Welcome back to another episode of The Exceptional Business Podcast. This week, we have the pleasure of hosting Tato Corcoran once again. If you missed our last episode, Tato is a seasoned entrepreneur with extensive experience in real estate and business acquisitions. Today, we dive into a topic that emerged from our last discussion: How to move through acquisition mode quickly and effectively. We’re calling it the “10-Minute Business Evaluation.”
The Frustration of Finding Quality Businesses
Both Tato and I have sifted through hundreds, if not thousands, of businesses. One of the biggest frustrations we face is the lack of quality deals. Out of a hundred businesses, you might seriously consider ten, and from that, maybe make offers on half. Tato shares his experience with buying businesses and real estate, emphasizing the importance of understanding your own strengths and weaknesses.
The 10-Minute Review Process
To streamline the acquisition process, we’ve developed a quick and dirty 10-minute review method. Here’s what you need to do:
1. Gather Key Documents: Ask for five years of P&Ls, tax returns, balance sheets, equipment lists, and if available, client and employee lists.
Look for Patterns: Consistency in financials is key. Look for trends and patterns in the P&Ls and tax returns.
Evaluate Integrity: Compare tax returns with P&Ls to ensure the owner isn’t hiding anything. Integrity is crucial.
Calculate SDE: Determine if the business meets your minimum SDE requirements. If not, move on.
5. Debt Calculation: Understand the cost of debt. Use a basic financial calculator to see if the business can sustain the debt.
Common Pitfalls and Additional Tips
Tato shares some valuable insights from his own experiences, such as the importance of understanding add-backs and the potential impact of PPP loans on financial statements. He also highlights the necessity of being prepared for unexpected costs, like maintenance or hiring new staff, which can significantly affect your cash flow.
Speed to Action: The 10-Minute LOI
Once you’ve done your quick evaluation, it’s time to act fast. Send an LOI or an email offer quickly to gauge the seller’s interest. If the seller isn’t willing to entertain your offer, move on. Always be respectful and leave the door open for future negotiations.
Creativity in Deal Structuring
While it’s essential to have a quick evaluation process, don’t shy away from getting creative with deal structuring, especially if you find a business that fits your criteria. However, ensure that the deal makes sense financially before diving into complex arrangements.
Conclusion
The 10-minute business evaluation is a powerful tool for quickly filtering through potential acquisitions. It allows you to focus on high-quality deals and move through the acquisition process efficiently. Remember, the key is to look at as many deals as possible and trust your gut.
For a more in-depth discussion on this topic and to hear Tato’s invaluable insights, make sure to listen to the full episode. Whether you’re a seasoned entrepreneur or just starting out, this episode is packed with practical advice that you won’t want to miss.
AND MORE TOPICS COVERED IN THE FULL INTERVIEW!!!
If you want to know more about Tato Corcoran, you may reach out to her at:
- Website: https://www.brandtmarble.com/
- LinkedIn: https://www.linkedin.com/in/tatocorcoran/
- Email:
ta*******@gm***.com
Connect with Chris Seegers: https://exceptionalcos.com/
Other Resources:
Books: Selling Main Street by Chris Seegers
