Latest / Harder Than Life / This Contract Mistake Cost Me $30,000 | Here's What I Learned

Transcript

This Contract Mistake Cost Me $30,000 | Here's What I Learned · Harder Than Life

• 0:01
  Now at Lowe's, faster quotes start at the Lowe's Pro Desk. Got a material list handwritten on a sticky note or saved us a photo? Perfect. Bring it to us and get a quote in minutes. And if you don't see what you need on the shelf, we'll help you get it. You can access thousands of products beyond what's available in-store or on Lowe's.com, right from the Lowe's Pro Desk. Build quotes faster and source the materials you need to keep your jobs moving. Just like that at Lowe's.
• 0:30
  They trusted my gut before I trusted a spreadsheet. If you are a business owner who is afraid to grow, this is for you. No contract will protect you from bad character. And the lessons that cost the most are the ones that teach the most. Stubbornness is expensive. Here's a cheat code. Use AI. Financial reviews, contract analysis, blind spot identification. AI can do all of it.
• 0:58
  And it will flag the one line at the bottom of the page that you almost missed. It's not a small thing. It's a competitive upgrade. Get very good at using AI because that may be the best business partner you have ever paid for.
• 1:17
  Those of you that are watching and you tune in every single week, please smash that subscribe button. We are focused on growing that for you to get bigger and better guests. I appreciate it. It means the world to me and our team breathing into you. If you're watching this on YouTube, Apple Podcasts, or Spotify, subscribe on that platform. I'm not telling you a story today. I'm living the proof, mistakes and all.
• 1:45
  Welcome to harder than life. I'm your host, Kelly Siegel. And today we're going to territory that most business owners are either too afraid to explore or too proud to admit they got it wrong. We're talking about mergers and acquisitions or MNA for short. And specifically, I'm going to tell you about a mid five-year figure mistake that came down to one line that I didn't read. One line, below a payment schedule,
• 2:15
  $30,000. Stay with me because by the end of this episode, you're going to be a smarter business owner than you were 30 minutes ago. Let me tell you who this episode is for. If you are a business owner who is afraid to grow, this is for you. If you've been running your company and you've hit a ceiling and you don't know how to break through it, this is for you.
• 2:40
  If you have never once considered buying another company as a growth strategy, especially this is for you. And if you're somewhere in the middle, maybe you've thought about it, maybe even looked at a deal or two, but something always stops you, keep listening. Because M&A is not just for the big guys.
• 3:02
  It's not just for private equity firms and investment bankers in suits. It's a tool. And like any tool, if you know how to use it, it builds something great. If you don't, it cuts you. I've been cut and I've built something great. Today, I'm going to tell you about both.
• 3:25
  Now keep in mind, this is gonna be mainly about M&As, but this is about a mistake I made. This can happen to anybody in anything that you do in life. So stay with me, even if you don't own a company, because at the end, I'm gonna have a great lesson and tell you how to avoid this going forward. Anytime I make mistakes, you know me, Heart of Life Nation, I'm gonna pay it forward and own it and tell you how not to do it. So smart people learn from their mistakes.
• 3:53
  wise people learn from other people's mistakes. And I make a lot of mistakes and I share them with you. So let me give you the context on where I've been. I've not done a hundred acquisitions and I have to be honest about that with you. I'm always honest, but I've done enough to have real scar tissue, true lessons, real receipts. My first experiences in M&A were distressed acquisitions, companies that were folding owners who couldn't hold on anymore.
• 4:24
  And what was I really buying? Was their client base, their relationships, their book of business. When someone else's dream is ending, if you move with integrity and speed, you can create a lifeline for their clients and a growth engine for yourself. That's not predatory. It's practical, smart business. I've also been through a partner merger that went sideways. I brought someone in. They did not hold up to their end of the bargain.
• 4:55
  And here's where I will tell you, the thing that saved me in that situation was the partnership agreement, a document written by an attorney that I had the foresight to execute before things got complicated. That document protected everything I had built, which brings me to something I want to say early so it lands before we go any further.
