Latest / Exit Algorithms / What Buyers Look For Before They Pay a Premium | Carl Allen, 400+ Acquisitions (#100)

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What Buyers Look For Before They Pay a Premium | Carl Allen, 400+ Acquisitions (#100) · Exit Algorithms

• Pete Vera, Exit Algorithms: Welcome to Exit Algorithms, podcast where we decode what it really takes to unlock growth, streamline operations, and prepare your business for a high-value exit. I'm your host, Pete Vera, and today is very special. This is the official hundredth episode of Exit Algorithms, and I couldn't have picked a more ⁓ guest to mark the milestone, Carl Allen. Carl is a personal inspiration and mentor of mine. Carl Allen: Thank you. Pete Vera, Exit Algorithms: And the founder and CEO of DealMaker Wealth Society. He has personally closed over 400 acquisitions, totaling more than $48 billion in deal value across his career at HP, on Wall Street, and as an entrepreneur. Today he coaches more than 7,500 acquisition entrepreneurs worldwide, has built a YouTube community of over 100,000 followers, and has bought and sold countless business in his own portfolio. If anyone knows how to grow a business with an exit in mind, it's Carl Allen. Carl, welcome to the podcast. Carl Allen: Thank you, Pete. It's an absolute honor and a privilege to be the hundredth. I know last time I saw you at one of our mastermind events, you were telling me about the success of this great podcast. I think it's a great tool for ⁓ for business owners in helping them prepare. So yeah, I was very humbled and honored that you asked me to come back for the hundredth. So thank you. Pete Vera, Exit Algorithms: Absolutely. Yeah. I've been definitely looking forward to this. ⁓ you're, you know, perfect guest, you all the exact experience to ⁓ to give some really good advice and wisdom to for these business owners. yeah, how about we start off and and do you mind just sharing a bit for people that don't know of you, your background, business journey, maybe some of the key moments that led you to where you are today? ⁓ you know, where do you spend your most most of your time these days? Carl Allen: Yeah. Yeah, absolutely. So I I'm fifty-five years of age now. I'm in my thirty fourth year as a as a deal maker. So was was brought up on on Wall Street. So I left university in the early nineties, went to work for Bank of America, so I was doing mergers and acquisitions. I started off in the like the industrial space, ⁓ working for companies like GE, Boeing, Lockheed, Martin, etc. and then gravitated as a lot of us did. into the technology industry as as the Nasdaq blew up throughout the 1990s. ⁓ I was doing deals with with HP, IBM, Microsoft, Dell, EMC, all those all those big companies. And then I left the the Wall Street world after the blew up. So 2002, I think it was, I went to business school. So I went to Chicago to do my MBA. And then I ended up working in private equity. That was my original goal to be a private equity investor. which ironically of am now today as well. And then we sold a technology business to Hewlett Packard in 2004. And I went to HP as part of that deal and became a a a buy MA director inside of a a hundred billion dollar corporate. And the reason I did that, Pete, was was for one simple reason. It's the least money I'd earned in like 15 years. working for a corporate buying business is you you make a lot less than you do as a as an investment banker. ⁓ ⁓ wanted to understand like what do buyers go through when they acquire, right? So if you're a large company and you're buying another company, you how do you buy it? How do you integrate? Like what's the rationale? What's the mindset that that you go through? How do you calculate deal synerges? How do you look at cross-selling? How do you look at transferring motes? ⁓ or best practices across the different the different assets, right? So I I kind of did that. And then 2008, I to retire. I was 37 at the time, was way too young. But my my 18 year old Josh, who's about to go to college, he just he was just born. So I I took some time out with him. And then when I wanted to kind of get back in the game, I thought, well I don't I only really have one skill set, which is deal making. It's buying and selling of businesses. I'm not an operator. I don't run any of the 37 businesses that that I own today. I thought, well, what can I what can I do? So ironically, decided to become a business broker. And you know, and I know I'm not huge fans of the business broker network generally. Some of them are amazing, right? But most of them I don't like very much, and they don't like me, and that's fine. so I decided to become a business broker, but instead of selling the business I was hired to sell, I I actually ended up acquiring it, right? I was able to do a leveraged buy-out. I was able to raise capital to acquire the business and then creatively structure the deal so that the numbers worked for me, the numbers worked for the bank, and the numbers worked for the seller well. And that deal taught me a very valuable lesson that I had not learned on Wall Street, which was when you're buying a small business, so deals five million dollars and below, when you're buying a r a small business. ⁓ sellers care ⁓ a lot about non financial things, right? They care about their legacy, they care about their employees, they care about their brand, they care about you as the buyer, they want to make sure that you're the the safe pair of hands that can take the business on the next level, right? That that they don't want to do anymore for for whatever reason, retirement, illness, you know, boredom, you know, what have you. so I started doing all my own deals and I bought businesses in lots of different industries: transportation, engineering, e-commerce, professional and IT services. And then fast to about 2015, so 11 years ago now, I was I was in England. I'd I'd done a couple of deals in the US where I live now. I'd done a couple of deals in Australia because my eldest son, who's 30, Had ⁓ had emigrated down there with ⁓ with his mother, ⁓ my my former wife. So they'd gone down there. So if I'm going there, I'm buying a company because then it could pay for my travel. I'd become fascinated with the United States because it's the biggest market in the world for what we do. ⁓ I was going to a closing ⁓ my attorney in the UK, and he's you know, we're in the the cab from the train station, and he said to me, You should teach this stuff. And I'm Really? Said, yeah, yeah, yeah, yeah. You should go and teach this stuff, right? Nobody teaches the art of creative deal making, how to find businesses, how to truly, I mean, truly vet them, how to value them, how to structure a deal that works for the buyer and the seller, and you know, the capital providers that that need to come in, and then what to do with the deal once you've acquired it, right? How to scale it, how to optimize it, how to make it worth a lot more money, and then how to go through an exit process where you can monetize that shareholder value that you created. ⁓ I crazily decided to do that, right? you know, 62,000 students later, over a billion dollars worth of transactions that you guys have closed in my community just in the last five years since we started tracking it. and it's it it's been amazing. but I that's Four to six hours a week of my of my time, that the rest of my time I spend inside of my private equity fund. So I'm a founding partner in 9FB Capital. We're about two years old. We have about 300 million dollars of of assets under management of capital. So we're what we call a lower mid-market private equity firm. So we're not a Blackstone, we're not a KKR, we're not a Kohlau group, you we're not a hundreds of billions of dollars. We're a small fund, but we're buying small businesses. We're buying businesses up to, you know, 10 million dollars in in valuation. They're typically retirement sales. we're buying in non-emergency medical transport, in engineering, in oil and gas and e-commerce and in professional services as well. So not only do I teach this stuff, I continually do stuff and I do this stuff probably eight to ten times more than I than I actually teach. And and I think that's very powerful, P, for the deal maker community because I'm working on a deal like right now the real estate coaching space. That's a really interesting deal. And I learn stuff on every new deal, even at ⁓ you know, my age and tenure. So when I'm I'll be talking that deal. So you guys get real time insights. about what I'm doing and what I'm seeing in the marketplace. Cause as as you know, you know, you and I have been working together for a while now, the MA market, especially in the United States, it's it's very cyclical. And there are a lot of changes that are happening with with SBA financing and creative deals and a lot of the other things that you can do get deals closed. But one of the reasons why I was very interested in coming and talking today is hopefully try and solve one of the problems that that we see Pete Vera, Exit Algorithms: Mm-hmm. Carl Allen: ⁓ as buyers is that oftentimes a business isn't ready to sell, right? Just because a business owner's kind of done, they're ready to retire and they they say, hey, I'm gonna sell my business now, sometimes you're not ready. There are things you need to do as a person. There are things you need to do as a business to get it ready that somebody will buy it and they'll buy it for a fair valuation. And hopefully we can get into some of those things today. Pete Vera, Exit Algorithms: Definitely. Yeah, there's a lot of a lot of rabbit holes we go down. I love your insider perspective ⁓ too. You know, you you're living this stuff. and similarly, I think on this this episode, we'll talk about how to sell a business properly and what to do before. yeah, let's start off, you know, having exited many businesses yourself, what would you say is the single biggest mindset shift a first time seller has to has to make to have a successful sell? Carl Allen: Yeah, absolutely. So the most important thing that a seller can do prior to exit is they have to extricate themselves from the day-to-day operations, right? So if you're in your business every hour of every day and you are the business and and all the systems and processes are all inside of your head, and you control like all the revenue relationships that the business has, you can control all the suppliers as well. Then if you want to sell that business, it's not worth anything because the business doesn't work unless you work, right? and you know, my my analogy is like the dancing bear, right? So you know the dancing bear, you know, you throw money at the bear and it it kind of dances around. That unfortunately, seven out of businesses that I look at, they have an owner that has that kind of mindset. so to sell your business. ⁓ And to sell it for a a decent valuation, the you have to be autonomous to your business. Your business has to work without you being inside of it, right? So it has to have a management team, it has to have systems and processes things in place. So at the very least, you you have to get all of those things in place before can sell it. Because a you know, a a ⁓ savvy a buyer knows what they're doing, that's the first thing that they're gonna look for. They're gonna look for that. ⁓ that infrastructure, that management team that that's gonna stay behind after you leave, right? ⁓ that's probably the most important. Pete Vera, Exit Algorithms: Yeah, I'd love to go a little deeper on that, on eliminating owner dependence, key man risk. Do you have any advice for installing you know leadership and systems so the business owner can step away and eliminate themselves as the bottleneck? Carl Allen: Yeah, absolutely. There there's loads of theoretical frameworks. The the the three that I've used over you know my three decades is EOS. I'm a huge fan of EOS. I'm a huge fan of Profit First, and I'm a huge fan of the EMyth, ⁓ which was founded by my very good friend Michael Gerber. He he's no longer the owner