Ep 559 The Good, Bad and Ugly of a $2.1M Searcher Deal | Built to Sell Radio

Colin Morgan (0:01)

Hi there, and welcome back to another edition of Built to Sell Radio, the podcast designed to help you punch above your weight in negotiation to sell your company. I'm the executive producer, Colin Morgan. Now if you want a company worth somewhere between $1 and $10 million, there's a good chance that a self-funded searcher has already found you. They're polite, they're persistent, and they will often agree to what your asking price is. What they rarely explain is how the deal is actually funded. 10% to 20% down for their personal savings, most of the rest borrowed from a bank, and a request that you finance a slice of it yourself. That last part is where owners get hurt, and almost nobody in this industry talks about it openly. Dan Burnside was one of those buyers. He cashed out his 401k, sold his house, and spent seven months hunting for a business to buy.

Two owners signed a letter of intent with him, neither of the deals closed, which cost both of them their negotiation leverage and months of momentum. The third was Parker Mechanical. It's an HVAC company in rural Colorado, doing $2.1 million in revenue, and close to $900,000 in SDE., Seller Discretionary Earnings. Now, Burnside paid $2.1 million with 10% down, and two years later, he filed for personal bankruptcy.

He agreed to sit down with John and tell the whole story anyway.

What he was looking for, what he missed, and what happened to the business and the people in it after the owner handed over the keys. You will not hear a buyer speak this frankly very often, and if a searcher ever knocks on your door, this hour is definitely worth your time. Without further ado, here is John Warlow with Dan Burnside. Enjoy.

John Warrillow (2:01)

Dan Burnside, what could have built to sell radio?

Dan Burnside (2:04)

Thank you. Thanks for having me, John.

John Warrillow (2:06)

Tell me about your journey in search. How did it all start? What got you interested?

Dan Burnside (2:11)

So I'd always wanted to own a business. My father worked for Intel for years and then left and started his own business. My grandfather ran a business and his grandfather before him owned and ran a business.

And so I was like, I just assumed I'd work in corporate for a few years and then do that. I looked into franchising very seriously all the way down to like FTD documents and went out and flew out and met owners and did on-site day. And it just was not right for me.

However, being a stereotypical millennial, I want instructions on how to do something. I want a platform that works. And it was kind of hard for me to think of doing something zero to one. I also at the time didn't think I had a good idea. I hadn't identified like a specific pain in the market. And I was working at a bank, Silicon Valley Bank, which banks specifically private equity and venture capital. So my job was like looking at what was going on in those markets and providing insights to the bank on what their future liquidity would be. If you know what happened with Silicon Valley Bank, you know that ended abruptly. But while I was doing that, I got an insight and I started researching. It was my job that also became my hobby, researching what private equity is doing. And I thought, man, I can do that. That's genius, leveraging really hard to go by an asset and then provide someone a landfall and retirement. That's cool. That's a great idea. And then you end up saving all these jobs. Yeah, that seems like white nightish of me. And so I had a very, I guess, kind of like naive view into it, but I started researching, I reached out some group that helps searchers kind of build their formula for their search process and kind of helps them vet businesses and go through that. So I started working with them. And do you pay them a subscription fee of some sort?

John Warrillow (3:57)

Or like, how did they monetize you?

Dan Burnside (4:00)

Yeah, so they monetize initially, I think it was like 5,000 bucks. It was immaterial compared to the cost of a business. And so I paid that. And then different stagegates, they like asked for more money. Eventually, I ended up firing them going my own way. But yeah, so you kind of do that. And then they had like a weekly seminar you would attend and talk with other people.

Just kind of on like what they're doing, what they're seeing. And so it was like a network of people doing the same thing as me.