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The 5 Ways Regular Kiwis Are Buying Businesses · Making Cents

• 0:00
  If the job market is totally balked right now, what about if you created your own job by having your own business?
• 0:07
  And what if you did that with less risk?
• 0:10
  Instead of starting a business and hoping it works, you buy one with a proven track record.
• 0:16
  Look, sunshine and roses on that.
• 0:18
  It's clearly a little more complicated, but it's a solid idea that can really work if you do it right.
• 0:26
  And someone who has ringside seats to that.
• 0:29
  Jess Shaw.
• 0:30
  She's the director of investor finance, and she's seeing an interesting trend.
• 0:35
  Her clients are looking to buy businesses like an asset class as if it was property or shares.
• 0:43
  So how does that even work?
• 0:44
  It's not just a job, it's not an income.
• 0:47
  If you're doing business right, you're building an asset, and that is of value and you can do something with it in the end.
• 0:52
  Is this something that only rich people can do?
• 0:55
  If I made a million dollars in cash to buy it, like, no, absolutely not.
• 0:59
  We can also actually lend against the business itself, and a lot of people don't realize this.
• 1:04
  What about making sure you're not spending a lot of money to get yourself into a financial hole?
• 1:10
  Your earning is uncapped.
• 1:11
  Yes, you maybe have to take a bit of a cut earlier on or earn nothing to begin with, but eventually you can make it whatever you want it to be.
• 1:20
  Well, welcome to Making Sense.
• 1:21
  It's the podcast people who want financial freedom without giving up their coffee.
• 1:26
  I'm Frances Cook, financial journalist and fellow financial freedom seeker who makes money simple for you.
• 1:32
  Today, it's buying a whole new income stream in the form of buying a business.
• 1:38
  This episode of Making Sense is supported by Odoo, the affordable way to get your business working smarter.
• 1:45
  Go to odoo.com that's o d double o.com for more.
• 1:49
  I want to help as many people as possible reach financial freedom by taking control of their money.
• 1:54
  And you can help me in that mission two really easy ways.
• 1:57
  First, hit subscribe wherever you like to listen.
• 2:01
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• 2:04
  Then send this episode to a friend so we can all level up our money together.
• 2:08
  Then the show grows and I can keep giving you the money, info that makes a difference to your life.
• 2:15
  Welcome, Jess.
• 2:16
  So nice to have you in because we were having a little chat after one of my previous episodes that went so well.
• 2:24
  People had more questions.
• 2:25
  You jumped and you had some answers.
• 2:26
  And I said, onto the podcast.
• 2:28
  Let's lay them all out.
• 2:30
  But before we get into that, I want to start with you, because you were on one of the teams for one of our country's biggest banks, you were on the business and commercial side.
• 2:38
  So you've been there in the thick of it, really helping people.
• 2:41
  Then you left to start your own business, and you're working with people again really closely, really helping them out.
• 2:48
  So you have this huge track record of helping people through some of their most difficult financial decisions.
• 2:54
  What do you think when you're looking at people and coming in, helping them with their money and their financial lives, what is one of the biggest things that you see that moves the needle for people in their money?
• 3:05
  Finance is really an amazing career in terms of the fact that you get to look under the hood, right?
• 3:09
  You get to look at what people earn, how they spend their money, what they own, what they owe.
• 3:15
  And you also get to understand, like, the financial decisions that have got them to where they are.
• 3:19
  Um, so it's a real privilege to have that background and that understanding.
• 3:23
  And I think the probably the biggest thing I see for clients is that they need to understand the key fundamentals of finance, which is what is going in, what is going out, and really understanding your numbers.
• 3:34
  I think there's a lot around putting your head in the stand and kind of not taking control of that.
• 3:40
  But if you're gonna make a real difference, you need to know that and need to build that through you.
• 3:45
  I think the other thing as well is getting good advice.
• 3:48
  So you don't have to know everything, but you have to be able to identify that and then find the right people to help you through that.
• 3:55
  Yeah.
• 3:55
  Which is such a tricky one.
• 3:58
  A couple of the things that you mentioned, there is in terms of being willing to face some difficult things, and we often do say that money isn't all numbers.
• 4:07
  So much of it is how you approach it, and that being unafraid to look at things and actually know what's coming in and going out and.
• 4:15
  And then also being unafraid to say, I don't know this bit, and I'm gonna find someone good who can help me with it, and I'm gonna trust them.
• 4:23
  Those are actually two really big confidence hurdles.
• 4:26
  So do you think money and confidence is a big one?
• 4:30
  Yeah, I think so.
• 4:31
  I think there's a lot of people grew up with not being taught how to do that, and they.
• 4:35
  I think a lot of people feel embarrassed about their finances.
• 4:38
  There can be a lot of, like, emotion that comes with that.
• 4:41
  And I think the first thing is identifying.
• 4:43
  Do you feel in control?
• 4:44
  Do you know what's going on and it's okay not to.
• 4:48
  We have clients coming in the whole time and they feel like something, they can't do something, or they're really scared to start the conversation.
• 4:54
  And then once we've had the conversation, they're like, you're kidding.
• 4:57
  We have options.
• 4:59
  We can do things.
• 5:00
  And I'm like, absolutely.
• 5:01
  So I think there's a huge part of it is like, what actually, you know, what's possible and the emotion that you tie up around that.
• 5:09
  So confidence is a huge thing.
• 5:11
  And.
• 5:11
  And there's different things that you can do to give you more confidence, obviously, learning about it, understanding it better.
• 5:17
  But there's also, like around making sure you have a backup plan that you're not sort of up against the wall.
• 5:23
  Things like that will really help you make better decisions because you're not backed into a corner and you're not coming from a place of scarcity.
• 5:33
  I think that's a huge one, actually, because I'll often talk to people about some of those initial first steps you can take with your money.
• 5:38
  And so many of them can seem small, but for starters, they help you build to those bigger things.
• 5:46
  Secondly, they often give you back a feeling of being in control.
• 5:49
  And I think you will always make better decisions when you're feeling calm and in control and you can look ahead and say, okay, cool.
• 5:56
  Rather than coming from that.
• 5:58
  That place of feeling like you're backed into a corner and you have to fight your way out.
• 6:02
  You are almost never going to make a good decision in that mindset, surely, right?
• 6:06
  Yeah, a hundred percent.
• 6:07
  A thing I talk a lot about with my clients is around building liquidity.
• 6:12
  Liquidity sounds like a bit of a scary word, but it's basically building in like a rainy day fund and a backstop.
• 6:18
  And we do that both for our clients on their personal side and also on the business side.
• 6:22
  And really making sure that you know when things go wrong, because they do go wrong.
• 6:27
  They always do.
• 6:29
  That's life.
• 6:29
  Just making sure that you have access to the facilities or savings or whatever that is for you so that you can then confidently move forward.
• 6:39
  So the other thing I love about that is it also means you can jump on opportunities.
• 6:44
  So if you have liquidity, you can just jump in and take a bit of risk if you need to.
• 6:49
  Yeah, yeah.
• 6:50
  What's the old thing is increase your surface area for luck to hit you.
• 6:54
  And when you are prepared like that, if luck arrives, you can actually jump on it.
• 6:58
  Like, how many times have we all had a thing happen?
• 6:59
  We're like ah, with hindsight I should have.
• 7:03
  Whereas if you've got that stable footing, you can.
• 7:05
  What's a big thing that you see in terms of like all the clients you've dealt with?
• 7:09
  Is there a common theme in terms of something that people often get right and then something that people often get wrong with their money?
• 7:17
  One of the key things I learned from my clients that had really moved the needle, really built businesses and grown wealth was that they knew what they didn't know.
