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This business coaching lesson focuses on how to negotiate financing for a business.

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Featured Coaching Excerpt - Notes & Transcript, Part 1
  • Principles for Negotiating Financing: 1. Establish the win-win.
  • Notable Quotable: "You can have everything in life you want, it you will just help other people get what they want." - Zig Ziglar
  • Jargonization Translation: Rapport - The ability to establish a relationship by asking people questions about themselves to get them to like and trust you.

[MUSIC PLAYING] -This is Daniel McKenna. And today we are with Clay Clark and Thriver of the Month winner David Grossman. Are you currently in negotiating talks about financing a business purchase? Well, it looks like you've stumbled upon the right series, my friend. In this lesson, Clay is going over how to effectively negotiate the financing of a business with the business owner. So, let's get you prepared for that negotiating and get right into this lesson. [MUSIC PLAYING] -Super Dave. What's up, my friend? -Pleasure to see you again. -Hey. I'm excited about you being here. And can you explain to the Thrivers-- because we have Thrivers all around the world-- where do you live in the country? Where in the country are you from? -I live in the tri-state New York City area. CLAY CLARK: Really? -Yes. CLAY CLARK: So when you say "tri-city," what are those three cities there? -It would be Westchester County, Fairfield County, and New York City in the [INAUDIBLE] part of New York City. -It's all right there, so you-- -Yes. -So a little bit of a change in the overall surroundings when you flew out there from New York into Tulsa here? -Yes -Yeah. What's fun about that at Thrive is we always joke around now. It's Thrive o'clock somewhere. We have people in Egypt. We have folks in Singapore. We have guys in China. That are all around the world. And it's just fun to meet you guys face to face. And because you're the Thriver who's earned the most points. -Twice. -Yeah. I'm excited. I'm excited that-- -The only two-time Thriver. -Yeah, you're a two-timer. Are you on steroids? -No. -OK. Well. We'll look into that. But say we were talking about negotiating financing. Specifically, if you're going to buy a business from somebody, and you're wanting to buy that business from a business owner, how to negotiate financing with them. So assuming you're trying to buy it from the owner, you're going to the owner and saying, hey. How can we-- let's work out a financing option, here. Now a lot of Thrivers watching this might go, what are you even talking about? I'm talking about there are a lot of times-- I would say more often than not-- where no bank is involved. There are no third party lenders. It's literally you and me. I'm buying a business from you, and we work out a financing deal between the two of us. And so we're going to get into the four moves. The four moves, and the four principles, we need to bring to the table if we're going to be working on financing a business purchase. So principle number one, we will be talking about how to establish a win-win. Principle number two, we are talking about never buying anything personally if possible. Three, we are talking about bringing as little cash to the table as possible. And four, we are talking about bringing no emotion to the purchase. And specifically we are talking about, again, financing this business. So principle number one. Establish the win-win. When you're establishing financing with somebody, it's a situation where you're saying, I don't have enough cash right now to buy the business upfront, or I don't want to buy the business upfront with cash. Whatever the reason is. But you don't want to have an adversarial relationship to start. And so a notable quotable I love to share is, it says "You can have everything in life you want, if you will just help other people get what they want." Zig Ziglar. So what I'm saying is, if you look at this deal-- the purchasing of a business, and working out a financing deal with a business owner-- as a win-win, you're going to be in a great spot. Because the owner over here, this is the current owner. This is the buyer. We could also call this person the seller. This person over here. You have an opportunity to build a win-win relationship where you both like each other. And who knows? This person might work with you on future deals. Who knows? You might have a problem with the business and you need some help from this guy, and he can help you. But the win is that he is going to make money. And you are going to make money. But I would also encourage you to go at the deal where you try to also make friends, or at least a solid reputation relationship, while you're going through it. I would actually put that on the list. I would actually tell the person that you're trying to get financing from. I would say, hey, as we work out the financing, my goal is to try to make it a win-win where we both make money on this. You make money from selling it. I make money from buying it. And we ultimately can leave the negotiating table as friends. So it's not going to get personal. We're going to focus on the problem, but we're not going to get personal. Specifically, with the businesses that you're looking at buying. I think you mentioned one of them might be a liquor store? -Yes. -Have you started talking to the owner at all, or-- -A little bit. -OK. And how has the relationship been? -Well, it's very cold. -Very cold. He's cold? -She's cold. -She's cold. OK. So. And when you say cold, how is it cold? -Well, it has a price. That's it. -Yeah. -OK. And the main thing is, I'll tell you this, is that-- -And this is a failed liquor store. -Failed? -Yes. It is in one of the richest towns in the United States, and it managed to fail. -Well, you have these four areas. Rapport, needs, benefits, close. So rapport. We've got to try to find something in common with this person. We've got to talk to her with a smile. We've got to get her to like us and trust us. This is all we're trying to do. And we have specific trainings on Thrive on how to do sales relationships and build relationships. But specifically, our number one goal has got to get this person to like and trust us. And I can give you examples. Recently I worked with a gentleman. He helps businesses acquire millions and millions of dollars to buy companies. So he helps companies to raise millions to go out and purchase things. And one of the things he talked about is, he said one of the best ways to get a very good deal is you have to get the person you're buying to like you. And this is just huge. It's just, at the end of the day, it's relationships.

