Before You Buy or Sell a Business

Jared Johnson sits down with Jaryd Krause, founder of Buying Online Businesses, to talk about how Jaryd went from working as a plumber in Australia to buying three businesses in three years and eventually building a career helping other entrepreneurs acquire companies. Jaryd shares how buying his first businesses allowed him to replace his income, leave plumbing, and build the lifestyle he wanted, while also learning that owning more businesses does not necessarily create more freedom.

They walk through Jaryd’s approach to helping buyers evaluate and acquire businesses, from establishing acquisition criteria and financing to finding deals, submitting an LOI, completing due diligence, negotiating terms, and supporting the buyer after closing. Jaryd explains why he looks closely at single-source dependencies, including reliance on one supplier, marketing channel, customer acquisition source, owner, or key employee, and why financial, marketing, and legal diligence can look very different from one transaction to the next.

The conversation also gets into the emotional side of acquisitions and why buyers sometimes struggle to walk away after investing months and thousands of dollars into a deal. Jaryd shares an example of a business where declining organic traffic was being offset by substantially higher advertising spend, information that ultimately led his client to walk away rather than inherit what Jaryd described as a potential million-dollar problem. Jared and Jaryd also discuss seller relationships, post-close growth, AI, changing marketing channels, and why listening to customers remains critical as businesses evolve.

Main Takeaways:

- Buying an existing business can provide an alternative to building a startup from scratch, but acquiring multiple businesses can also work against the lifestyle a buyer originally wanted

- Acquisition criteria should be built around the buyer’s available cash, financing capacity, goals, and the type of business they are equipped to own

- Single-source dependencies involving suppliers, traffic, revenue, owners, or key employees can create significant risk and should be investigated during diligence

- Financial diligence is only one part of the process; marketing, legal, operational, and dependency risks also need to be understood

- Buyers should be willing to walk away when diligence reveals risks that materially change the deal, regardless of how much time or money they have already invested

- A seller’s willingness to provide access to underlying data can become an important part of diligence

- Building a relationship with the seller matters because an acquisition is not purely a financial transaction

- The first 30 days after closing can be better spent learning and tracking the business before immediately trying to change or scale it

- AI and marketing channels will continue to change, but businesses still need to listen to customers and adapt around what those customers actually want

- Buying a business can create more freedom, but only if the buyer stays focused on the lifestyle and goals that motivated the acquisition in the first place

Episode Highlights:

- Jaryd’s background growing up on Australia’s Gold Coast and working as a plumber before entering business acquisitions

- Failing at two online startups and deciding to look at buying established businesses instead

- Buying three small businesses between 2014 and 2016 and replacing his plumbing income with the first two acquisitions

- Realizing that buying more businesses did not necessarily support his original goal of creating more freedom and time for travel and surfing

- Building Buying Online Businesses and helping buyers through education, due diligence support, and buy-side advisory services

- How Jaryd establishes acquisition criteria based on a buyer’s available capital and financing capacity

- Why he pre-vets opportunities instead of sending buyers a high volume of deals simply to create deal flow

- The importance of identifying dependencies on suppliers, marketing channels, owners, and key employees before closing

- A furniture business where organic traffic had fallen approximately 50% while advertising spend increased approximately 68%, ultimately leading Jaryd and his client to walk away

- Why sunk time and diligence costs should not convince a buyer to proceed with a transaction that no longer makes sense

- The importance of managing the buyer-seller relationship and understanding the emotional connection many owners have to the businesses they are selling

- Jaryd’s approach after closing, including slowing buyers down during the first 30 days so they can learn the business before focusing heavily on growth

- How AI, Google, Meta, TikTok, and other changes in marketing are affecting online businesses and customer acquisition

- Jaryd’s motivation to help people avoid major financial mistakes while creating more freedom and experiences outside of work

Connect with Jared:

If you have questions for Jared, visit:

https://jaredwjohnson.com

https://www.linkedin.com/in/jaredwjohnson/

Connect with Jaryd Krause:

https://buyingonlinebusinesses.com

DISCLAIMER:

The views and opinions expressed in this program are those of the guests and host. They do not necessarily reflect the views or positions of my employer.

Keywords:

buying a business, business acquisition, entrepreneurship through acquisition, ETA, Jaryd Krause, Buying Online Businesses, online business acquisition, due diligence, buy-side advisory, acquisition criteria, business financing, quality of earnings, financial due diligence, marketing due diligence, single source dependency, supplier risk, key person risk, traffic concentration, LOI, business valuation, seller relationship, acquisition risk, sunk cost, post-close transition, online businesses, e-commerce acquisition, recurring revenue, AI, business ownership, lifestyle entrepreneurship, acquisition strategy

This episode was recorded a few days before the SBA released its new rules taking effect October 1, including the requirement for a quality of earnings report on business acquisitions with a purchase price of $3 million or more. Because the conversation predates that announcement, it is not an explanation of the new SBA requirement. For a breakdown of the updated rules, listen to the previous episode.

