David Barnett loves to say that it took him 10 years to un-learn what he was taught in business school. After a career in advertising sales, he started several businesses including a commercial debt brokerage. Helping to finance small and medium sized businesses led to the field of business brokerage. He now works with entrepreneurs around the world who are buying or selling a businesses as a private transaction advisor.
Subscribe to EOFire
- Your Big Idea: Successful Entrepreneurs have One Big Idea. Follow JLD’s FREE training & you’ll discover Your Big Idea in less than an hour!
- Audible – Get a FREE Audiobook & 30 day trial if you’re not currently a member!
- YouTube – David’s small business resource
- You Are a Badass – David’s Top Business Book
- Business Buyer Advantage – David’s website
- The Mastery Journal – Master productivity, discipline, and focus in 100 days!
3 Key Points:
- You are not your business—closing a business does NOT mean you’ve failed.
- There’s more than one way to do any business.
- If you have several commitments in life, buy a business that is already successful and one that you can improve upon.
- IRS Medic: Visit IRSMedic.com/fire to get help with international business compliance and all of your tax challenges today!
- Billy Gene is Marketing: My friend Billy Gene is hosting a free training where he’s going to build an entire Facebook advertising campaign from scratch – the ad copy, the landing pages, and everything in between! Why struggle trying to figure out Facebook ads on your own when you can just copy Billy Gene? Claim your spot today at INeedThisTraining.com!
Time Stamped Show Notes
(click the time stamp to jump directly to that point in the episode.)
- [01:04] – David loves working with small businesses
- [01:13] – He’s a father of 2 and he has worked to build his business into something that will accommodate his life and family
- [01:35] – He’s a hiker and mountain biker
- [02:08] – David helps people with their financing
- [03:33] – One BIG and Unique Value Bomb: The actual terms of sale – it’s extremely rare for a business to be sold on cash terms
- [04:54] – Worst Entrepreneurial Moment: In 2011, David had gone the entire year without a deal closing. He knew it would be okay because he was expecting 6 deals in the fall. Fall came and 3 of those deals he counted on fell apart. The $250K David was expecting shrank down to $110K
- [06:16] – He realized he couldn’t be in a business where he did not have control
- [06:43] – It just wasn’t working and so he closed the business
- [07:00] – He went out and got a job
- [07:50] – “You are NOT your business”
- [09:22] – Keep going back to people to recognize your relevance
- [09:46] – Entrepreneurial AH-HA Moment: 4 months into his new job, David received a call from an entrepreneur who was trying to sell his business. David turned him down. A week later, David got another call. The caller was asking if David could help him buy a new business. He told the caller he was employed full time and that he could only meet on evenings and weekends, and he would charge as a consultant
- [11:08] – David realized all the ideas he was giving away as a broker were valuable
- [11:28] – He took everything he knew and repurposed it into a new business model
- [12:22] – Successful entrepreneurs were subsidizing his services to the unsuccessful ones, which David thought was unfair
- [13:41] – “There’s not always one way to skin a cat”
- [14:35] – What is the one thing you are most FIRED up about today? “I am most fired up about helping people get out of the jobs they hate”
- [15:28] – When you have commitments in life, buy a business that’s already successful
- [16:53] – The Lightning Round
- What was holding you back from becoming an entrepreneur? – “Absolutely nothing”
- What’s the best piece of advice you’ve ever received? – “The terms are more important than the price”
- What’s a personal habit that contributes to your success? – “Hiking or getting on my bike in the forest”
- Share an internet resource, like Evernote, with Fire Nation – YouTube
- If you could recommend one book to our listeners, what would it be and why? – You Are a Badass – “I read that book and I thought it was amazing”
- [18:21] – Reach out to David via his website
- [18:35] – David has a FREE Gift to Fire Nation – $100 OFF if you purchase his Business Buyer Advantage online course – use promo code: FIRE
- [19:02] – “You have to take some action”
David: John, I just lathered myself in gasoline to make sure it was extra exciting today.
