18 ways Business Brokers will Overprice Businesses for Sale

Thread 🧵

1) Weighting. Probably the most common and most deceptive is weighting the valuation entirely on the most-recent, best-year-ever. This can be appropriate if it's still growing the next year and sustainable, but often it's an outlier. More thoughts here: https://twitter.com/ClintFiore/status/1503717345860022273

2) Inappropriate SDE Addbacks. The most well-known and most complained about. Addbacks aren't a dirty word- they're fine. But they must be provable/documented, legal, on the tax returns, and clearly an owner-benefit that won't be necessary for you the Buyer going forward.

2B) The problem here is when sellers and broker get all loosy-goosy on them. For instance, if you see an addback for "Fuel Expense", and it's just an owner ballparking how much of the $15K of fuel was for their personal vehicles and it's not something they tell the IRS... no.

3) Inappropriate Normalization Adjustments. Another addback variation is adding large expenses that were "one time". Which can be fine if done properly. But the $20K of new paint or fixtures still have to be re-done periodically by the Buyer and Buyers have stuff like that too.

3B) I recommend you look hard at these and ask if that truly won't apply to you, and was that addback truly discretionary or one-time in nature? If it's a periodic thing, say $30K but happens every 10 years, take $3K/year budget for it into your projections. (cuz broker didn't)

3C) "Bad Debt" is a common one. If it's one crazy story, one time, maybe... but if it's a cumulative amount that gets periodically written off, it's not an addback, it's a cost of doing business in that company. You are buying that problem and shouldn't have to pay extra to.

4) Lack of Rent Adjustment. Huge landmines here often overlooked. Rents are going up everywhere. If you have to pay higher rent at purchase, broker should show that and negatively adjust the recast to reflect current earnings power. But they usually don't account for this.

4B) Especially important on owner-occupied to make sure broker is not "double counting" to ⬆️ value that includes RE. Sometimes Seller has a sweetheart deal with themselves on biz rent which inflates SDE. Then they value the RE at Market Rent overinflating that side. Must match!

5) Too high of a multiple. Pretty straightforward. Many brokers choose the 75th percentile or a way-above median multiple to hit the asking price # the Seller wants. Every Seller thinks their biz is "special". If above average on multiple it should be justifiable as to why.

5B) A higher multiple can be justified if, compared to its industry peers, it's got more recurring revenue, higher margins, higher growth rate, or some special advantage that conveys to you... but if none of those are present, a premium multiple is likely inappropriate.

6) Applying EBITDA multiples to what's really SDE. OMG where to begin on this one... must thoroughly understand the difference between these. But a common trick is brokers calling SDE EBITDA and using a higher EBITDA multiple. Read this rant for more: https://twitter.com/ClintFiore/status/1491603802520113152

7) Not accounting for rising interest rates. Newer one, but sometimes brokers will model out the ROI for you or Debt Coverage Ratio for you to justify their asking prices, but they aren't accounting for debt being more expensive than it was even a few months ago. Check for this.

8) Valuing projections, pro forma, DCF approaches. This one makes me lol, but I do see it often. Going all-in on valuing what the Seller says this year or next year "should" be in earnings, or a forward-looking DCF valuation. All of these aren't applicable to Main Steet <5M deals

8B) Usually business brokers value based on historical financials. So, often when I see this, it's the Seller's well-meaning CPA or Investment Banker or MBA friend that valued their small business for them using methodologies of large middle market or public companies.

9) Owner works more than full time. If owner works more than 40 hours per week, their entire pay should not be an addback. SDE is one full time working owner, at 40 hours per week. If they work 70 hours, best way is addback their pay then subtract someone at market pay for the 30

10) Multiple working owners. Same as point 9 above. Only the highest-paid, one owner should be added back to SDE. The others should be adjusted to a market compensation. Buyer shouldn't have to fill multiple spots from SDE.

11) Family members working free/cheap. This can cut both ways. Sometimes you see addbacks for $50K for the college kid that's the "social media manager" (not working) But sometimes their teen does rock social for them and gets paid off the books. Underpaid family does not convey!

12) COGS Shenanigans. Supply chain has been rekt last few years. Look hard at COGS. Make sure you can get stuff now at same prices Sellers could historically which the valuation is based off of. Restaurants getting margins squeezed right now with rising food costs for example.

13) Other Seller advantages that don't convey. These are hard to detect from the presentation. Most common is Seller's Personal Goodwill that can't convey to you. Ex: They're President of an association for 30 years and get referred heavily because of that position you won't have

14) Exclusions from Asset List. Most deals go down as asset sales. Look at what's excluded and make sure there's nothing on there that might directly or indirectly help the biz make money. Is racecar truly owner's toy or does it get them a lot of attention and business at track?

15) Last Year Victory Lap. Super important one. When you see a hockey stick up in earnings, make sure it's sustainable. Often it's the owner knowing they're about to sell and gaming their last year every which way. Pulling in future revenue, clearing out old inventory, etc.