In this episode, Jared Johnson sits down with John Hannum, CPA, CFO, and founder of PPS Finance, to explain what a quality of earnings report actually tells a buyer before an acquisition.

John explains why a QoE is not an audit, why it should be more than an accounting exercise, and how operational diligence can reveal risks that financial statements alone may miss. He walks through the process his team uses, including direct access to accounting records, proof of cash, transaction modeling, customer and supplier analysis, working capital requirements, and the review of seller add-backs.

Jared and John also discuss why buyers should not treat a QoE as a box to check for a lender. John shares why roughly half of the deals his firm reviews do not move forward and why discovering a problem before closing can be one of the best possible outcomes for a buyer.

They also share examples of questionable add-backs, poorly prepared reports, hidden operational dependencies, and financial records that may point to larger problems within a business.

Main Takeaways:

• This episode was recorded before the SBA announced its new quality of earnings requirement and does not explain the updated rule
• A quality of earnings report should help the buyer understand the business, not simply satisfy a lender
• A QoE evaluates normalized financial and operational performance, but it is not the same as an audit
• Direct access to QuickBooks or another accounting platform can provide a clearer review than relying on PDFs
• Proof of cash helps determine whether reported revenue is supported by actual customer deposits
• Roughly half of the transactions John’s firm reviews are stopped or materially changed during diligence
• Finding a problem before closing may save a buyer from an expensive mistake
• Transaction modeling helps determine whether the business can realistically support its proposed debt
• Customer concentration, supplier risk, staffing needs, working capital, and owner dependence should all be evaluated
• Add-backs should be supported by actual transactions and reviewed based on whether the expense will continue after closing
• A large gap between reported earnings and adjusted earnings should be treated as a potential warning sign
• Excessive or questionable add-backs can point to broader concerns about the seller’s business practices
• Clean books can make a business easier to diligence, more attractive to buyers, and more valuable
• A low-cost QoE that only restates accounting figures may miss important operational risks
• Buyers remain responsible for conducting their own diligence, even when working with an SBA lender

Episode Highlights:

[00:00] Why clean books make a company easier to sell and more valuable

[01:05] Important context about when this conversation was recorded

[02:20] John Hannum’s background as a CPA, CFO, and acquisition advisor

[04:15] What a quality of earnings report is designed to uncover

[06:10] Why nearly half of the reviewed deals do not move forward

[08:00] Using direct accounting access instead of relying on a crowded data room

[11:15] The difference between a QoE and a formal financial audit

[15:20] How proof of cash verifies reported revenue

[19:00] Modeling the transaction and testing whether the business can support its debt

[22:30] Reviewing customers, suppliers, margins, staffing, and working capital

[26:00] How seller add-backs are investigated and validated

[29:10] Jet skis, personal expenses, and other questionable add-backs

[32:20] Why excessive add-backs can signal larger problems within the business

[35:45] Preparing clean financial records during the final years before a sale

[39:00] Operational risks that may become problems after closing

[42:30] Why a quality of earnings report should be more than a spreadsheet

[46:15] Choosing an experienced diligence provider instead of checking a box

[48:30] The most unusual add-backs Jared and John have encountered

[50:00] How to connect with John and PPS Finance

Connect with John Hannum:

Website: https://ppsfinance.com

Connect with Jared:

If you have questions for Jared, visit: https://jaredwjohnson.com

LinkedIn: https://www.linkedin.com/in/jaredwjohnson/

DISCLAIMER:

The views and opinions expressed in this program are those of the guests and host. They do not necessarily reflect the views or positions of my employer.

Keywords:

quality of earnings, QoE report, John Hannum, PPS Finance, business acquisition due diligence, proof of cash, financial due diligence, operational due diligence, seller add-backs, adjusted EBITDA, seller discretionary earnings, transaction modeling, working capital, customer concentration, business valuation, acquisition financing, fractional CFO, QuickBooks due diligence, buying a business, business acquisition risks, clean financial records, mergers and acquisitions

Jared Johnson breaks down the latest SBA Standard Operating Procedure changes during a live presentation at Acquire Fort Worth. Drawing on nearly two decades of SBA lending experience, Jared explains how acquisition financing has evolved, why the SBA continues to revise its guidelines, and what the newest rules could mean for buyers, sellers, investors, and lenders.

Jared begins with the history of SBA business acquisition lending, including the increase in the maximum SBA 7(a) loan amount from $2 million to $5 million, the shift from 25 percent down payments to 10 percent, and the rapid growth in acquisition financing since 2018. He also examines how looser lending policies, rising interest rates, COVID-era stimulus, and delayed loan defaults influenced the current pullback.

He then explains the updated equity injection requirements. Buyers must now provide at least 5 percent of the total project cost from an approved source such as cash, qualifying borrowed funds, or a gift or grant. The remaining portion of the required injection may come from limited sources, including seller debt placed on full standby for the life of the SBA loan.

