What is an attractive buyer and how exactly do you become one? Being an attractive buyer means you get to seal the deal. Out of all your competitors, your offer stands out the most. Nobody wants to be unattractive, right? So if you’re looking for a way to ensure that your offer gets accepted first before other buyers, be sure to tune in to this episode.
Today, Robert Kale and I have a chat about the best way to structure deals, add-backs, and how to buy the best website business model for you. We also talk about building relationships in a deal.
You will have the tools to be the most attractive buyer after listening to this episode. Don’t forget to subscribe, tune in and learn more valuable lessons about buying and building online businesses!
Being an Attractive Buyer
Robert Kale’s Business Journey
- Robert Kale started in affiliate networking businesses for five years.
- Then came the skincare business where they had big partnerships with Costco and Nordstrom.
- Robert met Jock, the founder and CEO of Digital Exits about five years ago playing poker.
- It was only around two years ago when they started talking about working together on Digital Exits.
- Robert has been with Digital Exits for two years now.
Common Mistakes That Most Buyers Make
- The most important things to watch out for in buying a business are: income, bank statements, tax returns, add-backs, making sure that all expenses incurred by the previous owner have already been paid.
- The most common mistake is not digging deep enough and not asking questions.
Tips To Help Overcome The Most Common Mistakes
- Be really curious about the business you want to buy. Ask anything and everything you need and want to know.
- Just get on the phone and practice speaking to business owners.
- There are no stupid questions. You can’t be great right away, when you start getting used to it, your questions get better.
Sample Questions
- “What haven’t I asked? What haven’t I brought up that other people have asked?”
- “What am I not seeing in this business that I should know?”
Add-Backs
- Robert explains what add-backs are.
- The most common add-backs are the owner’s salary and car expense.
- What you’re trying to achieve with add-backs is getting the true EBITDA of a business.
- Looking at the add-backs, you need to be aware of things that seem to be in the grey area like five cars or a huge amount of expense for travel.
- If the car or travel is for personal matters, it’s fine as an add-back but if it’s for business purposes, you need to put it under expense.
Business Models for Beginners
- Jaryd suggests content sites for beginners.
- Robert has eCommerce sites.
- Robert’s top recommendations for first-time buyers are:
- eCommerce sites
- Software (B2B Software Company)
- Affiliate Business Sites
- Jaryd suggests picking a business model that would be easy to understand or something that one has at least a basic knowledge of, especially for beginners.
Structuring Deals
- The most common trend in structuring deals is the SBA loan.
- The second option in structuring deals is the seller note. This is the most common way to finance part of the deal.
- The third option is the Earnout Structure, although it is very uncommon.
- An earnout structure typically happens for bigger deals.
About Digital Exits
- Sites that are on pending status mean that they’re on diligence.
- Their due diligence usually takes about 30 days, they leave it up there so anyone can inquire about it.
- If for any reason, the transaction falls through, they can loop other people who are still interested in it.
- For marketing, Digital Exits posts in a couple of different places and then they do an email blast.
Beneficial Lessons From Robert
- It’s an easier process when you understand that you’re dealing with another person on the other side of the table for negotiation.
- Understand the business and give the seller what’s reasonable and what makes sense for them.
- Whether it’s your first time or nth time, do the same due diligence and ask a lot of questions.
- Find a business that fits for you.
- Don’t waste time trying to fit a square peg into a round hole.
- Ask friends, family, entrepreneur friends about their opinions, get their inputs.
- Be a good buyer. Follow through on your promises. Be on time.
- Jaryd suggests learning the due diligence process and being really good at it. It makes you an attractive buyer.
- For sellers, it’s wiser to work with attractive buyers for easy handover, easy migration and easy transition.
Piece of Advice
- Know your criteria, know what you want to buy. Find something you can bite off, chew, and manage.
- Don’t put down 5% on something you can’t afford, only to put yourself in debt for 10 years.
- Have a plan. Don’t just buy something to fill a void or just to get yourself out of a job.
- Make sure you have a plan to grow the business. Don’t buy something and keep it stagnant as an income source.
- Try to grow a business after the transition.
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Guest Info:
Robert Kale started out in the business industry at the age of 25. He is the owner of Ravenstone Digital LLC and is a business broker at Digital Exits. Before joining Digital Exits as a broker, Robert had a lot of experience in building and selling a lot of successful businesses online. He is also a co-founder of a skincare company who is partners with Costco, Nordstrom, and other big box retailers. Robert is known for helping online businesses sell successfully.
To connect with Robert, visit Digital Exits or through Email, Twitter, LinkedIn, and Instagram.
Resources
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