16) Stimmies. PPP, EIDL Grants, Retained Employee Tax Credits etc. can be hidden all over deals these last few years. Make sure they're properly accounted for and adjusted. Many brokers are missing these if the bookkeeper is putting them in the wrong places, etc.

17) Cherry Picking Comps. Especially in smaller niche industries without a lot of comps, if broker used comps for their multiple range, them removing some of the lower ones or leaving in a crazy high one can really skew the range. Run your own comps or ignore and focus on ROI.

18) Not accounting for CAPEX. Sellers always add back Depreciation but then rarely budget for equipment replacement. Huge one especially in deals that have trucks and heavy equipment. Also watch for deferred maintenance especially in last year before sale. 

Hopefully this thread makes you a smarter Buyer and helps you avoid some traps. If it was valuable to you, please comment something you liked about it, or something I missed, and consider sharing it. 

Happy hunting out there friends!

Overvaluing SMB Business Listings: 18 Deceptive Practices

Today's my 42nd Birthday. 

Here's 42 things I've learned so far about life:

🧵

1) Successful marriages and friendships are just choosing an imperfect person and deciding they're 'yours' no matter what. 

If you make it about loving/supporting them instead of 'what's in it for you' mentality. The relationship will be fruitful and satisfying.

2) People love hearing their own names and when you remember theirs. When you first hear someone's name, make a word association and you won't forget it. Mentally go, "Logan.. that was Wolverine's name. This guy is WOLVERINE". Then you see him and think Wolverine and remember.

3) Early mornings are the only reliable time you can quietly get things done at home if you're married and have a bunch of kids. Master and embrace the early morning. 

4) Get a quality safety razor, pack of replaceable blades, badger brush, and quality shave soap and you're set for life on shaving. Better quality shave and pennies per year for blades and cream once you have your kit. I just upgraded from a Merkur to a Henson razor and love it.

5) Spend money for high quality on things that touch your body for long periods of time. Underwear, undershirts, office chair, mattress, pillow, etc. all come to mind.

6) Be humble (or you will be humbled). That thing you swore you'd never do, that you thought you were better than, may be the very thing that undoes you someday. You're fallible and one moment of weakness or one bad day away from making a huge mistake- just like everyone else is. 

Just pray for grace for today, and try not to let today be the day you fall. 

The moment you think you can't fall, you will.

"God opposes the proud, but gives grace to the humble." -James 4:6

7) Take your kids on one-on-one dates. Doesn't have to be expensive. A walk in a park, an ice cream, morning breakfast tacos, etc. 

Put your phone away and be 100% present the whole time except for one picture to put in your "kid dates" photo album, which you'll treasure.

8) Get REALLY good at 1-2 things that other people highly value and you'll never go hungry. 

Sometimes there's magic at the intersection of mastery in two seemingly unrelated things that can take you 10X further than they could separately. Look for that magic too.

9) Make reading a regular daily habit. 10 pages a day minimum should only take you 8-15 minutes, but applied consistently will have you reading 10-20 books per year, which will make you continuously smarter/better your whole life. 

10) Read the Bible cover-to-cover at least once in your life. Do 4 chapters per day and you'll be done in less than a year. 

Read with an open mind and ask God (even if you don't believe in God) if there's anything you're supposed to hear in there each session.

11) Eggs are a super food. Eat more eggs.


12) If you start going bald just shave your head and be done with it. Don't stress about it or spend time and money thinking about how to reverse. 

Life's better once you just embrace it. 

Getting ready now takes 2 seconds and nobody cared about your hair anyways.

13) Do vote. Just vote for who you want and STFU about politics. 

Not worth losing real relational connections by publicly talking for/against those worthless creatures.

Better to be a friend to all than a friend to 50% by running your mouth about politics constantly.

14) Budget time and money each year for "bucket list" things you want to learn, do, experience, etc. since you don't know how long you have on this planet. 

Putting off the whole list for later is extremely risky and foolish.


15) When you travel places, don't fill your itinerary too full. Leave room for nothing, relaxing, wandering, spontaneity, magic, and serendipity.

16) Go on regular walks without headphones and let your mind wander. You'll have your best ideas, solve your hardest problems accidentally, and be healthier and happier in general.

17) 4 quarters are better than 100 pennies. 

(This is not about coins.)

18) Don't overthink social media. Do put yourself out there. It's about getting thousands of people to A- know you exist, B- like you. 

You get a lot more 'lucky' in life when thousands of people know you exist and like you.

19) Create more than you consume. Give more than you take. Earn more than you spend. Etc. Always be on the more virtuous side of the coin. 

The more you honor this the more long-term successful you'll be. Don't lower yourself to the wrong side of the coin for a quick hit.

20) Your excuses are BS. 

There's always someone who has done what you think you can't, that started with less advantages than you have.

21) Stop saying, "I don't have time". This is also BS. 

We all have the same 24 hours/day. 

Just be honest and say "that's not something I value enough to prioritize" when you're tempted to give the time excuse.

22) The best self-care can be cutting toxic people completely out of your life. 