• 7:27
  So they, what I like to call is build your own boardroom.
• 7:31
  So I'm not talking like director meetings and like monthly catch ups or anything like that, but build your team of people that are gonna help you, you know, elevate where you wanna go and get you to where you
• 7:42
  wanna go.
• 7:42
  Cause we don't know everything we, we can't.
• 7:44
  And so get yourself a really good advisory accountant, get yourself a really good commercial solicitor, get yourself a financial advisor, someone in your corner who's gonna help you enable that.
• 7:55
  On the finance side, a mentor, a coach, like find someone who's been there, done that and learn from them.
• 8:02
  So it's really around like finding those people, those key people that can help you get to where you want to go.
• 8:08
  That's probably the biggest thing that I've seen that people like get right.
• 8:13
  The thing that they do wrong is they put their head in the sand.
• 8:17
  And that can be whether it is their personal finance situation or their business and things are going wrong, wrong and they instead of taking action and seeking help, they just, yeah, what I call bury the head in the
• 8:30
  sand and kind of don't know where to look and don't do anything about it.
• 8:35
  The problem with your finances, if you don't address things, they don't just magically get better.
• 8:40
  No.
• 8:40
  What.
• 8:44
  So basically what happens is it compounds and your options actually get harder and harder and harder.
• 8:48
  The longer you leave it, it doesn't mean it's impossible to come back from, but it does mean the sooner that you can do something about it, the better.
• 8:55
  So whether it is on the personal side or on your business side, the sooner you can identify that things aren't quite going right and get the right people around you to help you get through that, you'll be able
• 9:08
  to turn that around.
• 9:09
  But that is what people often get wrong.
• 9:11
  I know.
• 9:12
  And even when it's a scary thing, like I remember, even when in my preference personal finance journalist days when I was just a broke uni student and got in trouble for some overdue payment on something and I just
• 9:25
  wanted to ignore it, wanted to ignore it, wanted to ignore it.
• 9:27
  Finally bit the bullet and called them and turned out to be a mistake and the whole thing got wiped and it was totally fine.
• 9:35
  And I'd been stacking up these late fees that actually if I hadn't dealt with it, it was about to get Bay Corped and I was going to be in so much more trouble.
• 9:44
  And just a phone call and it was done.
• 9:46
  And that was weeks of stress just gone.
• 9:50
  And it's, it's so hard.
• 9:52
  But when you're not facing things, you still know it's there, it's still stressful.
• 9:56
  It actually doesn't help with the stress when you're refusing to deal with it.
• 10:01
  It is actually almost a relief to face it sometimes.
• 10:04
  I think.
• 10:04
  Now you and I first started talking after an episode a few weeks back where we were talking about buying a business, how people are interested in buying businesses rather than starting one.
• 10:14
  You had some such interesting chat with me about the different things you were seeing with your clients and how they're interested.
• 10:21
  And you mentioned something that really got me thinking when you said that people are looking at buying a business almost as an asset class, which I took as, you know, they're buying it like they'd buy shares or property.
• 10:32
  But walk me through what you meant with that and what you're seeing right now.
• 10:37
  Yeah, so I think we all know New Zealanders love property, right?
• 10:41
  We've literally built a whole economy on it and a lot of people have done really well building wealth through property.
• 10:48
  One thing I would say though, a lot of people that have done that have actually also owned businesses.
• 10:53
  So there's a lot of people that have generated significant amount of wealth in New Zealand and they've done that through business.
• 10:58
  And business is actually an asset class as well in terms of the fact that you are not only generating income from that, but at the end you can sell it, you can sell it and you can then use
• 11:11
  that to invest into other things as well.
• 11:13
  So I think like a lot of people just look at property now.
• 11:18
  A lot of people are looking at investing as well.
• 11:21
  And I think that comes down to education and being able to learn more about it.
• 11:25
  We're not as scared about the share market crash anymore.
• 11:27
  We've learned past that companies like sharesies have really changed the game and really opened the door for making that more accessible.
• 11:34
  And, and so I think the same is happening for business.
• 11:36
  So people are now learning more.
• 11:38
  They're understanding that they can actually not only earn an income from A business, but they can also build an asset that they can sell one day.
• 11:45
  Yeah.
• 11:46
  So when you're thinking about a business as an asset, not just like income, not just a job, does that change the way you would approach it, run it?
• 11:57
  Like, what.
• 11:58
  What is that mindset and that approach?
• 12:00
  Like?
• 12:01
  Yeah.
• 12:01
  So I think if you're building a business and it's an asset for you, you're not just trying to generate an income from it, you're actually trying to build something that can one day be sold.
• 12:12
  So to be able to sell a business in the future, it needs to not be completely attached to yourself.
• 12:17
  Right.
• 12:18
  Because you can't.
• 12:18
  So I will never sell this business.
• 12:20
  Continue.
• 12:22
  So you need to be able to sell something that, yeah.
• 12:24
  Is not attached to yourself.
• 12:26
  It has the systems, the, you know, the clients, the suppliers, everything set up.
• 12:32
  And someone else can then go and take that to whatever level they want to.
• 12:36
  So I think there is.
• 12:38
  Yes.
• 12:38
  The kind of key thing is that, yes, you can run them very differently in terms of if you are just trying to get an income off it, then you'll try to maximize that.
• 12:48
  But at the end of the day, if you're trying to build a business, you're really actually trying to do yourself out of a job.
• 12:52
  You actually don't want the business to be reliant on you.
• 12:55
  You want it to be able to operate without you so that you can one day sell it.
• 12:59
  It is interesting in terms of, you know, we were talking off camera before and you were saying about, you see so many more young people coming through and they have so much more financial education than they used to.
• 13:08
  And I think a lot of this comes from.
• 13:09
  It feels like a lot of the ground has shifted financially in terms of what's required to get ahead.
• 13:16
  And I think this is also part of that, where people are looking at businesses, they're looking at having control over their income in a way, and they're also looking at how can I build something for the future?
• 13:27
  And the business is part of that.
• 13:28
  Right.
• 13:29
  I mean, do you think.
• 13:30
  I sense a real shift in how people approach their money and their finances and this being part of it.
• 13:34
  But what about you?
• 13:35
  What are you seeing?
• 13:36
  We are seeing the younger generation coming through and they are so switched on.
• 13:40
  They know what they want, they've researched how they're going to get there.
• 13:44
  They're operating their money really well.
• 13:45
  I mean, not everyone, but like a lot of them are.
• 13:48
  And.
• 13:48
  And it's really cool to see.
• 13:49
  And I think, you know, as someone in my 30s, I'm like, oh man, like this is great.
• 13:54
  Had I been doing that back then, look where I've been now.
• 13:57
  But I think it's really, really cool to see and there's, I think the element of now being able to learn and understand what the different asset classes can do for you can really, really move the needle for people.
• 14:09
  And it's not for everyone, and I'm not recommending that everyone go out and do it.
• 14:13
  But I think there's definitely a switch of it's not just a job, it's not an income.
• 14:18
  If you're doing business right, you're building an asset and that is of value and you can do something with it in the end.
• 14:23
  Yeah, I mean, yeah, I had a 17 year old on the podcast a few weeks back who had already started heaps of businesses.
• 14:30
  He was really switched on.
• 14:31
  He was really learning and experimenting with his money and very active in it.
• 14:37
  And I look at some of these younger generation, I'm just like, man, if I had started when they did, what a night and day difference that could have been.
• 14:45
  You don't have to get everything right.
• 14:47
  Sometimes it is learning and experimenting, but that actively taking charge and saying, I'm going to try some things and see what works.
