Mike Hall with Transworld Business Advisors of Raleigh

Intro: [00:00:07] Broadcasting live from the Business RadioX studios in Atlanta, Georgia. It’s time for Buy a Business Near Me, brought to you by the Business Radio X Ambassador Program, helping business brokers sell more local businesses. Now here’s your host.

Stone Payton: [00:00:32] Welcome to another exciting and informative edition of Buy a Business Near Me. Stone Payton here with you this afternoon. This is going to be a marvelous show. Please join me in welcoming to the broadcast with Transworld Business Advisors, Mr. Mike Hall. Good afternoon, sir.

Mike Hall: [00:00:52] Well, good afternoon. It’s a pleasure to be with you today.

Stone Payton: [00:00:55] Well, we are delighted to have you on the show, man. One of the first things I wanted to ask you a little bit about is just this this whole general concept of exit planning. I’ve been running into that term a lot lately, and I know Lee and I, who owned the Business Radio X Network, I suppose at some point we should have some sort of plan for for our exit. But from your perspective, why is it so important to have an actual exit plan for your business?

Mike Hall: [00:01:32] Well, so that’s a great question. It’s a big part of what I do is educating people on this very topic is the importance of having an exit strategy. So for many people who own small businesses, their small businesses represent a huge investment of their time and money and their source of retirement. And in order for them to be able to maximize that investment, they need to have an exit strategy so that they can exit their business on their terms. Unfortunately, what we see a lot of is business owners will contact us and say, hey, look, I’ve got a health issue. I’ve got my parents live out of state and they’re in and declining health and we need to sell our business within the next 3 to 6 months. Can you help us? Well, our answer is always yes, because we want to help as many people as we can. But that’s not the ideal scenario. The ideal scenario is that I would have met with that business owner a year or two, even longer ahead of time. And we had sat down and come up with a strategy for how they were going to exit their business, what their benchmarks were, how they were going to ensure the longevity and the health of that business long after them.

Stone Payton: [00:02:55] So so in terms of time and timing, yeah, what are we looking at? How far out should we get on top of this thing is should it be one or two years or more?

Mike Hall: [00:03:06] Yeah, it could be even longer, because the fact of the matter is, if you’re a small business owner, you don’t have a crystal ball. You don’t know what life circumstances are going to hit you. And so in a sense, we use this phrase begin with the ending in mind. I use the analogy that entrepreneurs and small business owners are like someone who can build a plane and and get it off the ground and get it flying at a nice cruising altitude, but have very little, if any, training on how to land the plane. And that’s kind of what the strategy is. And that’s what I help do. I help these business owners land that plane successfully.

Stone Payton: [00:03:51] So I suspect that you’ve probably got a pretty good handle on you can probably pretty quickly when talking to someone get a get a handle on how sellable that’s a word how sellable their their business is or maybe even could be, or there’s some criteria or there’s some things you look for, some markers, some red flags, some green flags, kind of things that you’re looking for. At least get a baseline.

Mike Hall: [00:04:20] Yeah. So here’s a stat for you just to paint a realistic picture, anywhere from 60 to 70% of businesses that list never sale. And so what I’m looking for is I’m looking to get as many business owners and small businesses into that that 30 to 40% that do sell. And to get them there, there’s three criteria stone that that we really like to see. Number one, a motivated seller. In other words, they’re engaged with going through with the process and they’re going to be forthcoming with their financials and they’re going to be cooperative and helpful in the process of getting that business listed for sale. So number one and motivated seller number two, they’ve got clean books. That point cannot be overestimated because clean books, that is the rails that allow that train to leave the station. If you don’t have good, clean books that are a buyer or banker or another professional can follow very easily. It makes it very difficult to sell that business. And then the third thing is you’ve got to have that business competitively priced. So that business owner has to have a very realistic, market based understanding of what their business is worth.

Stone Payton: [00:05:43] Yes. Say more about that, because instinctively I can envision, for example, me and Lee, I mean, this is our baby, right? I can envision us feeling like this is worth maybe more than the than the market says that it’s worth, which if that’s the case. Back to your earlier point about time and timing. Okay, great. What can we do to get those two numbers closer together but that say more about this? Is valuation the right word? What this market?