And sometimes that's family or former best friends. And that's okay. 

You get to choose who has access to you.

23) Keep your car reasonably clean and free from big messes of crap inside. You never know when you're going to give someone important a ride.

24) Always carry some cash. Always carry a pocket knife. 

"All I need is my phone" is false and childish. 

Cash and a good knife are versatile and can help solve many small or large problems a phone cannot.

25) Pay people to do things you don't want to do without hesitation when you can earn more than their cost per hour to pay.

26) If you have kids, try to honor the 2-2-2 Rule with your spouse for 'no-kids' time with just the two of you: 

- a date at least every two weeks.
- an overnight date or weekend getaway at least every 2 months.
- a vacation at least every 2 years.

27) Take turns being crazy with your spouse. Never be crazy at the same time. If you see them being crazy just think "oh, it's their turn". Bad things happen when you do crazy simultaneously.

28) Don't make goals and plans that require you to be perfect. Realize you're not perfect, never will be perfect, and give yourself room to not be perfect and still succeed. It's a bad plan if it requires 100% perfection.

29) The only correct way to measure yourself in anything is you VS previous you.

You versus the ideal you, you wish existed, makes you depressed.

You versus others, makes you jealous and miserable.

You versus yourself, measured backwards, is what matters and makes you happy.

30) Frame everything as "wants". 

You don't "need" anything except maybe breath and a heartbeat. 

If you're breathing you're alive. If you're alive you're in the game. 

Everything else is a win. Go for your wants. Be ambitious and relentless. But never "need" anything.

31) Deep friendships are forged in outdoor physical suffering. Military veterans that went through hard stuff together are great examples of this.

For civilians: endurance athletics, tough backpacking, hunting, climbing, or hiking adventures etc. form STRONG bonds. Do these.

32) Learn 3 things: 

1- Sales and Negotiation Skills 
2- to speak in front of people comfortably  
3- to write coherently

These are master skills that make you successful in anything.

33) Make physical fitness a consistent DAILY pursuit. Don't make the mistake I did in letting yourself go multiple times while focusing on business, family, etc. only to repeatedly struggle to 'get back in shape'. 

Just get in decent shape and stay there w/daily effort forever.

34) Get LASIK or whatever the best corrective eye surgery is as soon as you're a candidate if you don't have perfect vision. 

Having perfect vision with no glasses or contacts is amazing and you want as many years of your life with this amazingness as possible.

35) It's easy to make a comfortable living with a good skillset. But if you want to really "go big" or change the world, you have to learn to embrace LEADING PEOPLE. 

Recruiting, leading, training, motivating, inspiring, holding accountable, etc. become the skills you need.

36) A surefire way to make the world a better place is to raise kids to be slightly better humans than you. 

Make raising great children one of your highest priorities.

37) Mix in a healthy dose of history and biographies to your reading regimen. Learn from the past and the lives of others. If we don't study history, we are doomed to repeat it.

38) Have emergency liquid savings of 3-6 months' expenses, or 1 year if you're an entrepreneur. You will need it many times, and you don't want to have to tap your investments in a cash pinch- keep those investments snowballing.

39) You can't change people. 

You can only invite people to change. It's up to them and God if they change. 

The Lord is a gentleman and won't force Himself on you or force you to change. Be like the Lord to others. Seek to love unconditionally. Invite. Don't force it.

40) In the end all of this other stuff falls away and the only thing that matters when you die is "God and People". 

What did you do with God? What did you do with people?
How did you respond to God? How did you treat others? 

41) Don't wish death upon or curse anyone. Words and thoughts are powerful. Love and pity your enemies. Pray for your enemies. Agree with life. Believe in redemption. Agreeing with or desiring death for others places death's darkness and curse upon your own head.

42) There's no "bad" ethnicity, nationality, etc. 

Don't let yourself hate a people group. This is the root of all war, atrocities, and genocide. Don't let those roots take hold of your heart.

All nations have beautiful, wonderful people just trying to live in peace, raise children, eat good food, but we're ruled by shit leaders, consume biased information, and become conditioned to turn on one another. Don't let that happen to you.

43) If you want to fly, fly. 

It doesn't need to make sense. Humans have always looked to the sky and wished they could fly. Now we can. You need no further justification.

44) Don't say "we can't afford it" when you want something you don't currently have the money for. Don't curse or limit yourself. Instead say, "should we add this to the list?" and keep a list of things you want, prioritized by order of what's next, revise over time, and get 'em.

45) Small acts of kindness are huge. You can totally change someone's day or even life, with a kind word, a smile, a gift, a favor, with no strings attached. 

Seek out opportunities to bless others and you will live a blessed life.

46) Have a will and appropriate life insurance.

47) It's better to spectacularly, humiliatingly fail and even go broke than to look back on your life and wish you had tried. Remember, all you NEED is breath and a heartbeat. So don't be afraid to take your shot. Sometimes you have to take a leap of faith and make an all-in bet.

