Richard Parker OG of Business Buying Coaches, What I Learned from Buying 13 Businesses

 Summary

In this conversation, Jon Stoddard interviews Richard Parker, a seasoned entrepreneur with over 30 years of experience in buying and selling businesses. Richard shares his journey from a corporate vice president to an independent business owner, detailing the challenges and successes he faced along the way. He discusses the importance of due diligence in business acquisitions, the realities of buying distressed businesses, and the strategies that have led to his success in the entrepreneurial world. Richard emphasizes the need for proper consultation and education for aspiring business buyers, and he reflects on the evolution of his career and the impact of his course on teaching others how to buy businesses. In this conversation, Jon Stoddard shares his journey through various business acquisitions, focusing on the legal document services industry and the challenges he faced during personal loss. He discusses the importance of building a strong network for deal flow, adapting to market changes, and maintaining the integrity of business practices. Jon emphasizes the enduring principles of business acquisition and offers insights into navigating the complexities of the market.

Takeaways

Richard Parker transitioned from a corporate job to entrepreneurship after facing financial difficulties.
He started his first business as an independent sales rep before moving into acquisitions.
Due diligence is crucial in identifying red flags in potential business acquisitions.
Buying distressed businesses can be risky and requires significant knowledge and capital.
Richard emphasizes the importance of clean books and records when selling a business.
He has bought and sold 13 businesses throughout his career.
Richard's course on buying businesses has helped over 100,000 people.
He believes that buying a good business and reinvesting profits is key to success.
The market for teaching business acquisition has grown, but not all courses are reliable.
Richard's journey highlights the importance of understanding one's strengths and weaknesses in business. There's a high level of gratification in small-scale business.
The legal document market is vast in the U.S.
Cleaning up a business's mess is crucial for success.
Automation can streamline business processes significantly.
The core concepts of business acquisition remain unchanged.
Inflation's impact on the business market is minimal.
Many businesses listed for sale are not viable.
Personal resources often fund low-end business purchases.
Building a strong network is essential for deal flow.
Helping others is a key part of business integrity.

 Watch the Interview

Transcript

Jon Stoddard (00:05.39)
Welcome to the top &A entrepreneurs. Today, my guest is Richard Procker. Richard and I have known each other for a while because almost 20 years ago, I bought a course, how to buy a business from him. And he's been buying and selling businesses for 30 years. Welcome Richard. Thank you. It's good to be here. It's nice to put a face to an email or to an order confirmation. I appreciate you having me.

Yeah, so when I said, I think I bought a course from you, you went back in and your database and checked and that was back in what 2005. 2005 was old enough that I could go into the old database. I mean, I first looked at the order search and then shoot. said, shoot, he's not even here. And they said, wait a minute. I know we redid the database in 2007 and sure enough, dug it up and, there you were in 2005. I think it was December, 2005. my God. That's a long time ago. Anyway.

So how did you, let's start by like, how did you get into buying and selling businesses? And I know that you released that course, but what were you doing before that? And hey, I'm gonna get into buying and selling businesses. Okay, so this goes back, I hate to date myself, but this goes back to about 1990. I was working for a company, I was doing quite well. I was a vice president of a consumer products company. And through my brilliance, I managed to,

plow a ton of money into the stock market and then found out this whole concept about margin and said, wow, this is pretty good. I could double down and only use the same amount of money. And I blew everything and wound up with about 60 grand in debt, which is pretty interesting considering my gross annual income at that point was $72,000 a year. So I was in a little bit of trouble. And I realized that there's no way I'm getting out of this hole. And my then wife was pregnant with our first child. I realized there's no way I'm getting out of this hole, working for somebody.

So I decided to go into my own business and the first business was actually not an acquisition. It's a business that I started. I became an independent rep for the company that I was working for. They were selling off one of their divisions that I was running and I negotiated with the company that was buying them to be their independent sales rep for the territory of Eastern Canada. And shortly after doing that, probably about a year into it, I realized that growing the business

Jon Stoddard (02:23.565)
I either had to bring on more products or perhaps I should buy out some competitors or buy out some products that I was representing. So I did that and continued along that road, doing a little bit of distribution, mostly manufacturers reps rep work. And then I acquired a line called Sega, Sega video, which at that point in time, just, and it was sheer dumb luck. I mean, it has nothing to do with brains. I was just, just got lucky. That was at the point in time when Nintendo owned 80 % of the market, Sega owned 20 and within

about 18 months that flipped and I just happened to be there at the right time. Wait a minute, you owed the license to sell Sega? I had the Eastern Canadian distribution rights. my God. And when you say, my God, you remember a time when the ad was like Sega, everything was going crazy. It went crazy. But that was at the time, like was 92. And just when I started really Nintendo, it was an 80-20 split. mean, Sega was really nowhere. It was all Nintendo. And then that flipped.

Right. Cause they came up with the Sega Genesis and the business exploded and my business, my repping and distribution business, which was doing a few million dollars a year went to a little over 30, went just absolutely bonkers. And, and I had made a couple of other small acquisitions, along the way and started getting a bit of a reputation in my town in Montreal of, amongst my peers of, of knowing how to buy some businesses. So I started helping out some people.

And then in nine, that book went to about 1996. And at that point in time I was making more money than the whole senior executive at Sega. And they weren't very happy, but well, they were very happy because of my sales, but they weren't very happy when they were writing the checks, I guess, when they realized what they were making. So they bought me out, which was perfect and which I anticipated going into the contract. I knew that would eventually happen. It generally does when a independent rep starts doing too well, they try to convert it to house account and that protection in place.