Mike Hall: [00:06:17] Yeah, no. Valuation is precisely the word. In fact, normally when I engage in a conversation with the business owner who’s at least remotely interested in selling their business, that’s where we always start. Well, let me do a valuation for you. We don’t charge anything to do those. That’s our way of earning your your trust and your business. And so we we start with those valuations. Unfortunately, what we run into stone is we do a very realistic market based. We take a very realistic, market based approach to our valuations. And sometimes that means we just have to honestly tell a business owner something that they really don’t want to hear. But the fact of the matter is, so there’s no point in me giving a bloated valuation for the purpose of of enticing that business owner to list their business with me, because at some point reality is going to dawn and we’re not going to be getting buyers calling us to want to buy that business. Or if they do, they’re going to be putting in offers that are substantially lower than what it’s listed for. So we’d we’d much rather and the colleagues I work with in my office, we rather much get that valuation very grounded in the reality of where the market is so that we have those hard conversations up front.

Stone Payton: [00:07:40] So I won’t ask you to do a valuation webinar today, but like some of the high, high points they’re looking at what cash flow revenue, profits, like the number of customers, that kind of stuff I guess, right?

Mike Hall: [00:07:56] Yeah. So if I were to throw out a few key things that, that obvious attracting factors as it relates to a valuation, obviously profitability, if you’re not making any money, it’s going to be very difficult to sell your business and consistent profitability, too. That’s one issue we run into where, you know, is it something that you’ve steadily your profitability has steadily grown over time or do you see sort of a low profitability and then some kind of spike and then it goes back down again? So consistent profitability is a big, big attracting factor. If your business is the type of business that can have recurring revenue, that’s something that’s always very attractive to a buyer. And then other things like, you know, is your business the type of business that can be run with the minimal attention of the owner operator? So in other words, can it be a semi absentee business or is there management in place that the owner has to do very little? So it could almost be an absentee business. That’s obviously an attractive factor to an investor or buyer.

Stone Payton: [00:09:12] So how did you get in this business, man? What was the catalyst for you to start doing this kind of work?

Mike Hall: [00:09:18] You know, it’s interesting you ask that I actually have a background as a history teacher and so I yeah, yeah. So I did that for a number of years and I was also doing a little bit of real estate brokerage on the side. That’s how I got my teeth cut and the sort of the brokerage industry and brokerage knowledge and representation. And then a friend of mine, a lifelong friend of mine, the owner of our office, decided he wanted to open up a Transworld office in the Raleigh area. And after he did, I was very much curious as to what this was. But like many people out there, people just don’t know what business brokerage is or what business brokers do. And I was one of them and so I had a meeting with my boss. Now Balls and I just kind of started asking him a lot of questions and I was intrigued by what he was doing. But I thought, Yeah, I just don’t know if I’m going to be a good fit for this because I’m not a quote unquote salesman. And he said he said, Mike, you’ve been a teacher. You know how to educate people. You’re good with people. You’re a person of integrity. And, you know, you’ve worked in small business before. You have all the skills that are needed. I don’t need it. He’s basically said I don’t need some. He’s a salesman. I just need somebody who knows how to work with people and who wants to help people. And he said on top of that, he said, How many real estate brokers do you know in the greater Raleigh, Durham area? And I said, Well, quite a few. He said, How many business brokers do you know? And I said, one you. So that was that was pretty much the deciding factor. So then I came home and I talked to my wife about it and we both agreed that it was a good fit for me. So I’ve been at it going on four years now.

Stone Payton: [00:11:13] So let’s talk about the local market landscape and maybe you do more national work as well. But but I’m curious, is the is that Raleigh area a good place to to look to buy a business?

