Sunday, February 28, 2016

What is the best investment for a young person to make?

Sandra asks me what I think the best investment is for a young person.  I'm assuming she means someone just entering adulthood.

What do you think? Am I right?

Watch the video: 


Hey guys It’s Dave Barnett once again from . I got a question from Sandra who simply asks what kind of investments would I recommend for people that are young, like 18 years old and you know what thanks Sandra for the question it’s a great question.

You know there’s two different ways you can go down this path and one sort of voice of reason might say that a person who’s only 18 years old has the whole life ahead of them. So they should put as much money as possible to really secure you know, sort of fixed income product that grow very slowly because they have such a long planning horizon by the time they get to sixty-five or whatever. They’ll have accumulated wealth I’ll be really well off the problem with that kind of thinking. I believe is that number one you’re wasting huge amount of opportunity that a young person has an eighteen years old has.

If anyone knows anyone who’s young person just getting out of High School or college, please please share this message. The opportunity is that you’re at a point your life we have very little responsibility and the risk of the save now and wait for later plan is that there might not be a later you know. I unfortunately in my own life have all kinds of people around me, who are in their sixties who are falling ill with different health conditions and it really makes you understand your own mortality. And the risk of being alive you know, things happen. So the whole idea that you need to work hard your whole life and then at some point in the future, you’re finally gong to be able to rest, relax and enjoy the fruits of your labor. I think is flawed thinking I think people need to enjoy their life through their life so that they have no regrets at any given point back to the opportunity for the young.

Right now I have two children that I’m responsible for about, I’ve got a home mortgage, I have all kinds of responsibilities in my life. So I have to be careful as a forty-year-old, what sort of risks I take because I have to make sure that I’m able to pay my bills and meet my obligations and those obligations are important. We’re talking about my kids. An eighteen-year-old likely is not going to have a mortgage, they’re not going to have children and maybe they’re still able to live in their parent’s basement for example and if they haven’t gone to college or university and go on a huge amount of student loan debt, they also don’t have the burden of debt, so in my opinion one of these people should definitely get into business. Get into a business will learn through doing and you know what with the lack of wisdom and experience at a young person has in all like hood the business will fail and that’s okay. 

That’s how people learn you know when you’re learning to walk you keep falling down as a child and eventually get it right and I think that the point in a person’s life where you can most afford to fail and have the failure will mean the fewest repercussions for you is when you are that young adults. 18 years old you can get out there do something crazy, get in over your head in a lot of different ways, fail and learn some tremendous lessons and the advantage of course is that in failing at that young age or even succeeding you’re going to learn how to get into business and if it’s a successful business will be a little leverage, the efforts of other people, employees. Grown a business, learn how to manage a business. And that’s going to set the person up not for a comfortable retirement in 45 years. It’s going to set them out for an exciting active life of business ownership and with that hopefully increased earning in the ability to enjoy life to its fullest throughout the course of Life. Taking holidays, vacations, owning you know different property, having an RV, all that kind of stuff is all fruit from the labor of getting into business and taking the risk so Sandra that’s my advice for someone who’s young like 18 years old is not to be cautious in any respect but you get into business and learn by doing and just knowing that whatever happens there’s going to be a tremendous amount of information gathered, a tremendous amount of knowledge and wisdom and that even if it doesn’t work it’s ok anyway. 

If you disagree or if you have another idea, please share in the comments below and if you are older in life and you’re not ready to take on some risks because of the responsibilities you have and you want to get into business, not through starting one up and experimenting but you want a sure thing and you want to buy a mature successful profitable business then you should be checking out my online course where it’s actually a full day over nine hours of video tutorials and a workbook on how to go out and find the process of how to purchase ad analyze and price a business that you can buy.

Anyway thanks and we’ll join you next time! You made it to the end of the video that’s great. Don’t forget visit Sign up for my email list it’s right down here under the welcome video thanks and we’ll see you next time.