48) Resolve not to kill yourself. Seriously. Lots of us have had suicidal thoughts and they can feel overwhelming at their worst. Hang in there. Get help. It gets better. If you're alive, you're in the game. Don't remove yourself from the game.

49) Tip generously, especially for good service. Service jobs are tough and people are often trying to get one more step up in life by spending their time serving you. Help them out. If you can't afford a good tip, you can't afford it.


42 Life Lessons at 42


Lower Middle Market VS Main Street

Thread 🧵 to Bookmark

Extremely important if you want to buy or sell SMBs to know the different vocabularies, characters you'll meet, valuation methodologies, and deal structures at different levels.

I've learned this stuff the hard way over the last 10 years of doing deals at the top of Main Street and the bottom of the Middle Market. People look at you like you're from another planet if you use the wrong language based on size of the deal or their background.

There's no universally accepted definition, but if you forced me to draw a line where Main Street Ends and Middle Market begins, I would draw it at ~$5M Enterprise Value. 

But in reality, it's not that simple. It's more like this: 

Below $1M feels like Main Street and above $10M feels like Lower Middle Market M&A, and the grey area between $1-10M, you better know both languages. Often Seller speaks one and Buyer another. 

This is my favorite playground.

There's wealth to be made becoming "bilingual" here.

First Let's Understand Main Street, which we'll say is $0-$5M deal size. But I'm going to break it down further into Lower Main Street <700K Deals and Premium Main Street 700K-5M Deals.

<$700K Deals in Lower Main Street are difficult. Our firm essentially stopped representing deals under this threshold because you're essentially competing with jobs. As in, if you borrow money to buy a biz in this space, you can probably make just as much or more working a J-O-B.

The smallest deals in lower Main Street can have some good opportunities, but that's also where you have the worst business brokers, the craziest sellers, worst books, hardest to finance, hardest to make a living post-closing, etc. Valuation multiples are unpredictable.

This is why I encourage first-time Buyers to keep saving their money until they can at least shop for deals 700K-5M value in Premium Main Street, which are easier to bank, and have enough earnings to pay yourself a real living wage, service acquisition debt, and some cushion.

PREMIUM MAIN STREET 700K-5M

- Brokers typically call themselves "Business Brokers", "Business Advisors", or "Business Intermediaries"

- Valuations are done on SDE Multiples, (EBITDA + Owner Pay/Perks + Discretionary Expenses) 

- SBA Financing Dominates


PREMIUM MAIN STREET 700K-5M (Cont'd)

- Brokers are more "fishermen", they cast nets and drop lines in the water for Buyers to swim into or bite on.

- BizBuySell is the dominant marketplace but lacks quality control, so junk deals w/bad representation overwhelm Buyers

PREMIUM MAIN STREET 700K-5M (Cont'd)

- Most Deals are structured as Asset Sales

- Buyer brings their own Working Capital typically except normal inventory is usually included, structured "cash free, debt free"

- Buyers are usually individuals or other small businesses

PREMIUM MAIN STREET 700K-5M (Cont'd)

- "Interesting", "Varied" quality of financials, but generally never get audited financials, as a result, more addbacks/adjustments to financials by Brokers needed to show Buyers the SDE Earnings Power of the companies- this is a necessity.

PREMIUM MAIN STREET 700K-5M (Cont'd)

- FSBO opportunities in this space are troublesome as owners typically are not sophisticated, can't do their own financial recast properly, and unrealistic in valuation expectations.

- Buyers often also unsophisticated and inexperienced

PREMIUM MAIN STREET 700K-5M (Cont'd)

- Due Diligence often is little more than what's required to underwrite the SBA loan, and often Buyers attempt to do this themselves or with some help from their CPA. Look at tax returns, bank statements, payroll reports, close enough... ok

PREMIUM MAIN STREET 700K-5M (Cont'd)

- Buyers have to fill the operational shoes of the Seller as Seller still often has an important role. 

-Buyers almost never meet any employees and employees don't know company is for sale usually until post-closing deal announcement.

PREMIUM MAIN STREET 700K-5M (Cont'd)

- usually an Asking Price on the deal

- Buyers and Sellers often skimp on legal, especially under $2M and use attorneys as little as possible to do lightweight agreements and even share document drafting costs sometimes.

🛩️Now let's learn about the big brother to Premium Main Street, the Lower Middle Market (LMM), which we'll say is $10M+ Deal Size.

- Brokers feel insulted if called "Business Brokers" and prefer "M&A Advisor" or "Investment Banker"

- EBITDA multiples rule valuations

LMM $10M+ (Cont'd) 

- Multiples are higher due to supply and demand (more money chasing fewer deals), and brokers often factor in projections, growth rate, and sometimes present Discounted Cash Flow (DCF) methods to valuation, whereas this is uncommon in Main Street.

LMM $10M+ (Cont'd)

- M&A Advisors are more "Hunters". They build target lists of potential acquirers and proactively pursue them. Many deals come from established institutional relationships.