Mike Hall: [00:11:28] Well, you know, it’s funny you mentioned that, Carrie. The area outside of Raleigh where I live was just voted by, I believe it was MSNBC as the most prosperous place in the United States. Oh, my. Yeah. And this area has numerous accolades. Best place to start a small business. Best place to raise a family. This area is growing like gangbusters. I mean, we recently had commitments from Google and Apple to to increase their presence here. So this area is growing like crazy. And the small business climate here is is on the rise as well. So I know I’m a little bit biased, but I think the facts speak for themselves. This area is a fantastic area to start or to buy a business.

Stone Payton: [00:12:26] Now, it strikes me that if you’re if you’re selling a business, you’ve got this weird hydraulic this weird dichotomy of you want some degree of confidentiality maybe, but you also want to promote it, right? You don’t want to like I don’t know that I would want my clients to know that I was selling or maybe my employees. Can you speak to that a little bit? This, this, this. Yeah. Confidentiality, but promotion all at the same time.

Mike Hall: [00:12:56] Yeah. So there’s a little bit of sort of subtlety that a business broker has to be capable of and marketing a business because a hallmark of what we do is helping business owners to sell their businesses confidentially. And so to give you a perfect example, there’s a there’s a few things that we do in order to ensure that. So if I’m writing ad copy and I’m going to let’s say you you’ve got a restaurant selling that you wanted to sell, and it’s a fairly well known restaurant in my area. So I’m going to give a very vague description of that in the ad copy. I’m not going to name the name of the business. I might not even say if it’s a in Raleigh. I may not even say it’s in Raleigh. I may say it’s in Wake County. Oh, I may say it’s in central North Carolina if it’s very well known. The key thing is you want the concept of here’s a restaurant, and then you want to just throw out a couple of little sort of pieces of bait to catch a potential buyer. So the gross sales, the seller discretionary earnings or EBITDA, the net income essentially. And just a couple of other small things that typically is enough to attract a buyer. And then once they are attracted, they contact me. And then the first thing that I have them do is I have them sign a nondisclosure agreement. So anything that we discuss with them from that point on is just covered under that NDA. And then we kind of reveal information to them in stages to sort of keep them on the hook and keep them interested, keep them in the process. And as they make a greater commitment to the deal, whether it be an offer or whatever, that’s when they learn more and more and have more access to the business, if that makes sense.

Stone Payton: [00:14:56] It does. And I think you may have just answered this question just by virtue of your experience, based on your examples. But I’m going to ask it anyway, because I think some listeners might ask it. I mean, do I really need a broker? Can I just go out and sell it on my own?

Mike Hall: [00:15:14] So the quick answer to that is, no, you don’t need a broker. You absolutely can go out and sell a business on your own. But the problem with that is, and I just recently wrote an article about this for my website is I laid out all of the steps that you have to go through and all of the things that you have to give attention to if you’re going to sell a business. It requires a lot of time. It requires a lot of attention. And yes, you can absolutely sell your business yourself. But when you do that, you’re putting yourself at a great disadvantage because now you’ve got two jobs. Okay. Selling a business is not a part time job. It’s a full time job that requires full time attention. And if you think about it like this, let’s go back to the restaurant analogy I was just giving you. Well, let’s say that you’ve got buyers trying to contact you during the lunch lunch rush at your restaurant. Well, you can’t be taking care of your employees and your guests at your restaurant. If you’ve got people on the phone call and you’re trying to get information about the listing that you have for sale. I mean, that’s just one example of how. Yes, absolutely, you can do it. I don’t recommend it. And I know it sounds biased coming from me, but if I had a business for sale, there’s no way in the world I would try to sell it on my sell it on my own. I would want somebody to be an intermediary for me who was impartial, whose primary line of work was selling businesses. I would want to focus on keeping my business healthy and strong up until the finish and not having to take on that second role. But the short answer to your question is yes, it can be done.

Stone Payton: [00:17:03] Yeah. So so there’s all the work that you put in to helping other people sell their businesses. How does the whole sales and marketing thing work for you as a broker? Like how do you get the new business for yourself? That seems like that could be a bit of a challenge too.