Interviewer: Yes, David loves to say it took him ten years to unlearn what he was taught in business school. After a career in advertising sales, he started several businesses, including a commercial debt brokerage. He now works with entrepreneurs around the world, who are buying or selling a business, as a private transaction advisor.
David, take a minute. Fill in the gaps from that intro, and give us a little glimpse of your personal life.
David: I love working with small business. My entire career ever since I got out of university has been working with small businesses. And the personal thing I want to share is that I’m a father of two. And so, I have had to work to build my business into something that accommodates my life and my family because I don’t want to be one of those parents that sends their kids off to school and then day care every day. I want to have time with my children.
So, it’s a huge part of who I am as an entrepreneur and nothing recharges me more than getting out into nature. I’m a huge hiker and mountain biker.
Interviewer: Love all of that. You would love where I live down here in Puerto Rico. We have some amazing hiking, biking, and running paths right there in the rainforest. So, definitely cool stuff. And you have lots of areas of expertise, David, but lets’ kind of hone in on the one that you think rises above the rest. Give us that in a little bit of a nutshell breakdown. And then share with us something we probably don’t know about your area of expertise, that as entrepreneurs, we probably should.
David: I started off helping people with financing – with getting money for businesses to grow. And what I started to run into were people who were trying to acquire businesses and trying to get financing together. And when the big financial crisis hit in ’07, ’08, ’09, almost half of the sources of capital that I was using – those companies went out of business.
And so, as things were drying up, it was becoming more and more difficult. And at the same time, I began to see an opportunity to help people in buying and selling businesses. I remember I once got a call from a banker who said, “Dave, I’ve got this lovely couple. They’ve just immigrated to the country, and they have a deal to buy a convenience store. And they have a contract here which is for buying and selling houses which has been written up to buy this business. And it says they’re gonna get 95 percent financing in ten days,” which is completely ridiculous.
And it was at that moment I realized that there was a huge gap in my market for people that could professionally help people buy and sell businesses. And that’s when I decided to make the leap into business brokerage. And I did that for a few years. And it has led me ultimately to where I’m at today.
Interviewer: So, what’s the one thing that we don’t know – me, JLD, my listeners, Fire Nation – about this area of expertise that you’ve developed that we probably should know?
David: The thing that surprises most entrepreneurs is when they start to understand the actual terms of sale that most businesses are sold under. You see the headlines, you see the business deals, and it says that a company is sold for so many millions of dollars. And what most people don’t realize is that it’s extremely rare for a business to be sold on cash terms.
There’s usually some amount of vendor financing or seller participation in the financing for the buyer. And it’s critical in the deal structure because not only does it help the seller sell for a more reasonable price, usually a higher price, but it helps to protect the buyer because of all the unknowns and risks that are usually involved in a business purchase transaction.
And so it’s one of the biggest surprises I have when I do my workshops and seminars and I’m talking to business owners. Because of course business owners are expert at running their business, doing whatever it is they do to satisfy their customers. And very few of them actually have a great deal of experience in the buying and selling of businesses.
Interviewer: David, so far you’ve come across pretty much as an all-star, but the reality is you’ve had your struggles as well. And I actually want to go to one of those struggles specifically, that one being your worst entrepreneurial moment to date. So, don’t pull any punches. Take us to that moment. Tell us that story.
David: It was 2011, and it was a pretty bad year. I had gone basically the spring and the summer without a deal closing. This was when I had my business brokerage office. And in traditional business brokerage – it’s kind of like real estate where you take on a client who wants to sell a business and when you sell the business, you get a commission.
And I knew that it was going to be okay because for the fall I had six different deals lined up to close. And it was gonna bring in almost a quarter of a million dollars for me. And that fall, three of those deals completely fell apart, and it had nothing to do with me, the buyer, or the seller.
In one instance it was a regulated industry and the government agency wouldn’t issue a license to the buyer, so that deal fell apart. In the second case, a bank that had issued a financing letter rescinded it. They backed themselves out of the deal, and now there was no more money on the table. So, that deal fell apart.