of EMIT, he he sold the business, but his legacy kind of lives on. And and what those platforms do. ⁓ is they they they help you do one thing. They they help you transition from being an owner operator to being an owner investor, right? So think about a business as as like a bus, right? I'm taking my first bus ride in fifteen years next weekend. My son and I are going to Ohio to watch some soccer games. And the Friday games in Cincinnati, the Saturday games in Columbus And the only way to really get from A to B is to go on a Greyhound bus, right? So so me and Josh are going to be going on this bus, which will be be pretty cool. But think about a bus, right? If the bus is the business, right? And all the passengers on the bus are your customers, your suppliers, your partners, then as an owner, you should be driving the bus, right? Your your operator, your general manager, your CEO, your managing director, whatever you want to call them, your integrator, it's what EOS calls them. that's the person driving the bus, right? Your job as an owner of a business is to be the GPS, right? So ⁓ you're an owner of a business, there's only seven things you should be doing, right? It's mergers, acquisitions, joint ventures, exits, big ticket strategic growth relationships, you know, culture and leadership, right? Those are the seven things that you should be doing, right? Everything else ⁓ you should be delegating to people that that do that for you. Because then if somebody buys that business, the operational infrastructure of that business is already in place. It's intact, right? So you step away, then another buyer comes in, another owner comes in, and they'll have their own leadership style culture, they'll have their own, you know, big strategic relationships that they wanna that they want to leverage, right? So so that that's the single biggest thing I find with with a lot of retiring baby boomers actually. Is they've been in their business since they started it 10, 20, 30, 40 years. They are the business. All the customers know them personally, all the suppliers know them personally. they have a very kind of hands-on way of doing what they do. and I think that's great. However, the business sellable, right? Because so let let's say Pete you owned a business, right? Let's say you owned a transportation company, right? And whilst you're not driving all the trucks, you know all the customers, you know all the suppliers. ⁓ you're the liaison to kind of everything. There's no systems, processes, KPIs, there's no documentation. It's all in your head, right? So if I buy your business, so let let's say you and I strike a deal, I buy your business, and then after a couple of weeks of a quick handover, you've exited. What I actually acquired? Right? the brain trust, the institutional memory, as I call it, is you. ⁓ And you've exited, you're on a beach somewhere, right? Enjoying retirement. so that business I just bought has got now diminishing value because all that goodwill has evaporated, right? So and oftentimes I still buy companies where that hasn't happened, but I make the seller stay in the business for an extended period of time, maybe like six months. And and I I might say to a seller, look, this business isn't really Valuable in its current state. I'll give you some money as a closing payment. But the bulk of the cash I'm going to give you is once you've A, gone out and found a replacement for yourself, B, you've hired, trained, and onboarded them and empowered them. And then the business is completely autonomous from you. And once that's happened and that's all measurable, you get the rest of your money. ⁓ And I own an asset, a business that's going to work. without the owner actually being inside of it. And that's the single biggest problem in the United States today, right? Let me give you some data, right? There's two point five million small businesses for sale right now in the United States. And one out of eleven will sell that business within the next twelve months, right? The other ten out of eleven, is that? Well partly it's because of what I just said. Their businesses are not Transferable in their current state, so they're not really worth anything. And then number two is there's a big lack of qualified buyers that can find deals, build relationships, do the proper vetting, and then raise whatever capital they need to raise to be able to close that deal. so those are the two things that you know that's my mission, that's why I built a coaching organization. not only to give me deal flow for my private equity fund. Which I get from time to time and that's great. But it's to educate both buyers and sellers on what needs to be true deals to successfully transact, right? And and financial services providers have the same issue, right? Like if you go ⁓ I know we're we're we're closing on a deal right now in inside of our ⁓ our protege program, right? ⁓ you and and Laura and and the guys, and you again, that's a business that you found. where the owner is semi-absent. It has you know it's a big business, right? But it has great leadership inside of it. It's got great systems, great processes. So it's its value can be transferred seller to buyer, which is you guys, right? unfortunately that only happens like one in eleven times. So there's a big the there's a big job for most sellers to do. single biggest piece advice Make the business work without you being in it. and that's one of the first questions I ask when I'm sat down with a seller. I'll say, Hey, so let ask you a question. and and I always use the Tom Hanks story about ⁓ the guy that got shipwrecked on the ⁓ on the island, right? I'll I'll say, Hey, so imagine you're Tom Hanks in in that in that movie Castaway, right? And you know, your your plane goes down in the South Pacific and Pete Vera, Exit Algorithms: Castaway, yeah. Carl Allen: you know, you you're shipwrecked, you're stranded for like six months. When you came back, what would what would happen to your business? What kind of state would your business be in? And