Saturday, June 29, 2024

Does Business Debt Increase Volatility?

 Today, I have an interesting question from Eugene: “Doesn’t having business debt make a business more volatile?” Let’s dive in.

The Common Misconception

Eugene's assumption is understandable but not entirely accurate. Having debt in a business does not inherently make it more volatile. However, the key issue is how that debt interacts with the business’s cash flow and overall stability.

The Role of Debt in a Stable Business

Debt can be a useful tool for a business with steady and predictable cash flow. Here’s why:

  1. Boosts Return on Equity: Debt can amplify the returns for equity investors. If you demand a high return on your investment, using debt can enhance those returns. For example, borrowing at an interest rate of 5-6% can be significantly cheaper compared to the return you might expect on your equity investment.

  2. Fixed Payments: With debt, the business commits to regular payments. If the business has a steady cash flow, it can manage these payments without issues, making the use of debt advantageous for growth and expansion.

Volatile Businesses and Debt

While debt doesn't make a business volatile, volatile businesses should generally avoid debt. Here’s why:

  1. Unpredictable Cash Flow: Volatile businesses often experience fluctuations in revenue due to factors like seasonality, market conditions, or economic shifts. This unpredictability can make it challenging to meet regular debt obligations.

  2. Risk of Default: If a volatile business cannot meet its debt payments during a downturn, it risks defaulting on the loan, which can lead to severe financial consequences, including bankruptcy.

Equity vs. Debt

In volatile or high-risk industries, such as IT startups, businesses often seek equity financing rather than debt. Equity investors share in the risk and don’t require fixed payments, making this a more flexible option for businesses with uncertain futures.

Government Guaranteed Loans

One scenario where startups might acquire debt is through government guarantees. These programs enable new businesses to borrow based on projections, despite lacking a proven track record. While this can provide initial capital, it also increases the risk if the business cannot generate the projected cash flow.


So, Eugene, the answer to your question is nuanced. Debt doesn’t inherently increase a business's volatility, but volatile businesses should be cautious about taking on debt. For businesses with steady cash flows, debt can be a strategic tool to enhance returns on equity. However, businesses with unpredictable cash flows are better off avoiding debt to prevent financial strain.

For more insights on managing and financing small businesses, make sure to sign up for my email list at . Subscribers get early access to my videos and special offers on courses and workshops.

Friday, June 28, 2024

2023 HC#003 Examining a Cash Roofing Biz Video


HC#003 You like cash? I like cash! Who doesn’t? Well, when the seller of a business promises an ‘little extra’ because of undeclared revenues, it doesn’t necessarily all fall to the bottom line. I show the caller how we can see if the extra revenue makes sense and detect whether it may be likely that some of the expenses may be paid with the cash. So, it’s not as lucrative as you may be led to believe.

Wednesday, June 26, 2024

What does David Do


***New Video Alert!

I keep getting asked if I will help people on their project.

YES- I do that.

But, how?

This week, I reveal the matrix model I used to build out my consulting business.

It was done intentionally with a plan and it works great for many reasons.

I’ll walk you through it in this week’s video: 


See you over on YouTube

David C Barnett


Monday, June 24, 2024

Live Peek inside the collection industry with Blair DeMarco-Wettlaufer


Peek inside the collection industry.

New Livestream guest-> Blair DeMarco-Wettlaufer

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

He has decades of experience in the collections industry in both the US and Canada.

Tune in and as we’ll be discussing what you need to know about collection agencies both as an entrepreneur who might need to hire one some day and as someone who might be getting calls from them!

This is a ‘must see event’ for pretty much everyone interested in business.

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

Set yourself a reminder on YouTube here: 

We’ll be going live Monday June 24, 2024 at 1pm Atlantic Time and 12 Noon Eastern Time

See you there!