And in the third case, it was a franchise business. And the franchisors in dealing with the buyer were really rude and acted in a fashion that he didn’t like, and he eventually backed out saying to the seller, “I love your business and I would like to own it, but I will not get into a relationship with those guys.”
And just like that, John, a quarter of a million dollars shrank to about a hundred and ten thousand. And I realized I can’t be in a business where I don’t have control. All these other people that I don’t have my fingers on are able to upset these deals. And I realized this just can’t work. I was in a business with a roller coaster cash flow. I couldn’t even make a monthly budget to make sure that I could cover bills and set money aside for my kids’ future and things like that.
And so I realized in that moment that it just wasn’t working and I had to retreat and find something else. And so, I closed my business brokerage office and I made a deal for one of my associates to carry the flag and to carry on in the business. But the worst thing that can happen to an entrepreneur happened to me. I went and I got a job.
Interviewer: You never want a story that ends with I got a job when you’re an entrepreneur, but sometimes you’re just in that season of life where it needs to happen. But looking back on that, DB, where you had to go get a job, what is your biggest lesson learned?
David: A lot of entrepreneurs will identify themselves with the business, and they’ll personify that business. And one of the things that I really struggled with is I worried – all these people out there – if they find out that I’ve left this business and I’ve gone and started a job with someone, are they gonna think that I’m a failure? Are they gonna think, oh, obviously David isn’t as smart as he thought he was?
And what I realized once I started working in that new career is that you are not your business. You’re a separate person. And I now know that while it takes a lot of courage to get into business, I think it sometimes takes even more to get out of it – to know when your business isn’t working out and you need to flee.
And so when I run into people today – sometimes I have people that come to me. They want to sell their business. And when I start to examine it, I realize yeah, of course you want to sell it. This is not a hot potato; it’s a rotten potato. And I have to tell them you would be better served perhaps by an auctioneer. It’s time to get out of this thing and to kill it. And it’s not something that people want to hear because they’re afraid of how it’s gonna make them look.
Interviewer: There’s a book that I bring up from time to time. It’s Seth Godin’s book called The Dip. Yes, sometimes your business is going to enter a dip, and you need to find ways to weather the storm, to make that runway longer, to just keep going until you get through that dip to the other side where you start going and growing and making more revenue again. But at the same time, in that book he makes a point – sometimes you’re in a hole, and you just need to stop digging because the only way to get out of that hole is to stop digging.
So, you need to recognize, hey, is this an eventual hot potato, or is this a rotten potato? I mean, where am I gonna go with this? And it’s a great thing that we need to keep asking ourselves because times are gonna change. The economy’s gonna change. Everything in the actual market is gonna change, as far as what people want, and if you’re still relevant. So, you have to keep going back to people like David, like your clients, like your customers to recognize, hey, is my finger still on that pulse?
Now, on that idea, you’ve had a lot of great ideas. You’ve had a lot of great aha moments. Take us to what you consider one of your greatest ideas to date, and tell us that story.
David: It’s a continuation of the same story because about four months into my new job I was driving in the car on my way to a client appointment when my cell phone rang. And I answered it. And it was a fellow who had been given my name and he was trying to sell his business. And he wanted someone to advise him. And I said, well, I used to be a business broker, but now I’m not. And so, I’m sorry – I can’t really help you.
And then a week later my phone rang again. And this time it was another person who had been referred to me by an entirely different person who said, “I found this business that I want to buy. And my accountants looked at the numbers, and I spoke briefly with my lawyer, but neither of them seems to be able to advise me on how to make this deal happen – what I should be looking at and how I should formulate my offer, and if the value we’re looking at even makes sense.”
And that’s when my aha moment happened. And I said, look, I can help you. I do have the knowledge and the skills, but I’m employed full-time. So, if you’d like to work with me, I’ll have to charge you as a consultant. And I can only meet you on evenings or weekends. And then I just paused, and I started counting in my head. And about five seconds later he said, “So, then you’re free to meet me Saturday morning at 9:00?”