Jared also discusses the new restrictions affecting non-controlling minority equity investors. While investor funds may still contribute toward part of the required equity injection, investors generally must own less than 20 percent, exercise no control, and wait until the SBA loan is repaid before receiving distributions related to that investment. Jared explains why these restrictions could reduce outside investment in SBA-financed acquisitions and change how searchers structure their deals.

The presentation also covers the new Quality of Earnings requirement for acquisitions with a purchase price of $3 million or more. Jared explains what a useful Quality of Earnings report should evaluate, why lender ordering requirements may create timing challenges, and how a thorough report can uncover unsupported add-backs, cash-flow issues, customer concentration, and working-capital needs before closing.

Jared reviews the increase in minimum debt service coverage for initial acquisitions and partner buyouts, as well as the new treatment of transactions that include both a business and commercial real estate. Buyers can use separate loans or a single loan with a blended term, but they can no longer automatically receive a 25-year term simply because real estate represents most of the transaction.

He also explains the revised rules for business expansions, including the two-full-fiscal-year operating requirement, the move from six-digit to four-digit NAICS-code matching, and the ability to add new owners when completing a subsequent acquisition.

Jared closes by explaining how buyers should approach transactions currently under consideration, why proposed structures should be reviewed before submitting an LOI, and which parts of the new SOP may still require clarification from the SBA.

Main Takeaways:

• The latest SBA SOP takes effect October 1, 2026, for loans receiving an SBA loan number on or after that date
• The new SOP includes a dedicated section addressing business acquisition financing
• Buyers must provide at least 5 percent of the total project cost from an approved unlimited equity injection source
• Approved sources may include cash, qualifying borrowed funds that can be repaid from outside income, and certain gifts or grants
• Seller debt on full standby for the life of the SBA loan may cover up to half of the required equity injection
• Non-controlling minority equity investors generally must own less than 20 percent and cannot exercise control over the business
• Investors whose funds count toward the required equity injection may be unable to receive distributions until the SBA loan is repaid
• Investor capital contributed beyond the required injection may have greater flexibility, although lender covenants may still restrict distributions
• Acquisitions with a purchase price of $3 million or more now require a Quality of Earnings report
• The lender must order the required Quality of Earnings report, creating questions about timing, responsibility, and whether previously ordered reports can be used
• Quality of Earnings reports should verify cash flow, add-backs, customer concentration, proof of cash, and other financial information
• Due diligence costs, including reasonable Quality of Earnings expenses, may be included in loan proceeds
• Minimum debt service coverage increased from 1.15 to 1.25 for initial acquisitions and partner buyouts
• Transactions involving both a business and commercial real estate must use separate loans or a combined loan with a blended term
• Buyers can no longer automatically receive a 25-year term when purchasing both a business and its real estate
• The appraised value of the real estate, rather than the allocation in the purchase agreement, determines the blended loan term
• Expansion acquisitions generally require the existing business to have operated for two full fiscal years
• Expansion eligibility now relies on the first four digits of the NAICS code instead of all six digits
• New owners may be added during an expansion as long as the ownership requirements for the existing business are satisfied
• Lenders may waive the equity injection for qualifying expansion transactions, but the waiver is not automatic
• Seller notes generally cannot be refinanced until the borrower has completed 36 months of payments
• Buyers considering a transaction now should assume the new rules will apply unless the SBA loan number is obtained before October 1
• Buyers should review financing structures with an experienced lender before submitting an LOI
• Some provisions, particularly the Quality of Earnings and investor requirements, may receive additional SBA clarification

LinkedIn: https://www.linkedin.com/in/jaredwjohnson/

DISCLAIMER:

The views and opinions expressed in this program are those of the guests and host. They do not necessarily reflect the views or positions of my employer.

The SBA rules discussed in this episode were newly released at the time of recording and may have since been clarified or revised. Buyers and sellers should consult an experienced SBA lender and their professional advisors regarding their specific transaction.

Keywords:

SBA SOP changes, SBA SOP 2026, SBA business acquisition loan, SBA 7(a), buying a business, business acquisition financing, October 1 SBA changes, SBA equity injection, SBA down payment, seller standby note, seller financing, equity investors, search fund, entrepreneurship through acquisition, ETA, Quality of Earnings, QoE requirement, business acquisition due diligence, debt service coverage ratio, DSCR, commercial real estate financing, blended loan term, SBA expansion loan, partial change of ownership, business acquisition lender, Acquire Fort Worth, Jared Johnson, small business acquisition, acquisition financing, non-controlling minority equity investment, SBA seller note, SBA loan requirements

Jared Johnson sits down with Dennis Hayes, co-owner of WCI Business Sales, the oldest business brokerage firm in Arizona. Dennis shares what he has learned from a firm with 60 years in business and more than 5,000 closed transactions, what he is seeing in today’s competitive market, and how his perspective changed when he went from representing sellers to buying an 80-year-old business with his son.

Dennis explains why good businesses are creating what he calls a “feeding frenzy” among buyers, why owners are holding onto their companies longer, and why strong listings can attract serious interest almost immediately. He also breaks down one of the biggest problems he sees when sellers come to market: sloppy books and records.

