Episode 126 – The Importance of Telling Your Story with Byron Ginsburg

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Welcome back to the Apex Business Advisors podcast! In this episode, host Andy Cavanaugh and Doug Hubler discuss recent business closings, including a notable deal in the durable medical equipment industry. They explore the complexities of business transactions, landlord challenges, and screening potential buyers.

Special guest Byron Ginsberg, an expert in storytelling for businesses, joins to highlight the critical role of narratives in enhancing business value. He explains the impact of origin stories, client success stories, and employee profiles on a business’s marketability and legacy.

Listeners will also learn how buyers can stand out by effectively telling their own stories through polished LinkedIn profiles, personal websites, or professional profiles. Byron shares tips on demonstrating compatibility and potential to sellers for smoother transitions and preserving business legacies.

Tune in to discover how storytelling can be a powerful tool for both sellers and buyers. Whether you’re preparing to sell or acquire a business, this episode offers valuable insights and actionable advice to help you succeed.

Get in contact with Byron if you are interested in learning more about his services and how he can help your business at https://byronginsburg.com/

Andy and Doug along with the rest of the Apex Team can be reached here.

The FTC and Roll-Ups

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The FTC and Roll-UpsOne of the industries that has seen a lot of rollups recently is healthcare (we did a case study in an adjacent field, veterinary medicine). The problem with this activity? The current head of the FTC, Lina Khan, isn’t keen on all that activity.

Prior to her appointment Khan got a lot of attention for her article, Amazon and the Antitrust Paradox, in which she argues, among other things, that America’s antitrust legislation is outdated. Indeed, it was articles like that which spotlighted her for a role in which she would get to put her theories to the test.

A couple weeks ago news broke that after the FTC began an investigation of private equity firms acquiring small medical practices, acquisitions of such firms are down (down over 20% year on year). Unsurprisingly, this has had a downstream effect on valuations of those healthcare firms that could have been acquired in a roll-up market environment.

In these cases the FTC cites concerns about reduced competition, higher costs, and lower quality of care as the specific reasons for the investigation into whether these roll-ups are, as they suspect, harmful to the US economy in general. Now, regulatory scrutiny can slow down deals (and make them pricier), but it doesn’t make them impossible.

And the FTC hasn’t exactly been on a winning streak with these cases, anyway.

One of the cases that recently featured a win/loss was Federal Trade Commission v. U.S. Anesthesia Partners Inc and Welsh, Carson, Anderson & Stowe et al, U.S. District Court for the Southern District of Texas, No. 4:23-cv-03560. The court dismissed the case against Welsh, Carson, Anderson & Stowe (the acquirers), saying that the FTC “had not shown how Welsh Carson as a minority investor in the acquisitions was actively violating competition law,” but ordered that the case against US Anesthesia Partners could be pursued, saying that the FTC had “plausibly alleged acquisitions resulting in higher prices for consumers.”

What is Khan’s strategy anyway? Robert H. Bork Jr. recently opined that she might be trying to “win by losing,” allowing the cases to signal to Congress that laws need to be changed. Whatever her strategy, as we already noted, that shouldn’t really affect deals in the medium to long term, while in some cases interest rates could be slow-walking deals in the short-term (though, as we have noted, good businesses sell in any interest-rate environment). If the FTC starts actually winning these cases or Congress does change laws, that’s when we’ll see major market effects, as we saw in health care after the Affordable Care Act.

Episode 125 – Buying a Business: What to expect of your broker and what your broker expects of you

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Welcome to another episode of the Apex Business Advisors podcast! Join hosts Andy Cavanaugh and Doug Huber as they explore managing expectations between business brokers and buyers. They discuss the importance of regular contact, understanding broker roles, and clear communication.

Andy and Doug celebrate recent deals, share stories from the brokerage world, and emphasize honesty and transparency in transactions. They explain how brokers balance duties to sellers while supporting buyers, and what buyers should expect: timely responses, professional courtesy, and guidance in finding legal and financial representation.

Tune in to learn about the broker-buyer relationship and how to navigate the process successfully.

The Market Discovers Boring Businesses

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The Market Discovers Boring BusinessesIf you’ve ever paid any attention to the small business community on social media platforms like X, “boring businesses” are as popular as ever. The “bad” part of a boring business is that it’s not glamorous. The fun part? It reliably returns cash flow, day after day, month after month, year after year.

The Category

In case you’re still struggling to visualize these types of businesses, they include:

  • Self-storage
  • Laundromats
  • Vending machines
  • ATMs
  • Car washes
  • Bookkeeping/accounting
  • Home services

Other telltale signs of boring businesses include:

  • A fax number
  • No website
  • No internet presence

Codie Sanchez, one of the prophets of this category, even has a list of 130 of them you can peruse. She’s even started a holding company that strictly acquires and scales home service businesses.

The Opportunity

Some of the opportunities lie in the telltale signs we just mentioned. For example, a fax number indicates a business that has been around a long time and has established customers. But it also means that there’s probably been a lack of voluntary tech upgrades. Those upgrades would include an updated website, branding, and the right type of digital marketing and SEO.

All of those upgrades necessarily reach a broader audience, instantly adding new low-hanging revenue for mostly one-time investments.

Because a lot of boring businesses tend to be mom-and-pop (less so self storage since it became a PE darling) the possibility of a roll-up is also present, magnifying the financial effects of someone cutting inefficiencies/poor practices out of a mom-and-pop-style business.

For example, you buy a laundromat which is decently kept up, but perhaps you add branding, vending machines, wifi, etc. which brings in more customers. That means you can then apply those same changes to the next laundromat you buy, making it part of your new “chain.” This adds even more value for a future exit.