So I sold that and I decided I was going to move to Toronto because that's where all the major head offices were moving. Quebec was continually going through its language issues. I'm sure you read about. And then I decided, you know, what the heck, once I'm moving, I'm going to move somewhere warm. I hated the winter outside of being an avid hockey player. I hated the winter. So I decided to move to Florida, got involved in a golf venture down here and again, and was continuing looking at, you know, making some acquisitions.

Jon Stoddard (04:46.989)
And then in 1999, I was looking at a business down here, which was in the commercial laundry business, who was the distributor for a well-known brand in the commercial and not residential that would supply hotels, condominiums, apartments, dormitories, for, you you put in your 75 cents or 50 cents at that point in a quarter for a dry, and they service those, sold and service those machines.

I was negotiating the acquisition of that company. I had the offer all done, signed, everything in place, deposit in place, and started doing the real formalized due diligence and found out that the company was an absolute disaster. I mean, it was a complete house of cards. was everything that you would, that someone would fear could happen was in place at that business. And I decided to rescind my offer and walking out of the place. And I remember it like it was yesterday.

When I was walking out, going to my car in the parking lot, I remember thinking to myself, know, the average person who looked at this business and had got to the point that I got to would have more than likely gone through with the transaction. And it was strictly because I had a background of experience in really digging into a company to find out, you know, what red flags are, what's good, what's bad. That's the only reason why I was able to catch what I caught.

and backed out of the deal. I said, you know, the average person would have gone through with that and it would have been a disaster. Maybe wasn't a monster acquisition. was just a little over a million dollars. What were the red flags that you started to see that said, and then you, the more doors you open, the more red flags. Okay. So we could start with a number of things. They had two very distinctive sides of their business. One was the repair and one was, were the sales. Start found that what I

What was unbeknownst to me that the owner of the company, he had a lot of these machines that he owned that he placed personally into a lot of locations. He was doing service, not charging the company. Okay, so he was having his own employees do free service for all of his machines. That's the first thing. The other thing was, and I can go through the list, I say you go through the laundry list, pardon the pun, inventory. They were doing a lot of part servicing.

Jon Stoddard (07:10.477)
When we went through the inventory there, let's say it's all good and resaleable inventory, but to starting digging through how many units and keep in mind washing machine and dryer machine parts. mean, the tiny little parts, can have a box this big and have 500 pieces in it, right? And started going through those and realized that in some cases they had 15 years worth of inventory. And what happened was they had had a reputation for being the place where, you know, if you had an old machine, you could find the part there.

But a lot of these parts are really expensive. And so they're saying, well, we have about a year's worth of inventory. But some of those cases you had, they'd sell 15 a year and they had 180 parts, 180 pieces in inventory. Then there was a case of there were a couple of people that were being paid cash. So what he was doing was the machines that he owned, right? He was taking the machines, the cash out of the machines.

not putting it through the business, okay, but saying, here's how much the cash was generating. So give you an example of saying there's, you know, a hundred thousand dollars in unreported income that I take out of the machines. Well, it was cash in and he could cash out. Yeah. But what he wasn't, but what he wasn't, it wasn't trackable. And the other thing was he was paying. So it'd say like, well, let's say that number was 200,000, but he was playing, paying people and suppliers in cash and wasn't recording it. So that, even if that number was legitimate,

It was grossly reduced. And I was trying to explain to him, hey, you can't steal it twice. I don't run a business that way. I put everything on the books, but you can't steal it twice. If you want to steal that money, that's your business. I don't judge. That's up to you. As long as you don't mind looking over your shoulder for the IRS, but you can't expect to get paid for it on a multiple. I mean, you just can't steal it twice. There was the inventory of the machines.

Again, also the machines themselves, a lot of them were, you know, machines that just simply weren't wanted in the marketplace. The big, particular brand, the big, you know, the big washers and big dryers that you'd find in coin laundries, this brand wasn't sought after. And he had a lot of that. Okay. And there's a relationship with the manufacturer. You can exchange the manufacturers and notice that relationship doesn't exist. So from one thing after the other, I mean, it was endless, right?

Jon Stoddard (09:34.453)
And then finally just threw up my hands and said, yeah, you just called. I made a call. Yeah, made the call and happy that I did. as I was in the parking lot, I said, you know, I'm very curious what the average, you know, what an individual does who's looking to buy a business on the lower end, maybe not even a million dollars, but buying a $200,000 business. What resources are available? How can people help? I've been dealing with and doing some brokerage for many, many years and recognize that, you know, by and large, you know, brokers

that can be an impediment to the deal. And they certainly don't go out of their way to help the buyer. Their interest is selling a business, getting it closed, not necessarily making sure that the individual buys the right business. So I was very intrigued to say, okay, what type of information is available for individuals outside of hiring a $500 an hour accountant? Because CPAs aren't the right people to guide them and nor their attorneys. They need proper consultation. And this is when the internet just was...

you know, the bubble was bursting. Everything was free at that point. So I started getting busy with the internet and it was more intrigued from a standpoint of research and realized there's not a lot available. There were a lot of books about buying a business, right? But they were very basic and good. mean, no education is bad education, but there was really nothing that took a buyer, an individual who had no experience for the most part, by the hand, step by step through every stage of the process.