Jared and Dennis dig into Quality of Earnings reports, seller add-backs, financial due diligence, and why buyers should never assume the numbers they are given tell the whole story. Dennis explains why he believes buyers are ultimately purchasing a known and reliable revenue stream and why understanding where that revenue comes from and whether it will continue after closing should be central to due diligence.

Dennis also walks through the acquisition he recently completed with his son. After selling the same Phoenix cooling business eight years earlier, Dennis found himself on the other side of the transaction when the owner was ready to exit. He shares how they evaluated the opportunity, why a Quality of Earnings report became essential to getting the deal done, and what they learned after taking over the 80-year-old company.

Jared and Dennis also discuss buying commercial real estate alongside a business, how real estate values can outgrow the cash flow of the operating company, why buyers and sellers need to disclose problems early, and the surprises that can surface late in a transaction. They close with Dennis’s perspective on mentorship, training the next generation of business brokers, and why closing day still motivates him after decades in the industry.

Main Takeaways:

• Quality businesses are attracting significant buyer interest, while good listings are becoming harder to find
• Business owners often sell for personal reasons rather than business reasons, making listing volume difficult to predict
• Sloppy books and records remain one of the biggest deal killers in small business transactions
• Running personal expenses through a business can lower taxable income but ultimately reduce the value a seller can substantiate when it is time to sell
• Quality of Earnings reports can provide clarity when tax returns and internal financial statements do not accurately reflect the economics of a business
• Buyers should independently verify financial information and should not rely on a broker to perform their due diligence
• A buyer is ultimately purchasing a known and reliable revenue stream, making the sustainability of that revenue critical
• Hidden liens, financial issues, and other surprises are likely to surface before closing, so sellers should disclose problems early
• Commercial real estate can be a valuable part of an acquisition, but the business still needs enough cash flow to support both the company and the property
• The value of commercial real estate can sometimes grow faster than the cash flow of the business occupying it, creating challenges for future buyers
• Dennis’s own acquisition showed how strong financial diligence can turn a complicated opportunity into an attractive deal
• Mentorship and continued learning remain important even after decades of experience and thousands of transactions
• Business ownership is not for everyone, but for entrepreneurs who enjoy solving problems and building value, the work itself can be rewarding

Episode Highlights:

[00:00] Why good business listings are creating a feeding frenzy among buyers

[00:05] Dennis’s background and the 60-year history of WCI Business Sales

[00:13] What Dennis is seeing in the Phoenix business brokerage market

[00:29] Why listing volume has become increasingly difficult and owners are holding onto businesses longer

[00:51] The number one problem Dennis wishes every seller would address before going to market

[00:53] Sloppy books, personal expenses, and the impact they can have on business value

[01:03] When a Quality of Earnings report can help establish what a business actually earns

[01:23] What buyers should know about financial due diligence

[01:35] Why Dennis believes buyers are purchasing a known and reliable revenue stream

[01:43] How Dennis went from selling an 80-year-old cooling business to buying it with his son

[02:17] Why a Quality of Earnings report was essential to completing Dennis’s acquisition

[02:37] The surprises that can surface late in a transaction and why sellers should disclose problems early

[02:53] What buyers should consider when commercial real estate is included in an acquisition

[03:23] How real estate values can outgrow the cash flow of the operating business

[03:43] Why including real estate can change the financing dynamics of an acquisition

[03:55] The mentor who taught Dennis the business brokerage industry

[04:15] What still motivates Dennis after decades of buying, selling, and advising businesses

Connect with Dennis Hayes:

Website: https://wcibroker.com/

Connect with Jared:

If you have questions for Jared, visit: https://jaredwjohnson.com

LinkedIn: https://www.linkedin.com/in/jaredwjohnson/

DISCLAIMER:

The views and opinions expressed in this program are those of the guests and host. They do not necessarily reflect the views or positions of my employer.

Keywords:

business brokerage, buying a business, selling a business, Dennis Hayes, WCI Business Sales, Arizona business broker, Phoenix business acquisition, quality of earnings, QoE, business valuation, seller discretionary earnings, add-backs, business acquisition due diligence, SBA lending, commercial real estate, business acquisition financing, seller accounting, business buyer, business seller, entrepreneurship through acquisition, ETA, small business acquisition

Jared Johnson sits down with Layne Kasper of Kasper & Associates for a live episode recorded at Acquire Fort Worth. With nearly three decades in business brokerage, Layne shares an inside look at how brokers prepare businesses for sale, identify qualified buyers, protect sellers throughout the process, and navigate an increasingly competitive acquisition market.

Layne explains how sellers typically enter the market, why many business owners have little understanding of what their company is actually worth, and how his firm approaches preliminary valuations before taking a business to market. He walks through the process of gathering financial information, preparing detailed acquisition materials, maintaining confidentiality, and using targeted outreach rather than broadly advertising listings.