- Axial and Pitchbook platforms can help deal sourcing/finding

LMM $10M+ (Cont'd)

- LMM Buyers are also "Hunters" and often have full time deal finders, scouts, and proprietary search efforts to outreach and interface with M&A Pros and directly with Business Executives.

LMM $10M+ (Cont'd)

- Buyers are often institutions: Private Equity Groups, High Net Worth Individuals or their Family Offices, Traditional Search Funds, Other Midsize Private Companies, or Public Companies.

- Buyers are sophisticated and experienced

LMM $10M+ (Cont'd)

- Due Diligence extremely thorough and often includes a Quality of Earnings report usually

- Seller Financials much higher quality, usually CPA Reviewed by a good firm or Audited

LMM $10M+ (Cont'd)

- Working Capital is worked into the deal, "there's gotta be blood in the body" or "there's gotta be gas in the gas tank" they say

- Management team often met by Buyers during process, and intact post-closing and a big part of the deal.

LMM $10M+ (Cont'd)

- Usually no Asking Price for the deal. Sellers don't want to put a self-imposed cap on their deal size and Buyers will do their own valuation math anyways. Brokers will sometimes "whisper" Seller's desired multiple range to Buyers.

LMM $10M+ (Cont'd)

- Process can be run auction-like by brokers, and various methods are employed by M&A shops to get simultaneous competitive bidding on a company and cracking the whip on timelines, but some Buyers are turned off by these methods, so it's a dance.

LMM $10M+ (Cont'd)

- Deal Structures are more exotic without the SBA regs to deal with and usually involve some combo of cash, earnout, holdback, stock swap, seller notes, etc. Buyers will pay premium Purchase Prices for good companies but engineer various downside protections.

LMM $10M+ (Cont'd)

- Attorneys play a bigger role. Usually several rounds of "lawyer ping pong" on final documents with important battles fought over Reps and Warranties and the fine print since they're usually a bit more complicated in structure and sometimes Stock Sales.

Conclusion. Players from the LMM are looking at deals at the top of Main Street and vice versa. I imagine it kind of like this where two oceans are colliding, which creates some of the best feeding grounds if you understand the creatures you'll encounter in both. 

Visualized: 

I maintain that it's in this, rich, diverse SMB ecosystem that the best opportunities are today and am positioning my company to help facilitate deals and translate between these worlds.  🐳🦈

You as a 7-figure Buyer or Seller would be wise to learn both games fluently, and be able to structure your deals, speak the right language to the right characters, and don't get married to the "right" way to do things based on the bias of the ocean you come from. /END

Deal Size Differences: Main Street vs Middle Market

21 Year Anniversary Today of when I crashed an airplane into a mountain canyon wall. ✈️⛰️

True story. I should be dead. Here's what happened. 👇

At the time I was 20 years old, a Junior at Embry-Riddle Aeronautical University in Prescott, AZ, working on obtaining my Commercial Pilot's License. I had been flying since I was 16 and advancing rapidly through my studies and ratings.

November 29th, 2003 was a beautiful clear, crisp fall day in Northern AZ. I took off from Prescott to do a cross-country solo flight to Laughlin, NV, then Boulder City, NV and back. 

I had to build cross-country time for my rating and found myself ahead of schedule, so I decided to do a little sightseeing along the way. Northwest Arizona is breathtaking jagged wilderness full of mountains and interesting rock formations. 

Over the desert I descended to check out an old abandoned airfield and some interesting topography. It was peaceful and beautiful out there and I loved the quiet peace of flying by myself away from civilization. 

After wandering around the sights for awhile I decided it was time to head home, and punched in Prescott on my GPS to give me a direct route.

Between my destination and my current location lay the jagged, rugged, Aquarius Mountains. I pushed in the throttle of the Cessna 172 as I turned towards them and initiated a cruise/climb. The mountains rose in front of me as I paralleled a ridgeline to my left. 

I noticed my vertical rate of speed slowing, and then reversed as I began to lose performance in my climb. I checked my airspeed. It looked good. I checked my engine instruments. Everything was in the green. 

With full throttle, there was no reason I should have been descending... but I was. My curiosity quickly turned to concern as lost more altitude and sunk below the ridge to my left. 

In front of me the mountains only got higher, so I knew I needed to turn around and get back to the lower terrain, perhaps go do an emergency landing on that old airstrip so I could figure out what was wrong on the ground. 

I initiated a turn around a hill that looked like it would lead me back. As I descended around the corner, I realized every pilot's worst nightmare. 

I had flown into a dead-end box canyon. 

I was now in a narrow canyon that dead ended into a mountain face, and still losing performance. Doing a 180 was too risky. I pointed at the lowest saddle of the canyon holding full throttle and best angle of climb on my airspeed... and kept sinking. 

My engine was running and I was praying I'd regain climb performance to clear the ridge. I kept the low point in front of me on the windscreen, and as I focused on it... I heard the unmistakable sound of my stall warning horn. 

I knew at that moment I wasn't going to be flying out of the canyon. I lowered the nose to keep control of the aircraft and picked a spot to crash.

