray Voth- RPM Training.

I’m happy to have Murray join me on a live broadcast.

He’s been in and around the automotive industry for his entire career and now he works with auto shop owners helping them make their businesses better.

Tune in and as we’ll be discussing service, pricing and setting customer expectations.

This is a ‘must see event’ for anyone who owns or will own a business that caters to the public.

Yes- I will ask him for tips on how to impress sellers in this industry. 

It’s a target-rich subgroup of owners.

Be sure to join live so that you can ask questions, replay will be available.

Set yourself a reminder on YouTube here: https://youtube.com/live/4vJGl8pHD54 

We’ll be going live Monday February 26, 2024 at 1:00 PM Atlantic Time and 12 Noon Eastern Time

See you there!

David C Barnett


Saturday, February 24, 2024

The Hidden Dangers of Businesses with No Asking Price

I have an interest in discussing a topic that I received years ago – “businesses without specified asking prices”. 

Inspired by a question from one of our viewers, I'm eager to provide some illuminating insights into this intriguing subject.



Dead Capital and the Real Issue:

I've encountered situations where businesses are presented for sale with no asking price, and upon closer inspection, I found a common issue—dead capital. 


What's dead capital, you ask? It's when business owners have invested in machinery, inventory, and other assets that aren't generating a sufficient rate of return. 


In simpler terms, the business isn't justifying the capital invested in it.


The Cash Flow Conundrum:

In the two instances where I was brought in to assess such businesses, the cash flow didn't align with the tangible products and assets involved. 


Whether it's machinery, inventory, or infrastructure, the return on investment wasn't up to par.


 This mismatch between the value of the assets and the actual cash flow is a red flag.


Warren Buffett's Perspective:

It brings to mind a quote from Warren Buffett, who once mentioned that if you want him to consider buying something, you need to put a price on it. 


The idea is simple—transparency in pricing is crucial for making informed decisions.


The Auctioneer Dilemma:

Traditionally, businesses facing dead capital would head straight to an auctioneer, liquidating assets to recoup some value.


 However, a growing trend involves attempting to sell these businesses as going concerns, hoping to find a buyer willing to pay more than the sum of its parts.


The Buyer's Dilemma:

For prospective buyers, it's essential to be cautious. Businesses with no asking price may be concealing a deeper issue. 

The real challenge is distinguishing between a genuine opportunity (perhaps with a redevelopment angle) and a business burdened by dead capital.


Navigate the World of Business Buying:

If you're intrigued by the prospect of buying a business and want to avoid costly mistakes, consider enrolling in my online course, Business Buyer Advantage. 

It's a comprehensive program that guides you through the nuances of acquiring small and medium-sized businesses.


Visit to explore the course, watch an informative video, and take control of your journey in the world of business acquisitions.


Be sure to never miss any of my great content or special offers by being on my email list at https://www.DavidCBarnettList.com 


Cheers,


David Barnett


Wednesday, February 21, 2024

Raise your Prices


***New Video Alert!

I had a meal the other day with a small business owner.

He has a very popular service that doesn’t make him any money.

What can he do?

Why is pricing review so important?

I will get into it this week and give some advice about how to do it.

Watch this week’s video here: https://youtu.be/t_FpX1zr_7k 


Cheers


See you over on YouTube

David C Barnett


 

Saturday, February 17, 2024

A Lesson from Ryan Duffy's Franchise Dispute

 A Lesson from Ryan Duffy's Franchise Dispute

Hello Everyone,

Today, I stumbled upon an intriguing newspaper article that sheds light on the complexities of a small business deal. Let's dive in.



The Unseen Opportunities in Newspapers:

Being an avid newspaper reader, I often discover unique business opportunities and insights that aren't readily available elsewhere. Years ago, I came across a headline involving a dispute related to the Donair dynasty, and while it might seem like a family matter, it unveils the intricacies of a real small business deal.


The Donair Dynasty Background:

The article delves into the history of the Donair, tracing its roots to an immigrant from Greece who created a sweet-sauce version of the traditional gyro sandwich. 


This innovative twist led to the establishment of the King of Donair chain, becoming a thriving business. 


Fast forward, and a family dispute over a small business deal surfaces, bringing the details into mainstream media.


Ryan Duffy's Franchise and Financing Dynamics:

The focus of our interest lies in a franchise deal involving Ryan Duffy's, a well-known steak and seafood house in Halifax. 


Two parties, Bern and Costain, sold their Ryan Duffy's franchise to Gamalakos, the son of the Donair inventor. 