Here's what you are, what you're going to face. Here's what you need to know. Here's what you need to do. Here's how to do it. And if X happens, here's what you do in that situation. If this situation happens, here's how you deal with it. Again, through and valuing a business and arranging financing and negotiating the deal, questions to ask the sellers. Because people, for the most part, still think of buying a business like buying a house.

And I decided to take all that hundreds and hundreds of files of businesses that I looked at or help people look at probably close to thousand and it always kept incredible notes. So I decided to put it into a course, which I did. I wrote it quickly. I gave myself 90 days to write it because I, when I was thinking of it, but I started speaking to a lot of people who would, you know, about writing books.

Jon Stoddard (11:50.989)
And you know, you meet a lot of people said, you know, they, I'm writing a book now. And you say, well, really how long you're writing it? 16 years, right? No one, no one gets to the finish line. I said, there's no way I'm going to do that. And digital publishing was just starting. So I said, you know what? I've got to get it out there. And if I have to make change, I'll make changes on the fly. I didn't want a publisher. I'd had a couple of publishers once I produced this and sent it to a couple of publishers. There was a high level of interest, but I didn't realize that publishers don't promote your books. Yeah. Right. You got to do the promotion. So I said, you know, what the heck with them? What do I need these guys for?

And so I launched it online April 23rd, 2001. And the night before we pulled the trigger to go live, I remember my wife asking me, how many things are you going to sell? And my answer to her then is this is still where I feel now is, if I sell one and I help one person buy a good business or make sure one person avoids buying a bad one, that's going to be perfect for me. I didn't do it for the money. It was a labor of love. If I never sell it.

didn't sell a single book or never sell another one. A guide again doesn't change my lifestyle. But that was my only, my only motive was to help one person. I just never thought it would turn into what it turned into. I mean, it's crazy. It's 20 years later. has it turned into? I mean, how many courses do you think you sold over last 30 years? Probably a hundred thousand. A hundred thousand. Wow. Yeah. And are you surprised or shocked?

You know, within the last five years, so many of the people are getting into the business of teaching other people how to buy businesses. I'm not surprised at all. I'm scared to tell you the truth, because a lot of these are courses and boot camps for thousands and thousands of dollars that are trying to teach and preach this idea of buying businesses for no money down or distress businesses. And, you know, I haven't attended these webinars or

or weekly retreats or whatever. I, I'm certainly not going to disparage any of the individuals, but conceptually it just doesn't work. so it doesn't work because what I mean, buying distress businesses is not for the faint of heart. I bought a distress business and it took me emotionally, you know, a year to turn it around and a lot of money. Yep. Well, well, so my line on distress businesses is, is this causes a lot of stress.

Jon Stoddard (14:09.485)
I you're buying someone's garbage, right? So yes, can you buy a business for no money down? Yes, you'll buy garbage, right? Out of a thousand times, can you find one that's a good business? Possibly. But think about it this way. Why on earth, unless a seller, there's a morbid reason, death, divorce, illness, et cetera, why on earth would anybody sell a good business to a stranger for no money down?

I mean, this is not like buying a house, right? Where if in a year, you know, if the people don't take care of the house, the house is still going to be standing. If you don't take care of the business, the business is gone, bankrupt, not coming back. So nobody sells a good business for no money down. Now there are cases where they may sell it to an employee or a family member, someone they know or someone who has familiarity with the business, but they're not selling it to a stranger for no money down. Certainly not a good business. A distressed business, if you don't have the stomach for it,

And if you don't have the brains and if you don't have the capital, it's gone. It's on its way to being gone anyways. So it's going to go quicker. So you need to know what you're doing and you need to have money to put into it. So you may get it for very little down, but that's not where it ends. mean, the money only starts at that point. And so this concept, it just doesn't work in the real world. And that's why, I over the years, I mean, can't even tell you how many, two of them are three this week.

where people emailed us and said something about that exact concept. Can I buy a business with no money? You know, how many courses we've sold, I probably could have sold 10 times the amount of I told people, yeah, you could buy it for no money down. But it's not reality. I had a call from Europe, a guy said he wanted to buy a business. And I said, well, tell me how you got this concept of buying a business. There's no money down. Well, everybody in America is selling their businesses. So no money out of pocket.

Like, yeah, that's not really, that's not really happening. It's not really happening. Not good business as you went through the experience, you said, and it's, it's, it's, it's, it's painful. And if you don't know what you're doing, there's a reason why it's a distressed business. Now there, could be many reasons, but there certainly is one reason, whatever that may be, lack of customers, bad ownership, failing product, no marketing, whatever it may be. But there's a reason why that business has gone south. And so, you know, I've just been a huge promote proponent.

Jon Stoddard (16:33.141)
of buy a good business, work on it, okay, build it up. Don't take out too much money as it starts to grow, keep putting it back in and you're going to wind up way ahead of the game. That's how I did it. mean, my first business remained the basis for my income for years and years. The second, third, fourth, fifth, sixth business I bought, I never took a penny out. just put it back How many total businesses did you buy? 13. 13. And did you stack them on top of each other or did you buy, sell, buy, sell? Some.

