Lifestyle vs. Asset Businesses – Saul Cohen

Saul Cohen:
When you start out a business, it’s all rosy. You’ve got fantastic idea, you’re going to bring it into the world and it’s like, it’s great. And then you get caught up in the weeds, you have one failure after the next and you have to duck and dive and move and develop. And over time, you forget what you’re really in this for. To me, there’s two real answers to that. The first is, am I building a lifestyle business or am I building an asset, a legacy, something that I want to sell on? And I think those two things are really different because a lifestyle business is essentially built around your lifestyle. You’re accepting that it’s probably going to give you a really, really good income.

Dana Robinson:
Exit Plan is a podcast for business owners and those who want to be business owners. I’m always in search of the lesser.

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Known stories of entrepreneurship.

Dana Robinson:
In the Exit Plan podcast, you’ll hear stories from startup to sale and hear from the professionals who helped business owners achieve their exit. Hosted by me, author and private equity manager, Dana Robinson, along with my co hosts and guests, you’ll hear real stories, tips and tools that will help you plan for the exit you want, whether you are still working as a day.

Dana Robinson:
Job or running a business.

Dana Robinson:
Let’s get started with this episode of the Exit Plan Podcast.

Dana Robinson:
Hey, everybody, it’s Dana Robinson coming at you with the Exit Plan podcast and a guest from across the pond, as they say, Saul Cohen. Thanks for coming on.

Saul Cohen:
Thank you for having me on.

Dana Robinson:
And you can tell from Saul’s charming accent that he’s hailing from, from England. London, to be specific. How’s it, how’s it going on this March, mid March day for you in, in London?

Saul Cohen:
Yeah, it’s been, it’s been a, it’s been a busy couple of months for us, but I’m enjoying the start of the spring, as I was saying before. So.

Dana Robinson:
Yeah, good. Well, it can be beautiful and hopefully getting some good weather, uh, coming to you from San Diego where it’s cold and windy today. So we’re, we’re, we’re trading weather, I think. So let’s, I’d love to just get straight into what you’re doing and how you got to be doing what you’re doing and then, you know, we’re going to learn a lot today for the audience sake about optimizing an entrepreneur’s exit, you know, shortening the timeline to exit financial planning before you exit. Sort of thinking through a lot of the things that my listeners, hopefully as business operators and people Trying to figure out how do I get a better exit? Get to an exit. You’ve got some expertise and that’ll be exciting. But let’s get, let’s get beef the, the pre story, the history and, and more about you.

Saul Cohen:
Cool. Yeah. Okay. So I run a niche accounting practice doing well. We specialize in companies growing through M and A and looking to exit their business out to normally not private equity, sometimes private equity, but normally they’re exiting out to private investors. I specialize in helping clients through that journey end to end. And I suppose the reason why I got into that space is very much actually, you know, just down to my background. So my dad, he was an immigrant into the uk.

Saul Cohen:
He set up his own business. He, I mean he actually was educated, he had a degree. He was going to go into a career in politics and he came into the UK and just decided that he wanted to do his own thing and started his own business, which was great. And you know, it was a, in my, in my view it’s like it’s a fantastic sort of solopreneur type business. You know, it, it provided for us and our family, gave us the lifestyle that we needed, you know, allowed him to invest in his future. But he got ill and wanted to sell the business and thought it was worth more than it actually was. And that left a real impact on me. And I suppose while he was in business because, because of the fact that I grew up in an entrepreneurial household, I was always quite into entrepreneurship.

Saul Cohen:
So I studied economics, went to, did an economics degree and by the time I was there, I’d never take any time out of education. I was just so frustrated with, with life. I was just like, you know, all we’re doing is more and more exams. When am I actually going to make an impact on the world? And so, so I actually started a business while I was at uni. We made loads of mistakes, me and, me and my business partner, you know, we, we. The idea that we had, and it’s just this in of itself is a really powerful lesson. The idea that we had was massively valuable and I know it was massively valuable because someone had the same idea as us, built the same business as us and sold out five years later for 14 million. Wow.

