When the City Rezones Your Business Out from Under You

 …And why the real problem wasn’t the zoning.

Today, I want to share a horrifying story that starts with a sneaky zoning change… but ends with a hard truth about business ownership that way too many entrepreneurs ignore. https://youtu.be/lwORvoJ_xeY 

The Zoning Nightmare

I got a call from a guy who owns a small manufacturing business. He’s been at the same location for over 30 years. Back then? His shop was in the country.
Today? Residential neighborhoods have grown all around him.

One day, he finds out the city quietly changed the zoning on his property—from industrial to residential—without ever notifying him.

Now that he needs a mortgage to unlock capital from his building, the bank refuses. Why? Because if anything happens—like he sells or the bank forecloses—the property can’t legally be used for industrial purposes anymore.

He’s furious. He calls me to vent.

But Then the Questions Start…

As always, I ask:

“Why do you need the loan?”
To buy inventory in bulk and improve margins.

“What were your sales last year?”
“I don’t know.”

“How much do you take out of the business?”
“Well, I will reinvest everything.”

🚩Red flags everywhere.

Let me be blunt: Business owners who don’t know their numbers are usually avoiding them. And in my experience, that avoidance is almost always masking a bigger issue.

The Sad Truth Unfolds

I dig deeper. His business sells only to governments.
Every job is awarded by tender. It’s always about being the lowest bidder.

He’s trapped in a race to the bottom.
And he thinks he’s “building his business” by leaving all the money in… except the business now can’t afford to pay him, and it’s not worth anything to anyone else either.

When I asked what made the business valuable, his answer?

“I own the building.”

Guess what? That building just lost its core utility. And no, it's not valuable if it can’t legally support the use it was built for.

The Real Problem Wasn’t the City…

It’s not about zoning.
It’s about running a business that can’t pay its owner.

And here’s the brutal truth I gave him:

“They actually did you a favor. If your business made real money, you’d move it or sell the land. But you can’t—because the business doesn’t work.”

He thought he was building wealth.
In reality, he’d created a job that didn’t pay, while the city and taxpayers got cheap products on his dime.

Lesson: Know What You’re Building

A business is not a piggy bank.
It's not a retirement plan.
It's not a hobby disguised as hard work.

It’s a system to combine people + place + capital into one thing:
👉 Cash flow for you.

If it’s not producing cash for you today?
It’s time to fix it—or kill it.

💥 Key Takeaways

✅ Just because you own a building doesn’t mean you own value.
✅ Your business must pay you today—or it’s a hobby.
✅ Avoiding your numbers is a warning sign.
✅ Leverage cheap money, don’t worship being debt-free.
✅ "I'm reinvesting everything" is often code for "I'm afraid to look at the truth."

Don’t Be That Guy

Don’t forget—join my email list for early access to my latest videos and insights at DavidCBarnettList.com. You’ll even receive 7 FREE gifts when you sign up.

– David C. Barnett

3 Red Flags to Run- David says differently_

 

***New Video Alert!

Today, I address simplistic advice from an article likely written by an AI.

Should you run from these common deal problems?

-Lack of documentation

-Excessive add-backs

-Uncooperative sellers

I’ll tell you what I really think in this week’s video: https://youtu.be/E5AqdO2C3Ew 

Cheers

See you over on YouTube

David C Barnett

2025 LIVE Ed Patton Financial Fundamentals

 

Financial Fundamentals Are not on your Financial Statements!

New Livestream guest- Ed Patton from Patton systems in Texas.

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

Ed has had a long career in management and knows that business owners don’t like to read financials. 

He has a different set of tools.

Tune in and as we’ll be discussing financial fundamentals.

It’s a way of breaking down a business’ financial position into a series of ‘scores.’

This is a ‘must see event’ for people who want to learn how to better run a business.

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/663lJ_Jw-bQ 

We’ll be going live Monday July 14, 2025 at 1 PM Atlantic Time and 12 Noon Eastern Time

See you there!

David C Barnett

How Do You Know If Someone’s Ready to Be an Entrepreneur?

 Sean asked a great question recently:

"How can I tell if someone’s truly ready for the challenges of owning a business?" https://youtu.be/tJuCAlwidRE 

If you work with aspiring entrepreneurs whether they’re thinking about starting or buying a business this is one of the most important things to figure out early on. The hard truth is: not everyone is cut out for entrepreneurship, and diving in unprepared can lead to costly mistakes.

When I was a business broker, I saw this all the time. People would come to me with the dream of buying a business often leaving behind secure jobs with pensions and perks without fully grasping what they were walking into.

So how do you test their readiness?

Here are two simple but powerful filters I’ve used over the years to separate dreamers from doers:

1. The “Late-Night Credit Card Terror” Test 😱

Running a small business isn’t always glamorous. Sometimes, it's 3:30 a.m. and you’re lying awake trying to figure out how to make payroll because a client payment fell through and rent just cleared your account.

This happened to me. I realized at that moment that my only option was to take a cash advance on my personal credit card to pay my receptionist.

It felt awful — but it worked. That’s the gritty reality of small business ownership. It’s not just about vision boards and product launches. It’s about resilience, resourcefulness, and doing what it takes.

I now ask aspiring business owners:

“Have you ever had to take a cash advance to cover payroll?”

You’d be surprised how many seasoned owners nod their heads. If someone can’t even imagine that scenario or is clearly horrified by it it may be a sign they’re not mentally prepared.

2. Can They Sell? 

Sales is the oxygen of a business. No matter what kind of company you run, if the sales don’t happen, the business doesn’t survive.