And so, I was able to basically in that moment realize you know what, all of the advice and guidance, and all the information that I was basically giving away for free when I was a broker – trying to attract people to come and do deals with me so I could earn a commission – all that information is valuable. And I can take what I know and I can reformulate this and repurpose this into a new kind of business model that won’t have some of the negatives that the business brokerage had.
And so, that’s exactly the business I’m in today, where every week I’m sending out invoices to clients. So, I no longer have the ups and downs of cash flow. And the other big advantage is actually for my clients because when I was a business broker, I would have many different businesses for sale. And I would work on all of them.
And the ones that sold – I had to charge those guys significant commissions. I remember the biggest invoice I ever sent a client was for $96,000.00. And that was a hard one for him to swallow. I ended up making him a liquid millionaire. So, he was very happy, but it was a big bill to give to anyone. And then I had all these other businesses that I was never able to sell, but I worked hard on them. And those guys never paid me anything.
And I realized the successful entrepreneurs were actually subsidizing my service to the unsuccessful ones. And that’s not fair. So, my clients today – they basically operate from my menu of services, and I do the things – the specialized tasks that business brokers do for their clients, but I do it for people that are selling or buying on their own, and they simply engage me to do those things. And they pay me for that time. And as a result, at the end of the day the sellers pay far less for advice and guidance than they did under my old business model as a business broker.
Interviewer: Fire Nation – what I’m taking away from this is that you need to listen to your potential clients, your followers, your fans, people that are reaching out to you. What are they saying? What are they asking? What are their problems or pain points, their obstacles? And what’s the solution that you can provide for them? And David had a solution before his most recent solution that he just talked about, which was that commission only operation that again was subsidizing his winners with his losers. And he didn’t just think that was super fair.
So, what can you, Fire Nation, take away from that and say, hey, what are my people telling me, and what can I provide them? And that gave David the idea to say – hey, I’m gonna be a consultant. So, David, my big takeaway was just that. What do you want to make sure our listeners get from your story?
David: There’s not always one way to skin a cat. You can develop information, systems, processes, and knowledge. And there is more than one way to sell it. So, today while I work with people one-on-one, I also have live workshops that I do where I teach a group of people all at the same time. And when I feel like I’ve got my workshop perfected, I then turn it into an online course which allows me to leverage my time and to reach far more people with the same kind of information and messages.
And, of course, it ends up being cheaper. So, someone can take an online course of mine – one of my courses is like nine hours of content. If they were to hire me to talk with them for nine hours it would certainly cost a lot more than what I charge for the enrollment fee.
Interviewer: So, let’s talk about today. In just a few sentences, break down what you are most fired up about right now.
David: I’m most fired up about helping people get out of the jobs they hate that drain them of their vital energy, but they’re afraid to get into business because of their family and financial commitments. And one of the things that I love to say is that it’s faster, easier, cheaper, and less risky to buy a business than to start one.
Someone who has a mortgage to pay and children to feed and they want to be in business – they can come up with that idea, they can try to side hustle and grow it. They can put all this effort into it, but at the end of the day they need to attract customers away from other businesses where presumably the clientele is happy. And if it doesn’t work, it’s a lot of energy and resources. And if somebody quits a job to go try something new, there’s the risk that it doesn’t work and all the repercussions of that.
And so, when you have commitments in life, I say to people, buy a business that’s already successful. And that way you already know that you’ve got the customers and the cash flow as long as you can keep it going. And as a bonus, what I say is buy a business that you know how to improve.
I used to see it time and again – that book E Myth by Michael Gerber, where he talks about the technicians versus the entrepreneurs. And so many small businesses out there are technician-driven and they grow to a certain size until it reaches the limit of the owner’s capacity to manage everything in their head. And then the business is stuck at that size – sometimes for decades.