Jared and Layne also discuss what buyers can do to stand out when attractive businesses may receive interest from dozens or even hundreds of potential acquirers. They explain why financial qualification, relevant experience, preparation, and the ability to build trust with a seller can significantly influence who ultimately gets the deal. For buyers, the process is not simply about evaluating the seller. Sellers and their brokers are evaluating buyers at the same time.

The conversation also explores current valuation multiples, seller financing, SBA prequalification, private equity versus individual buyers, off-market deal sourcing, and why having the right acquisition team can prevent buyers from wasting time on deals that were never going to close.

Layne and Jared also discuss why the long-predicted "silver tsunami" of retiring baby boomer business owners has been slower to materialize than expected. For many owners, selling a company means giving up something deeply connected to their identity, relationships, income, and status. Understanding that emotional component can give thoughtful buyers a major advantage when approaching sellers and negotiating a transaction.

Main Takeaways:

- Business brokers represent the seller and are responsible for protecting their time, confidentiality, and interests throughout the transaction

- Many business owners begin the sale process without knowing what their company is worth or how the acquisition process works

- Sellers who begin preparing several years before an exit have more opportunities to position their businesses for a successful sale

- A detailed acquisition report or SIM can help buyers evaluate an opportunity efficiently and reduce unnecessary delays

- Strong businesses can attract significant buyer interest quickly, making speed and preparation important for serious searchers

- Buyers can stand out by demonstrating liquidity, financing readiness, relevant experience, and a clear ability to close

- SBA prequalification can help buyers understand the size of acquisition they can realistically pursue before submitting offers

- Brokers increasingly want evidence that buyers have the financial resources or investor backing required to complete a transaction

- Buyers should remember that the acquisition process is a two-way interview and sellers are evaluating them as potential successors

- Building trust with a seller can influence negotiations, deal structure, seller financing, and ultimately who wins the transaction

- Buyers who submit generic questions without reviewing available materials can quickly signal to brokers that they may not be serious

- Seller financing can help bridge valuation gaps while demonstrating the seller's confidence in the future of the business

- Businesses with approximately $500,000 to $1 million in EBITDA may trade around three to four-and-a-half times EBITDA, while businesses above $1 million may begin reaching approximately four-and-a-half to six times depending on the opportunity

- Off-market opportunities can often be found through attorneys, bankers, financial advisors, industry groups, and other trusted networks

- Searchers may not need to hire a buy-side intermediary if they are already capable of conducting targeted outreach themselves

- A strong acquisition team that includes experienced lenders, attorneys, CPAs, and due diligence professionals can help buyers identify both viable opportunities and deals they should walk away from

- The anticipated wave of baby boomer business sales has developed more slowly because many owners continue operating well beyond traditional retirement age

- A seller's business is often deeply connected to their identity, making respect for what they have built an important part of the buyer-seller relationship

- Businesses with established middle management can be particularly attractive because buyers can focus on growing the company rather than immediately replacing the owner's operational responsibilities

- Buyers using outside investors and maintaining additional liquidity after closing may be better positioned to handle unexpected challenges and pursue future growth

Episode Highlights:

[00:00:40] Why buyers need to remember that acquisitions are a two-way interview

[00:01:36] Layne Kasper's background, Air Force career, and transition into business brokerage

[00:04:20] Kasper & Associates' focus on lower-middle-market businesses in Dallas-Fort Worth

[00:06:20] How business owners typically begin thinking about selling their companies

[00:08:00] Why attorneys, bankers, and financial advisors can be valuable sources of proprietary deal flow

[00:09:40] Preliminary valuations and determining whether a seller is truly ready to go to market

[00:11:45] Why seller commitment matters before a broker invests significant time into preparing a listing

[00:13:00] Gathering financial information and building a detailed acquisition report or SIM

[00:15:30] Preparing a business for market and setting seller expectations around valuation

[00:18:30] Targeted buyer outreach and the "rifle" approach to marketing a business

[00:20:15] Protecting seller confidentiality and identifying financially qualified buyers

[00:22:30] Why attractive businesses can generate dozens or even hundreds of interested buyers

[00:24:30] How searchers can stand out in a highly competitive acquisition market

[00:26:00] Behaviors that signal to brokers that a buyer may not be serious

[00:29:30] Why buyers and brokers sometimes become frustrated with each other

[00:32:00] The buyer-seller relationship and why buyers must sell themselves to the seller

[00:34:30] What brokers mean when they describe someone as a financially qualified buyer

[00:37:00] Jared's approach to buyer prequalification, liquidity, investors, and acquisition financing

[00:40:00] Why some brokers require buyers to speak with a lender before moving forward

[00:42:00] Sellers choosing individual buyers over private equity and strategic acquirers

[00:45:30] Why traditional private equity structures may not fit owners who want a complete exit

[00:47:30] Off-market deal sourcing and whether searchers should hire buy-side brokers

[00:51:00] Networking strategies for finding proprietary acquisition opportunities

[00:54:00] Creative approaches to inventory and accounts receivable in deal structures

[00:56:30] Current valuation multiples for businesses at different EBITDA levels

[00:59:00] Seller financing and how it can help bridge valuation and financing gaps