And some were investment, that mostly were businesses that I liked, that I liked the concept, I liked the model, I know what I'm good at, and I certainly know what I'm not good at. And I've got a lot more weaknesses than I do strengths. So businesses that would fit well with what I believe and what I actually, I'm not trying to maybe being too humble. I know what I'm good at and I know what I'm not good at. And so buying businesses where I can invest in the business, grow them, put in good structure.

even before, you know, advent of all the wonderful technology we have today, but good processes and systems in place so that they were, I always try to buy a business and think about selling it the day I bought it, even though I didn't want to run, even though I didn't buy it with the idea of selling it, I wanted to run it like I had to sell it. Yeah. Did you, you wash the car, you clean it out. If somebody walked up and said, Hey, I'll pay you for that because it looks better. And the day before they saw the same car and it was dirty. Yes. Yes. That's a great analogy. It's exactly that.

And it also made my life easier, right? So, because if you have a business and you put in the front end work and get the procedures and policies and systems and good people into place, then ultimately it makes your life easier from a standpoint of running it. You can go away on vacation with a clear head. If someone leaves, you're not worried that the whole thing falls apart. All of these components to it just become better when the time comes to sell.

The important things, there's a few things that are important when you sell a business. You want to have clean books and records, right? It should be able to, you should have a good buyer pool and you want to be able to make sure that it can transition well to a new owner, assuming that individual or group has the right people. And so you can pre-plan for that from the day you start or buy your first business. Well, let's talk about some of those businesses. What are we looking at like the first couple, two or three that you liked and you're good at?

Jon Stoddard (18:55.575)
So I know that my strengths are sales, marketing, I'm very organized and I can get cut through to the processes that need to be in place, right? And I like to automate as much as possible, not getting rid of people, but I like to automate. I gotta tell you, you must have learned a lot about automation if your sales for Sega went from 1 million to 30 million, figuring out how to put processes in place.

Yeah, the good part is they were the company I was, you know, I was a distributor, I didn't have to deal with a lot of that. But boy, did they ever, right? And they had, you know, a good part of what they had Sega Japan, which is called Sega's abbreviation for service games. They've been, you know, leaders and kings in the arcade business for, I mean, it must be close to 100 years, right? So when they came over to America, a lot of that was in place, a lot of it, you know, people, it was a different way of doing business.

but a lot of that was in place. For me, it was really managing. The biggest challenge I had is the product was so out of control and demand when we would release a new game like Virtual Fighter on the Genesis platform. Like I'd get an allocation of whatever the number was, 30,000 games, right? And I had orders for 130,000. So just keeping...

keeping customers happy and making sure everybody got a little bit and the ones that weren't loyal, making sure they didn't get any. So, but those type of processes and systems and making sure that the launch was handled properly. That was, it took work. mean, it took a lot of work, but fun work, right? I mean, it was really popular. It was crazy. the, know, was all advertising was all over the TV and people would walk around going Sega. I mean, it was great. know,

Let's go back to some of those. What was the first business you bought that was a profitable business? What was the revenue size? What kind of business was that? Okay, so I started my rep agency and then I bought a small... I was selling consumer products, set the stage a little better for you. I was selling consumer products to major retailers in Canada. Let's carve out the SIG and forget about that for a second.

Jon Stoddard (21:17.249)
But I had the rights for one of them was an infant products lines, pacifiers, squeeze, toys, bibs. It was a place school baby line that was under license from Hasbro. And I was actually rep for Hasbro at that point. And then what was happening is I was selling these, this product into all these retailers, like the Canadian version of CVS and Walgreens and Walmart, the Canadian version of those, have been Jean Couture shoppers, drug mart, these sellers, those were comparable retailers. Walmart only came later to Canada.

And what would happen is we'd sit with the buyer, we'd do the line listing for the year, we'd lay out all the products, the planogram and what it looked like. And it looked terrific. Gorgeous packaging, blister packs, all laid out, all perfectly aligned, looked great. And then you'd ship in the stuff to the store, do ads throughout the year and promote certain products. And then you go into the store and you look at your four, eight or 12 foot section, looked like dog's breakfast, right? It was like, my God, like this has no relationship to what we hung up in the buyer's office, right? Like what this is supposed to look at.

And I was losing sales because we realized that, know, merchandise was stuck in the back room. Goods were being delivered to the store. They didn't have adequate store personnel to put it on the shelves. They wasn't that EDS electronic data systems that you had, transfer systems of the replenishment that came years later. So I bought a small company. was based in, it was in Quebec and one in an office in Ottawa that they did retail merchandise servicing. So they had people that went into the stores across Canada.

took the merchandise from the back room, hung it up onto the shelves, a third party and the supplier, so in this case, let's say Play School Baby or whoever it was, was Goody Brushes and Combs, they would pay for that service because they knew it wouldn't get done by the store personnel. So we did that on test basis, then I bought three other ones, rolled up with a few partners to be able to do this across Canada where we had offices. So it was coast to coast, Canada is a big country. So there are people doing this way, it's big, right?

So the people were doing some similar stuff on a very, very, very regional basis throughout Canada. So I bought and brought them in as partners. One in the maritime provinces, another one in Ontario, one in Western Canada. And we formed this company, which was called Devru, D-E-V-R-E-W Merchandising, which was one of the names of a company that my partner, who company required, was doing it in the maritime provinces. And we were doing...

Jon Stoddard (23:42.349)
small business at that point. By the time I exited, it went from about a $500,000 business to $4.5 million. That's very profitable. Very profitable. We're selling labor, right? Yeah, you're just somebody coming to your store, they have a picture of what it's supposed to look like. They'd come into a store like a CVS, go to the back room, get all the products and then go rearrange them on the shelves at CVS. Correct. Yeah, you know, when you see sometimes you walk into the drugstore,

and you see someone working from Carlton cards or something, they're rearranging. yeah. You'd always ask him where do you find that? He goes, I don't work here. They're doing the greeting cards. Greeting cards are horrible because people put them back all over the place. The products we were doing a little easier, a little bigger, but yes, that was, that was the concept. Then I bought another rep agency. Then a purchase and start, purchased a piece and, and, and, and start another component to an infant products company.