David C Barnett

Saturday, June 22, 2024

 Hey everyone! It's David Barnett today. I have an interesting question from Sam, who wants to know what kind of online business I would start if I were to do it all over again. Watch here: 

My Online Business Journey

A couple of years ago, I started my online journey with YouTube videos. Initially, these videos served as a marketing tool to attract consulting clients to my real-world business. Over time, this venture evolved into a full-fledged online business. Here’s how it happened:

  1. Books and Courses: I started writing books that people can download or purchase as physical copies. Additionally, I developed online courses, such as my Course Business Buyer Advantage: Online Training and Sell My Own Business System: Online Training (Prepare yourself for Exit or Transition) which help people learn valuable skills on their own time.

  2. New Products: Recently, I’ve been writing my new book Buying vs. Starting a Small Business.: Search or Startup? A guide to keep you from going broke in this book We will explore what it really means to be successful in your own business beyond the surface-level statistics. You will learn how businesses are valued and how to use tools like debt to acquire one or buy the stuff you need to do a startup. Most importantly, we’ll explore the real risks of small business and manage those risks by understanding how to plan for contingencies, pivots and setting limits.

Why Online Businesses Appeal

The appeal of online businesses is multifaceted. Here are a few reasons why they’re attractive:

  1. Side Hustle Potential: Many people can keep their day jobs while growing an online business on the side. This reduces the initial risk and financial strain.

  2. Scalability: Creating electronic products, such as online courses, involves a lot of upfront work. However, once the product is created, it can be sold repeatedly with minimal additional effort.

  3. Automation: Platforms like Gumroad handle e-fulfillment, managing sales, passwords, and payments, allowing you to focus on creating content rather than administrative tasks.

My Advice for Starting an Online Business

If I were to start an online business again, I’d likely follow the same path—creating electronic products that can be sold multiple times. Here are some tips based on my experience:

  1. Create Once, Sell Often: Invest time in creating high-quality products that can be sold repeatedly. This could be online courses, eBooks, or other digital products.

  2. Leverage Automation: Use platforms like Gumroad for digital products or Shopify for physical goods to manage sales and fulfillment automatically.

  3. Focus on Value: Ensure your products provide real value to your customers. This helps build a loyal customer base and encourages repeat business.

Buying an Online Business

Even in the online world, my core advice remains the same: it’s often faster and easier to buy an existing business than to start one from scratch.


Starting an online business can be a rewarding venture, whether you create your products or buy an existing business. Focus on creating scalable, valuable products and leveraging automation to handle administrative tasks. And remember, sometimes buying an existing online business can be a quicker, less risky path to success.

If you enjoyed this, make sure you join my list so you’ll never miss any of my new content online: 


David C Barnett

Friday, June 21, 2024

2023 HC#002 James does a normalization in the UK Video


HC#002 James wants to examine a painting and wall covering contractor business in the UK… his big question? What is the SDE (or adjusted EBITDA as they call it across the pond). In this call, we take a look at the income statement and do a line by line normalization and show James what he should be asking when he next meets the seller.

Wednesday, June 19, 2024

Who Should appraise the Business for SBA


***New Video Alert!

An appraisal is an appraisal, right?

Well, maybe not.

It could be a smidge higher or lower depending on who does it and why.

This week, we tackle the problem of understanding the incentives and biases of the people who do valuations to support things like borrowing money.

Learn more by watching this week’s video: 


See you over on YouTube

David C Barnett

Monday, June 17, 2024

Live - The mirror image of life insurance- understanding annuities.


New Livestream guest- Mark Willis

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

Mark has been on the show many times discussing insurance strategies for small business owners and buyers and is the sponsor of my show.

Tune in as we’ll be discussing something new- Annuities.

This is a ‘must see event’ for anyone who is entrepreneurial or wants to learn about money or investing.

I’m going to ask him about how these tools can play a role in business or in your plans for retirement or helping to retain/recruit staff and other ‘angles’ that could be interesting.

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

Set yourself a reminder on YouTube here: 

We’ll be going live June 17, 2024 at 12 Noon Eastern Time, 1PM Atlantic Time

See you there!