Mike Hall: [00:17:21] Yeah, I mean, I think marketing is probably the greatest challenge can be the greatest challenge for any small business owner. And I just think it requires a lot of creativity and a lot of time investment. So for me, you know, there are some marketing channels that I use to help bring in new business. Sometimes it may be direct mail. I spend a lot of time networking, so I’m constantly meeting with small business owners and getting to know them and to know their needs. I have several networking groups that I’m a member of. You may have heard of an organization called BNI, so I’m a member of a local BNI group and that’s a huge source of referrals and encouragement for me. So networking is a big part of that direct mail. And then of course, I try to have an Internet presence and use social media as well.

Stone Payton: [00:18:21] And you’ve got to develop, nurture relationships on both sides of the equation. Right. Because you need you need buyers and sellers, don’t you?

Mike Hall: [00:18:32] That’s exactly right. So I’m a I am a candidate for one of the designations for our industry called Certified Business Intermediary. And that means a big part of what I do is just being an intermediary excuse me. Intermediary. I’m a go between. And so in order to be a go between, you’ve got to have something on either side. So, yes, you’re exactly right. I have to first of all, when the business of sellers and then once I win their business and they become my clients, then I have to help them to make a good case to buyers that this is a good business for them to buy.

Stone Payton: [00:19:10] Yeah. So let’s talk about deal structure for like how to finance the deal because it doesn’t always have to be straight up. I like your business. I agree with your valuation. Here’s your check. Right. It can be more creative than that, right?

Mike Hall: [00:19:25] Oh, absolutely. There’s any number of ways that deals get funded. It could be the traditional route, which is SBA funding. So if that particular business meets the criteria and credit worthiness of the buyer is there, they may be able to get SBA lending. And so that’s a perfectly normal and common way for people to buy businesses. It could be something that that business or that buyer doesn’t fit the traditional SBA model. So then you have to go for a more creative type of financing. And more, more than likely, it’s going to mean a combination of some type of banking bank financing, along with what we call seller financing. And so I always encourage my sellers to at least be open to offering part of the deal as seller financing.

Stone Payton: [00:20:26] So this kind of it kind of goes back to, yeah, you need a broker, but I envision you. I suspect you have a great deal of your own counsel on some of these matters, like due diligence and deal structure and all that. But I’m also envisioning you as kind of a almost like a quarterback, right? Like if we need to talk to investment bankers or people who can loan me money if I’m buying or even on the seller side so that we can grease the skids for the the buyer. So you must be you must cultivate and really nurture relationships with other practitioners that handle these specific aspects of a deal, huh?

Mike Hall: [00:21:07] No, that’s exactly right. So and that’s been one of the benefits to expanding my own professional network is now when someone contacts me a seller and saying, I want to sell my business, well, if I need to talk to an SBA lender, I’ve got a network of SBA lenders that I several SBA good SBA lenders. And in my network I can call if they are having some issues with their their bookkeeping. I’ve got a bookkeeper on standby and she’s ready to go to work and to help them out if it’s accounting and tax related issues. I’ve got a fantastic CPA now that’s in my network. So yes, I am quarterbacking a lot of issues because ultimately Stone, my job is to get this deal done. And so I’ve got to find creative ways to solve problems and to bring people together. It’s a huge part of what a business a business broker does. And, you know, and it’s one of the interesting aspects of what I do is just figuring out how to solve a problem and to keep that deal alive when in many cases it dies several times before we get it across the finish line.

Stone Payton: [00:22:26] Yeah, that’s you must be incredibly patient and persistent, but I can tell that you love the work, man. What are you finding the most rewarding about the work?

Mike Hall: [00:22:37] Thank you. Yeah, I do. I do enjoy it. I think a big part of it is the fact that I get to contribute to the future health of our local economy. So if you understand the nature of small business and where we are demographically, we’ve got a huge swath of baby boomer business owners that are really in need of passing the baton. And so I get I feel a sense of achievement and reward when I get to step in and help them to do that and to do it well, because that means that’s another. Of our area businesses that’s going to remain open and vital and serving our community for years to come. It’s going to provide employment for people. It’s going to help a business owner provide for his family. The new business owner provides for his family, and it’s going to provide retirement for that, that owner who’s stepping away. So I get to facilitate all of that and in a way I get to make a huge, like I said, a huge contribution, contribution to the local economy.