[01:02:00] Current deal flow and why fewer businesses may be coming to market

[01:05:00] Why buyers need experienced lenders, attorneys, CPAs, and advisors on their acquisition team

[01:08:00] Why the predicted baby boomer "silver tsunami" has taken longer than expected

[01:10:00] The emotional connection between business owners and the companies they have spent decades building

[01:13:00] How respecting a seller's legacy can help buyers negotiate better transactions

[01:16:00] Interest rates, financing conditions, and their effect on deal flow and valuations

[01:19:00] AI exposure in SaaS, digital marketing, consulting, and other acquisition categories

[01:23:00] Why buyers are increasingly raising additional equity and maintaining liquidity after closing

[01:26:00] The value of acquiring businesses with established middle management

Connect with Acquire Fort Worth:

Learn more about upcoming Acquire Fort Worth events and connect with the local entrepreneurship through acquisition community: https://www.linkedin.com/company/acquire-fort-worth

Connect with Jared:

If you have questions for Jared, visit: https://jaredwjohnson.com

LinkedIn: https://www.linkedin.com/in/jaredwjohnson/

DISCLAIMER:

The views and opinions expressed in this program are those of the guests and host. They do not necessarily reflect the views or positions of my employer.

Keywords:

business acquisition, business brokerage, business broker, buying a business, selling a business, SBA loan, SBA financing, buyer prequalification, seller financing, business valuation, EBITDA multiples, lower middle market, entrepreneurship through acquisition, search fund, business searcher, due diligence, deal sourcing, off market businesses, seller psychology, acquisition financing, buyer qualification, private equity, strategic buyer, letter of intent, LOI, acquisition strategy, business succession, baby boomer business owners, silver tsunami, seller transition, middle management, Dallas Fort Worth business acquisition, Acquire Fort Worth

Jared Johnson sits down with Guy Bartlett, founder of The Business Buyers Club and Fidelis Advisory, a fractional M&A service based in the UK. Guy shares how 42 years in the British Army Reserve shaped his approach to acquisitions, how he stumbled into his first share sale in the late 1990s, and how that experience led him to complete over 150 transactions and personally acquire 13 companies since 2006.

Guy explains why M&A is fundamentally a people business, how due diligence can never fully capture a company's culture, and why the "transition trenches" after a deal closes are often harder than the deal itself. He breaks down the psychology of sellers who come to market unprepared, why so few UK business listings actually sell, and how unregulated brokers contribute to unrealistic price expectations on both sides of the table.

Jared and Guy walk through what overseas buyers need to know before acquiring a business in the UK, from leadership presence and management incentives to deal structures like security bonds for deferred consideration. They also discuss the coming wave of baby boomer business exits, the risks of waiting too long to sell, and the hard lessons Guy learned from deals that went wrong, including a lost government contract, an underfunded roofing acquisition, and a cultural transition that cost him a business.

Main Takeaways:

• M&A success depends more on people and culture than on spreadsheets or numbers
• Due diligence can verify contracts and financials but rarely captures a target company's culture
• Only about one in five UK businesses listed for sale actually sell
• Unregulated brokers in the UK often promise inflated prices to win the mandate fee
• Sellers need a clear, realistic understanding of how much money they actually need before pricing a sale
• Waiting too long to sell can be catastrophic, including forced closures and lost value for owners and employees
• Overseas buyers acquiring UK businesses should be prepared to lead in person, not manage remotely
• Tax-efficient tools like Enterprise Incentive Schemes and growth shares help retain key management post-acquisition
• Vendor and seller financing structures reduce reliance on traditional debt and lender risk
• Deal fever, the emotional rush of finally finding a deal, causes buyers to overlook red flags
• Maintaining a strong pipeline of options is the best defense against overpaying or over-committing
• When problems arise late in a deal, asking "how do we mitigate this" is more productive than walking away
• The UK is likely entering its final five years of a major wave of baby boomer business exits
• Self-funded and creative deal structures are becoming more common as debt becomes more expensive and risky
• Curiosity, mentorship, and surrounding yourself with people ahead of you accelerates growth as an operator

Episode Highlights:

[00:00:40] Guy's path from the British Army Reserve into printing, marketing services, and his first share sale

[00:02:40] Teaching himself leveraged buyouts and completing his first acquisitions in 2006

[00:04:10] Writing "Business Magic" and founding The Business Buyers Club in 2014

[00:05:30] Launching Fidelis Advisory as a fractional M&A service for busy operators

[00:06:50] 42 years of military service and the direct parallels to running acquisitions

[00:09:40] Why M&A is fundamentally about people, not numbers

[00:11:20] The "transition trenches" and why culture is impossible to fully diligence

[00:13:40] Why only about one in five UK business listings actually sell

[00:15:00] Unregulated brokers, inflated price promises, and take-home fee incentives

[00:16:50] Helping sellers understand the real number they need versus what they want

[00:19:30] The dangers of waiting too long to sell, including two cautionary stories