The canyon was funneling, getting narrower as I approached the dead end. I decided my best chance of survival was to turn into the left wall which had about a 50 degree upslope and try to avoid hitting the largest boulders if I could. 

I made a mayday call even though I didn't think anyone would hear and continued to pray. The next few seconds seem to have all been in slow motion. 

I could not believe this was happening. 

I could not believe I was about to die. 

I never had the slightest clue that this would be my time. 

I did not feel ready. 

I just kept flying and kept praying.

I made my left turn and aimed at a small clear-ish spot of bare ground, keeping my hand forward on the throttle and nose low so I wouldn't stall. 

As the rocky surface approached, I yanked back on the yoke, bleeding off the last of my airspeed and getting the nose at as high an angle as I could muster on impact. I remember seeing the rocks in front of me. I remember hearing a loud BOOM as I impacted. 

But the next instant I remembered I was laying on the mountain about 15 feet from the plane. 

I had no idea how I got there. But it happened in a blink.

I don't remember ever unbuckling myself or climbing from the wreckage. 

I know almost no time had passed since impact as I could hear the gyroscopic instruments still spinning down and saw a waterfall of fuel coming from the broken left wing.

It was so steep I thought the plane might fall down the mountain after impact. It didn't. 

It just hit and stuck to the mountain. Dead stop.

I also thought the plane would explode or catch on fire since I went in full power with a lot of fuel on board. but there was no fire. 

I knew there was a survival kit in the tail so I quickly ran and grabbed it before the plane could catch fire, then got a safe distance between me and the wreckage. 

As soon as I was a safe distance I stopped to look myself over for injuries. I had none! I didn't even have the smallest scrape or bruise ANYWHERE on my body. No bruises where my seatbelts were. No pain in my back which should have broken from the G-forces of the impact. 

My legs were fine despite a rock penetrating the floor and destroying the rudder pedals where my legs should have been when I hit. No cuts on my face despite the windshield being destroyed and many of the instruments on the panel inches from my face shattering upon impact. 

It was a surreal experience standing there on that mountain; this other-worldly setting of rocks and mountains with no signs of human life in any direction except for me and what used to be my airplane. 

Now I needed to get found.

I pulled out my sectional chart of the area and figured out exactly where I was. Not good. There were no roads, buildings, or water sources for many miles any direction. There were a few small patches of snow but I had minimal water, clothing, and shelter items. 

It was afternoon and I knew my best odds of survival were getting found TODAY. I climbed the nearest peak and built a signal on top out of a small reflective solar blanket, sticks and rope. 

I then hiked a ridge to another peak and built a windsock from the flimsy orange tube tent in the survival kit. It was a clear day and I could see probably 80 miles every direction and couldn't see a single aircraft or sign of civilization anywhere. 

The silence was eerie, and I still felt like close to death- like I was still going to die. I thanked the Lord I survived the crash and proceeded to pass the time waiting for aircraft by writing letters to my family and friends. 

Even if I died, I was grateful I had a chance to express myself one last time. After I wrote letters and read Psalms 23 from the pocket Bible I had with me, the sun continued its downward path towards the horizon as I scanned for aircraft. Nothing. 

I hiked back down to the plane to see if I could make sure the Emergency Locator was working and check the radios. The radios were destroyed but a small red light on the ELT in the tail gave me hope my position was being broadcast.

Sure enough about 3 hours after impact I spotted a small twin-engine plane. I used a signal mirror to try to get its attention turned towards me and my makeshift signals. My heart leapt when I saw him blink his lights and rock his wings. I knew I was found. 

They circled for a few minutes as I waved and gave thumbs up. It was an ERAU twin trainer sent from Prescott to look for me after I didn't return on time.

They flew off and about 45 minutes later a DPS helicopter arrived and picked me off the mountain right as the sun dipped under the horizon and took me to Kingman, where I got on a ride on the same twin engine plane that found me.

The FAA investigators saw the crash site first before they saw me and couldn't believe I was the one flying. They had never seen a survivor in a box canyon crash. They said I should be dead or at least be in the hospital with a broken back and tubes sticking out of me.

They said force of the impact on my body should have been roughly the equivalent of being strapped to an office chair and being pushed off a 100+ foot tall building, landing seated, wheels down onto a concrete sidewalk. (Do not suggest)

Dealing with the aftermath was a battle all on its own. Figuring out what happened, dealing with my school, the FAA, the NTSB, my own doubts, my future in Aviation, and all that took time and I went through the wringer dealing with everything.

Eventually I did piece together what happened and chalk the accident up to lack of experience in mountain flying. I was too close to the lee side of a ridgeline and had accidentally positioned my plane in a wave of downward-moving air called a mountain wave. 

And by the time I realized it, it was too late and I had made the fateful wrong turn. I got kicked out of the flight program at my school via a split decision where a 5-person panel (2 of which I got to choose) decided 3-2 I couldn't stay in the program. 

I also got a 6 month suspension (reduced on appeal) of my license from the FAA who felt compelled to do 'something' even though the inspector liked me and understood it was an accident. "You still crashed a perfectly good airplane" he said.