Stone Payton: [00:23:53] You know, I hadn’t really thought about it until you just touched on it, but I suppose there really is a what would you call it, like like a demographic trend. That’s I mean, that’s really going to this business is not going anywhere. Because what you said about the baby boomers. Right. Speak more to that, because that’s got to have a direct impact on this arena.

Mike Hall: [00:24:17] Oh, absolutely. Yeah. In fact, I did. Part of what I do for our office here in Raleigh is I have a background in research and writing, so I like to do research on topics related to the work that we do. I did a project on what we call the Silver Tsunami, which is basically a coin, a phrase coin to describe this this large exit of baby boomers from small business ownership. And so it’s roughly 27 million businesses representing anywhere from 5 to $6 billion worth of in our economy. And so this phenomenon is is so interesting because according to research in this area, only 20% of these baby boomer business owners are going to hand their business off to a family member. Roughly 18% of them are going to shutter their doors. And so that business will not exist anymore and the remainder of them will have to have somebody to help them to pass that business on and fund their retirement. And so I’m really keeping an eye on this trend and really trying to do my best to educate these baby boomer business owners. Hey, look, you have options, right? You know, even though over half of you have never had a business valuation, if statistics are correct, you have options. Let me help you understand what those options are.

Stone Payton: [00:25:54] All right. So let’s leave our listeners with a few pro tips, a few pieces of counsel. Buyers and sellers alike. I mean, one pro tip is just reach out and talk with Mike and have a conversation. But, you know, even short of that, some things that we ought to be thinking about, I don’t know if it’s something we ought to be reading or just a couple of actions we can take now so that we’re properly prepared when the time comes to buy or sell. Let’s leave him with a couple of pro tips.

Mike Hall: [00:26:20] Yeah. So one huge tip I would give our our business owners out there is don’t wait till the last minute to to come up with an exit plan. Again, over half of those business owners out there have never had a business valuation done. It doesn’t cost anything to contact me to have a business valuation done and that information can be used for you can useful be useful to you to set your benchmarks for your business. So even if you’re not ready to sell now, you can you’ve got something to aim for. You know where you are that will enable you to know where you want to go. So that’s the first thing. For buyers, I would say, hey, you know, don’t get frustrated. I know that there’s a lot more buyers out there looking for businesses than there are businesses to list for sale, but there are a lot of good businesses out there. Also, get to know brokers in your area. They can be some of the best source of information and they can also tell you things that you need to be doing to be prepared to get ahead of the game when you find a business that you want. So getting your financing in place, getting your financial statement in place, when you have to submit that to a potential landlord, if you’re going to buy a business that has a commercial lease, just little things like that that help you to be more prepared. A reputable broker is going to be able to help educate you so that you’re ready.

Stone Payton: [00:27:48] Yeah, well, I’m glad I asked. So what’s the best way if someone hears this conversation, but they’d like to get in touch with you and have a conversation with you or somebody on your team, whatever you think is appropriate email, phone, website, LinkedIn. But let’s leave them with some points of contact.

Mike Hall: [00:28:05] Yeah. So my website is very easy to remember. It’s a business broker. Raleigh R a l e business broker. Raleigh dot net. And my email address is m hall mphahlele at t WorldCom for Transworld T WorldCom. And then they can give me a call at 9194241927.

Stone Payton: [00:28:30] Well, Mike, it has been an absolute delight having you on this show, man. Thanks for coming on and sharing your story and your insights and your perspective. This has been very informative, man.

Mike Hall: [00:28:41] Well, I appreciate it, Selwyn. It’s been good to talk with you and to communicate with your listeners.

Stone Payton: [00:28:47] All right. Until next time. This is Stone Payton for our guest today, Mike Hall with Transworld, Business Advisors of Raleigh and everyone here at the Business Radio X Family saying We’ll see you next time on Buy a Business Near Me.