[00:23:00] Advice for overseas buyers acquiring UK businesses, from leadership to tax tools

[00:27:30] The current state of the UK economy and its impact on SME M&A

[00:29:40] Lessons from failed deals, including a lost government contract and an underfunded roofing acquisition

[00:33:10] A cultural transition gone wrong after acquiring an electrical contractor

[00:36:00] Deal fever, red flags, and the power of walking away

[00:38:20] Using a triangle framework to mitigate problems between buyer, seller, and company

[00:40:00] The coming wave of baby boomer business exits and where the UK market is headed

[00:43:30] Mentorship, curiosity, and Guy's advice on building a strong network

[00:45:10] What motivates Guy and where to find him

Connect with Guy Bartlett:

Website: https://fidelis-advisory.uk

Connect with Jared:

If you have questions for Jared, visit: https://jaredwjohnson.com

LinkedIn: https://www.linkedin.com/in/jaredwjohnson/

DISCLAIMER:

The views and opinions expressed in this program are those of the guests and host. They do not necessarily reflect the views or positions of my employer.

Keywords:

mergers and acquisitions, SME acquisition, business buyers club, fidelis advisory, UK business sale, leveraged buyout, business broker, due diligence, seller psychology, baby boomer business exit, deal structure, deferred consideration, vendor financing, SBA lending, business acquisition mistakes, culture in M&A, overseas business acquisition, UK economy, exit planning, business valuation

In this special episode of Before You Buy or Sell a Business, we're sharing a presentation from Acquire Fort Worth, Jared Johnson's monthly event for entrepreneurs through acquisition (ETA), buyers, operators, and investors.

Richard Chance, Professor at Tarrant County College and founder of the ETA Accelerator Program, shares the lessons he's learned from working with hundreds of aspiring business buyers. Rather than focusing on deal structure or financing, Richard explores the mindset, habits, and behaviors that consistently separate successful searchers from those who struggle to acquire a business.

Throughout the presentation, he discusses why buyers should treat their search like a startup, the importance of building systems instead of relying on motivation, how repetition develops better acquisition judgment, and why relationships, consistency, and execution often matter more than finding the "perfect" deal.

Whether you're just beginning your search or actively evaluating acquisitions, this presentation offers practical insights into building a more disciplined and successful acquisition process.

Main Takeaways:

• Treat your business search like a startup by building systems, measuring progress, and committing to consistent effort.
• Focus on the activities you can control instead of becoming discouraged by outcomes you cannot control.
• Distinguish between real obstacles and self-imposed barriers that often prevent buyers from taking action.
• Build an acquisition operating system to manage outreach, relationships, deal flow, and personal performance.
• Reviewing more opportunities develops better acquisition instincts and improves decision-making over time.
• Don't let the pursuit of the "perfect" acquisition prevent you from gaining valuable ownership experience.
• Success in ETA requires strong habits, accountability, and a support network that helps you stay consistent.
• The best opportunities often begin as conversations, relationships, or situations, not listings.
• Develop a value creation plan before closing so you're prepared to operate and grow the business from day one.
• Long-term success in acquisition entrepreneurship comes from consistency, discipline, and continuous learning, not luck.

Jared Johnson sits down with Mark Sims, Managing Partner at Consult MSG, to discuss what separates businesses that create lasting value from those that create unnecessary risk during an acquisition. Drawing on decades of experience in consulting, corporate leadership, M&A, and post-acquisition transformation, Mark introduces his framework for evaluating businesses through the "Five Cs" of value creation and preservation. Together, they explore why competitive positioning, cash flow management, clean financials, customer concentration, and operational capabilities matter long before a deal reaches closing. They also discuss how buyers should evaluate founder dependency, customer concentration, documentation, and non-compete agreements, along with practical ways sellers can prepare their businesses for a smoother exit. The conversation closes with lessons from real transactions, common deal mistakes, and what successful buyers should focus on during the first 100 days after acquiring a business.

Main Takeaways:

• The Five Cs provide a practical framework for both buyers evaluating businesses and sellers preparing for an exit.
• Competitive positioning should clearly explain why a business wins customers and where future growth opportunities exist.
• Understanding the cash flow cycle helps buyers evaluate working capital needs and operational efficiency.
• Clean, organized financials reduce friction during due diligence and increase buyer confidence.
• High customer or vendor concentration can significantly increase acquisition risk and should influence valuation.
• Buyers should evaluate whether customer relationships are tied to the business itself or primarily to the owner.
• Documented processes, SOPs, contracts, and operational systems make businesses more transferable and valuable.
• Non-compete agreements are not a substitute for reducing founder dependency and transition risk.
• Sellers should begin preparing for a sale well before going to market by cleaning up operations, financials, and documentation.
• Buyers should develop a value creation plan before submitting an LOI and execute against it after closing rather than relying solely on a "wait and see" approach.

Connect with Jared:

If you have questions for Jared, visit: https://jaredwjohnson.com

https://www.linkedin.com/in/jaredwjohnson/

Connect with Mark:

https://www.consultmsg.com

DISCLAIMER:

The views and opinions expressed in this program are those of the guests and host. They do not necessarily reflect the views or positions of my employer.