Well, after I was doing the PlaySchool baby work, decided to go into competition with them on some of the soft goods, infants, onesies and bibs and what have you, and hooded towels, the vomit cloths, those type of things. And started importing those directly from Asia. And I went into and we bought a smaller company that was doing some cut and sew operations.

So those were related and then there were other and they're related and you had knowledge about that experience. You know what the KPIs were. Yeah, exactly. And I could understand and, you know, try to keep in mind focusing on what I'm good at. And also at that point was being able to sell more stuff to the same group of customers. Like I didn't want to have to learn a whole new customer base and through the whole introductory process. So that was good. Then I bought some crazy wild ones. bought one of the

an ironworks company, believe it or not, that did decorative ironworks. And the reason why I bought it was with, it was for and with my, more for my late brother-in-law was a terrific guy. And then... So how did that one go? The ironworks? I ironworks, could, I mean, it's a visible, I kind of, sometimes I like those businesses where people build stuff and you could see the finished product and you're proud of it. And then you install it in front of somebody's house and you go, Hey, I built that.

Jon Stoddard (26:00.863)
Now you drive by and you know what? It's a great point because there's an enormous level of satisfaction and gratification versus selling, you know, someone a stack of bibs, right? That they're putting in the retail store. Yes, there is. mean, it's a very high level of gratification and it was done on a small scale, but it was really, really nice. We did a lot of, know, like driveway gates and, you know, ornamental fixtures and stuff like that. So it it worked. Okay.

And my brother-in-law did all right with it. then, you know, fast forward to here in Florida, I bought a legal documents company, a company that did legal documents. If any of your listeners are familiar with legal Zoom, I mean, they do, you know, there's templates of certain agreements, whether it be in corporation or other type agreements, but there's enormous market in America. Unfortunately, you know, coming from Canada, we're not a litigious society. I don't sue anybody.

But in the United States, everybody's suing everybody else, right? There's the courts and the costs for individuals to take something to court, whether it be divorce or guardianship or support, that type of thing for lower income individuals is really prohibitive. It's not only prohibited from the standpoint of the cost if they're going to hire an attorney, but it's really daunting for them when they walk into a courthouse. You you have, for example, I think it was in Missouri, you counties and every county has a different set of documents to file for an uncontested divorce.

Wow. And so this company that I bought, had a barrage of phone calls that they really couldn't handle. But they were doing the document preparation work for individuals that were going to represent themselves in court. How did you come across that? Now you were already selling your course and you were... yeah. yeah. So yeah, sorry about that. If the chronology is off. I was selling my course. I was doing a lot of intermediary work. This was in 2009 when the market really crapped out.

the brokerage intermediary work acquisition business dropped substantially. And during that time he said, you know, I'm just going to buy a couple of businesses, put some systems in place and build them up. I don't care about the recession. I mean, there's plenty of businesses that do well in a recession. there's plenty of businesses that have stuttered a little bit that I could acquire and build them up. that, I bought that, that was a fellow. was, used to work together. He used to work for me in the golf business, I told you, but when I first moved to Florida,

Jon Stoddard (28:25.909)
And he was a salesman for me and he was selling for this particular company. We're sitting around his house one night and just talking and he's telling me about this company that he's working for. And he's telling me they can't handle, they can't handle the amount of calls that they're getting. So wait, time out. I need to have a conversation with you. Yes. Anytime there's like pull from the market, you go, how do I get involved in that? Yeah. mean, the hardest thing in business, if you buy a business where, know, where you have to create demand, I mean, it's so expensive and it's all.

darn near impossible most of the time. here you had a business and they said, like, give me an example. Like when you say you can't handle the calls, right? She said, yeah. I said, like the company gets like 1500 calls a day.

He said, and we were like, you know, six salespeople and they did not. So I dug in and I trusted him implicitly. So dug into the product that you're doing and want to make sure of course that it's legal, right? Cause you're, if you're going to court, you want to make sure what they're doing was legal. And of course it's pros, it's called pro se, P R O S C pro se litigants are people who represent themselves in court, not every jurisdiction or every county in every country in every state.

allows it, there's certain cases that they can, for example, bankruptcy, can't use a document preparer, right? But most cases, custody, support, divorce, uncontested divorce, guardianship, those can all be done by pro se litigants. And so what this company had was, it spoke to the owner and there's documents all over the place, right? Like I said, those 42 counties, I think it was in Missouri. So I said, okay, well,

I liked what they're doing because the amount of calls and he was the guy wasn't he was he was a mess. The guy was running it. wasn't he wasn't paying people probably. There were no systems. You're getting 1500 calls a day. You better have some systems in place. I spoke to him a couple of times and then I bought the business from him. I paid him what he wanted for the business. It was grossly overpriced, but it wasn't a lot of money. Right. And it was a private company. I can't disclose the number, but it wasn't a big number. Does he just want to get rid of the headache or what?