David C Barnett

P.S. See all of Mark’s past appearances on this page-

Saturday, June 15, 2024

Franchise vs. Starting a Business: Making the Right Choice

 I received a question from Sarah and Bruce years ago, both asking if it's better to buy a franchise or start a business from scratch.

Sarah wanted to know if it's better to buy a franchise or start a business, while Bruce specifically asked about the benefits of buying an existing franchise versus starting a business from scratch. Let's dive into the discussion. Watch the full video here:

Starting from Scratch: The Risk Factor

First off, starting a business from scratch is inherently risky. Many new ventures fail within the first year due to a lack of systems, processes, and adequate financing to sustain operational losses until reaching the breakeven point. While it's not impossible to succeed with a startup, it requires careful planning, execution, and a significant amount of resilience.

Franchise: The Appealing Option

Franchises often tout a greater success rate compared to independent startups. However, this claim comes with some caveats. Not everyone can afford to buy into a franchise; it typically requires a certain level of wealth and net worth to qualify. Consequently, franchise owners may have more resources to weather the storm if things don't go as planned.

If you're leaning towards the franchise model, it's generally advisable to buy an existing franchise location rather than starting a new one. Why? Because launching a new franchise is akin to starting an independent business—you need to attract customers who are already patronizing existing establishments. Buying an existing franchise allows you to analyze its performance, including sales and profits, providing a clearer picture of what to expect.

Ultimately, whether to buy a franchise or start from scratch depends on your preferences, risk tolerance, and financial situation. Franchises offer a sense of belonging, operational guidelines, and potentially higher success rates, but they come with restrictions and ongoing fees. Conversely, starting a business from scratch offers freedom and creativity but requires a significant amount of groundwork.

If you're considering buying a franchise, opt for an existing location with a proven track record. This mitigates some of the uncertainties associated with launching a new venture.

If you’re still on the fence about the Buy vs. Startup question, check out my new book which is being released this fall. Pre-ordering is now available on Amazon. 

Buying vs. Starting a Small Business: Search or Startup. Find it in my amazon store


David C. Barnett

P.S. Make sure you never miss any of my new videos by joining my email list over at

Friday, June 14, 2024

2023 HC#001 Gerri Buys a Bakery Video


HC#001 Gerri has had a successful career over decades as a business owner, but when her husband died, things fell apart. Now this experienced entrepreneur wants to put her skills to work in a small business that she can manage on her own. We discuss a bakery opportunity that she found and I work with her to uncover key areas that need to be explored as she negotiates for it.

Wednesday, June 12, 2024

Credit Score and Business Loans


 ***New Video Alert!

Peter has a Hospital putting him into collections!

Will this reduce his credit score?

Will this mean no ability to borrow for a business loan?

It’s complicated but not hopeless.

Learn more by watching this week’s video: 


See you over on YouTube

David C Barnett

Saturday, June 8, 2024

So If You Want to Buy a Business – Here’s What You Should Do Next

Today, I've got a question from a viewer and his name is Vincent, who's 27 years old at that time. He wants to buy a business from one of these baby boomers that he keeps hearing about who are going to have to start thinking about retiring one day. Now he wants to know what he needs to do today in order to buy one of these businesses.

I'm going to give Vincent and many of you out there who are in the same situation some advice on what you can do today. Some of it is going to be pretty glamorous and exciting advice, and some of it is going to sound pretty boring. But it's the boring stuff that you really need to focus your attention on. Watch the full video here: 

Start Saving Money

The number one thing you have to do as a 27-year-old to buy a business from a baby boomer is start living below your means and save money. Yes, I know. It's pretty boring. But you need to save money because you're likely going to have to put some kind of cash down in a deal, or at least have cash available to pay people like lawyers, accountants, and other specialists who are going to help you finalize your deal and close it. Largely, that kind of money comes from savings. If you need to borrow money and others see that you have no savings, they'll wonder if you can't manage your own life, how will you manage a business? 