I resumed flying after my suspension and graduated from Embry-Riddle, Magna Cum Laude. I finished up my flight ratings at another flight school and obtained my Commercial, Multi-Engine, Instrument Pilot and Flight Instructor ratings all after the crash. 

I learned a lot more about mountain flying after the accident and ended up instructing in Colorado for several years after school and still love flying but have extreme respect for mountains and maintaining safety margin in all I do in General Aviation.

A few years later I met the love of my life, got married, started a family and have four beautiful kids, was blessed to work at rewarding careers, and started multiple businesses. The last 19 post-accident years have been truly the best years of my life.

I've sadly lost some friends from college in plane crashes that were better, more experienced pilots, better humans than me, in accidents that didn't seem as violent as mine... I know it's not fair I'm alive and they're not... it truly is a mystery.

But I know God is good, that they're with Him, and that I'm going to make the most of my 2nd chance. I wrote a previous thread about how my near death experience changed my perspective forever if you want to hear more about the impact on my life. https://twitter.com/ClintFiore/status/1502053016546930688


In recent years, I have flown for fun and business in a high performance 6-seater, a turbo Beech Bonanza A-36 and loved every minute of it. 

If the crash story hasn't scared you off from flying, I wrote a thread about how to get started in aviation mid-life and how much it costs in time and money and all that. You can do it safely, and starting a little older/wiser than when I did can be smart! https://twitter.com/ClintFiore/status/1527983297233530882

/THE END. 

If this is the first post you've seen from me, consider giving me a follow. I'm a dude that tweets like a maniac about business deals and the work I do helping people buy or sell small businesses (SMBs). I try to keep it entertaining, educational, and uplifting.

Miraculous Survival: The Airplane Crash Story

In cold outreach, the most common response of an interested Seller playing coy is: 

"Well, it's not for sale... but everything has its price!" 

Don't be caught off guard by this. Here's how to respond 🧵

First off, it's not always, but it CAN BE a strong indication of interest. They generally flat ignore you or turn you away cold if they're not interested. "Everything has its price..." is them leaving the door open for you to pursue. 

I would quickly respond with something like:

"Haha, I'm the same way! Everything but my wife and kids are for sale if the price is right! (well, maybe my 17 year old boy when he thinks he's got it all figured out)

Look, I don't want to waste your time. I have been trying to find a _____ business for awhile and have money tee'd up to pay a fair price if I find a good one. I can tell you real quick where I'd be ballpark, and you can let me know if that range might make sense to you.

But, I can't shoot in the dark here. Can you tell me how business has been the last few years in all this craziness? Up, down, steady? I assume you took a hit in 2020 like most people did. Did things come back okay for you?"

Here's the thinking behind it. Follows the basic pattern of all sales:
- Build Rapport
- Present Problem
- Offer Solution
- Close

Build rapport by joking back with them, sprinkle something human (referencing your family) in your joke to let them know you're a real person with a similar mindset. You're talking their language.

Casually recognize and alleviate all the fears of this dance with labeling. 
- wasting their time
- you not having the money
- lowball offers (reference "fair" and for a "good one")
- process being formal or onerous (quick ballpark)

Present problem. "can't shoot in the dark"
- You can't just throw out random offer without knowing some basic information. No serious person would do so. (and you DANG sure don't want to know their 'asking price' to a random stranger, so NEVER ask them what they want for it)

Offer solution. 
- You only need a tiny bit info to satisfy their curiosity. 

You didn't ask them how much they make a year (which challenges their ego) or for tax returns or confidential info. Just for the general trend. A gentle, open-ended question will open the floodgates.

How are things the last few years of craziness? is standard small-talk stuff they're used to answering. You just need them to give you ANYTHING at this point since it's a cold start. Once they start talking, you can draw more info out, but ask the easiest, safest questions first.

Close is the "I assume... and did things come back okay?" This is like waving a red flag in front of a bull. People love correcting assumptions. They probably did ok in 2020 and will quickly correct you. Remember your goal is to not get ghosted, tease out info, & make a friend.

So your "close" is essentially asking an easy question to keep the dialogue going. Cold first contact is like meeting a pretty girl in public for the first time... your goal isn't a deep convo to see if she's "the one". You just want her interest and her # to ensure next steps.

Getting them to talk about something easy like trend the last few years, number of years in business, number of trucks or employees, etc. are safe and easy. But it crosses the chasm from a stranger joking to a friendly dialogue with biz data! Once you're there it's downhill.

You eventually get smooth rounding the bases with people:
1B = talking casually, hypothetically about a sale
2B = seeing some financial info and data
3B = negotiating and structuring an LOI
3B to Home Plate = Diligence, Financing, Legal, Closing

/end


Responding to the "Everything has its price" Statement

20 things Business Brokers should 🚩NEVER🚩 do:

1- Keep up listings after they've already sold as Buyer bait.
2- Fail to mark under contract listings as such.
3- Projections.
4- Set an asking price based on what the Seller wants for it with no defensible logic or support.