• 14:54
  I think it's such a necessary switch.
• 14:57
  Right?
• 14:57
  Definitely, definitely.
• 14:59
  I do think as well though, it doesn't mean that it's too late.
• 15:01
  Right.
• 15:02
  So for me in our business, both my business partner and I did almost a decade each in finance before, before we started and launched our business and we actually find that that is now some of our secret sauce
• 15:13
  because we actually learned the trade, we really understood it, we built a competitive edge and we were then able to go and launch a business coming from a place of experience, a place of credibility and a place of
• 15:26
  actually knowing what to do.
• 15:28
  So I think that there is also an element of yes, the younger generation can have a great head start and can really hit the ground running.
• 15:36
  So, but also for us a little bit older, we can absolutely still have a have a real opportunity in that space that you don't have to do it when you're younger either.
• 15:47
  Yeah, useful energy versus experience and some skills.
• 15:51
  I sometimes look back at the skills that I've ended up using in this business that I would have never thought things that I just said yes to.
• 15:57
  It worked, try it.
• 15:58
  And I was like, eh, that's not for me.
• 15:59
  And moved on.
• 16:00
  But you still picked up some skills along the way and then you end up using those skills later in a totally different context.
• 16:06
  And even When I look at my uni time, I have too many degrees, I spent too much money, I didn't know what I wanted to do, so I got a few more degrees and then was like, oh, that's
• 16:14
  actually a lot of debt.
• 16:14
  Yeah.
• 16:16
  And for a long time I felt like that was wasted time and wasted money.
• 16:19
  And now I look back and I'm like, actually, I did end up repurposing that in unexpected ways, literally a decade later.
• 16:28
  Particularly if you go into business, Right?
• 16:29
  Yes.
• 16:30
  So I'm the same.
• 16:31
  I haven't done finance my whole career.
• 16:33
  I actually had a couple of different careers first.
• 16:35
  And I think, like, now in a business, I'm really tapping into those skills and those industries that I was using back then and has really kind of shaped who I am now as a business owner.
• 16:46
  And I think that is really powerful.
• 16:48
  I don't think there's ever a wasted skill or, you know, career move.
• 16:53
  It's all about making sure you're learning and as long as you're learning and continuing to challenge yourself, you're going to do really well.
• 16:59
  Yeah, yeah.
• 17:00
  Oh, man, I so agree.
• 17:01
  I could agree to death on that one.
• 17:03
  So when you went to leave the big bank environment, which you'd been part of these huge teams, and then you're setting up your own business yourself, you know, living what we're talking about here, why did you want to
• 17:16
  make that transition?
• 17:18
  It all started a long, long time ago.
• 17:21
  So I actually always wanted my own business and I actually, in my 20s, tried to start a business, realised quite quickly I didn't quite have the capital skills to do that.
• 17:33
  So I made a really deliberate decision to change careers and I went into business banking.
• 17:37
  In my mind, I was like, well, I'll just go talk to business owners all day, I'll learn about their business, I'll see under the hood, I'll help them grow their businesses and see where it takes me.
• 17:46
  Turns out I spent about nine years working with business owners, right.
• 17:50
  From small business up to really large organizations and, and really learn in depthly, like, what worked, what didn't, how they got there and actually fell in love with finance.
• 17:59
  So I was not in finance prior to that and actually really, really loved, loved it.
• 18:04
  While I was in the bank, I actually looked at buying a number of businesses.
• 18:08
  I looked at different IMs, ran the numbers, really, really looked at it, but nothing ever quite clicked.
• 18:14
  And then my lovely business partner, Jess, actually came up with the idea of Vesta and what that could be and it really flicked a switch in me Because I realized actually what I had learned over the last decade
• 18:27
  in banking really was valuable.
• 18:29
  And actually what we could then go out and create with now, being independent and working across the banks meant that we could really go out there and have, you know, offer our clients something different.
• 18:40
  So we made the decision.
• 18:42
  It was really scary because I think when you're in, you know, they call it the golden handcuffs.
• 18:47
  You know, you've got a great job, you get all the perks.
• 18:51
  We got six weeks annual leave every year.
• 18:53
  I mean, it was great maternity cover, all the things.
• 18:57
  And I think from going out and starting from scratch and building something from nothing was always the dream, but it was still a really big decision.
• 19:05
  And we definitely, we went out there and we did it, and now I would never look back.
• 19:10
  So it definitely has been the best decision we've ever made.
• 19:13
  But I think, yeah, it's really interesting.
• 19:15
  Always wanted to own my own business, Always wanted to get there.
• 19:19
  And I actually think that potentially the experience that we got through those years actually have enabled us to do a better job of starting our business and growing it to where it is.
• 19:30
  Can I be Snoopy as well and say, you know, how does it compare going from employee to business owner in terms of both, you know, the finances of it and how it fits in with lifestyle aspects like those
• 19:45
  two big changes?
• 19:47
  Yeah.
• 19:47
  So in terms of the finances, as I said, I always wanted my own business.
• 19:51
  So when we bought our last house, I actually set up our mortgage so that I had an option to go do something if I wanted to.
• 19:59
  Smart.
• 20:01
  And I love doing this for clients.
• 20:03
  Basically when we know that a client has a plan in the place in the future, we want to set them up for that now.
• 20:08
  So when that opportunity arises, they're in a position to say, yes and not in a position to go, oh, shit, how am I gonna pay the mortgage?
• 20:15
  So what we did when we bought our last house, and that was about sort of seven, eight years ago, is we actually set up the ability to have access to some capital so that if we wanted to go
• 20:26
  do something, we could, when the opportunity came to start the business, like you said, like we.
• 20:33
  You have a great salary.
• 20:34
  When you stop, the salary doesn't continue.
• 20:36
  Nothing's there, particularly when you start a business.
• 20:39
  And so basically I was in a position where I was able to pay myself for a while until the business was able to then support an income for me.
• 20:47
  And basically that gave me the freedom to, one, not only start the business and ensure the mortgage and the family and everything was still Sorted, but also make sure that we were able to really like, give the business
• 21:00
  the time it needed to actually now support us for an income as well.
• 21:05
  So I think that is a really important thing in terms of setting that up.
• 21:09
  You know, making sure that I had an emergency fund, making sure I had all of the things set aside so that if things go wrong, we were okay and we didn't have to be stretched in that position.
• 21:20
  So that took a lot of weight off.
• 21:23
  And it's not like a, oh, just cover yourself for a month.
• 21:25
  No, I covered myself for like six to nine months.
• 21:29
  So, you know, like, it didn't necessarily mean that's when we started paying ourselves.
• 21:33
  But in terms of.
• 21:34
  It was earlier, but it was like I was prepared that should the business not be able to pay ourselves, we were fine, we were good to go.
• 21:42
  And that was really cool.
• 21:43
  Is the idea that long term, it then becomes bigger than it was in the employee salary side of things?
• 21:51
  Yeah, definitely.
• 21:52
  Your earning is uncapped.
• 21:53
  Yes.
• 21:54
  You maybe have to take a bit of a cut earlier on or earn nothing to begin with, but eventually you can make it whatever you want it to be.
• 22:02
  And so for me personally, yes, this business will allow my income to substantially grow.
• 22:09
  And the more that we invest into the business, the more that that's going to grow as well.
• 22:14
  So where I was at a job that I had a cap in terms of the salary, in terms of the bonus structures, in terms of where I could take that as well regionally, in New Zealand, basically, here it
• 22:27
  is now untapped.
• 22:28
  As a business owner, it is always.
• 22:30
  That risk reward conversation, isn't it?