Keywords:

business acquisitions, business valuation, entrepreneurship through acquisition, ETA, SBA acquisitions, value creation, value preservation, due diligence, quality of earnings, cash flow management, customer concentration, founder dependency, competitive positioning, standard operating procedures, SOPs, operational documentation, transition planning, acquisition strategy, lower middle market, M&A

Jared Johnson takes a different seat in this episode as he gets interviewed and answers real questions from buyers and sellers about entrepreneurship through acquisition. The conversation cuts straight through the hype and focuses on what it actually takes to buy and run a business.

Jared explains why ETA has become so popular in recent years and why much of what people see online does not match reality. He talks through what lenders are really looking for, including experience, liquidity, and consistent cash flow, and why those factors matter so much when getting a deal approved.

The episode also covers the most common reasons deals fall apart. Jared walks through red flags like inconsistent financials, customer concentration, and buyers trying to operate businesses remotely. He shares where buyers go wrong, especially when they skip due diligence, rush into deals, or rely too heavily on brokers and sellers without verifying the numbers.

There is also a personal story from Jared’s first acquisition that shows how expensive mistakes can be when diligence is limited. It is a clear reminder that even deals that look solid on the surface can carry real risk.

This is a practical, honest look at ETA for anyone considering buying a business or currently in the process.

Main Takeaways:

• ETA is real, but it is much harder than it is often presented online
• You cannot treat buying a business like passive income, it requires real involvement
• Lenders focus heavily on buyer experience, available cash, and stable cash flow
• Deals often fail early due to weak financials or lack of buyer preparation
• Customer concentration and inconsistent revenue create major risk
• Skipping due diligence or hiring the wrong advisors can be costly mistakes
• Asking why the seller is selling can reveal important issues
• The best deals match the buyer’s experience with the business they are buying
• Investors can help, but not all investor relationships are good ones
• Patience matters, buying the wrong business is worse than waiting

Connect with Jared:

If you have questions for Jared, visit: https://jaredwjohnson.com

https://www.linkedin.com/in/jaredwjohnson/

DISCLAIMER:

The views and opinions expressed in this program are those of the guests and host. They do not necessarily reflect the views or positions of my employer.

Keywords:

entrepreneurship through acquisition, ETA reality, SBA lending, buying a business, business acquisition mistakes, due diligence, quality of earnings, cash flow analysis, customer concentration risk, deal red flags, acquisition financing, small business acquisition, search fund, lender perspective, acquisition strategy

Jared Johnson sits down with Ivy Millman, CEO of WHIZDOM, to explore a missing piece in many lower middle market acquisitions: customer due diligence. Ivy shares how her background in accounting, Stanford, Apple, and decades of business-customer research led her to build a firm focused on helping buyers, investors, and operators understand what financial, legal, and technical diligence often miss. The conversation breaks down how independent customer interviews can uncover risks around retention, churn, concentration, loyalty, product issues, and transition vulnerability before a deal closes. Ivy explains her process, why customers often reveal more to a neutral third party than to sellers or buyers, and how these insights can shape valuation, confidence, and post-close growth plans. Jared also shares what he is seeing in SBA acquisition lending, including higher defaults, tighter scrutiny, and the growing need for real diligence before buyers commit to multimillion-dollar deals.

Main Takeaways:

- Customer due diligence fills a major gap left by financial, legal, quality of earnings, and technical diligence

- For B2B acquisitions, revenue sustainability depends heavily on retention, loyalty, stickiness, and switching risk

- Customers are often more candid with an independent third party, especially when they want feedback kept anonymous

- Seller-protected customer relationships do not have to block diligence if the process is structured correctly

- Independent customer calls can uncover hidden risks that materially affect valuation and deal confidence

- Customer insights can help buyers decide whether to move forward, renegotiate price, or build a stronger post-close plan

- High customer concentration becomes even riskier when relationships sit primarily with the founder or seller

- What buyers learn pre-close can become a practical roadmap for post-acquisition growth and retention

- Sellers can use the same kind of customer work before exit to improve enterprise value, loyalty, and retention

- SBA acquisition buyers should not rely on lenders, brokers, or sellers alone to validate a deal

Connect with Jared:

If you have questions for Jared, visit: https://jaredwjohnson.com

https://www.linkedin.com/in/jaredwjohnson/

Connect with Ivy:

https://www.linkedin.com/in/ivymillman/

[email protected]

DISCLAIMER:

The views and opinions expressed in this program are those of the guests and host. They do not necessarily reflect the views or positions of my employer.

Keywords:

customer due diligence, B2B acquisitions, lower middle market, ETA, entrepreneurship through acquisition, SBA loans, quality of earnings, QofE, customer retention, customer stickiness, customer loyalty, customer churn, revenue sustainability, founder dependency, seller transition risk, customer concentration, post-acquisition growth, valuation risk, M&A diligence, independent third party diligence