The Invest Local Book blog is all about small business, franchises, local investing, home economics, small business systems and borrowing money for your business. It's full of great content and I look forward to seeing your feedback.  Sign up for my mailing list and don't miss a thing! [CLICK NOW]

Tuesday, February 23, 2016

An interesting take on goal setting. Great article by Mark Manson.

Hi guys, I came across this great article today. Food for thought for anyone who likes to set goals.

It’s the new year and let’s pretend for a moment that you have decided that you want to become rich. Maybe you’re sick of your student loan debt. Maybe you’re sick of eating frozen waffles for dinner every night. Maybe you recently became…

Monday, February 22, 2016

How many years of results do we average when pricing a business? Viewer Question- David C Barnett

A great question: When we evaluate a small business for sale, how many years of results do we average? It depends…

Can't see the video? Watch it here: 

Also, get my new FREE e-book: 12 things to do before you consider selling your business 


Good day, it’s Dave Barnett from I’ve got another question today about buying a business. This question is from Bob.

Really the question is about evaluating businesses and Bob wants to know when he looks at a business, how many years of results should he average out when deciding what kind of numbers to use. So if sales, you know change every year, do we average out, for example, three years of sales or five years of sales, what averaging do we do to the numbers? and then the truth of the matter is, it’s maybe frustrating answer for you Bob, but it depends. and this is what it depends on it depends on the trend. Let’s take a look at the white board.

Aright Bob, so what I’ve done here is it created an example company and we’re going to call this one the Growing Company. Now each one of these columns represents a year and so we have six years of data here, and then the dotted line is our forecast year, so it’s our best guess as to how the upcoming year is going to shape up. Now normally you’re evaluating businesses based on financial statements which means that if the financial statement for this last year is in your hands, it means you’re already into that forecast year. So you may be able to look at least a few months of results for the upcoming year and see if it looks like it’s going to be performing as well as prior years now, in this case what people sometimes want to is say looks let’s just average together a bunch of years but in realty that’s not the best way to look at a company.

The most recent year of performance is the best indicator of the performance of the company and if I’m evaluating a business that has sales that were continuously growing year after year. And profits that were lined up just as nicely growing year after year that would I would actually do as I would probably do it weighted average and I would probably put fifty percent of the weight on the most recent financial statement. I might put ten percent of the weight on the forecasted year. If we’re reasonably certain that it was going to perform as we expected. And then I might put some waiting on these past years but I wouldn’t make it an even weighting. I might put 20% on the year before this gives me 70 and then I might put 15%. And then this gives me 60, 80, 95 and then I might put 5% there. So I would use a weighted average with the majority of my weighting being on the most recent year. So this is an example of a growing company.

Let’s take a look at some other example. Here we’ve got the opposite situation. We have a declining company. We have sales that are going down every year and we’re projecting another small decrease in sales and we got profits that are going down every year as well. This is a completely different situation if you we’re trying to sell a company like this. You would probably want to make some sort of argument to use even average of several years of results if you were buying the company though, the very first thing you’d have to isolate is why are the sales declining. Is there a reason why this industry is falling out of favor? I mean are you buying a video store in the modern age of online streaming movies for example. Is it just the industry is dying off or are there problems with the way the company is managed and run that maybe you could fix. You never pay for something that could be as I mentioned in many of my other videos, you always pay  for what you get.

So in this case if I was doing an evaluation from bob’s point of view as a buyer. I would actually want to have all of my weighting on the most recent years and in fact you know I would probably do something like 85 and 15 so if I was projecting even more decline in the last year I want to have some weight on that. So that we drag down the overall fact of the different year’s performance. This company in the future year has very little in common with this company back here. This company was bigger, had more sales, probably more customers, maybe more employees, or profits, etc. then this company over here there is a material difference between how these companies operate.