sometimes they'll go, ⁓ wow, my business wouldn't last like a week. It would be dead within a week. Well then I can't buy that business, right? Because if I buy it, unless you're gonna stay around for a few years and help me transition, I can't really buy that business. Whereas when the seller turns around and says, Well, well nothing would happen. ⁓ the business would continue to grow. I have my operator, my sales team all work for him. Nobody in the business works for me. They work for my operator, my GM. I can log in on my phone. I can see my revenue. I can see my balance sheet. I can see how many new customers we're attracting. I can see what all of my KPI key performance indicators are in business. I don't need to be my business for it to I'll tell you one thing, Pete. When I'm not in any of my businesses, they grow. If I get involved in my businesses, they don't grow. Because I'm a pain in the butt and you know I don't know how to operate a business. I'm terrible. So I just get out of the way. I hire operators into my businesses that know what they're doing. I give them the strategic map. I tell them what the performance numbers need to be. I give them the resources that they need for people and systems or what have you. Pete Vera, Exit Algorithms: Mm. Carl Allen: And then I just let them get on with it. And I measure them weekly, ⁓ more often, sometimes less often. Pete Vera, Exit Algorithms: Mm. Yeah. And similarly business owners could could should be implementing some kind of similar system, right, of tracking and being able to manage it remotely, you know, not involved in every every single operational decision. Carl Allen: because if that's the case, your isn't sellable. If if I was allowed a second piece of advice, once you've done that, so once extricated yourself from the daily operations of your business, and then you're you're working on your business strategically, not in your business tactically, once you've done that, the second thing that you need to do is, and this is gonna sound really strange, figure out who you want to sell to. Right, let me explain why I just said that. Because not all buyers the same, right? So ⁓ are typically four ⁓ of buyers, right? buyer number one is is a what we call a strategic buyer, so that's a competitor of yours that's typically larger. They could be in the same industry or they could be in ⁓ an industry, and rather than build Capability that you have, they would rather buy it, right? So look at all the big companies in the world: Amazon, Microsoft, Google, Apple, they they don't innovate, they buy stuff that people have have already built, right? So they don't have time to build stuff, they they just buy it. And a lot of companies do that, and that's what drives strategic MA. But an and a strategic buyer will often pay you the highest valuation, right? Because when they buy your business, they can leverage what you've got into what they do and vice versa. That's called cross-selling. And then when you combine two businesses together, there's often duplicate costs that can be taken out. So they can pay a lot more money for your business. But that comes with a risk, right? Because if you're very legacy-driven as a seller, if you care about your employees, And you care about your customers and how they're treated, selling to a competitor probably a idea because they might rip the business apart and destroy the legacy that you've built. Yeah, you've been paid, but you know, money's not everything, right? The second buyer would be a financial buyer, like a private equity fund, somebody like me. And what I'm typically doing when I'm buying a business is I'm the majority share of it. So the seller's getting a day one payday, but then wanting that seller to stick around for a period of time so that I can roll up and I can build things around it. So if if you want to 100% retire and you don't want to be in your business any longer, selling a financial buyer a PE fund is probably not a great idea. And then third is is ⁓ a leverage buyout. So it's selling your business to an individual. or a team of individuals. so like the deal that that you and Laura were doing, that that's a seller not selling to a competitor, not selling to a financial buyer, they're selling to you as a team. And then your valuation is really kind of standalone. You don't really have a lot of leverage because you're not combining it yet with anything else. So your valuation is pretty much determined by the capital markets, right? Like the SBA 7A loan And then the fourth Community you can sell to is your existing employees in inside of your business, right? So if you've got a leadership team, they can buy it through what's called a management buyout and MBO, and then you've got tools like eSops and all those different things allow employees to kind of benefit from the future value of of the business. And and all those different buyers have different characteristics, right? So if you want High valuation, high risk, you'd sell to a strategic buyer. If you want a lower valuation and lower risk, you know, you'd sell to people like us, a private equity firm would be kind of something in the middle. So I those before anybody goes anywhere near a broker or anywhere near a selling conversation, you've got to have those two things in place. You've got to be out of the business pretty much from a day to day, and you to know ideally who your buyer is going to be. Pete Vera, Exit Algorithms: Love it. Yeah, you know, after you've looked at thousands of deals, had thousands of seller conversations. Do you have a can you think of an example where after, you know, maybe just the first ten minutes of a conversation, you could tell this, you know, this deal's gonna be a winner or maybe another one where they sell seller said something early on that that made you walk away. Carl Allen: Okay. it's interesting. So so my kind of playbook for this is initially it's all about the relationship. It's all about building rapport, building no like and trust. And and what I do is in the kind