The purchase price was $400,000, structured as a financing agreement.


100% Seller Financing and Promissory Notes:

Here's the intriguing part — the entire $400,000 was financed by the sellers through two promissory notes. 


Yes, you read that right, 100% seller financing. The agreement required monthly payments with a 4.5% interest rate. The transaction details are somewhat unusual, as it was a share deal for a restaurant, not the typical asset sale.

My guess is that the sellers were only willing to do this because they believed the buyer had the experience and expertise to successfully execute on the project.


Defaults, Guarantees, and Legal Consequences:

Unfortunately, the buyer, Gamalakos, defaulted on the payments just under a year after the deal in December 2017. What's notable is that the sellers, instead of reclaiming the restaurant, pursued legal action to recoup the money.

 The article mentions an interesting negotiation point — Gamalakos offered a 50% personal guarantee, reducing his potential liability.


Insights into Real Business Deals:

This real-life scenario offers a glimpse into the dynamics of small business transactions.


It dispels the myth that deals are always done with full cash payments and explores the intricacies of seller financing, defaults, and negotiations around personal guarantees.


Learn to Navigate Business Deals:

For those aspiring to buy a business one day, it's crucial to understand these deal dynamics. I've crafted a comprehensive program on how to buy a business, encompassing video tutorials, online courses, and group coaching. 


Whether you're a seasoned entrepreneur or new to the business world, there's something valuable for everyone.


Remember, negotiating personal guarantees is not set in stone. 


It's a skill, and as showcased in this real example, negotiations are possible.


Cheers to unveiling the secrets of business transactions!


If you want to learn more and see my latest videos, be sure to subscribe to my email list at https://www.DavidCBarnettList.com 


David Barnett


Wednesday, February 14, 2024


***New Video Alert!

I get frequent questions about choosing an industry or type of business.

In today’s video, I explore Michael Porter’s ‘5 Forces’ within the lens of small business.

Watch this week’s video here: https://youtu.be/3_Ejjrdo-cU 


Cheers


See you over on YouTube

David C Barnett


 

 


***New Video Alert!

I get frequent questions about choosing an industry or type of business.

In today’s video, I explore Michael Porter’s ‘5 Forces’ within the lens of small business.

Watch this week’s video here: https://youtu.be/3_Ejjrdo-cU 


Cheers


See you over on YouTube

David C Barnett




Saturday, February 10, 2024

Navigating the Nuances of the Small Business Market

 Today, let's dive into the complex world of the small business market, addressing a question I received a few years ago about market conditions.


Understanding the Unique Dynamics:

The notion of a singular market for small businesses is a common but misleading concept. 


In reality, every category and even each individual small business has its own distinct market. 


Drawing parallels with real estate, where markets for three-bedroom homes can vary by city, the small business landscape is similarly intricate.



The Secretive Nature of the Small Business Market:


Unlike real estate, the small business market is shrouded in secrecy. The lack of transparent data makes it challenging to gauge market conditions accurately. While real estate transactions and prices are publicly available, no such comprehensive database exists for small businesses. This opacity further complicates the understanding of small business market dynamics.


Buyer-Specific Markets:

Buyers in the small business arena are diverse, each seeking unique opportunities aligned with their preferences and backgrounds. For instance, a buyer with an engineering background might be in the market for a manufacturing facility, excluding businesses like flower shops, regardless of their profitability.


Market Filters and Conditions:

Buyers often apply filters such as industry focus, geographic location, or personal considerations when navigating the small business market. These filters contribute to the complexity of defining a specific market, as the ideal business for one buyer might not align with the criteria of another.


Government Policies and Market Impact:

Observing market trends over the past few years, I've noticed the influence of government policies on specific small business segments. In my local context in New Brunswick, Canada, government programs aimed at boosting immigration have led to an influx of demand in businesses that are relatively simple to operate. The provincial nominee program, for instance, fast-tracks citizenship for immigrants investing in businesses.


Impact on Pricing and Overpaying:

This government intervention has inadvertently led to an oversupply of demand in certain market segments, causing newcomers to overpay for businesses. Businesses like gas stations, convenience stores, and small franchises have witnessed significant price hikes due to the pressure created by the provincial nominee program.



Join my email list at www.DavidCBarnettList.com 


I share weekly videos touching on various aspects of small businesses, investing, and more. Your journey into the world of local investing and small business success begins here.


Cheers,


Dave Barnett