Featured Coaching Excerpt - Notes & Transcript, Part 2
  • Jargonization Translation: Benefits - Solving problems based on the needs of the customer. Always support benefits with facts.
  • Lesson Nugget: Explain and be clear about the benefits so that you can build trust with the buyer and they can see how they are able to profit.
  • Jargonization Translation: Close - A call to action for the customer.
  • Principles for Negotiating Financing: 2. Never buy anything personally if possible.

[MUSIC PLAYING] -So we need to somehow get in there to get that lady to like us. So what would I do if I were you? Specifically, I might drop by a platter of fruit. I might drop by donuts. You're like, are you kidding me? Now, I literally would drop-- I might cater for food. I might send a handwritten note saying, hey, I'd love to sit down and talk with you and see if we can work out a win-win. I want to build a relationship and make a way for you to make some money and for me to make some money. But you want to get that rapport. Now the second step is you want to find their needs. So you want to find out what the seller's needs are. Because here's the deal. Most people who are selling a business-- I'm just trying to help you on this-- most people who are selling a business need time, and they need money. But usually they need a little more time than money. So they might have been working in that liquor store 50 hours a week for the last 10 years. And they're going, I just want some time for myself. You might be trying to buy a-- recently there was an automotive mechanics business I was working with. And this guy, he just had failing health. He had failing health. His health was failing. And he needed to sell the business because he didn't know how long he'd be around. Another gentleman recently, I talked to a guy, he had cancer. And he's, unfortunately, in a really bad spot. And he said, hey, I got maybe three or four years left, and I just want to go and see the country in my RV. So in that situation, if the buyer had taken the time to get to know that guy well, he would have realized that the seller, who was trying to sell, he didn't need a big lump sum. He just needed time freedom. So he could've said, hey, you know, I'll pay you a percentage of the gross every month, and you can start on your trip right now. I mean, whatever. The benefits. These are benefits. You want to be able to concisely explain, what are the benefits for you and for me? The benefits for your is you get time freedom. You get to make some money. You get to be away from the stress of owning the business. You're going to have no stress. You're going to have that time freedom. And the benefits for me? I get to make money. I get to-- I guess I'm going to have less time, but I get a chance to earn money with my time. I get to earn more money for the hours I'm working. And I get to add [INAUDIBLE] responsibility, be my own boss. But you want to explain this clearly. What is the win-win? And if you don't explain what the win-win is, what happens is that you end up creating a weird deal where there's mistrust. If they're like, well, why? How would you benefit? You want to be clear about the benefits. The win-win. And the final is the close or the call to action. You want to determine the time. But we want to make it a win-win. And I'm just telling you, you wouldn't believe how many people-- this is the skill of communication. If you read any of the books about executives or leaders, they all say that communication is one of the biggest challenges in the world. And You think about our President, whether we like him or not-- some people watching this love our president. Some people can't stand him. But he's a great communicator. President Obama is a great communicator. President Reagan in the 80s is a great communicator. Oprah is a great communicator. Steve Jobs was a phenomenal communicator. Walt Disney is a great communicator. Everybody who gets to the top of the food chain is a great communicator. But when you're buying a someone's business, they might not be a good communicator. So we can't let her coldness deter us from wanting to buy the business. Make sense? -It does. -So we've got to get into that. Now the next thing, the next principle, is we never buy anything personally if possible. So we never want to buy anything, never want to buy anything personally if possible. So let me just show you an example. If I were to buy a business with an LLC or I were to buy it personally. If I personally buy the business over here, or I buy it through the LLC over here. If I personally buy the business, at some point, I'm going to get sued. If I buy it through an LLC, at some point I'm going to get sued. In both scenarios, I'm going to get sued. Why? Because when you own a business, things set on fire, bad things happen. -Cut off their toes. -People cut off their toes. Yes. It's going to happen. But under this scenario, if you buy it through an LLC, personally your money is protected. And the LLC is what takes the brunt of the lawsuit. So when the lawsuit does happen, they're going to attack your LLC, your Limited Liability Corporation. But you personally have your money safe. If you don't do it, when you get sued, you personally are going to be liable. Somebody is going to be liable. Something's going to be liable. But you want to buy your business with an LLC. If somebody is not willing to work with you where they allow you to buy the business just through the LLC, I would walk away from it. Because there's too many deals out there.