Let’s take a look at 2 more examples. Here’s another example and I’m going to call this one Uncertain Trend. And what we see here is a bunch of moves up and down up and down. There is no real consistency to the performance one year after another. We can clearly see that there’s an increase or a decrease in what’s going on in this business. Now if we can identify why? so for example a ski resort maybe has its revenues and profits directly tied to the amount of snowfall every year that can give us an indication as to why the performance jumps all over the place but from the point of view of a buyer who wants to buy the business, your concern is how do I average these numbers together? Again in all of the different situations I’ve looked at. The last full year performance is still your best indicator of what you know What the business is worth how the performance is. So in a case like this, I would actually want to put a little more weight than the first example, so I might put 60% weighting on this year and then maybe 15 and 10 so this would give me 75-85 and maybe five here and 10 over here. So were still using an average in this case we’re getting more of a sampling of other year’s performance but we’re still primarily look at the last full year results. Given that the most recent performance is in most likelihood the most relevant performance to how the company is going to perform. What you’re probably noticing is that in none of these cases have I simply taken four or five years of results and just average them because, quite frankly, a company five years ago is very different from the way that the company operates behaves the market condition of a company today and so as we get further into history the results increasing become less relevant.

I always love it when people say ‘’Hey it’s a great company, has been around for eighty years. Well you know a lot of steel mills have been around for eighty years and a lot of other big industries that don’t have such a great performance track record in today’s day and age. the fact of the matter is the longevity of a company may be good for its’ story, its marketing, its number of customers, the people who’ve heard about it but what we’re really concerned about is how this company operating? How does it perform today and what is the likely outcome of the company going to be in initial time period when we take it over as buyers.

Let’s take a look at another example that’s a little bit different. Alright in this last example I’m going to call this one Rapid Growth Example because I’ve had a few cases recently that I’ve worked on where this has been the scenario. You’ve got companies that because of really unique intellectual property have been able to create products. Where they’re the only player and they create significant value for their customers such that everyone in a given industry wants to switch over to their products. So there is growing demand from all over the world for these products. People want to sign on to be customers and every year the company is logging incredible growth like 30%, and 50% and 70% and a hundred percent and 150% growth. Year after year now that kind of growth creates certain challenges obviously as far as cash flow and receivables and things. But in some industries are able to demand deposits up front and things like that. You can actually work with that kind of growth.

Now in a situation like this, This company in the final year literally has nothing in common with the company of a few years ago. And in this case what I was suggesting to the person who wanted to have the business evaluated, what is that from the sellers point of view he’s going to want to drum up the fact that the future is so bright and that this thing is going to carry only probable we’re like crazy in the future the buyer obviously wants to get as a good a deal as you can as this thing grows and grows and grows, clearly the business has more and more and more value in a case like this, would actually ended up happening was I put eighty percent of the valuation on the final year and 20% on the future forecasted year. With the idea being that this valuation would have to be updated its a deal didn’t happen within a few months there’s going to have to be updated again because the company keeps changing in a material way as we move forward into the future and not only is this kind of growth and give you sort going to base of your evaluation on the biggest sales and profits numbers but the sellers also going to come and top-ranked multiple given the fact that the company to such a shinning jewel that a lot of people obviously in a way to get their hands on.

So Bob I hope this helps your question do we averaged the last three years? No I’ve never used sort of an average of any number of year, it’s always got to be a weighted average you’re always going to want to put a maximum sort of weight on the most recent history and if things are going down in a big way or up in a big way than your want to consider maybe even forecast year as the company changes in a material fashion. anyway I hope this was helpful and if you have any other questions about how do you buy or sell small business come to my blog site in check over my business buyer course or and soon I’m going to have my exit planning course which will be online come to my blog site and get yourself up for that one as well. Have a great day

Hey you made it to the end of this video. That’s great! Don’t forget, visit, sign up for my email list, it’s right down here under the welcome video. Thanks and we’ll see you next time.

The Invest Local Book blog is all about small business, franchises, local investing, home economics, small business systems and borrowing money for your business. It's full of great content and I look forward to seeing your feedback.  Sign up for my mailing list and don't miss a thing! [CLICK NOW]

Friday, February 19, 2016

New FREE e-book to help business owners get ready to sell

I've just finished a new e-book for business owners to help get ready BEFORE the day comes to try to sell their business.