• 22:32
  Where everything with money, if you want to earn a bit more on investments, the share market is tagged higher risk, but you get those ups and downs and overall over time you get more.
• 22:45
  Same thing with business.
• 22:47
  You're stepping away from that safety if you get paid this every fortnight or every month.
• 22:51
  But if you take that step and push into it, the reward can be so much more.
• 22:56
  But you have to take that step into the unknown.
• 22:58
  Absolutely.
• 22:59
  That's why business isn't for everyone.
• 23:01
  It definitely is.
• 23:02
  You do take on a lot more risk and you have to be comfortable with that.
• 23:06
  But I think again, it's around educated risk.
• 23:09
  So the business owners that I've seen that have done really, really well.
• 23:12
  It's all educated risk and they have an element of knowing that they have, you know, know a backup plan or they're not risking everything.
• 23:21
  There's.
• 23:21
  There's something left over.
• 23:23
  It is all around making sure.
• 23:24
  You understand that.
• 23:25
  And then being in a position to take on that risk.
• 23:28
  Okay, so buying a business versus starting one.
• 23:32
  This is one I've had so many people DMing me, emailing me about, because there are lots of people who would like to own a business or run a business, but they're just not sure about making that leap.
• 23:44
  It's a bit daunting.
• 23:45
  And buying business versus starting one can be quite different, can't it?
• 23:49
  Yes.
• 23:50
  So when are they, when are they good?
• 23:52
  Different situations.
• 23:52
  Yeah.
• 23:53
  Cool.
• 23:53
  So when you start a business, quit your job, day one, Monday rolls around, you have no income, no clients, no systems, no processes, you're completely starting from scratch.
• 24:06
  Right.
• 24:06
  So you literally have to do everything.
• 24:09
  When you're buying a business, you are, yes, you are paying for that business, but you are buying on day one.
• 24:15
  The clients, the team, you're buying the cash flow, you're buying, you know, the.
• 24:20
  Where they operate from.
• 24:21
  So you basically are buying a business really packaged and good to go.
• 24:25
  So I suppose the key difference is the upfront cost.
• 24:28
  Right.
• 24:28
  In terms of when you're buying a business, you have to outlay money to buy that.
• 24:32
  But at the same time, from starting a business, you do have to literally do everything yourself.
• 24:37
  From start.
• 24:37
  From the start.
• 24:38
  So they're, they're definitely very different.
• 24:41
  And I wouldn't say any option is right or wrong.
• 24:44
  It really depends on what the opportunity is in front of you.
• 24:47
  Interesting.
• 24:48
  So it's having a little look at what you've got on your side and where you want to go and then figuring out from there.
• 24:55
  And so am I right in summing up, sort of buying a business, you can get going, you can hit the ground running, you get a little bit of the edge, but you'll probably pay for it.
• 25:03
  Starting a business, you can start off with fewer resources, you can test, you can iterate, but you are starting from nothing.
• 25:09
  And it might take longer to ramp up and like hit profitability, that sort of thing.
• 25:13
  Is that?
• 25:14
  Yeah, definitely.
• 25:15
  And I think there's an element of when you're starting at your own business, you have, you know, you're building everything right.
• 25:21
  So you, you're setting it up exactly how you want it.
• 25:25
  Whereas when you're buying a business, it is an established organization, there might be things that go right, there might be things that are not so good.
• 25:32
  That's why really good due diligence is really important.
• 25:35
  But you definitely are.
• 25:37
  Yeah, you have probably less control of what has happened, but you basically can take it forward.
• 25:43
  Yeah, yeah.
• 25:44
  And I've talked to a few people who've found that somewhat of a.
• 25:48
  I don't think it's ever necessarily easy.
• 25:50
  Going to work is never necessarily easy.
• 25:52
  That's why they call it work.
• 25:54
  But an easier start into the business world for a lot of people is to come into something established and say, right, this is running and now I can figure out how to run it better.
• 26:04
  But we've got a track record.
• 26:06
  But the finance, that is one that so many people messaged me about and said, I just don't know how I'd make it work financially.
• 26:13
  So what are some options for people there?
• 26:16
  Yeah, I think there's a real misconception out there around how you would actually fund buying a business.
• 26:21
  I'll have people ring me and they'll be like, so do I need, like, if I'm going to buy a million dollar business, do I need a million dollars in cash to buy it?
• 26:29
  Like, no, absolutely not.
• 26:30
  There's a lot of different ways out there to do it.
• 26:33
  And the cool thing is often it's a combination of them that actually is how someone will eventually buy the business.
• 26:40
  So a couple of things that you can do to buy a business would be cash.
• 26:44
  So having access to some funds to tip in it can be releasing equity in your property.
• 26:51
  So we all know that banks will let us lend against our properties.
• 26:56
  Typically in New Zealand it's around up to 80, 85%.
• 26:59
  So if our mortgage is a lot lower than that level, then we can release equity in our property to, to buy into a business.
• 27:05
  We can also actually lend against the business itself.
• 27:08
  And a lot of people don't realize this, so it's called like a cash flow loan or an unsecured loan.
• 27:13
  And basically they're banking on the future earnings of that business to pay down that loan.
• 27:19
  So banks look at an established business and there is proven history there.
• 27:23
  There is the ability for the bank to go, okay, so we kind of have got historic financials.
• 27:29
  We kind of understand how this business operates.
• 27:31
  We're comfortable that this business is going to continue to operate at that kind of level.
• 27:36
  And so they will actually lend money in the business for you to then buy it.
• 27:40
  The other thing in terms of the business could be there could be assets in the business that they could fund against.
• 27:45
  So there could be vehicles, fleet plant and machinery, those kind of things that the bank are quite happy to lend against.
• 27:51
  So we can leverage against that.
• 27:53
  Another thing could be a vendor loan.
• 27:55
  So the vendor itself might leave money into the business and basically you pay that out over Time, but you're not having to fork that money up upfront.
• 28:03
  And I think the thing that a lot of people don't realize is if they don't have the cash, they assume that they can't go ahead.
• 28:10
  But you actually can 100% fund a business purchase.
• 28:13
  But you do have to have skin in the game.
• 28:15
  So you have to either put up your house and some equity or you need to work out another sort of solution.
• 28:21
  But it definitely is the ability to actually fund a whole 100% of the business purchase.
• 28:26
  Amazing.
• 28:27
  I love that there are other options there because I think it does get.
• 28:32
  It helps to be a homeowner often it helps to have assets in general, but you have that, that home asset that you can say, you know, we can lend against this and we all sort of understand the mortgage
• 28:45
  system so it makes a bit more sense to us.
• 28:47
  But I like that it's not limited to that because then otherwise you can end up with this really two tier system of people who can get ahead and try things and risk things versus people who would like to
• 28:56
  and might have the energy and, and the will and the skills and they can't.
• 29:00
  That would suck.
• 29:01
  Yeah, definitely.
• 29:02
  You don't have to have a home to buy a business.
• 29:05
  As you said though, it definitely makes it easier.
• 29:07
  The old saying, safe as houses, banks take that very literally.
• 29:11
  Yeah.
• 29:12
  Especially in New Zealand.
• 29:13
  Am I right that like often the talk is that banks are far more happy to lend for property and against property than on other things?
• 29:23
  Is that right?
• 29:23
  They're a bit friendlier on that front.
• 29:25
  It is a lot easier to get by a house than it is to get lending in your business.
• 29:30
  And I think a lot of that has meant that a lot of people have gone that way.
• 29:34
  Right.
• 29:35
  Because they found it easier to.
• 29:37
  The thing though, I would say is that it doesn't mean that it isn't that you can't get it done.