of like 15, 20 minutes of having a seller conversation, I I ask myself the question, would I go out and have a beer with this person? And if the answer to that is no, I probably don't continue the conversation, right? as as strange as that sounds. But then oftentimes, you and and and again, I I've I've got so many examples. I could tell you so many stories of deals that I've done and deals that I've not done, that have really come down to kind of one thing, which is when you're when you're negotiating with a seller, right, really, really listen you know, what they're Right. You were at the Chris Voss event, right? That that that we did in in Vegas. We were you out Were you about the Chris Voss event? ⁓ no, you didn't make it. ⁓ no, you didn't make it, did you? So so we flew Chris Voss in, who's a very good friend of mine now, to a two-day negotiation training. And he said something very powerful. He said, as human beings, we have two ears and one mouth, right? You should listen twice as much as you speak. And oftentimes, when you sit down with a seller and you're negotiating, what most deal makers Pete Vera, Exit Algorithms: Actually, it was Carl Allen: Do is they just come out with the numbers. Well, hey, I've valid your business. I think it's worth three million bucks. I'm gonna pay you two million dollars as closing payment, and then a million dollars gonna be selling out, earn out, roll over equity, kind of what have you. And oftentimes sellers like they're not thinking about that. It's like, who's this buyer? What is he gonna do for my business? Right. So I asked this really cool question, you my seller conversation before I go anywhere near ⁓ a discussion. And ask them the question, I'll say, So what would have to be true for me to buy your business? And they say, Well, great. And they'll they'll give you all of their deal points. And oftentimes it's not about money, right? I remember bought a marketing agency in California twenty twenty seventeen, I think it was, twenty sixteen. And ⁓ I sat down with the owner and I said to her, Hey, you know, what would have to be true for me to buy your business? She said, Well, Carl, I only have three deal points. And typically you you might expect that's total price, closing payment, and terms on the rest, right? Her deal points were can't change the name of the business, can't change the logo of the business, and then you can't fire any of my employees, right? You you agree to do all those three things. we can do a very, very creative, very flexible deal, which is what we did, right? So oftentimes if you give the sellers what they want and those are non-financial items. Then you can horse trade and you can do that, right? And and and again, flipping that for the seller, because I know your audience are primarily sellers, right? So price and terms might be important to you, right? but you know, my advice would be think about what else truly matters. If you, you know, if you've been in your business twenty-five years and you know, you've missed vacations and and you know, your son's high school football games or your daughter's like clarinet recital or whatever it is right you know you you've been locked in your business and you've built something amazing right you you've got to think about you know if you sell even if you sell for the highest amount and you bank that money and then you're you're living the rest of your life how would it feel if somebody like shut your business down right your brand your logo disappeared overnight right all your employees that have served you for long they're all on the streets right They're all calling you up asking for loans because they heard you made all this money, but they can't make the mortgage payments, right? can't go to the grocery store, they can't finance their car because they've been let go, right? so need to think about that, right? What what what do you value in your and selling to individuals can protect a lot of those different things, right? Selling to a large competitor oftentimes doesn't do that. Pete Vera, Exit Algorithms: Yeah, huge. ⁓ thank you. I love that perspective. Yeah, and I I think it'll be useful for you know business owners listening, thinking that of an exit. ⁓ from a from a buyer's perspective, what are maybe the top three things you look at in a business bef for a potential acquisition? Carl Allen: Yeah, cool. So so this really comes down to I think what I call the four pillars of valuation. So when I'm looking at a deal, oftentimes you know most people in the world think a business is really just all about its numbers. ⁓ and and it's not, right? That's only one leg of the of the chair. I also look at, you know, seller psychology. What does the seller really want, right? What's their motivation, you know, to want to do a deal? You know, if you're talking to a business owner. And ⁓ you know, they have an illness, right? or they're getting divorced, or or they have a partnership dispute, or or there's something going on that's really motivating the exit, they might not want to wait four, five, six months for you to go and close on an SBA loan, right? which will give them most of their cash up front. they might be willing to do a faster deal in a matter of days or weeks for you to buy the business, you know, creatively. And then pay them an income over time, which is effectively taxed ⁓ long-term capital gains. We call that an annuity deal, right? ⁓ then so structure of the deal is also really important. And then the fourth thing that I look at, which most people overlook, right, is what I call the transfer of value. So we touched on this earlier on in the conversation. Whereas you can have two businesses, Pete, with the exact same financial profile, which can be worth Completely different valuations, right? and it's called the transfer of value. So, for example, take take two businesses. One business has like very, very high customer concentration. So, let's say it's got five customers or four customers, the owner is the business, doesn't have a management team. there's