I’ve seen so many people, my own clients, who have come from larger businesses, the military, places where there is structure and organization and systems. And they’ll buy one of those technician-run businesses and introduce that formalization – the policies, the procedures, the business systems – and then allow it to grow. And that’s where you really build value because small businesses are bought at small multiples and if you can build it up to a medium or larger-size business, not only is it worth more because the cash flow’s grown, but that cash flow will actually be sold at a higher multiple.
Interviewer: Fire Nation – speaking of value, we have some value bombs awaiting you in the lightning rounds after we thank our sponsors. David, are you ready to rock the Lightning Rounds?
David: Absolutely, JLD.
Interviewer: What was holding you back from becoming an entrepreneur?
David: Absolutely nothing. Ever since I’ve been 12 years old I’ve been trying to sell something, or do some service, or hustle for cash in some way or another.
Interviewer: What is the best advice you’ve ever received?
David: The terms are more important than the price.
Interviewer: What’s a personal habit that contributes to your success?
David: Hiking or getting on my bike in the forest – being close to nature, definitely.
Interviewer: Can you share an Internet resource like an Evernotes with Fire Nation?
David: This one was tough for me because I’m not a big gadget guy. But I think the online thing that’s done the most for me has probably been YouTube as far as meeting new people and reaching new audiences.
Interviewer: If you could recommend one book, what would it be and why?
David: You Are a Badass by Jen Sincero. I read that book and I thought it was amazing. It’s obvious that Jen has read a ton of personal development stuff. And I feel that she’s distilled all the most important things down into this one book. I’ve recommended it to hundreds of people.
Interviewer: Let’s end today on fire with you giving us, Fire Nation, a parting piece of guidance – the best way that we can connect with you and then we’ll say bye-bye.
David: Yeah, sure, John. Basically if somebody is interested in exploring the idea of buying an already successful existing business instead of starting something on their own, they should come to my website, businessbuyeradvantage.com and you can sign up for my online course. But there is also a ton of free resources there that they can access. And just because I’ve had such a great time being on your show, I would like to offer a gift to Fire Nation. Is that okay?
David: So, anyone who wants to sign up for the business buyer advantage online course – if they use the promo code fire at checkout – I’ll take $100.00 off the course.
Interviewer: Whoa – love all of that – businessbuyeradvantage.com and snag that course, Fire Nation, for $100.00 off with promo code fire – and David – the parting piece of guidance?
David: I think the parting piece of guidance that I would want to share is that you have to take some action. In one of my workshops where I talk about buying businesses, I say look, examine what you’re gonna earn when you have the business of your dreams and you’re the manager, not only as far as money, but how much more you’re going to enjoy life being in charge and controlling your own destiny. And look at what you have today because there’s an opportunity cost to not acting.
We all know someone in our lives that went to a nine-to-five their entire life that they hated just because of some pension or this idea of security. You can’t waste your life. In my experience, those people end up retiring and become ill. They never get the juicy plum that they thought they were gonna get. It’s always somehow not as good. It’s not worth the sacrifice of a person’s life.
Interviewer: Fire Nation, you deserve that juicy plum. So, go after it. And you’re the average. Of the five people you spend the most time with, you’ve been hanging out with the DB and JLD today.
So, keep up the heat and head over to eofire.com. Type David in the search bar – his show notes page is gonna pop up with everything that we’ve been talking about today. These are the best show notes in the biz. Time stamps, links galore, and let me just say, David, thank you for sharing your journey with Fire Nation today. And Fire Nation – businessbuyeradvantage.com is where you want to go to learn more. And of course that promo code – fire – is gonna take $100.00 off his course.
1) The Common Path to Uncommon Success: JLD’s 1st traditionally published book! Over 3000 interviews with the world’s most successful Entrepreneurs compiled into a 17-step roadmap to financial freedom and fulfillment!
2) Free Podcast Course: Learn from JLD how to create and launch your podcast!
3) Podcasters’ Paradise: The #1 podcasting community in the world!