• 29:42
  It's just you need the right people in your corner.
• 29:44
  You need someone that understands business and understands business lending.
• 29:48
  And if that's something that you're really passionate about, then get a good person to help you through that.
• 29:53
  Because I would argue as well that sometimes you have more options.
• 29:56
  As a business owner, we've actually helped people who have started their own businesses or bought their own businesses and that's been the main way that they have got into it without a home.
• 30:06
  And then they've really struggled to actually get a home because they have a business.
• 30:10
  And business income can be a little bit more variable.
• 30:12
  It can be A little bit harder for people to understand.
• 30:15
  And so we had a client who had been 10 years trying to buy their first home and had never been able to do it because someone didn't understand their business and how it operated.
• 30:25
  And we were able to have 10 years, and we were able to help them buy that first home because we were able to understand and basically restructure their business finances, put it in a way where they were able
• 30:36
  to do that.
• 30:37
  And so I think there is a real misconception out there as well, around not understanding that side.
• 30:42
  So it can go both ways.
• 30:44
  Like it can flip on itself.
• 30:45
  In time, it will change, it'll get better.
• 30:48
  I think our new governor really wants to maybe put some things in place that are gonna make it easier for business lending, which would be great.
• 30:57
  So I'm hoping that in time we'll make it easier for people to.
• 31:01
  To do business, to get access to funding and.
• 31:04
  And to really, like, you know, improve our economy as well.
• 31:07
  Well, exactly, because you do hear the classic Bernard phrase.
• 31:11
  I think it.
• 31:11
  I think it was him that coined it, where we talked about New Zealand just has a housing market with bits tacked on.
• 31:17
  And that's our economy.
• 31:19
  And it is very much that way.
• 31:21
  And when you look at what you can get lending for and what is encouraged, basically it's investing in houses and getting the business.
• 31:28
  Lending can be harder.
• 31:29
  And I mean, personally, that frustrates me because we should be supporting small businesses more, right?
• 31:35
  Yeah, 100%.
• 31:37
  I would say, though, that I think there.
• 31:40
  It's not for everyone, but there are definitely ways that you can make it easier for you to get business finance and to make that interest rate differential get a lot closer.
• 31:49
  Run us through some.
• 31:50
  Yeah, so for example, we've just helped a client buy a business.
• 31:53
  So it's very topical for this conversation today.
• 31:56
  They have 100% funded this business purchase.
• 31:59
  What they have done is they had a bit of equity in their home, so we have been able to use that for their contribution.
• 32:04
  So they didn't have any cash to contribute, so we've used their equity in their home to do that.
• 32:09
  And then we've actually done majority of the lending in the business itself as a business loan.
• 32:13
  Now that interest rate is in the sixes, which is really cool.
• 32:17
  It's technically unsecured.
• 32:19
  There is an overarching sort of security mix behind it.
• 32:24
  In terms, they do have the house and the mortgage as well, but technically this loan has not necessarily got any security behind it.
• 32:30
  And this is in the sixes.
• 32:32
  You know, our you know, floating interest rates are in the sixes for houses, so pretty bloody cool to be able to see that there is actually appetite out there.
• 32:40
  And I think the key thing there for that client was that we were able to.
• 32:45
  We were tendering the.
• 32:46
  The opportunity so we were bringing competition into the mix and we also were able to present it in a way where we were helping the banks understand how to mitigate the risks of that business.
• 32:58
  So they were in a position to put the best price forward for that client.
• 33:02
  So you hear a lot of things like, you know, interest rates in the teens, the 20s, like getting really high for business.
• 33:08
  It doesn't have to be that way.
• 33:10
  If you've got the right person in your corner, that can really help you move the needle and really help them understand your business.
• 33:16
  This episode of Making Sense is supported by Odoo.
• 33:20
  Be honest, how many subscriptions are you paying for right now to run your business or side Hustle?
• 33:25
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• 33:28
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• 33:58
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• 34:01
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• 34:03
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• 34:07
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• 34:17
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• 34:20
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• 34:25
  I'll also pop that link into the show notes for you.
• 34:27
  Right back to it.
• 34:29
  We were talking earlier as well about in terms of like finding the right business and doing some due diligence.
• 34:34
  Do you think there are certain types of businesses that do better in New Zealand or is it about more matching yourself to the business?
• 34:42
  Yeah, what I would say, having seen under the hood of all industries, all around New Zealand, all different locations, there's not one industry that's better than the other.
• 34:52
  There is good and bad operators in every single industry.
• 34:56
  And when I say bad operators, maybe just not as good at running a business.
• 34:59
  I don't think there's Necessarily one that shines out.
• 35:03
  One thing I would say though, is running a business is not like a job.
• 35:07
  You can't clock in, clock out.
• 35:09
  You know that, I know that.
• 35:12
  And so what I would say is that don't go into a business if you have no interest in it.
• 35:19
  If you're just in it for the money, I think you really do need to have an interest in what you're doing and to be really good at what you do, you have to have a real passion for it.
• 35:29
  And I think that there is real value in that.
• 35:33
  You can make a great business in any industry.
• 35:35
  It's really how you then grow it and what you do with that.
• 35:38
  So I don't think there's really one size fits all.
• 35:41
  That's so interesting.
• 35:42
  That's just sparked something that I was reading about the other day that had me really going.
• 35:46
  Yes, as I was reading it, where they were talking about, there are lots of people who say they would like to run a business.
• 35:55
  And you say, oh, cool, what sort of business?
• 35:57
  And they're like, I don't know.
• 35:58
  I just really could see myself as a business owner.
• 36:02
  It's sort of like, okay, that's fine and that's cool.
• 36:04
  But is this about who you would like to see yourself as versus what you would like to be doing?
• 36:10
  Because the wanting to see yourself as a business owner, Great.
• 36:14
  And I also think you can probably want to run a business for the various things it can bring you.
• 36:19
  Like, I am fine with people taking a cynical approach to life of, I would like to earn more.
• 36:23
  Great.
• 36:23
  Running a business can be good for that.
• 36:25
  I would like to be more in control of my own hours.
• 36:27
  Okay.
• 36:28
  You can set your hours.
• 36:29
  They will probably still be like big hours, but you can set them all these things.
• 36:33
  I'm fine with people wanting to do that, but you should want those tangible things, I think, rather than just like, I think I would be a great boss.
• 36:40
  It's sort of.
• 36:41
  Yeah, that different mentality.
• 36:43
  Almost like when people say they would like to write a book and then you say, what about?
• 36:46
  And they go, dunno.
• 36:48
  And they just want to be the sort of person who would write a book, you know?
• 36:50
  Yeah, definitely.
• 36:51
  And I think, you know that that sort of thing can be really, really interesting.
• 36:54
  It's sort of interrogating why you want to be there.
• 36:57
  Um, and it definitely helps if you know a bit about the industry or at least find it interesting and can see yourself talking about it endlessly at the dinner table.
• 37:08
  You gotta find it interesting on some level.
• 37:10
  Right.
• 37:10
  Cause it's gonna be occupying.
• 37:11
  Yeah, yeah, sorry kids.
• 37:14
  Like, sorry, everyone.
• 37:16
  You should find it interesting on some level.
• 37:18
  Cause it's gonna be occupying a lot of mental real estate, right?
• 37:20
  There's such value in that.
• 37:22
  Because the, the thing with being a business owner is it's just everything all the time, right?
• 37:28
  And I think we will have a lot of people bring us up and say, hey, I want to buy a business.
• 37:32
  And it's great.
• 37:33
  It's like, yeah, why?
• 37:33
  Why do you want to buy a business?