• 5:23
  The major winners in all of this and every deal I have ever done are the attorneys. Sorry, sorry, my boy who always takes care of me, you know who you are, but this goes true to in any thing, any conflict in life, attorneys are always going to be a bit in business. I paid almost as much to lawyers to write contracts as I paid the M and a firm to make one introduction.
• 5:51
  But here's the difference. The attorneys delivered. We'll get to that M&A firm in a minute. Let's talk about what just happened. I just closed an acquisition on another IT company. We grew about 20% overnight, 20%. Think about that. One deal, one aligned organization, 20% growth. We're in the integration phase right now, and I'll be honest, it's not without its challenges.
• 6:21
  But for the business itself, the fundamentals are strong. And here's why, because I trusted my gut before I trusted a spreadsheet. Before there were attorneys, before there were consultants, before there was a single document signed, I had a simple dinner with the owner of the company and his wife. And I knew, I knew within that dinner that this was the right move. Not because the numbers were perfect,
• 6:51
  Not because the timing was ideal because of the alignment, because of the character. These were honest people, the kind of people who couldn't lie if they wanted to. And that matters more to me than a financial model anyone has ever put in front of me. Here is something I believe to my core in my soul, extremely deep things that are meant for you tend to fall in place.
• 7:22
  Things happen for you, not to you. And if you're focusing on a deal, something feels off and you keep pushing anyway, that's a signal. Pay attention to that signal. There is a fine line between persistence and stubbornness. In an M&A, stubbornness is expensive.
• 7:48
  Actually, in any deal, stubbornness is expensive. Think about the girl or the guy that you chased. Think about the business that you went after or the job that you chased after.
• 8:02
  And then I ended up going, man, I wanted that so bad. What did they say? Grandma used to say, be careful what you wish for because you just might get it. So let me tell you something that most business, most people in business have no idea about is even an option. We structured it still not as a traditional cash acquisition, but as a customer purchase. What does that mean?
• 8:26
  Instead of writing a large check at closing, we structured payments over three years tied to the growth of their customer base. Employment contracts were part of the deal, very little money exchange hands at close. And here's why that is brilliant, not just for me, but for the seller. When a seller is willing to tie their payout to the future performance of their business, that tells you everything about their confidence in what they built.
• 8:54
  It also aligns incentives. They want to see this succeed just as much as I do. That is a win for me. That is a win for them. And that is a win for the business. Heck it's a win for all the customers to win, win, win, and a win. Now, how did I structure this? I'm going to be very transparent.
• 9:20
  I have a contact, someone who has done significant M&A work over the course of their career. And as a favor, yes, as a favor, he coached me through the structure. Keep in mind, I ran into this fellow at a wedding. So remember when I just told you about things happening for you? This was another one. So that conversation was with more than everything that the M&A consultant did for me combined.
• 9:50
  That conversation cost me nothing but a relationship built on mutual respect. I paid that guy nothing and he was glad to help. Which brings me to the part of today's episode I really want you to lean in for. When we started this acquisition process, I hired an M&A consulting firm. Mid five figures. I thought I was getting white glove service.
• 10:16
  I thought I was getting negotiation support, deal guidance, help with the purchase agreement, someone in my corner. I thought I was getting a consultant. What I actually got was a finder. And here is the moment I knew. I had a meeting with someone at their firm. Not my primary contact who was unavailable, but another person there.
• 10:42
  She pulled open a spreadsheet, an archaic spreadsheet with numbers that were so far off from the market reality that I actually pressed her on it. I asked her point blank, where's the white glove service that you're talking about? She laughed, literally actually laughed and said, who told you that? Who told you that? It was at that very moment.
• 11:11
  I knew exactly what I'd paid for and it was nothing. She said, we introduce you. We give you this spreadsheet. That's it. No negotiation support, no help with a purchase agreement, no guidance and introduction and a spreadsheet I could have built myself in about four to five minutes in AI. Now here's where it gets worse.