5- Set asking price that won't appraise and definitely won't meet minimum debt coverage ratio standards for SBA lending.
6- Go to market before they've reviewed P&L's and Tax Returns of Sellers and have them available for Buyers on the other side of an LOI.

7- Feign massive Buyer interest in a deal to create FOMO.
8- Fail to negotiate critical pieces of the deal at LOI that will avoid deal-killing fights near closing (allocation, WIP, inventory or W/C adjustments, Seller Financing details, timeline, etc.)

9- Make more money from up-front fees and retainers than success fees at closings. (a few well-known names- this is their biz model!!!)
10- Ask anyone to fax you anything. 
11- Use the last Broker's CIM / Photos / Sales Materials in your marketing.

12- Talk bad about someone else's deal/s or brokerage to persuade a Buyer to prefer your deal/s.
13- Fully rely on BizBuySell for Buyers. 
14- Ask another Broker for a share of their fee after a closing that was not agreed to in writing beforehand.

15- Not disclose when a bank you recommend to a Buyer pays you fees.
16- Take on more engagements than you can have time capacity to properly work.
17- Use the words "Cash Flow" or "Profit" carelessly. (always specify SDE, EBITDA, etc...)

18- Be unwilling to talk to a Buyer about one of your listings, even high level, non-confidential stuff until they've sent you a Personal Financial Statement.
19- Represent a Seller that brags to you privately about tax fraud (cash they take home not on the financials etc.)

20- Put making your fee above the best interests of the Buyer or Seller. (not saying be willing to surrender your fee to make a deal work, but don't get someone into a bad deal just so you can get paid)

How many of these have you seen happen over the years?

/END THREAD

20 things Business Brokers should 🚩NEVER🚩 do:

How to figure out if the SMB you want to buy is over-reliant on the Selling Owner- one of the biggest risks in purchasing a business.  🧵

(BOOKMARK THIS)

Buy something from the business if you can. See if you touch the owner at any point in the normal sales process. Now buy a 2nd time and ask for something custom or a policy exception or discount. See if employees can handle the curveball or if they run to the owner.

Read every review on every review platform. See if you see the owner's name mentioned in the review. Seeing the owner's name on 50% or more of reviews is a major red flag. 🚩

Does the owner take long vacations often or have intense hobbies like regular golf, fishing, hunting, etc? Scour their social media for these hints and ask them about what they do for fun and their travel. 

One of my Sellers had their best sales month ever when they were in Belize for a month totally unplugged- this was one of my favorite selling points to make to Buyers worried about over-reliance on Seller.

If possible see if you can shadow the owner for a day of remote work. If their day is full of panicked employees calling and asking them what to do, that's bad. If their day is them running payroll and ordering inventory and boring financial/ownership stuff, that's good.

Some owners make it impossible to steal from the business, but that has a downside of an owner bottleneck potentially. Good ones, trusted employees could steal, but it would be impossible to get away with it. Ask them about theft history and potential and how they manage it.

Ask what trade shows they go to and who goes from their company. If only the owner and their spouse go every year, this could be a major problem as owner might have all the critical industry relationships. Like to see teams that go with multiple leaders when applicable.

Dig into reason for sale. If it's burnout and a dad tired of missing all his kids' ballgames, or a mom feeling guilty, that's not a good sign. A well-run company has owners that go to all their kids' games. So ask about their kids and their relationship with them. Dig in here.

If you're able to talk to any managers (not always possible), they're a gold mine. Ask, "what does the owner do you wish they would stop doing?"

The long, interesting, list of addbacks on Broker's recast can be a red flag. Means owner uses business like personal piggy bank and likely doesn't have financial controls in place and all employees are clueless about the $$ aspects of the biz, as owner and CPA have "black box".

Look for awards and accolades on your tour and in the CIM. Do the awards say the company name or the owner's name? Look at the "About Us" on the website. Is the owner 80% of it? 20%? 0%? 

20 or 0 is my preference if buying.

Speaking of website, I like to see delegation here. If owner is the only one that updates the website or has admin credentials on CRM, website, etc. That is a sign they don't train and delegate important things or trust their team.

Get an employee list that has position, and TENURE for all W-2s. I like to see a mix on tenure. Everyone having worked there 20+ years is actually a risk they're overly loyal to status quo and Seller, and of course all new could mean owner runs people off and culture sucks. 

This one's a little "woo-woo" but ask Seller if they take personality tests like DISC, Enneagram, MB, etc and what they are. If they have a great answer here and seem self-aware of their strengths and weaknesses of personality traits, that's a great sign. Big blind spots, bad.

Ask Seller in what ways they are potentially holding the company back from reaching its fullest potential. Thoughtful, vulnerable answers here can tell you a lot. A good Seller shouldn't take an extreme end of the spectrum stance and answer with nuance explaining their pros/cons.

Does Seller almost always open or close the business beginning or end of day? That's bad. Both is suuuper bad. I love it when Owner just pops in and out randomly and employees never know when they'll be there. Says a lot.