very, very high turnover of employees, very, very high turnover of customers, pretty weak brand and reputation in the marketplace. And ⁓ Terrible culture in the organization, that business is not going to be worth anything, right? It's going to be worth the value of its balance sheet. Whereas the same business, terms of revenue and an EBITDA, if it's got thousands of customers, the owner is semi-absent, it has a management team, systems, processes, KPIs, all these different things, you know, long tenure of employees, long tenure of customers. Customers generate recurring revenue, long contracts, all those different things. You know, great internal culture, great external brand and reputation. Those businesses on paper are the same, but one is inherently worth a lot more than the other, right? so you have to do what what I call the business attractiveness assessment, right? So I look at a business, and you know, you've seen the analysis over 20 to 25 different measures which you can get from the seller conversations ⁓ that you have. So I'm able to calculate in my vetting. So this is not due diligence, right? This is before I make an offer on a business, determining how that business is. How good is that business, right? Is it a best in-class business? Is it the best business in the market? If it is, I probably won't buy it because I'm going to have to pay ridiculously high multiple to acquire it. Or is it an absolute dog with fleas that's got so many issues with it? ⁓ It's worth the liquidation via which balance sheet. I'm not going to buy that business either. I want to buy the businesses in the middle. So I'm looking to buy a good business that I can turn into a great business over my period of ownership. Because at that point, I can buy it, say a three to four times multiple of profit and then sell it for an eight to ten times multiple of profit when I've turned it into the very, very best business in the market. You know, merchants and acquisitions peak. comes down to really simple and demand economics, right? if more supply of something and less demand, prices go right? If there's more demand for something than there is supply, prices go up, right? So the best businesses in the market that sell for these crazy high multiples, that's because there's only one of them out there, right? But most other businesses are not, are not in not in that realm. Pete Vera, Exit Algorithms: Yeah. So how does a business owner prove that their business is, you know, is is one of those good businesses that you want to invest in? Carl Allen: Yeah, so so you can do this yourself or you can you can hire an advisor to to get your business you know truly ready for exit. You you can work with guys like EOS, Profit First, you can even work with all the seepers ⁓ in the Exit Planning Institute, right? They can help you really position your business to be to be best in class. But it's making sure it's following all the things that we talked about, like the number one, you're not the day-to-day operator of the business, right? There a buyer can come in and look at your financials and review all of your KPIs and all of your dashboards and all of the tracking that you have in place to the performance of your business over time. You know crazy, Pete, right? Most small business owners in the United States, and this is scary, they only look at their numbers once a year. And it's when the CPA. ⁓ Sends them their financial accounts, right? Generally during tax season, right? It's like, hey, I'm about to send in your tax return, but here are your are your numbers, right? they go, that's not great. Our revenues dropped this year, our profits dropped even more, our balance sheets got a lot worse. Like, what happened? Like, we don't know, right? And you can't change it. You can't, it's not back to the future, we can't go back in time. with you know the almanac that Biff Tanner had Impact to the Future and change change history, right? you know, you can't react because you're looking at stuff that's you know in in the past, right? So what you need in your business is you need what I call optics, right? You need, you know, maybe 10 ⁓ to numbers that you can track pretty much on a weekly basis, right? and im imagine you're a plane. Right, so you're in the cockpit of your plane, like what are the major dials that you're gonna be looking at? Right? It's your speed, it's your bearing, it's your altitude, and it's your fuel gauge, right? If you're looking at those four things consistently, you know where you are, right? You know you're not gonna crash, right? Most small business owners, they're flying their planes with no dials, right? They don't know where they're going. They don't know how fast they're going, they don't know how high they're going. Well, mountains coming up, be careful. No, we might run out of fuel, which in business is working capital, right? So, so business owners they don't track that stuff. And if you're tracking your business, you're measuring your business every week, that means you've got 52 opportunities in a year to kind of course correct, right? It's like, okay, I got my numbers for this week, my revenue was good, my cash collected was good, but ooh, I didn't generate in enough. New leads into my sales funnel as I should be doing, right? I need to fix that because then if my average sales cycle's three weeks, three weeks from now I'm gonna have pretty, pretty low revenue numbers, right? So because you're tracking that in real time, you're able to kind of fix that. Now, granted, most business owners don't do that. And that's not to say that they're a bad business, they just don't do it. But if you do, right, that's gonna add multiples to your valuation. Pete Vera, Exit Algorithms: Yeah, love it. Yeah. And Carl, you you talk a lot about mindset and in your training programs. I've gotten a lot of value of that out of that personally. And this kind of applies to both on the buy side and sell side. I I'm curious, you know, if if you could pick one mindset difference from people have success in