It's coming out April 1 in conjunction with my new book on selling businesses and my online exit planning course.

Sign up and get your free copy via e-mail on release day: 

Monday, February 15, 2016

New Updates about products and Events. What to expect this spring.

I've been busy planning for this spring:

Watch the video below.  Here's what's new:
  1. I talk about a recent appearance at CBDC Kent speaking to new entrepreneurs
  2. I have a live seminar of Business Buyer Advantage coming in April with early ticket specials [SIGN UP HERE]
  3. New book covers.. check them out
  4. A whole new book in April for business owners who want to sell
  5. A deal on my new exit planning course.  [GET THE DEAL HERE]

I cover all the news in this brief video.  If it doesn't appear in your viewer, click this link:

The Invest Local Book blog is all about small business, franchises, local investing, home economics, small business systems and borrowing money for your business. It's full of great content and I look forward to seeing your feedback.  Sign up for my mailing list and don't miss a thing! [CLICK NOW]

Thursday, February 11, 2016

43 Types of Passive Income

I've been encouraging a close friend of mine to find ways to make extra money online, helping her to develop her 'hustle.'  She found this great website with a list of 43 types of passive income and I thought I would share...


or find it on Amazon.

Monday, February 8, 2016

Cirque du Soleil - Puerto Vallarta Mexico - Grupo Vidanta -- The story of the the desperately dropping price.

Here's something a little different. While in Mexico, I took the time to attend a timeshare sales presentation. Watch and learn how NOT to build trust in your customers.

The Invest Local Book blog is all about small business, franchises, local investing, home economics, small business systems and borrowing money for your business. It's full of great content and I look forward to seeing your feedback.  Sign up for my mailing list and don't miss a thing! [CLICK NOW]

Tuesday, February 2, 2016

What are legitimate reasons someone may wish to sell a small business?

Business people looking at purchasing an existing business are often worried that there is a hidden problem.  Understanding the seller's motivation can be key.  Here, in my experience, are the top legitimate reasons someone might have for selling a small business.

Hello everyone, it's David Barnett once again and I've got another viewer question, this time from Peter.  Peter asks, why is the vendor selling?  What is the motivation?  It is a question that I've always heard time and again from every buyer who has ever looked at a business that is for sale.  Why is this seller trying to sell his business?

Now the fear that the buyers have, reasons why people get motivated to ask this question, is that they are worried that the reason the seller wants to sell is because the business is awful, it's losing money, it's failing, it's about to go bankrupt and someone is trying to pass a rotten hot potato into their hands.  So they are worried about this question of motivation, why is this person who owns the business really trying to sell it to me.

In my experience, and I've talked about this before in other videos, people rarely sell a small business for financial reasons.  Very rarely do they say, okay, today is the day I am going to cash out and make my fortune.  This is the stuff of legends and stories and famous people, entrepreneurs that get speaking career because they can talk about the big business they sold. 

Very often what happens when someone sells a small business is that they get a couple of years multiple on their earnings.  It's not like you are going to cash out your business and become fabulously wealthy for the vast majority of entrepreneurs.  So then, why would someone sell a small business, particularly a good one that makes a good, decent profit.

If you have a good business that makes you hundred thousand dollars year in, year out.  Why would you ever sell?  Well, it turns out that there are perfectly, legitimate reasons for selling a business but they are not financial or business reasons generally.  They are almost, always personal reasons.  Remember a small business in a lot of ways is simply an extension of the individual who happens to own and operate the business.

So the number one perfectly legitimate reason why I would have sellers come to me while I was a broker come to me and say, I would like to sell my business, is burn out, fatigue and exhaustion.  Think about it this way; if you were in the same job for fifteen years, do you think you might get bored of it?  Well, for people who have a job when they get bored of their job, they go looking for another job.  They either look for a transfer within their company or they go looking for another place to work and when they find that job, they give their notice at their first job and they move to a new career.