Saul Cohen:
Now we would. Right. He was a, an experienced business owner who we found out, you know, six months after starting, found out that this is our big competition. So like it was always there in our, in our head, like, oh, we, we should, we should keep an eye about what on, on what they’re doing. And we had a, you know, clearly a good idea, an idea with, with legs, but we had no execution power in terms of. We just didn’t know what we were doing. And the difference between R2 exits, you know, he, he’s actually, he’s gone to Clyde and Company. He’s a lawyer, corporate lawyer, doing really well.

Saul Cohen:
I went on, you know, we sold that business for a fraction of, of, you know, that money. You know, it was, it was very, very. It never really amounted to anything or definitely never amounted to the potential that it clearly did have. But, you know, it was a really good opportunity, a really good step for us to just get into the entrepreneurial world and see what that’s like and, and start figuring things out. And I always say to my clients, I was like, no one teaches us this stuff. There’s no like, school for entrepreneurship. Right, sorry. Everyone just, everyone just sort of makes their own way through and they muddle through.

Saul Cohen:
And so the best way we can learn is through making mistakes and talking to other entrepreneurs. And so we just went out and made loads of mistakes and it was good to do it while we had, we had nothing to lose, I suppose. And then we. I went to PwC, became an accountant. After that whole experience, I decided that I just wanted to work as closely as I could with business owners and I wanted to work with as many different types of business owners. And I was actually thinking that I’d probably end up in some kind of private equity or banking. So, you know, not a dissimilar, I suppose, career to you. And I just went out, I went into BWC and got sort of really swept up in that whole wave of, you know, like, you become the PwC professional.

Saul Cohen:
It was great. And I loved the work that was doing. It was. It was a fantastic place to work and to learn. And I often say one of the best things about those sort of businesses, you know, your big fours, probably the, the law practices the same. I imagine a lot of the big banks are the same, is they’ve built their culture in such a way that you just become a good accountant. It’s not a choice. It was actually, I, I actually, I asked in my interview, I remember saying, and like, I didn’t really understand the answer at the time I asked, I was like, what should I do to become a good accountant while I’m here? And they were like, no, no, you don’t need to worry about being a good accountant.

Saul Cohen:
You will be a good accountant. It’s like not a choice. It just sort of Happens. But to be successful, what you should do is build on your networks. And I was like, wow, like, okay, that’s quite cool, I’ll build on my networks. But I didn’t really appreciate the value of that until like now I’m looking back, yeah, I get that. The reason why is because they’ve got this incredible culture and you just get sort of swept along. And for me, leaving was triggered by that whole experience with my dad where I saw him build this great business, come to exit.

Saul Cohen:
And yeah, he got a bit of a reward, but it’s not, you know, it’s not as good as the reward he deserved. And I was just like, that’s a shame. There must be loads of people like that who, you know, they just get there. They don’t know what they don’t know. No one teaches them how to do business. And you know, it’s almost like a dark arts of accounting in terms of what to do to get a good exit or what to do to, you know, plan for tax and all this sort of stuff. And being a PwC and seeing businesses grow and, and expand and deal with risk in, in a completely different way to the SME world, I was just like, that’s such a shame. You know, like I’m sure entrepreneurs, there were loads of entrepreneurs who are like that and like my dad and you know, and you know, maybe even bigger businesses who just don’t get the, the exit they, they deserve because of the, because of silly things that they don’t know.

Saul Cohen:
And it’s, it’s, you know, and, and, and I thought that was a shame. So I went out and started my own practice and have been doing that ever since.

Dana Robinson:
And that’s your focus. You’re looking for the small medium enterprise that needs to do some things so that they’re not giving some value away that they can, that they can kind of close the loop on.

Saul Cohen:
Exactly. Yeah. Yeah.

Dana Robinson:
You know, let me, let me just go back to your origin story and, and I, I think for those that are listening that are, that are entrepreneurial, that story of failure is, it ought to be more commonly accepted, more, more celebrated because the, that I think we venerate the, the sort of entrepreneurs that have success and the ones you meet, the, the entrepreneurs that have had one, two or even three successes and haven’t experienced the, the sting of, of failure, especially when the ide, you know, the idea is validated, you know, you had a good idea, you know, they’re missing, they’re missing something. In fact, I’ve known some Professional investors who avoid investing in startups unless there’s a fail, a failure somewhere within your founders that, that has taught them these valuable lessons.