Jon Stoddard (30:32.109)
Because I just wanted, I liked the business and I just wanted to get rid of him. Yeah, but he did. He just wanted to get rid of it because it was a headache to him and he couldn't figure it out. He was was a moron. I mean, he really was. And I hope he's listening. It was, it was, was like, it was a case of, I dug into people that I found that after people that he had taken money from, he didn't do their documents, didn't have the document prepared done. shouldn't have been done in certain county. So the first thing I did was I went through all of the files.

found out what was incomplete, where money was taken, got in touch with everybody. If they didn't have their files done and they couldn't be done, I just wrote them a check, gave them back their money. Right? That was like, first, let's try to clean up this whole mess. Cause the last thing I want is that I didn't want the salespeople to be spending the days answering calls from upset customers who were right. Like the last thing, you're never right. You don't take people's money and not provide a service. If you can't provide it, if you did it inadvertently, you thought you could do a uncontested divorce.

in the St. Lucie County and you realize after you can't do that when they're, just give the people their money back, right? Very simple. So I first cleaned all that up and told the salespeople, look, we have all these calls. These are going to continue to come in. Just let's get everybody clean, right? Whoever, if the company took money from, even though I, legally, I didn't have an obligation to do that, but it's the right thing to do. So the first thing, make everybody right. And over time, instead of there's any of those calls coming afterwards, just clean them. Just,

just give them a check. mean, we don't even have to go into the details. So that was step one. The second part was saying, okay, let's automate this whole process. Cause it used to be people would call up. They would intake the information manually and send it out to a document preparer. The document preparer would do the documents. They would send them out to the customer. The customer would then file them. And, but there was no way in communicating with anybody how all of this was happening. So I spent, I spent at that point in time, I think it was $50,000.

and automated the entire system. The only manual thing that was done was the actual answering of the phone call. Because I wanted a human to answer the call. Other than that, all the customer information was entered in the system. lined, we got the right software for that or developed it ourselves, built ourselves, built it ourselves. So we got copies of every single case that we were doing in every single county that we're doing. And we had the template documents put into a system by field.

Jon Stoddard (32:53.761)
so that when you intake an order, you'd be able to quote the price exactly. You'd know exactly if we couldn't do a particular case in a particular county. Once that was done, it got uploaded. The information got uploaded and automatically triggered to a document preparer who had specialized in or was in that area or had previously done similar documentation for the similar type of case in that county. So it went through with tiers. They completed the documentation. If they have any questions for the client, they could communicate with the client, get the information.

And then the information got uploaded, sent to the consumer and we followed up to make sure once it was filed, they sent us back documentation to confirm it was filed. If it wasn't filed, we helped them get through what was the reason. Because the clerk of the courts in a lot of these areas are really difficult people. They make it very hard. They certainly make it hard on poor people. I could tell you that much, which is completely crazy. Like the people who need it most suffer the most. was eye opening. And I ran that for

few years did very well with it. had a good staff. What do you think your ROI was on that when you sold it? Well, here's how I sold it. I wanted to start taking it easy so I brought in a partner from Canada. He came in and he bought 50 % of the business, wanted me to help him run it for a while and he said, we'll come up with a plan and a formula in advance for him to buy me out for the balance. mean, the money in that business is about

eight or 10 times what the investment was. So that turned out pretty good. Yeah. What happened was when I had my 50 % in a business, my father passed away in June 13th, 2013. And it was not that was not long after I'd sold the first 50%. My dad and I were really, really, really close. He was up in Canada. And I just was really not in the I wasn't even going to move to work. And

with the partner, he was an okay guy, I was teaching him, right? And he really got the hang of it. We had a deal in place, we were probably a year two out from when he would trigger the buy on the remaining 50%, right? But he was running the business, he had already moved it to his own location, he was running it, I wasn't really involved, was checking in or whatever. And then I went to see him, said, look, I just really don't have the stomach or the interest to have.

Jon Stoddard (35:16.083)
any involvement, oversight, anything whatsoever. So forget the agreement that we had in place. Let's just come up with a number that you're comfortable with and I'm going to give you the deal of a century to buy the other 50%. Yeah. And he did. that was done. And then I went into, I'd helped. I had been hired by a family, a very well known family in America in the investment business. They had hired me about 2007.

to mentor one of their sons who was looking to acquire a business in Florida. We worked together for a number of months and then he ultimately decided to go work in the family office, was, you know, family office invests family's personal wealth, which was just starting out at that point. And it was the best decision, you know, certainly at that point, he ultimately became the co-CEO. The family office has like a hundred people and it's Uber wealth. And then they...

And I've been doing a lot of intermediary work along the way out of that window of the legal documents business, but I was doing a lot of buy side and sell side intermediary work, which I really enjoyed, right? And a lot of leads would come from the course. People would hire me as an intermediary consultant or getting a lot of profile, writing a lot of content online, getting hired by sellers and was doing that. I was really enjoying it and decided in 2017 to go into the investment business with that family. My dear friend left.

decided to leave the family office and start doing some of his own investments. And we hooked up together and went into the investment business. They took a break really from the &A world for four That's Roy Street Advisors? It was prior to Roy Street. It was called P squared. P squared. Yeah. Okay. And that was a Dalio family office funded investment. My partner was Devon Dalio. Ray Dalio? Yeah. So Ray's son, Devon and I were partners and been very, very close friends.

and family hired me to mentor their eldest son in the investment business. So I did that, started in 2017. Made a number of investments, but co-investments in about 120 Taco Bells and Applebee's and some other fund investments. And then on December 17th, 2020, my dear partner and cherished friend, Devon, he was killed in a car accident. God damn.