• 11:38
  And this is the part I need every single person listening to tattoo somewhere. They will see it before they sign any contract. The agreement had a descending payment schedule based on what you pay for the company. Very standard, very straightforward, makes sense. And then below the schedule was one line, one sentence that I missed. Minimum payment, $30,000.
• 12:08
  one line below the schedule $30,000 for an introduction and a spreadsheet.
• 12:18
  Now at Lowe's, faster quotes start at the Lowe's Pro Desk. Got a material list handwritten on a sticky note or saved as a photo? Perfect. Bring it to us and get a quote in minutes. And if you don't see what you need on the shelf, we'll help you get it. You can access thousands of products beyond what's available in-store or on lowes.com right from the Lowe's Pro Desk. Build quotes faster and source the materials you need to keep your jobs moving. Just like that at Lowe's.
• 12:49
  I am not telling you this to embarrass anyone. I am telling you this because that one line is probably in a lot of contracts you've never looked closely enough at. And my hope is that by me saying it out loud today, you will be spared the same tuition. Stay with me, too, because I'm going to tell you how to fix this. And it is so simple. I can't believe I let this one get by me.
• 13:16
  Let me give you some real talk though on M&A consultants and brokers. First, they're paid more when you pay more. That means their financial incentive is to push you toward a premium price. Not the right price. Not the fair price. The highest price they can get you to agree to. That's a real conflict of interest built into the business model. And most first-time buyers never even think about it.
• 13:45
  Second, they don't understand the difference between a finder and a consultant before they sign anything. A finder makes an introduction, that's their job, that's their value. Some of them will dress it up with language like white glove service and full support. We're with you through the whole process. Make sure you get it specific, get it in writing. What does support mean? Are they present during negotiations?
• 14:15
  Do they review the purchase agreement? Do they advise on the deal structure? What exactly are you doing beyond making a phone call? And third, read every line of the contract, every single line, not just the headline numbers, not just the schedule, every line below it. Because the line that costs you is never the one at the top, it is always the one at the bottom.
• 14:37
  Now here's a cheat code and I'm going to share this with you and you, cause y'all know me. I'm going to talk about AI. Here is something I want to say that I believe is going to reshape how small and mid-sized business owners approach deals in the next five years. Artificial intelligence.
• 14:54
  The work that that M&A firm did, the research, the spreadsheet, the introduction sourcing, the basic financial modeling, I could have done all of it with AI for free, or at least close to it. And going forward, that's exactly what I intend to do. Financial reviews, contract analysis, pay attention to this one, blind spot identification. AI can do all of it.
• 15:24
  And it will flag the one line at the bottom of the page that you almost missed. We acquired a company that had barely touched AI. My organization is highly automated. And one of the real value adds of this acquisition, beyond the clients, beyond the revenue, is that we are now bringing an entire team into the future. It's not a small thing. It's a competitive upgrade. And they did not even know they needed it.
• 15:56
  So use AI. And guys, if you want to email me, kelly at heartedlife.com, I'll share with you the prompts that I use. I have AI review everything. I'm working on another contract. I pointed out, I said, read this. Tell me what...
• 16:11
  what's good, what's bad, and what I should be looking out for. And it gave me a summary of it. Guys, AI is your friend. For those of you that are not, that are still listening to this for entertainment, you could have it interview you for relationship advice. And I'm telling you, it's impartial. So it's not your friend who's jaded telling you, you should look out for this, or I got a friend that did that. Let's get back to specific M&A because I've still made more mistakes and I'm gonna share them with you. I'm gonna talk briefly about where we are right now. We're about,
• 16:41
  as I'm recording this two and a half months at post acquisition and we're in the integration phase and it's a, it's, it's its own challenge. And I'm going to be real with you. It's not without friction. My culture is intense. Our core values are commitment, innovation, and excellence. Ooh, I knew when I picked excellence, that was a different, different one. I'm an uncommon human. I know it.