• 37:35
  And if they are kind of like, oh, I kind of, you know, want to, I want to work less or I want to be more in control or maybe I want, yeah, more flexibility.
• 37:48
  Like there's definitely things that can work.
• 37:49
  But I would say that a lot of people don't realize how hard it is to run a business.
• 37:53
  I think when you are in a role, you can clock in, clock out.
• 37:57
  It's not your responsibility, it's not your name on the door.
• 38:01
  And I think there's sort of when people running their business, you know, you wake up at 2am in the morning worried about something or maybe excited about something.
• 38:11
  And I think there's definitely an element of the fact that it's a big commitment and, and we sort of walk through all of our clients around when they are sort of looking to buy or start a business, really
• 38:22
  helping them understand what it actually is like so that they can ensure that it's the right move for their family and the right move for what they want to achieve.
• 38:30
  Because I think that, yeah, it's amazing, but it's quite hard.
• 38:33
  Literally, one of my very specific trigger points for I need to make a change on something that's going on in the business right now is if I wake up two mornings in a row at 3am because I can't
• 38:44
  turn my brain off.
• 38:45
  And that is one of my noted red flags of, oh, something's going wrong and I need to make a change.
• 38:51
  But the reason that that is a deliberate red flag is because that has happened multiple times where I can't switch my brain off.
• 38:58
  And it's woken me up at 3am and that's it.
• 38:59
  I'm awake and I'm thinking about the business.
• 39:02
  And that's for a business that I love and that is operating really well and really enjoy running it.
• 39:07
  You know, that's, you know, something that I've experienced multiple times.
• 39:11
  So what do you think?
• 39:12
  Is there a certain type of person that can be good or bad at running a business?
• 39:17
  Like there traits that people should look to be building in themselves or identifying in themselves.
• 39:24
  Mindset's huge.
• 39:25
  When you have a business, it's ups and downs rollercoaster.
• 39:29
  The highs are incredibly high, the lows are incredibly low.
• 39:32
  And you really have to have a really strong mindset and a strong why are you doing this?
• 39:38
  You also have to be able to learn, you have to be able to adapt.
• 39:42
  You have to constantly want to improve on things always as well.
• 39:47
  Constantly hustling.
• 39:49
  I think there's an element of the businesses that I see go really well and go through all different economic cycles and really stand the test of time are those that can pick up the phone and get shit done.
• 40:02
  Yeah.
• 40:02
  You see an issue and you say,.
• 40:03
  Right, get it done.
• 40:04
  Yeah, exactly.
• 40:06
  This may be a problem.
• 40:06
  I'm not going to play possum and freak out about it.
• 40:09
  What's my next action point?
• 40:10
  A hundred percent, like, take action and if you don't know the answer, find someone who does.
• 40:14
  Yeah, absolutely.
• 40:15
  Finding those people that are good at what they do and understand your problem at a, at a new level, I think that's such a key point.
• 40:22
  I think being able to put aside your own ego of wanting to get things done.
• 40:27
  The New Zealand number eight wire mentality is brilliant in a certain way.
• 40:31
  Right.
• 40:31
  Of I will just figure it out, I will find a solution that works and patch it up and get moving.
• 40:38
  But it can have a drawback in terms of that mentality can also lead to what we call in my household a huckery solution.
• 40:45
  And huckery solutions were a real thing for a long time.
• 40:48
  In my house.
• 40:49
  I'm trying to stamp them out.
• 40:50
  Can we do it once and do it right, please, instead?
• 40:54
  Because when you can find someone who really knows what they're doing and can look at it and say, yes, that patched up solution could work.
• 41:01
  But here's a faster, better, more efficient way that can save you time, that can save you money.
• 41:07
  Even if you're paying for that person, it can save you money overall.
• 41:10
  And it's really important to know when to look for that outside expertise.
• 41:15
  Right.
• 41:15
  100%.
• 41:16
  I mean, in our own business we have done that back a few months ago.
• 41:21
  We really found that we knew where we wanted to go, but we didn't know quite how to get there.
• 41:27
  And we were finding, you know, a fast growing business and we're like, we just need someone who gets it, who's been there, done that.
• 41:34
  And so we brought on a coach and it's been absolutely like fantastic for our business.
• 41:39
  He's sold his business and he now coaches people doing the exact industry that we're in.
• 41:44
  And it has been an absolute game changer because we can come to him with a problem, he completely gets it, he knows exactly what to say, what to do, and within minutes we are back on track.
• 41:54
  So I think there is huge value in that, I would say as well, in terms of business owners.
• 42:00
  Find that person or find the team that lets us come back to the team, the boardroom, of having those people that are in your corner who are specialists in what they do and using them to get you where
• 42:12
  you need to go is really, really important.
• 42:15
  So, for example, when we are working with clients that run businesses or looking to buy businesses, they don't understand finance.
• 42:24
  And it's not their job to understand finance.
• 42:25
  I mean, I'm not doing my own plumbing.
• 42:28
  I'm calling a guy to do that and he's gonna do a bloody good job of it.
• 42:32
  Or girl.
• 42:33
  But I think we can often think that we can just maybe watch a YouTube video or run it through ChatGPT and really understand it, I think.
• 42:41
  But if you are in a position where you can actually work with someone who completely understands that, you are gonna move the needle significantly more and save a lot of stress and time and you can get on to
• 42:53
  doing what you're really good at.
• 42:54
  Yeah.
• 42:54
  And I think what you say there about a coach from your industry so important because I.
• 43:00
  There's a great.
• 43:02
  The business mentors program in New Zealand, which I think is run through MB is brilliant and they have a lot of people available and it's a very cheap way to find a coach when you're starting out.
• 43:11
  And I worked with someone through that at the very early stages of my business, which was fantastic, especially at that early stage where I maybe didn't need as much specialized help.
• 43:20
  It was literally like laying the ground or making sure I was running a business properly.
• 43:24
  But then as I started leveling up, I was like, I really need someone who actually understands independent media and podcasting and social media.
• 43:32
  And this stuff is incredibly specific and incredibly specific to the New Zealand environment too.
• 43:37
  We do things a little differently here because it's such a small country and so a slightly different way of interacting with your audience.
• 43:43
  And so then I was looking for someone who really understood that.
• 43:47
  And that was a real game changer as well, understanding sort of the different stages that your business could be at and when to bring in those real specialists.
• 43:55
  And it is a game changer in terms of saving yourself time, saving yourself money, even if it's an investment.
• 44:00
  Right.
• 44:00
  And that's the key thing.
• 44:02
  It's an investment.
• 44:03
  So I'm not gonna lie, like, you're paying for a coach, particularly someone who's going to be an expert in your industry.
• 44:09
  You're probably gonna have to pay for that.
• 44:11
  Right?
• 44:11
  Like, it's not a free service.
• 44:12
  You're.
• 44:13
  You're buying that expertise.
• 44:15
  You're basically being able to level up your business way quicker because you have access to someone who's already done it.
• 44:21
  And I think there's an element of people will get caught up on the cost.
• 44:25
  But if that, if you treat it like an investment, if you understand of what you're gonna get in terms of return, it is an absolute game changer.
• 44:32
  And I think a lot of people are scared to take that advice, take that coaching, and you just, you do it.
• 44:39
  Is my.
• 44:39
  Is.
• 44:40
  My motto is do it.
• 44:42
  I think we.
• 44:43
  I mean, we're relatively new into our business, but I think, you know, even had.
• 44:47
  We had him on from day one.
• 44:49
  Wow.
• 44:49
  You know, like, it's incredible what we've been able to achieve in a really short amount of time with having him on board.