Main Street ⁓ and A and those who don't, what would that be? Carl Allen: Yeah, so I think so as a this is this is from a buyer's perspective, right? Yeah, so from a buyer's perspective, I think the number one mindset thing is the people that win versus the people that don't well the there's two points to this, right? So the first one is they they do the work, right? So if you think about it, buying a business, it's not hard. It just takes a little bit of hard work, right? You've got to define your buyer box, you've got to find some deal flow. You've got to have seller conversations, you've got to do some some vetting and analysis, you've got to put an offer together and then normally go out and raise some capital and then get the deal closed, right? So there are reps you have to put in each and every week to be able to do that, right? And and the three reps that we typically track inside of our community is how many deals have you originated, how many sellers have you met. And how many offers have you made, right? And if you're consistently doing those three things week in, week out, it's impossible not to close a deal, right? Think about that wants to go to a gym to build muscle, right? So I, you know, I just come back from the gym, as you can tell, and I'm to build a little bit more muscle. And for me, I know if I go to the gym four times a week and I do my reps, I do my sets, and then I put the proper protein and fuel inside of my body. I know it's biologically impossible for me not to build muscle, right? Business buying is exactly the same thing. So you have to do the work, you have to do the reps. And that's true P for anything in life. Anything in life that you want to achieve, you have to do the things, right? You can't just watch training videos or read about stuff. You've actually got to get out there and you've got to implement the things that that you're learning, the things that you've got to do. So that's the first thing. The second thing. And this is even more powerful. if if I look at my eight and nine figure killer killer deal makers inside of my community, they figured out one super truth, which is their why, right? Their purpose, right? Why are they actually doing this? Because the irony is nobody actually wants to buy It's not what we want, right? We want the that come. From business ownership, right? Especially if you're an owner investor, it's legacy, it's freedom, it's work-life balance, it's cash flow, it it's wealth creation, generational wealth creation in some cases. You know, if you if you find a business doing half a million dollars of eBit dot and you buy it for a three times multiple, 1.5, and you can grow that business to five million dollars of eBit dot with acquisitions, and you can sell that for 10x, right? You just made 50 million bucks, let's say it takes you 10 years, you're in the 0.01% of the US population, right? For some people, that's huge. That's worth the hard yards of doing what we do, right? So those are the two things. I think it's doing the work, doing the reps, having a plan, but then deep down, really having a having a burning heart, right? You know, I'm a huge fan of the Rocky movies, right? If you ever watched all the Rocky movies, that the fights where Rocky won, like against the Russian in four, against Clubber at the end of three, like against Apollo at the end of two, right? Like that kind of the eye of the tiger that he had, right? That passion, that mission, that fight, that desire, if you've got that in abundance, you can do anything. You can run through walls. And if you've got a a purpose and a why that's bigger than you. More the better, right? So a couple of examples. Zafrina Causaban, who she was at the Alantra event last year. I don't if you met her, she's a CPA. She's buying up all these CPA firms in America. then ⁓ outsourcing a lot of the growth to St. Lucia. So she's originally from St. Lucia, and island's struggling economically. There's a lot of CPAs down there out of work. She's That's her goal, that's her why, that's her mission, that's her purpose, right? So that's driving her. So every tough conversation she gets in, she's fighting for something bigger than her. She's fighting for her country, right? And then my very good friend now Jonathan Bates, who was former military, he's buying a businesses, just close to $14 million ⁓ business. And when he buys a business, he parachutes in members of former you know, military vets like himself and gives them like executive roles in these deals. So he's helping his former brothers and comrades get back into life, ⁓ running these businesses that that he's buying. So again, he gets into a tough conversation, a tough deal rather than saying, you know what, think I can do this. He has to do this. He's fighting for people beyond right? It's not just about him and his family, he's fighting for a community, right? Pete Vera, Exit Algorithms: Yeah. Yeah. Carl Allen: So I think when you stack all these different things gives you a fuel and a fire, you know, just to just to get this done. Pete Vera, Exit Algorithms: Yeah. ⁓ powerful. Awesome. I know we have a few few minutes left here. I wanna be respectful of your time. one the one of the other focuses of the show is AI. And I I would be you know, I'd I'd love to hear your perspective on on you know, how are you using AI personally and professionally and how do you see it impacting your industries that you're in the most? Carl Allen: yeah, amazing. That's a great question. So I think th there's two things, right? Let's talk about AI as a as a disruptor. So there are some industries that you know AI's, you know, taken out for lunch, right? You know, so if you're in the buckkeeping industry, you're in the marketing, copywriting industry, you you run basic agency services that have a lot of digital output, you know, you're you you're done, right? Unless your customers are people that Will never use AI. And then you can use AI just to become a lot more productive in kind of helping them, right? I think about I like boring