Saul Cohen:
That’s quite interesting. Yeah.

Dana Robinson:
And, and I’ll give a, I’ll give a shout out to a, a meme that hit my feed this morning that’s was a picture that said, you know, ideas are worthless and execution is precious. You know, this, the, a lesson that you learn. You know, the, the, you know, the idea is not what has value. It’s. And we in the US with the shark tank sort of myth, we, we tend to look at, you know, great ideas and think when you get the money then, you know, you get an investment, you’re there and there’s so much work that goes from the idea to the, the end that execution is, is where, you know, where most of us who have a failure or three tend to, you know, tend to, to have, you know, the rocks of execution. And as you say, I think there’s this correlation between like, there’s this knowledge gap, learning gap, something consulting gap for both the startup entrepreneur who doesn’t realize how hard of work it’s going to be to execute.

Saul Cohen:
Yeah.

Dana Robinson:
And the longtime seasoned operator like your father who also, you know, was, you know, in a vacuum. There’s no, the, the resources are like go find a book, read e Myth, go find a consultant. You know, we see this in private equity constantly because our, our businesses acquired mostly retiring owners portfolio or their, or their business, their assets and they, they don’t have time. They’re, they’re selling because maybe it’s health, maybe it’s just they’ve hit the end of their Runway and there’s 25 things that they haven’t done over the course of the last decade. Two decades, three decades. You’d think like, do you have. I’d love to just like start with the top things that you think are the most common. What, what are the themes that I think that become.

Dana Robinson:
And do you solve all of those or do you, you know, what do you do about them when you.

Saul Cohen:
Yeah, so I, I think the first thing that I always do with my clients is I always ask them and it’s funny because no one, no one ever really knows the answer is like what are you actually trying to do? What are you trying to build with your business? Right. Because I think lots of us, I mean, myself included, right. I’m on this journey as well as much as anyone else. Right. You know, when you start out a business, it’s all, it’s all rosy You’ve got fantastic idea, you’re going to bring it into the world and it’s like, it’s great. And then you get caught up in the weeds and you get knocked for six. And as you say, you know, you have one failure after the next and you have to duck and dive and move and develop. And over time you just, you forget what you’re really in this for.

Saul Cohen:
And to me there’s, there’s two real answers to that. The first is, am I building a lifestyle business or am I building an asset, a legacy, something that I want to sell on? And I think those two things are really different because a lifestyle business is essentially built around your lifestyle. You’re accepting that it’s probably going to give you a really good income. It’s going to give you maybe a lot of flexibility throughout your working life and that’s, that’s fantastic. It’s probably never going to be, I mean, it might be big in terms of revenue and profits, but it won’t be big in terms of team. You know, the processes won’t be as developed. And yeah, that’s, that’s fine because it suits your lifestyle. Or are you building this asset type business, right, which is something that you’re really going to sell.

Saul Cohen:
It’s going to be like a tangible business that goes out to private equity. Right. And I first saw this idea from Daniel Priestley. I don’t know if you like a great Australian, it lives in the UK now, but yeah, fantastic author and like, like someone who really understands like business. And he wrote this book, 24 Assets, where he sort of builds those two apart. And I was like, you know, that, that, that should be core reading for every entrepreneur. Like that, that book is, it’s, it’s insane. Right? And actually if you think about, if you go through those assets that, that he numbers the 24 assets, if you can tick all of those off, you know, that’s like, it’s like a private equity cheat sheet.

Saul Cohen:
Yeah, right, yeah, it’s great. But and the thing is, it is different building those two. So the first thing that I always say is, you know, understand what, what you really are building here. Are you building something that’s catered to your lifestyle and if so, that’s fine, or are you going to build something that you want to eventually sell and you know, it might make you income over the years, but you’re not going to take out as much over those years. Even in the good times, you’re not going to take out as much because you’re Going to reinvest that into developing, essentially developing the asset that you’re looking to sell one day. Yeah. And so I think that’s to me, CL point number one because yeah, knowing that we do work with, we do work with clients on both of those journeys, you know, on, on sort of the lifestyle type business, we’re looking much more like tax planning, efficient investments. Let’s build something for you so that you’re not reliant on it.