• 17:07
  I do what I say I'm going to do, and that's it. There's no negotiation. There's no compromising. I don't drink, I don't lie, I don't cheat, I don't steal. I am constantly working on my mind and my body to advance and compete in this world and hopefully win. And I'm gonna remind you of those core values again. Innovation, commitment, excellence. Those are high standards, man.
• 17:36
  When you bring a new team into that culture, there's an adjustment period. One thing I am correcting constantly is that my team refers to the new office as our West Side Team, because they're geographically located on the West Side of Michigan. And every single time I hear it, I correct it. We're one team, not the East Side, not the West Side. One team. Leadership is not a speech.
• 18:01
  It's a pattern of correction. It's showing up the same way every single day until the culture is no longer something you talk about. It's something you are. The work is ongoing and I'm committed to it. Remember, leaders always go first. So I wanna give, as we start wrapping this up, I do wanna give you guys the advice for the first time a choir. If you've never done a deal before and you're sitting on the fence, here's what I wanna say to you.
• 18:30
  Put one foot in front of the other. That's it. Everything always works out. And like anything in life, practice makes the master. I've negotiated on more deals than I can count to close the ones that matter. Many, many, many, many fell apart, even all the way at the closing part. But it got me comfortable negotiating with the lingo. Patience is not optional in this game.
• 19:00
  Patience is the game. And here's the practical checklist I want you to walk away with today. Number one, find your deal. Look who is in your space, who is struggling, who is retiring, who is burnt out. Who has something you want? Clients, geography, talent, technology. Start looking. You cannot buy what you have not found. Number two.
• 19:29
  Have dinner first before the lawyers, before consultants, before spreadsheets. Have a real conversation. Is this somebody you really wanna do business with? Because no contract will protect you from bad character. But good character makes every contract simpler. Number three.
• 19:55
  Get a great attorney, not a good attorney, not a friend, a great attorney. Yes, they are expensive. Yes, they are worth it. They keep you out of trouble later. The partnership agreement I talked about saved me once, the M&A contract burned me once. The difference was the attorney. Number four, always assume positive intent.
• 20:25
  Go into every deal believing the other side wants to win too. A deal where only one person wins is not a deal worth doing. Win, win, win. Or walk away. Number five, and this is a strong one, use AI. Use it on the financials. Use it on the contracts. Use it to find the one line at the bottom of the page before it costs you $30,000.
• 20:53
  And finally, last but not least, trust but verify. Go through those six things again and realize those six steps work in anything in life. Not just business. Not just M&A. That's why I did this one today. So I'm going to leave you with this. I've bought distressed companies. I've merged with partners. I've broken up with partners.
• 21:18
  I've bought out people who didn't hold up their end of the bargain. I've just closed on an acquisition that grew my company by 20%. I've paid a mid five-figure finder's fee to a man I will not shake hands with the next time I see him. Every single one of these experiences made me better. Smarter, more prepared. Because things happen for you, not to you. And the lessons that cost the most are the ones that teach the most.
• 21:48
  If you have questions, if you're sitting somewhere right now thinking about a deal, thinking about growth, thinking about whether M&A is something that could change your business, reach out to me directly. I gave you my email earlier. I'll give it to you again. It's kelly at harderthanlife.com. I will do my best to point you in the right direction because that is what this show is all about. It's not about being perfect. It's about being honest.
• 22:17
  It's about willing to say, I made a mistake. Here's what it costs me. And here's how you avoid it. So as you go into your week, whether you're closing a deal, reviewing a contract, or just trying to figure out what your next move is, remember this trust, but verify, assume positive intent, have a great lawyer, have a lot of patience and
• 22:46
  Get very good at using AI, because that may be the best business partner you have ever paid for.
• 22:54
  Please rate and share this podcast. I'm active on all social platforms and love to hear from my Segal supporters. Each and every episode is sponsored by my company, National Technology Management, the easiest and best IT company to do business with, delivering peace of mind with technology every day, even simplifying cybersecurity. Visit TrustNTM.com for more info. Until next week, be harder than life.