• 44:54
  So get a coach.
• 44:56
  Yeah.
• 44:56
  100.
• 44:57
  And I often think of it a bit like fitness.
• 44:59
  Like, I really love fitness and weights and all that.
• 45:03
  And we often talk about, you know, there's, there's bulking and cutting.
• 45:06
  When you're bulking, you're trying to build muscle and you're trying to, you know, really like, level up.
• 45:10
  You're eating a lot more and you're trying to, like, build up your body like that.
• 45:13
  And then when people are cutting, they're often trying to, like, reduce down a bit more, eat a bit less and show off all that hard work.
• 45:19
  And then it's a little bit the same with the business where you might have seasons of really investing, where maybe you don't have much profit left, you don't have much left over, but you're really putting everything into building
• 45:30
  that business and building something for the future.
• 45:33
  And then after you've had a bit of build, you might say, okay, this bit can go, this bit can go, this bit can go.
• 45:36
  And you're cutting back, cutting back, cutting back.
• 45:38
  And you're giving time for all that hard work to then pay off and shine and you can bank some profits again.
• 45:43
  And I think there's different modes and different seasons.
• 45:46
  And this year for my business, I was like, right, we're in build mode, we're investing in it.
• 45:51
  And we did have to.
• 45:52
  And it's really funny, my husband who runs this ad alongside me.
• 45:57
  He's the world's most frugal man, is the nice way to put it.
• 46:01
  Cheap is another way to put it.
• 46:02
  My account's an accountant, so we can font on there.
• 46:08
  They keep us in line, but Lord, they.
• 46:10
  They get stressed when they see us spending money.
• 46:13
  And he really had to like, sort of get on board and be like, yep, it's investments, investment, investment.
• 46:18
  And it is all very much linked to.
• 46:20
  We're not just spending money for the sake of it, but it's all very much linked to outcomes and what we're trying to achieve.
• 46:26
  That taking that time to invest, it's scary, but you got to do it, right?
• 46:30
  You definitely do.
• 46:31
  I think it's like anything with.
• 46:33
  With growing an asset, right?
• 46:34
  Growing.
• 46:35
  You have to invest in it to keep it growing.
• 46:37
  So I think a lot of people look at it as a cost, but turn it into investment and it really flicks the switch and it really moves you back into that mindset chat of like a growth mindset.
• 46:47
  So we're not.
• 46:48
  If we always constantly cutting when we're running a business, we actually wanna grow it.
• 46:53
  We want to, you know, and that is going to not only increase our income in the future, but also the value of the business as well that we're building.
• 47:00
  And Seasons is totally a thing.
• 47:01
  Like, so when we started the business, we were very much in a season, like you had to, you know, I'd be a little bit more across everything.
• 47:10
  And we definitely started the business knowing we put an investment in so that we could hit the ground running.
• 47:15
  We could invest in different activities like branding and marketing, our working capital, things like that.
• 47:20
  And then as the business grows, you constantly have to reassess where you are in that.
• 47:24
  And can the business now support more things?
• 47:26
  Can you start taking income from the business?
• 47:28
  Can you start growing in this area?
• 47:30
  And I think that's something you constantly have to reassess.
• 47:33
  Yeah.
• 47:33
  What stage you're in, what season.
• 47:35
  And our lives have seasons as well.
• 47:37
  Like your personal finances have seasons, for example.
• 47:40
  You know, whilst we were starting the business, for myself personally, I was having less, you know, aggressive on my mortgage repayments because I was in the season now of starting and building a business.
• 47:51
  And so I think as well, like go kind on yourself in that space, like you don't have to do everything at once.
• 47:56
  And as long as you have a plan in place, it'll come right.
• 48:00
  I love that.
• 48:00
  I think that's such an important reminder because of course, we're constantly navigating our Personal and our business lives at the same time.
• 48:06
  Okay, so we've covered who might be a good or a bad person to be looking at buying or starting a business.
• 48:12
  What about in terms of the businesses themselves?
• 48:14
  Red flags, green flags.
• 48:15
  Yeah.
• 48:16
  Cool.
• 48:16
  So I think when we're looking at a business like it's normally done through like a business broker and you'll get like a information memorandum and in there will be a lot of marketing fluff.
• 48:28
  It is a sales document and they'll be talking about all the great things in the business and how it operates and they'll also have some financial information in there.
• 48:37
  And so what the key thing we would be getting our clients to do is send us through that information memorandum and we have a look at everything.
• 48:45
  And the key things that we're trying to look at is we basically trying to understand what are the key risks in the business and what is the likelihood of this business continuing to operate at the levels it is
• 48:55
  operating at.
• 48:56
  So we're looking at trends, you know, as revenue and profitability increasing or decreasing.
• 49:01
  Is there a reason why, for example, like we've just come out of a pretty or hopefully coming out of a pretty gnarly recession.
• 49:08
  So some of the financials can have an impact, right?
• 49:10
  Like they're showing some, some tougher times in there.
• 49:14
  And so understanding that, understanding what it's going to look like moving forward, the key costs in the business, the key drivers around like gross profit, around profitability or also understanding like the add backs as well that people are
• 49:27
  adding back and really understanding the industry itself.
• 49:31
  So does it have like diversified clients or is it like really reliant on one client?
• 49:37
  So is there a big risk of potentially that stopping?
• 49:40
  Why is the owner selling the business?
• 49:42
  Is he gonna go set up shop down the road or is he legit legitimately selling the business and looking to retire?
• 49:48
  So really understanding like what are the key risks of this business being able to continue to operate at that level so that you can be confident in the asset that you're buying and the money that you're investing into
• 50:00
  that asset.
• 50:01
  So a good business is something that would have, you know, sustainable earnings and a trending upward in terms of profitability and revenue.
• 50:10
  So we would normally like to see at least three years so we can see consistency there.
• 50:15
  We're gonna, ideally a good business is not going to be attached to our owner.
• 50:19
  So it can actually continue if you take it on, it would have a diversified client base, might have a good team of staff involved that aren't going to also Leave when, when the owner leaves.
• 50:30
  So ideally not family of the owner, if they, you know, leave as well.
• 50:34
  So there's just definitely things around making sure there's consistency there and that there's also opportunity for you to go and make your mark.
• 50:41
  And should you go through those documents with anyone?
• 50:44
  Because I imagine it's quite daunting for some people to be going through all that stuff.
• 50:48
  Yeah, definitely.
• 50:49
  So if you're buying a business, you need a really good team around you.
• 50:52
  And I think a thing that people don't realize is that unlike buying a property, when you're buying a business, there's a lot more due diligence to be doing.
• 51:02
  So when you're buying a property, you obviously you need your solicitor, you will need your, your mortgage advisor to do your finance for you.
• 51:11
  You will need also maybe a valuation or maybe like a building report or something like that.
• 51:16
  And you can sort of satisfy those conditions quite quickly.
• 51:18
  It's quite easy to sort of work through that process.
• 51:21
  But when you are buying a business, there is a lot of due diligence you need to be doing.
• 51:26
  You know, there's financial due diligence, there is legal due diligence.
• 51:30
  And so you really need a really good team around you.
• 51:33
  So we would always recommend that you need a commercial solicitor.
• 51:37
  You need someone who, who does business buying, so not someone who does property purchases.
• 51:43
  So the lawyer is actually going to go through, in depthly through all of the contracts.
• 51:47
  They're going to go through the staff, the lease agreements, the actual agreement themselves, they're going to go through all of the legal side of the business.
• 51:57
  Then the accountant, and again a good advisory accountant, someone who again is working with business owners and does business acquisitions as well.