Jon Stoddard (37:32.703)
And, and he and I were, mean, we're super close. Ray was, Ray was our only investor. mean, we didn't need another investor. Ray was, Ray was, what's he worth now right now? 16 billion. Yeah, I don't know. I don't count. He's worth a lot of money. and the real neat thing about him is if you spend time with them, right. Outside of the fact that you would realize very quickly how bright he is. Right. You read his books. mean, the principal.

Outside of that, you wouldn't know if he was the richest guy in Connecticut or the poorest. I mean, he is just like a down to earth, great guy, humble. mean, our families, you know, I mean, they're extended family to me and vice versa. mean, and, you know, especially in light of, you know, the Devin's accident, but he's him, they're all family. mean, they are, they have three other sons. I mean, they are just like the kindest, fairest, most down to earth, humble, not showy.

I mean, just incredible, incredible. And so it's unfortunate, of course, terrible. It was just a horrible, horrible scenario. It a young man, 42 years old. And he was, and like his, rest of the family, just an incredibly philanthropic, like the kindest. used to, when people used to ask me, people had this impression of what's son of a billionaire like? I mean, people were blown away by him because he was certainly, he was the kindest.

smartest guy that I'd ever met when you take a combination of those two. My late partner Devin. And after that, we had had to figure out how to extract ourselves from the business because the business was stood up for Devin. They didn't need those investments that we were making. And then decided I formed Roy. I took a lot of time off after Devin's passing. I'm looking this up. Devin is a young guy. 42 years old. Yeah, with a young daughter.

and an incredible guy. mean, if you're really interested, there was an article written, I think it's called Institutional Investor. And it's spoken to myself and this Bruce Zimmerman who does the investments at the family office who Devon was quite close to. So just get some good perspective on him, person. Because one of things after I spent too much time obviously, but one of the things that happen when you're

Jon Stoddard (39:58.253)
you know, when that's who your father is, even after he's passing a lot of the articles where, you know, they spend time talking about Ray and it was not about Ray and Ray didn't want it to be about Ray, right? So that was a good article that you get a real good sense of the person he was. He was a terrific, terrific guy. People were blown away. Him and I, we shared an office, we worked face to face. I had relocated up to, was working out of New York and Connecticut together. And then subsequent to that formed Roy Street Advisors back into the

sell side representation, which I've been doing for a little over a year. have great deal flow, right? I have. Where does that come from? Where does your deal flow come from? Is that because of your social capital and the products that you've sold and your history or what do you think it comes from? I'm blessed because I don't have to do any advertising. And I know that I've conducted myself in a really good way with the agenda to purely help people on both sides of the table all these years. And I'm not

trying to blow smoke out of my own rear end. I really take pride in doing the right thing. Good, bad, or other words, it's part of reason why I got out of the lower end businesses, because even as representing sellers, I could never bring myself to letting a buyer buy a business in the shape that they were in. So my deal flow comes from attorneys and accountants, often more often than times that we're on the other side of the deal, right? And buyers from the course, and I've written hundreds of articles over the years that are online and still contributing right for Forbes.

So attorneys, accountants, other buyers, other sellers, and to your point, I think I've built up some really nice capital of referrals. I never take on an engagement easily. I like to work with sellers for months or a year to make sure their business is ready if there's any problems in place to get those corrected. I like the business to be very sellable because I understand the buy side and what a buyer is looking for. So oftentimes, you know,

There's a lot of upfront work before even taking engagement. But the deal flow has been good. It's always been good. What size of business do you take on? I try to operate in businesses that I like to say are too big to be small, too big to be small, too small to be big. So in other words, between business brokers and higher end investment bankers, typically businesses with EBITDA, I say businesses with EBITDA from one to 10 million, but is high.

Jon Stoddard (42:17.677)
I mean, because once you start getting to 10 million, you know, there are people that are better suited than me to handle those size transactions. So the sweet spot is really businesses of a million to $5 million of EBITDA. Okay. And I like those you're dealing very often with a more sophisticated person. And I'm not saying that in a negative way related to the owners of smaller business. They don't put stuff in place or there's, you know, they're not, you know, the buyer's not getting what they think they're getting, but

know, and you can work with them, very often they have a second level of management in place. And they have the capital if it requires some work to get it ready for sale, to get some systems into place, they have the capital to do it. it's, it's a nice and they're hard to finance. So this way, I don't have a lot of competition, like there's very few, you know, investment bankers that work in my swim lane. They like bigger deals or they like, or business brokers like much smaller or smaller deals. So it's a, it's it's a good spot for me.

Yeah, and you find, or you already have network of sellers to help them. So let's say somebody finding a buyer that needs to finance it. Yeah. And the financing is always a challenging part, right? But their deals are financeable, right? Combination of SBA, seller financing. Sometimes there's some of these search funds. Sometimes it's, you know, the business where I play our, our, businesses that could be purchased by private equity, quite private equity firms.

as an add-on, unless you get to the $3 to $5 million EBITDA range, they're not buying that as a platform company, but the smaller ones they look at for add-ons to their existing business. So have a really good network of prospects. Yeah. Let me go back to that course that you wrote 32 years ago. You think that the N90 days, you think that what you wrote then is still relevant today or how much have you updated that course since then?