Develop Your Credit

Number two, start developing your credit. Get a credit card and use it responsibly. Put a little balance on it and pay it off, and repeat. This will help your credit score rise and qualify you for larger credit facilities. These may be personal facilities, but you may need to draw on them in the future for a deal. Start saving money, and start developing your credit score to get it high and develop credit facilities. Going into a bank, asking for a line of credit, buying a house, getting a mortgage—these actions will help improve your credit and net worth, making you look better on paper.

Choose the Right Industry

Now, let's think about the business you want to buy. Some industries are dominated by big players, while others have fractured ownership with lots of independent family-owned businesses. For example, the pipeline industry is controlled by a few giant companies, while auto repair has many small, family-owned businesses. You need to look at your skill set and interests and decide what kind of industry you would like to be in. Align that interest with an industry that has lots of independent owners because these are the people likely to sell their business to you. Put yourself into a field with rich opportunities where you'll have plenty to choose from. You don't want to have to buy a specific business just because it's the only independent one around.

Gain Industry Experience

Next, start working in that industry. Even if you're not a business owner, look for a job in that industry to develop industry-specific skills and knowledge. This is crucial because when it's time to buy a business, bankers will want to know that you have experience in that industry. If you can get a job as an assistant manager or manager, even better. You'll be able to show direct experience in managing that kind of business.

Take an Online Course

Consider signing up for my online course, Business Buyer Advantage. It's easy, cheap, and will teach you what to look for in a business, how to properly examine financial statements, do a normalization, and figure out roughly what a business is worth. When it comes time to make the purchase, you can give me a call, and I'll help you out.

Build Relationships with Suppliers

Lastly, and this is one that not many people will talk about, once you're working in that industry, start to meet and develop relationships with the suppliers in that industry. Even if your job isn't in purchasing, find out who the sales reps are or which businesses your employer buys from. Create relationships with those people. When a younger person buys a business, they often have difficulty with financing and putting the deal together. Suppliers can help you if they choose to. They help people they like, have confidence in, and believe in. For example, in an auto repair business, if you can build a relationship with a parts supplier, you could ask for help with a loan or extended terms when buying a business. These relationships can have a huge impact on your operating capital.


It's not very likely that you'll go out as a 27-year-old and buy a business from a baby boomer immediately, but here's the good news. All those statistics about baby boomers selling their businesses and the huge transfer of wealth are based on the faulty assumption that people retire at 65. 

In small business ownership, people often stay on longer. So, you'll have plenty of opportunities over the next 10 to 15 years. It's better to bide your time, get prepared, and be in a solid position to make a good deal rather than jump at an opportunity when you're not ready. You need stability as business can be risky.


David C. Barnett


Wednesday, June 5, 2024

Best Businesses for the End of the World


***New Video Alert!

What scares you more, Fire or Zombies?

This week, I take a look at disaster planning and preparation and explain the best kinds of businesses to own if it’s all coming to an end.

Learn more by watching this week’s video: 


See you over on YouTube

David C Barnett

Saturday, June 1, 2024

Deceptive Webinars Rant

Can you trust the people you’re doing business with?

What if they make it obvious that they’re liars?

Would you still do business with them?

My deceptive online webinar experience:

The webinar was only offered a couple of times over the weekend, and I happened to have my children with me over the weekend, which rules out daytime online activities like webinars because my kids are young and they interact with me at a minimum every 10, 15, 20 minutes. 

Being in Atlantic Canada, I joined a West Coast webinar at 11 p.m. my time. During the 90-minute session, the host asked for feedback and commented on the chat, but I couldn't see any of the interactions he mentioned.

I realized it was likely a recording when I didn't see any other participants' inputs. Despite this deception, I stayed for the content but felt betrayed. If the host had simply shared a recording, I could have watched it at a more convenient time. This deceit made it hard for me to trust and buy from him.

I find it frustrating when marketers use such tactics. It's essential to be honest, especially in online sales and presentations. Deception undermines trust and rapport, which are crucial for successful business relationships.

So anyway, that's my rant. It annoys me when people are deceptive in this fashion, and clearly in a way that was so easily detected by anyone who stops and thinks a little bit and knows how to interact within the online platform.