• 52:06
  So you get the right skill there.
• 52:08
  They are going to go through all of the numbers line by line.
• 52:11
  They're going to make sure that it's actually validated.
• 52:13
  So they're going to get like the GST returns, everything.
• 52:17
  They're going to go through and make sure that the numbers are really right.
• 52:20
  And they're going to help you build a forecast because just because someone's run it some way, you're actually going to run it potentially slightly differently.
• 52:27
  So how is it actually going to play out?
• 52:29
  And they're going to help you sort of understand that and build that through.
• 52:32
  And then if you need finance to buy that business, you need someone who understands finance.
• 52:37
  So that's where we come in and that's what we do.
• 52:39
  We help businesses, people buy businesses and we help them get the finance for that.
• 52:44
  So someone who really understands what the bank is going to require, has experience with business lending and is going to be able to present that structure in the right way, but also help you understand the cost of getting
• 52:58
  the loan.
• 52:59
  Because a lot of people will come to me and they'll have the.
• 53:02
  They'll be like, here's the financials, like, can I get a loan?
• 53:04
  I need it to be this amount or whatever we're looking to purchase it for.
• 53:09
  And a lot of time, the business, I actually can't support and give them a salary that they need to live on to pay their mortgage.
• 53:15
  So a lot of people don't realize that just because at the bottom there's a shiny number that says, this is how much is left over.
• 53:21
  You still have to obviously take a salary from that, which they think, yep, cool, that's going to.
• 53:26
  That's better than my salary.
• 53:27
  That's great.
• 53:28
  You still have to pay the debt.
• 53:29
  So a lot of people don't realise that and they'll run the scenario and then they'll be like, oh, oh, okay, that's actually.
• 53:36
  It's less than I'm earning currently because I actually have to pay back the loan.
• 53:40
  So a key thing with people don't realize with lending is that you're actually paying off the loan after your profit.
• 53:47
  So it's after taxable income that pays down the principal on a loan.
• 53:51
  Ooh, okay.
• 53:52
  That's a good little trap to be aware of.
• 53:54
  You mentioned as well.
• 53:55
  And I think this is a really important one that we just talk about and acknowledge the elephant in the room, because you mentioned about it, tough times for businesses.
• 54:02
  And so, I mean, I absolutely rate the fact that owning your own business can be incredible.
• 54:08
  It can be a great way to increase your income, to take control of things and to run your career in a way that is more true to you.
• 54:17
  But there are also realities of that.
• 54:19
  And it has been a really rough economy.
• 54:21
  And we hope there's light at the end of the tunnel.
• 54:24
  Maybe it's a train, but we hope it's light at the end of the tunnel.
• 54:28
  But.
• 54:28
  But, you know, so if people are looking at this and thinking, I'd love to do this, I'm a little scared about the timing.
• 54:33
  Are there ways to sort of future proof or to find a good option that can go through the good and the bad times.
• 54:42
  The thing with business, yes, there's great times, but it is all in cycles.
• 54:47
  So there'll be good years, there'll be bad years, and that is.
• 54:51
  There's so Many things out of control, right.
• 54:54
  The economy being one of them.
• 54:55
  We are a small, small impact on the economy.
• 54:58
  And so, you know, things can change really quickly.
• 55:01
  What you need to do is really build in the rainy day fund, the liquidity.
• 55:05
  That means that when things go wrong, you can do it.
• 55:09
  And we've had all sorts, right?
• 55:10
  We've had Covid, which was, you know, a bit scary for a minute, and then it was a sugar rush with significant amount of cash that was flowing around and people doing all sorts of things.
• 55:19
  We then had a cyclone in different parts of the country that has had impact when we were in Hawke's Bay, had a huge impact on us down there.
• 55:28
  You then have a recession that really changes things.
• 55:30
  I'd say at the moment, the thing that I'm most certain about is uncertainty.
• 55:36
  So I think you definitely have to build in the flexibility to ride different types of changes throughout your business.
• 55:45
  Where we like to do that for recommend that our clients do it, is that making sure you have a rainy day fund, making sure that you have access to facilities or capital or cash so that when things go
• 55:57
  wrong, you can manage that and you're not in a position of hardship and you're not having to be backed into a corner.
• 56:04
  And I think the thing is just banking on the fact that something will go wrong at some point, and so you just need to have a plan in place for that.
• 56:12
  So like, we talk about a lot around risk, really, just to understand those risks and then help mitigate them.
• 56:17
  So, so what is your backup plan?
• 56:19
  Should something not go right and then setting that up.
• 56:21
  The other thing that's really important, I've seen this for business owners that we've worked with over the years, is that you need to build equity into your balance sheet.
• 56:29
  If you have equity, you have options.
• 56:31
  So if something goes wrong and you have equity in your balance sheet, banks, lenders will look at it a lot more favorably and give you options and will do some pretty cool things because they know that you actually
• 56:44
  run a really good business, something has happened outside of your control, and they will help you get through that.
• 56:49
  So banks are actually there to partner with you.
• 56:51
  They're not there to sell your house.
• 56:53
  They're actually there to help with you.
• 56:55
  And I think that is what I've learned over time is that one build in that backup plan, build in that liquidity, and then make sure if you do get that situation, reach out for help.
• 57:06
  Okay, so someone is listening to this.
• 57:08
  And I think, you know what?
• 57:08
  Yes.
• 57:09
  For all of the sort of ups and downs.
• 57:11
  I'm keen.
• 57:12
  I would like to have a look at buying a business.
• 57:14
  What's something they could do this week or this month, you know, fairly immediately to start putting in the groundwork to prepare for that.
• 57:22
  If you are looking at starting a business or buying a business, you need to first understand your own position and what options you have.
• 57:29
  So there's no point if you are sort of maybe don't have a super strong financial position and then you're like, yeah, I'm going to go about buy a $5 million business.
• 57:40
  Good luck.
• 57:43
  So I think the first thing is making sure you understand actually what is possible and what your options my first step would be.
• 57:49
  If you want to do that and you're serious about it, talk to someone who understands business, understands finance, and can help you understand your options and what, what you can do.
• 57:58
  And then we'll help you know what kind of your, your limits are, what, what's sort of possible.
• 58:03
  And then you can go and find that, you know, find that option and basically work with them on that.
• 58:08
  Well, of course, that is one of the areas where you specialize.
• 58:11
  So let's give the proper plugs.
• 58:13
  Jess, where can people find you if they want to talk to you?
• 58:16
  Yeah.
• 58:16
  Cool.
• 58:17
  So my business partner and I, we run a business called Vesta Finance and Advisory.
• 58:22
  We help ambitious professionals and business owners grow their wealth through property, business and kiwisaver.
• 58:28
  And we are like any business these days, all online and on socials.
• 58:32
  So you can find us online at our website, you can Google us, you can also find us on LinkedIn, Instagram, Facebook, and there also might be a TikTok floating around.
• 58:41
  So reach out if you want to chat.
• 58:45
  Yeah, and I've got to say, I've really enjoyed the LinkedIn chats we've had.
• 58:48
  So I highly rate you there if you would just want to give you a little stalk and get some of your great advice and wisdom for free.
• 58:53
  Always fun, just.
• 58:54
  Sure.
• 58:55
  Thank you so much for coming on.
• 58:57
  Really lovely to chat.
• 58:58
  Now, if this was helpful to you, then do send it on to a friend so we can all level up our money together.
• 59:03
  Until next time, have a great day.
• 59:06
  This podcast can only give you general information about how things work in most situations.
• 59:11
  It's not individual financial advice.
• 59:14
  If you're after that, a financial advisor is always the best bet.