Welcome back to another episode of Before You Buy or Sell a Business. Today, I talk with Erik Fike as he shares his experience of buying a business while still working in his current role.

He discusses how he found the right business, the challenges he faced during the transaction, and the lessons he learned along the way. Erik provides valuable insights into the due diligence process, the importance of finding the right lender, and the need for mentorship and guidance in the acquisition process. He also highlights the significance of having experience in running a company and the motivation behind his decision to pursue business ownership.

Key Takeaways:

• Finding the right business: Erik emphasizes the importance of defining specific criteria for the type of business you want to buy, such as remote operation, B2B services, and revenue margins.
• Negotiating the LOI: Erik shares his experience of going through multiple revisions of the LOI with the seller, ensuring that all key aspects of the deal were addressed and agreed upon.
• The challenges of bank financing: Erik discusses the difficulties he faced in securing bank financing and the importance of finding a lender who understands the business and can provide the necessary support.
• The value of working capital: Erik highlights the importance of having sufficient working capital to navigate unexpected challenges and maintain stability in the business.
• Lessons learned: Erik advises considering forgivable seller notes to mitigate risks and protect against potential contract pauses or cancellations.

Notable Quotes:

"You really should have a mentor. I definitely have, and I also recommend peer groups for that same kind of thing. It's been great too." - Erik Fike

"The best-case scenario with a bunch of recurring revenue is awesome. This is not one of those businesses. This is a big project-based business." - Erik Fike

Erik Fike's LinkedIn

IN THIS EPISODE

00:00:00:00 | Introduction, Erik Fike's Background

00:04:02:10 | Emerging ETA Space & Social Media

00:17:37:01 | LOI, 9 Revisions, and Addressing Key Issues Upfront

00:20:11:13 | Experienced Lender vs Unexperienced Lender

00:27:06:20 | Unexpected budgetary issue in California affecting contracts

00:31:03:08 | Seller Note Forgiveness and Customer concentration

00:36:04:12 | Stability and Experience with Project-based Revenue

00:38:05:04 | Erik Fike Answers: Do You Have a Mentor?

00:39:30:02 | Erik Fike Answers: What Motivates You?

In this episode, host Jared Johnson interviews Eric Pacifici, an attorney specializing in small and medium-sized business (SMB) mergers and acquisitions (M&A).

Eric shares valuable insights and advice for buyers and sellers in the acquisition process. He emphasizes the importance of having legal representation and discusses key contractual terms such as indemnity and non-compete clauses. Eric also addresses the cost of legal services and the benefits of a fixed fee model.

He highlights common challenges in SMB M&A deals, including issues with quality of earnings and seller disputes. Eric provides practical strategies for mitigating risks, such as addressing customer concentration and involving investors in the deal. Throughout the conversation, Eric's passion for SMB M&A shines through, as he offers valuable guidance for navigating the complexities of these transactions.

• Treat your bank as an ally, not an adversary. Your interests are aligned, and the bank can help identify potential issues such as customer concentration.
• The three most important contractual terms in an SMB M&A deal are indemnity, non-compete, and a strong letter of intent.
• Quality of earnings is a crucial aspect of due diligence. Hiring a quality of earnings provider can help uncover potential issues and protect your investment.
• Customer concentration is a common challenge in SMB deals. Mitigate this risk by including contingent compensation in the purchase agreement or promissory note.
• When bringing in investors, consider their control rights, objectives for the business, and potential impact on governance.

• "You're risking your financial life. You're taking multimillion-dollar personally guaranteed debt. You need to have a checklist of things that you need in your deal."
• "Don't be a jerk, but you don't need to walk on eggshells. You're risking your financial life, and you can always pull the plug and go do another deal."
• "Find smart money people who can serve as strategic advisors. It's better to have strategic alignment than just generic dollars."

• SMB Law Group
• Eric Pacifici on Twitter
• Eric Pacifici on LinkedIn

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If you have questions for Jared, visit JaredWJohnson.com

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

In this episode of Before You Buy or Sell a Business, host Jared Johnson welcomes back Tommy Speigner to share his journey and lessons learned from acquiring a business in an industry he had never explored before. Tommy discusses the process, challenges, and triumphs he experienced in finding and buying a company. The conversation dives into the nuances of engaging with investors and the strategic approaches for buying and growing a business successfully.

From the decision-making strategies to the realization of purchasing a forestry and vegetation management service company, this episode unpacks the details of identifying viable business opportunities and the role of investor relationships. Tommy's experience demonstrates the importance of adaptability and keen business acumen.

Key Takeaways

• Tommy Speigner explains the differences between his initial solo venture and his recent team-backed approach.
• The episode delves into the intricacies of searching for and acquiring a business outside one's typical industry.
• Key discussions on leveraging relationships, networking, and utilizing different types of funds for business acquisition provide valuable insights.
• Tommy shares his firsthand experience with the SBA loan process, exposing both challenges and triumphs.

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If you have questions for Jared, visit JaredWJohnson.com

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