Not Complicated

Perhaps what is most attractive about boring businesses, both for rookie entrepreneurs and seasoned business owners, is that these businesses are not overly complicated, nor do they require a significant training/certification period. They involve a discrete list of tasks that need to be completed by you or your team each day, week, month, and year. Some businesses, like ATMs, for example, can run pretty much on auto-pilot. They already have built-in customers. They can sometimes offer lower overhead, which is a great help to a first-time business owner.

Guess who also loves boring businesses? Banks. These boring businesses are the types of companies who have already been part of transactions at the bank or who bank there now.

As you build out new customer acquisition funnels through digital marketing, etc., you will learn how to add these new processes to what you’ve already been doing.

Does a boring business sound exciting to you? Let’s find you one! Give us a call.

Episode 124 – The Curious Case of the Unsolicited LOI

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In this episode, we explore the unsolicited Letter of Intent (LOI), highlighting red flags and potential scams in brokerage. Andy and Doug dissect the LOI, discussing buyer tactics and the importance of professional intermediaries for protecting sellers. They explain how to qualify serious buyers and ensure smooth business transactions.

Cautionary Tale #11: Counseling Sellers

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Cautionary Tale #11: Counseling Sellers“You’re working with the buyer!” It’s not the first time a seller has accused us of such a thing. The implication was that somehow, in building a relationship with the buyer to keep the deal moving forward, we were compromising our job in representing the seller. This narrow-minded view can’t be held by anyone serious about a successful sale of a business.

Something we say over and over is that delays can kill deals. One of the most obvious ways those delays happen are buyers who are not convinced of the importance of momentum. As brokers it’s our job to be helpful and friendly (we’ve often been called coaches) and that helpful and friendly attitude isn’t just for our clients, it’s for everyone in the transaction, including accountants, lawyers, and spouses.

A business transaction is not a sprint, it’s a marathon, and those who’ve run marathons can tell you that a big part of the mental battle is trying to stay on an even pace the entire time. Run too fast early on and you might hit a wall early too. Run too slowly, and you end up bleeding time off that you could easily have banked into a better run time. The emotion involved in a business transaction, often one of the most monumental of anyone’s life, requires a general calm friendliness all the way through.

If brokers are “too friendly” with a buyer, it’s not because they are trying to cheat you. It’s because they’re trying to get you to the finish line. After all, the price of the sale has been fixed, as has the commission.

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A bank recently rolled out an advertising campaign: “Surprises: great for parties, bad for banks.” We agree, though we would say that surprises are not just bad for business transactions. On more than one occasion a last-minute surprise has killed a deal.

A close call we had in the past year involved a seller who had really screwed up the tax planning part of the transaction. He had:

  • Put two different businesses within the same entity
  • Had not bothered to keep the separation clean and efficient
  • Failed to disclose this problem

So he brought it up just prior to the closing day. Needless to say this surprise focused everyone and because the business was solid (despite the seller being incompetent on this issue) the buyers were willing to pay up to $200k of the anticipated tax liability to get the deal over the line. This compromise was able to happen in large part because of what we alluded to above: we had developed a relationship with the buyer as well as the seller. The seller could see we had been surprised as well and knew that we wanted to work in good faith toward a solution that worked for everyone.

This particular surprise didn’t end up crashing a deal, but it very well could have.

As we say early on in the transaction process: tell us everything, even if you don’t think it’s important. And the important stuff? Tell us that first.

Thinking about selling a business but not sure you’ve got the right mindset for it yet? Let us walk you through what you need to do to prepare so that when it is time, it’ll be smooth sailing.

Don’t Wait for Rates

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Don't Wait for RatesAt the beginning of 2024 the market was led to believe that there would be multiple rate cuts. Yet the Fed met in early June and there hasn’t yet been one (though one, and one only, is forecast before the end of the year). Instead, Fed Chairman Jerome Powell has kicked the ball into the long grass, claiming that “rate cuts that might have taken place this year, take place next year.” What does that mean for buyers and sellers in the small business marketplace?

Don’t Fixate

Sellers have been known to wait for the “perfect time to sell,” and we can tell you from many years of experience that such timing rarely occurs. What makes more sense is “the right time to sell” and that’s grounded in circumstances that both buyers and sellers have real control over. Searching for perfection can often lead to disappointment in life, not just in buying and selling businesses.

What we’ve seen in the last 12 months, as the federal funds rate has stayed in the 5.25-5.5% range, the highest in 23 years, is that there are still good buyers chasing good businesses. Because their primary goal has been to capture a great business, they have looked for that first and then worked on financing after identifying the right business. In certain circumstances, given the current rate climate, we’ve seen some flexibility from sellers given expected cash flows in relation to higher bank loans.

If, however, potential buyers are waiting on the sidelines for the “right rate” they should keep in mind that others may think this way as well, and when they wade back in when “rates are right” they might get caught in a bidding war for a business, leading any “savings” from “waiting” to turn into a premium they end up paying.

Trust the Market

That leads us to our second point. Whatever your thoughts on politics and government, many would agree that when the Fed is seeking to intervene it’s trying to adjust for something that is already happening.

Yes, there is much uncertainty in the world at the moment, and domestically, it’s an election year, but we can only report to you what we are seeing and hearing, and that is that businesses are being bought and sold. 2023 was our best year ever at Apex and midway through this year we feel confident that we are going to have another good year.

A solid business doesn’t rise or fall based on interest rates in the market. The same goes for when you buy a business. If it’s a solid business at this time, it will be whether rates go up or down. And as we’ve said (and seen) if the business is a good fit, a seller might be willing to make a concession on price to help make the financing work for serious buyers.

As we said, serious buyers are interested in the right business, not the perfect interest rate.

Thinking of coming off the “interest rate” bench? We’d love to talk to you about what’s available right now. Give us a call.