Featured Coaching Excerpt - Notes & Transcript, Part 3
  • Notable Quotable: "Rule number 1: never lose money; rule number. 2: don't forget rule number 1." - Warren Buffett
  • Principles for Negotiating Financing: 3. Bring as little cash to the table as possible.
  • Mystic Statistic: "29% of startups fail due to insufficient capital." - Fortune
  • Lesson Nugget: Keep as much capital as possible for any surprises or emergencies.
  • Definition Magician: Owner Carry Financing - When a property buyer finances the purchase directly through the person or entity selling it.
  • Definition Magician: Revenue Share - Sharing operating profits or losses among associated financial contributors.
  • Notable Quotable: "Plan on having problems." - Clay Clark

[MUSIC PLAYING] -There's just no scarcity of deals. And I'm going to read this to you here from Warren Buffett. It's a quote he has. He says rule number one, never lose money. Rule number two, don't forget rule number one. Well, Warren Buffett is a self-made billionaire who a lot of people consider to be the best investor of all time. And what's he's saying is, you can't afford to lose it all. In your case, I mean, if you've saved up-- I'm just making up a number, but if you saved up half a million dollars or a million dollars, or you have a bunch of equity in your house or whatever, you don't want to lose it all because the liquor store you bought just got sued. And you're also crazy if you think your business isn't going to get sued. If you're watching this, I want to encourage you, every business at some point is going to get sued. Every business gets sued. I don't know of a business that I've worked with for-- I don't know of a business that's been around for more than 10 years that hasn't been sued. So if you own a business, you're going to get sued. Now the third here is you want to bring as little cash to the table as possible. And we have some other episodes where we really dive into the specifics of how to go out there and purchase a business and negotiate the purchase of a business. But in this particular episode, what I want to share with here is we want to make sure we put as little cash in the game as possible. Little cash. Little cash in the purchase. And why? There is three reasons why. One, you are for sure going to get sued. I want to repeat that again. Something's going to happen. Two, you're going to have problems. Three, you need a cushion. Most businesses in our country fail because they don't have reserves set aside for being sued, having problems. They don't have a cushion. And if you don't have money set aside for that, you can't sleep. And if you can't sleep, you can't think. And if you can't think, your business is going to fail. And I'm just telling you, I see so many businesses who-- they go out there and they buy a franchise, they buy a business, they buy a rent house. Recently, I like to think of one particular person I met at a conference. She had said that her and her husband had saved a few hundred thousand dollars, and they had bought rental houses all throughout San Diego. Well, the problem is they're heavily financed. So as luck would happen, she's like, wouldn't you know it, the air conditioning went out. You know, the first month we bought it, the air conditioning went out. And I'm like, well you're in San Diego, it's not that big of a deal. And she's like yeah, I know, but you know, I mean, it's-- there is a couple days it gets hot. But then the person we rented it to wanted a property with AC, and you know. I'm like OK, OK, what else? Well there is-- well, the pool in our other property had a problem, and so we had to fix that. And they didn't have enough cash to handle it. So now they're a person who owns rental houses, all of which are having repair problems, and they don't have enough money to get through that challenging time. So you just want to make sure you put as little cash into the deal as possible. So how do you do that specifically? What are the specific mechanisms to do that? Is one, we talked about this, I want to make sure that we just get this, is the owner would carry financing. OK? Owner carry financing. That's where, again, where the owner would finance it. So you pay him a little bit down, and then every month you make payments to them. Just like a bank. You're still paying interest, but it's just to them. It's not to the bank. The other area is you do a revenue share. So you walk up to that lady who runs that liquor store and you say, I'm going to pay you a percentage of all of the gross revenue I make every month. About 5%. If you buy a franchise, by the way, you're going to pay about 6% to 8%. So it's like buying a franchise. You say hey, I'm gonna pay you 5% of the gross sales until we pay you back. And then that third option, that third option, if you had to, you might say to the owner hey, I'm going to put a little more cash down. I'm going to put more cash down. But I want a longer length of terms. So a bank might only finance it for 10 years, but I would like you to finance it over the next 15 years if I put just a little more cash down. But the goal is you want to minimize the amount of cash you have to outlay, and plan on being problems. I repeat, plan on having problems. Plan on being sued. Plan on having problems. Plan on employee turnover. You know what's crazy, when you buy a new-- when you buy a business, you go in and you say, how much sales are you doing? And they say well, we're doing a half million a year, a million dollars a year of-- a million dollars a year of sales in our liquor store. The day you buy it, sometimes half the employees get up and leave, because they're not loyal to you, they're loyal to the previous owner. So just plan on that. Cool?

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