For a business owner, it's not that simple.  You can't just opt and leave the business because for a many, great many entrepreneurs, majority of their family’s net-worth is tied up in that business.  They can't just walk away from it.  So, in order to change what they do every ay, to get a new "JOB" so to speak, they actually have to sell the business and then either go get a job or go start another business or maybe even buy another business.  It's a perfectly, legitimate reason for someone to want to sell a business.  They just can't stand it anymore because they have been doing it for so long.

The second reason, of course, is retirement.  Now this is a natural reason and people expect to see this from someone who is maybe 65 years old or older.  What's interesting about people that want to sell because of retirement is I have noticed that entrepreneurs who are happy and enjoy their business and what they do every day, tend to stay in their business much longer than what we traditionally think of as a standard retirement age. 

Most of the business owners who ever came and spoke to me about selling for retirement reasons, if they were in their late 50s or early 60s, it wasn't usually because they want to come in and talk about selling for retirement, it's usually because they were under pressure from their family or spouse, who were encouraging them to sell the business and retire.  What I found from a lot of these people, is they weren't really motivated and accepting good offers from people because they actually didn't want to sell their business.

I found a change of heart somewhere around the age of 70 to 75.  I even had some people come in and finally decide to retire in their 80s.  If you meet a gentleman or a lady who is getting up in years and they around that 70 years of age mark, probably retirement is a real motivating reason why they might want to sell that business.

Some other legitimate reasons why people have tried to sell their business; re-location is increasingly becoming one of them.  So imagine a married couple, one spouse has a very high income job; maybe they are a doctor, lawyer, military officer, something like this, and they earn $150,000 a year let's say.  The other spouse owns a business and it's a good business, maybe only earn $70,000 or $80,000 a year.

The spouse with the job that earns much more, they might end up being transferred to another city.  When that happens, of course, the couple would like to stay together, so the business owner ends up putting the business up for sale so that they can join their spouse in the new city.

I once had clients where the spouse that had the job, ended up moving and lived in an apartment in the new city while in this case it was the wife who stayed behind for eight months, living in their house, trying to sell the house and trying to sell the business.  They wanted nothing more than to be back together but they had to sell the business, they just weren't willing to walk away from it.

Another reason why people sometime sell their business is because of health reasons.  They get diagnosed with a terrible illness and they don't want to leave their business to family members who may not be prepared to handle it.  These are very motivated sellers.  They want to get their affairs wrapped up so that no one in their family has to deal with the fall out of what could happen if they passed on before the business is sold.

I unfortunately have met several heirs, who were basically handed businesses when the owners passed away and these heirs were completely unprepared for the challenges of managing a business.  In a lot of cases, didn't even have much in the way of work experience, let alone managing a company and they were desperate in trying to sell the business before the inevitable was going to happen.  They were going to manage it into the ground, and they knew it.  They knew that the days were numbered and they were trying to sell it as quickly as possible.

The last reason why people sometimes want to sell a business is sort of a financial reason and the story goes like this.  This business has a lot of opportunity to grow but I don't have the resources and capital to take it to the next step.  So I need to sell the business to someone who has greater resources who can bring it to the next level.  That's what I call under capitalization reason for having to want to sell the business.

This is the one that you actually have to be afraid of, because usually there is a whole story tied up about what could become of the business if only there was other money available to invest and that is linking to what we call blue sky.  If you want to learn more about the dangers of blue sky when you are negotiating a business, then you should be taking my course, business buyer advantage which is available at and of course, it's an entire program based on my full day seminar where I teach people step by step from beginning to end the process of financing, analyzing, making offers on structuring the deal for and executing the purchase on a small business.

So anyway, thanks a lot and Peter thanks for your question.  We'll talk with you later and don't forget to sign up for my e-mail list.  Thanks.

Hey!  You made it to the end of the video, that's great.  Don't forget visit  Sign up for my e-mail list.  It's right down here under the welcome video.

Thanks and we will see you next time.

The Invest Local Book blog is all about small business, franchises, local investing, home economics, small business systems and borrowing money for your business. It's full of great content and I look forward to seeing your feedback.  Sign up for my mailing list and don't miss a thing! [CLICK NOW]