businesses, right? So like businesses that AI is only gonna optimize. So non-emergency medical transport, great sector. I'm rolling up deals in that space. ⁓ AI can't drive the amulet and pick up the patient and take them for dialysis, right? But AI can help with route logistics. Billing efficiency, all those different things, right? AI, so I live in Texas and it's really hot right now. if my if my AC was to fail, AI's not going to fix that. AI can help my service engineer be a lot more productive in terms of his routes. AI can help me as a customer maybe optimize my cycles of when I use it to save me money in electricity. All these different things, you know, transportation, construction, in home services, HVAC, electrical plumbing, all these different things. ⁓ can't replace that, it can just kind of optimize that. So there are some industries that you've got to be careful, you know, basic software development. You know, if you own a business that designs apps for people, you know, AI can do that now in five minutes, right? So, you know, that's another industry that I would like to be in. In terms of AI for deal making, You know, it again, AI can give you all the information. It it can make you a lot more productive, it can help you analyze and vet a business ⁓ a lot faster than doing it manually and lot cheaper, right? You can upload income statements and balance sheets and an information memorandum to Claude or Chat GPT, and it can give you an honest assessment of what's going on in that business a lot faster and cheaper than like a CPA would do, but again, you've still got to do the work, right? AI is not gonna schedule the seller conversation for you, right? You know, AI's not gonna ask the questions you need to ask to get the information that you need to both A determine is it a business you like, B, what's the valuation, and C, if you wanna kind of continue with the conversation. we've put as you know, we've put my brain into AI. in ⁓ and that's been really, really powerful. So as a student base, you guys can get access to me. ⁓ Pete Vera, Exit Algorithms: Powerful. Yeah. Carl Allen: twenty four seven three six five when I'm probably, you know, not available to speak to in person. But every deal I've ever done, every business I've ever reviewed, every book I've ever written, you know, everything I've ever said, done, thought is all in this AI construct. So you can access that and get my brain looking at at your deal. So, you know, AI's here. I I I'm bit about how fast it's accelerating. You know, I remember ⁓ Skynet and Terminator 2 in the early 90s. So I'm a little bit worried about that. You know, I don't want machines AI powered flying all over the world and killing people. but I I do think there's some very, very powerful stuff that's going on right now. but it's only there for productivity and and and time saving. For me, someone's still gotta get out there. You've still got to make the offer, you've sort of got to build a seller ⁓ seller conversation, you've still got to go and talk to the bank. if you want to borrow money to finance the transaction, you still have to do all of those things. AR is just gonna help you faster. It's gonna prepare you better. Pete Vera, Exit Algorithms: Yeah, absolutely. Awesome. Yeah, I know we're we're up on time here. la last question, Carl. And you touched on this pretty, pretty heav heavily earlier. but if you have the leave the listeners with something, one practical takeaway tip they could implement this week to help their ge business gear up for sale and maximize exit value, what would that be? Carl Allen: Yeah, so the first thing I would do is I would look at how can I extricate my business quickly as possible without without damaging it, right? So what can you delegate? What can you outsource? What can you stop doing, right? What systems and processes can you put in place? Measure your If there's one thing I would do today, if you're watching this, is ask yourself, when did I last measure the performance of my business? and then go and measure it, right? Take Seven days take a week, how many, how much revenue do you generate? What was your average revenue per customer? How many units did you sell? Whatever it is you sell, product or service, ⁓ what's your cash flow? What's your margin? and then what are some of the the leading indicators that are going to help you down the line, right? You know, what's your marketing funnel look like? How many new leads did you get, right? What's your conversion rate of lead to customer? Do all these different things, you know, become curious. Right? Because number one, you'll find things that are wrong in your business that you can fix. What's that gonna do? It's gonna make you more profitable. That's gonna make you more valuable. Right. And then if you do those things, and then you find a way to work more on your business strategically rather than in your business tactically, you know, not only is your business more sellable, it's more sellable for more money. Pete Vera, Exit Algorithms: Absolutely. Great way to end this, Carl. Thank you so much for being on my hundredth episode. ⁓ definitely Yeah, thank you. Definitely my my best yet. ⁓ I really appreciate your time. Where's the best place listeners can ⁓ can find you, learn more, find your book? Carl Allen: You're welcome. Congratulations. Yeah, so if you go to at Carl Allen Official YouTube or on Instagram, there's tons of free training on there and there's some links. And then I I have like a thousand dollar training program that ⁓ I that happy to give away to your viewers for free. ⁓ if you they go to trainwithcarl dot com, that's train withcarl dot com. they can ⁓ they can get free access. to all of that training and all those resources. And I think the book's in there as well. So so yeah, enjoy. L little gift from from me to your ⁓ your amazing community. Pete Vera, Exit Algorithms: Great. I'll leave that in the show notes. Thanks for coming on today, Carl. Great conversation. Carl Allen: All right, Pete, take care. Thank you very much.