Okay, so you asked great questions, by the way, and I wrote it was in 2001. You know why I love that business, similar business, why I the intermediate business? Because I could do it till I die. On the course business, it's, know, really, of course, 548 pages with lots of worksheets and valuation spreadsheets and formulas. If I were to look at the business for sale market,

Jon Stoddard (44:35.799)
from 30, 40 years ago to Liz now. Like if I died and came back in 20 years from now, I'd probably have to change 20 pages, right? The process hasn't changed. know, certain businesses, you've got the advent of social media or some of other, you know, financing may have changed somewhat or the areas for financing, but the core concept of identifying the type of business that's right for you. How, you know, the internet has changed how we search for it, but the business, you know, what's right for you?

questions to ask the seller, how you conduct due diligence, the valuation to place on it, the negotiation, tying it up and closing the deal. That's none of that. None of that were the way you said that will ever change. never. It's 80 to 90 % of the process remains the same. They're all changed. So for example, know, 20 years ago, I couldn't think of buying an online business or retail has changed, but the process of buying a business has stayed the same and is not going to change. Like I said, if I

died and came back in 20 years from now, I'd have to rewrite 20 pages. Now, with that said, I update the course every year and update it as much anecdotally. I try to keep stuff that's trendy away from it because I let anybody who buys our course email me at any time. And I'll get onto the phone with people. I'm on the phone all day long with people who buy our course and help them and I ever charge them. You know, I'm happy to help them and provide some consulting. the emailing, so something that's topical or trendy, it's best.

reserved for not being memorialized in the course, because it could change in a year from now. Interest rates, for example, or that type of stuff. So yeah, there's, you know, we do the updates every year, but it's a small percentage. And I try to through our articles and the interaction that I have with our clients who can call me or email me, you know, they're either more up topical or stuff that may be more applicable today.

is always addressed. But again, to the original question, by and large, I mean, it's like 80, 90 % at least that's the same. So let me ask you about this since you've probably been through a few cycles, inflations, interest rates, how, does that change buying a business harder to get financing for a business? I wrote an article last week in Forbes. If everyone's checking out the Forbes, under my name and my, my

Jon Stoddard (46:54.925)
heading was inflation is not going to have any impact on the business for sale market. I don't think it will. If you go back in time, interest rates have always gone up and down. So we've gotten used to this idea of boring money, cheap capital. So for individuals who, let's say, borrowing from bankers, doesn't happen frequently, but more SBA type loans or seller notes. So instead of paying 4%, they might go to 7 or 8%. So that's the only difference.

know, relative to the business size and what it's going to cost you over the long term, it's not a, it's not a massive amount of money. I don't think it's going to change it. think businesses that may decline as a result of the economy, that of course can have an impact. I do believe that valuations are going to have to come back down to normal on the, on the lower end of the market. Cause they've gotten like people are smoking crack, but they're asking for the business. makes no sense. It doesn't make sense from an ROI perspective. So on the lower market, those, I believe those multiples are going to come down.

with PE firms that are making investments. yeah. big, you know, what, 13 trillion or more. Yeah, that's not changing. Like they got to deploy, the money's got to go somewhere. If they don't, if they don't buy businesses, they got to get back the money. So they're not giving it back. that much. what'll happen on that end, I believe the interest rate, they'll, they'll just put more equity into the deal. They're not going to leverage them as much. You might impact it a little bit. So they'll put more equity instead of, know, instead of levering it.

some of them are crazy six times, they'll ever to three or four, they'll just put more equity in, which is better anyways. And so, you know, is where I think the inflation and interest rates are hurt is on the real low end of the market. And the reason being is when you get into the real low end, people use their personal resources. They oftentimes will take a home equity line to fund a down payment. That might get a little scary for them.

They don't have the same capital. know, people who've, an individual has never bought a business before, you know, they're going to, this is a massive decision, biggest decision you've probably ever make in their life. They may not have the mindset to do it during a recessionary period. And so for that low end, yes, I think it'll have an impact. Outside of that, I don't think it'll have any impact at all. They really don't. Yeah. And we just keep chugging along. We keep chugging along. mean, business, business, some businesses are going to

Jon Stoddard (49:16.641)
disappear or get hurt because of the economy and those won't get sold anyways. I if you go into the business for sale websites of the lower market, I 75 % of those business never get sold. So 75 % still won't get sold because they're crap businesses, right? But once you move up a little bit, I just, and I'm not trying, I'm ideal in reality. I'm not just this.

crazy optimistic, nothing but blue sky guy. I I just do not believe that unless it's catastrophic, I just don't see it having a big impact. I think in some cases it'll help. think some valuations, I some multiples will drop and some direct to consumer businesses will suffer. where I play anyways, and especially with PE firms, I don't see any dip at all. Because at end of the day, they got all this capital, like you said, what, 13 trillion?

It's got to be deployed. Yeah. Richard, I really appreciate you spending time with me today sharing your wisdom and knowledge and experience on this. How do they find you to get that course? Diomo.com. It's the abbreviation for doing it on my own. Diomo.com. And there's a whole series of guides for specific. Yeah. And writes for Forbes. Yeah, right for Forbes. And that's an interesting article that people should.

read that related to inflation as a recap of what we just talked about. At the same time, if anybody has any questions, I never actively promote the sale of my materials because I want people to help them in some way, but not withstand that. If anybody has a question, who wants to get in touch with me, my email is rparker at diomo.com and email me with any questions. I'm happy to help anybody. Yeah, and he's on LinkedIn too. I'm on LinkedIn and that's how we found each other. It's really nice to connect with you.

after all this time and you asked great questions. So I really enjoyed this and I appreciate you having me. Yeah, thanks so much, Richard. I appreciate it. Thanks for talking to you. Okay, bye.