Even if you hire salespeople, you are still the chief salesperson as the owner. That’s why I always ask:

“Have you ever worked in a commission-only sales role?”

If they say yes, great. They’ve already had to survive on performance. They know the pressure of “eat what you kill.” They’ve learned how to handle rejection, stay composed, and deliver value without coming off as desperate (what I call “commission breath”).

If they say no? That’s a yellow flag.

I often recommend:

• Try door-to-door fundraising for a nonprofit
  
  

• Do cold calls for a charity or community cause
  
  

• Practice telemarketing for something meaningful
  
  

The idea is to test their comfort with selling, especially when there’s no safety net. If they won’t try it even when their job and mortgage are safe, how will they perform when their livelihood is on the line?

Bottom Line

Entrepreneurship isn’t just about skills, it's about mindset, stress tolerance, and grit. Before someone takes the leap, they need to understand the true nature of the journey ahead.

✅ Are they ready to make tough calls in tough times?
✅ Can they sell without fear or desperation?
✅ Do they know what it’s like to live without a safety net?

If the answer is yes, they might just be ready.
If not better to find out now than 6 months (and $60,000) too late.

Got more questions like Sean’s? Keep them coming.
And if you’re looking to dig deeper into buying or selling a business, check out the free resources and videos at DavidCBarnett.com.

Don’t forget—join my email list for early access to my latest videos and insights at DavidCBarnettList.com. You’ll even receive 7 FREE gifts when you sign up.

Your Small Business Banker's Point of View

 

***New Video Alert!

Today, I discuss the four levels of assurance that lenders rely upon and the six stages of small business failure and how this keeps your banker up at night.

Watch this week’s video here: https://youtu.be/9Xl43oe58JA 

Cheers

See you over on YouTube

David C Barnett

Chris works in the construction trade and recently reached out with a timely question.

 Chris works in the construction trade and recently reached out with a timely question.

He's been talking with the owner of the company he works for about potentially buying the business. They’ve agreed to wait until February—when things slow down in the construction season—to really dig into the conversation. In the meantime, Chris wants to know:

“What kind of prep work can I be doing now to get ready?”

Great question, Chris—and it’s one I hear often.

The Temptation: Planning to Grow the Business

Chris mentioned that he’s already been brainstorming ways to expand the business—new services, product lines, or work types. This instinct is natural (and exciting). But here’s a big caution flag I need to wave:

Be careful not to get “buyer fever.”

When you start imagining all the amazing things you’ll do after you buy the business, it’s easy to become emotionally attached to the idea of ownership. This can cloud your judgment, reduce your willingness to negotiate, or make you overlook red flags.

The Right Focus: Learn the Acquisition Process

Before you fantasize about growth strategies or operational tweaks, your energy is much better spent learning the process of buying a business—the mechanics, the risks, the legal pitfalls, and the financial analysis skills you'll need.

You already know construction. But how much do you know about:

• Negotiating a deal structure?
  
  

• Doing proper due diligence?
  
  

• Evaluating working capital and cash flow?
  
  

• Managing post-sale liability?
  
  

If your answer is “not much,” that’s exactly where your focus should be.

Don’t Get Distracted by Start-Up Thinking

There’s another danger in going too deep on growth planning before you’ve bought the business.

You may start thinking, “Why don’t I just start something from scratch?”
Big mistake.

One of the biggest reasons to buy a business is to avoid the risk of start-ups.

Established businesses come with revenue, staff, systems, and—importantly—customers. Don’t trade that for a dream that might not get off the ground.

Research the Right Stuff

Here are a few smarter ways to spend your prep time:

✅ Learn the Buying Process

Take a course (like my Business Buyer Advantage) or read up on real-world acquisition stories.

✅ Network with Industry Buyers

Reach out to others who’ve bought construction businesses. Learn what they wish they knew beforehand.

✅ Investigate Legal and Liability Issues

Construction businesses often come with long-tail risks:

• Workplace safety claims
  
  

• Warranties on past work
  
  

• Workers' comp exposure
  
  

• Environmental or permit issues
  
  

If you’re considering a share purchase, you need to understand what liabilities might follow you post-sale. A good lawyer and accountant are crucial here.

✅ Understand the Value of the Business History

One tricky balance in construction is that a business’s history can be both an asset and a liability.

• It may help with bonding eligibility and access to government contracts.
  
  

• But it can also mean you inherit risks you didn’t create.
  
  

Final Thoughts

Chris, you're already ahead by asking the right question. The key now is to use your time wisely and stay grounded in the real purpose of buying a business:

To acquire something that works today—not just something with future potential.

If you’re in Chris’s position—or thinking about buying any kind of business—head over to www.BusinessBuyerAdvantage.com to check out the Business Buyer Advantage online course. It’s the same material I cover in my live seminars, condensed into nine hours of actionable, real-world instruction.

Don’t forget—join my email list for early access to my latest videos and insights at DavidCBarnettList.com. You’ll even receive 7 FREE gifts when you sign up.

Thanks for reading—and if you’ve got your own question about buying or selling a business, send it my way!

– David Barnett

Full Time vs Part Time Search

 ***New Video Alert!

Should you quit your job and search for a business full time?

This week, I made a video about the pros and cons of searching full vs. part time and what lessons we can learn from people who already own a business who search to grow via acquisition.

Part time search can work better, if you have a real plan.

Watch this week’s video here: https://youtu.be/pl92EhRWR-M 

Cheers

See you over on YouTube

David C Barnett