Saul Cohen:
You’re going to accept that your exit in terms of when you sell your business, if you sell it for anything, you’re either going to have, you might have one or two people in the business that you want to sell it over to and sort of just give them a step up. You’re not going to get much money out of it. Maybe you’ll get a bit of a profit share or something or you’re going to just get, sell the assets in terms of the client bank and that’s it. Right. You’re not going to get a big exit. But I’m telling you that now, not in 20 years time so that you can plan for that over the next 20 years of your journey. And, or the other way is, yeah, we do work with clients to sort of build in a backend function. Maybe they’re going to make a couple of acquisitions themselves, roll them up into, into their business, build a proper finance function, build up the data room so that when they do come to exit, they’ve got everything ready and it’s like, yeah, here you go.

Saul Cohen:
And just doing that, you know, being able to answer the questions that an investor is going to ask and, and showing that you’ve, you’ve thought about your business in terms of the risk it poses and it’s cash generating potential. To me, what we’ve seen in our clients is that adds a lot of value.

Dana Robinson:
Yeah, absolutely. Now the, the, there’s nothing wrong with having a, a lifestyle business. It’s the, the challenge becomes like I, I go to meet with someone like that as a buyer and it’s hard to explain to them that they’ve, they’ve spent their lifestyle, their career extracting the value that they now somehow would like to re. Extract. And, and you know, it’s a real example. You have a business that, you know, has a, an adjusted EBITDA of million bucks, you know, for year after year after year. And instead of, you know, high taking 2, $300,000 of that and hiring a management team that’s portable, the owner just gets to keep that money. Right.

Dana Robinson:
They they, they don’t like the idea that they don’t get to keep that. And on that I’d say, you know, you should be keeping four or five hundred thousand of a million EBITDA small business. And it’s very hard to, to chop that in half and hand it to operating experts and general manager, ops manager, whatever the role is. And particularly when they’re going to give.

Saul Cohen:
You stress, by the way.

Dana Robinson:
Yes, absolutely. Yeah, you’re going to pay him and then for a while you’re going to work harder as an, as a lower paid owner to be sure that you hold them accountable to, to do the job that you’re trying to, to get them to do. So I, I love the idea of having that conversation early in somebody’s business and explaining you could spend 30 years extracting all the value, but you better be investing that because you’re not going to get $30 million for your business if you have not built portable management and a machine that has the 24 boxes that, that you can check and say this is an asset. How successful do you have people who say, I get it, I, I bought into just being a, a lifestyle business or do you find that almost everybody really believes, okay, I want to be an asset, I want to build something I can sell.

Saul Cohen:
So the, the interesting thing actually the litmus test is for us is at the end of the first year of working with us. So everyone always says, I’ve only had, I’ve only had one client who said, yeah, do you know what, I’m just, I’m building a lifestyle business and that’s fine. Yeah, everyone, everyone, almost everyone has always said, yeah, we’re, we’re in long haul, we’re entrepreneurs, we’re going to do it. And then you come to year one and you’re like, okay, fine, so we’re going to put this back into the business. And I’m like, wait, but I want that.

Dana Robinson:
Yeah.

Saul Cohen:
And, and that, that really is the litmus test. It’s like, you know, they’re like, I, I want to buy this property or I want to go and do this thing. I’m like, yeah, that, that’s fine. But if you’re doing that, then this business becomes your lifestyle business, not your, your asset. And you know, I think people, people really start thinking about things when it becomes tangible. Yeah. And that, that’s sometimes the problem. Right.

Saul Cohen:
You know, we just carry on in life. And one of the things that I’m really passionate about is just making sure that as many entrepreneurs are just making a conscious decision with. It doesn’t matter what the conscious decision is, but just make a conscious decision and say, yeah, I’m reinvesting this income or no, I’m not. I’m choosing not to reinvest that income. I’m going to take it out personally because either I need it now or I’m going to reinvest it in the future, as I would encourage you to do.

Dana Robinson:
Yeah, I think that’s an interesting observation. I would have guessed that it would be close to 100% of people who believe they want to build an asset and not lifestyle. So lifestyle business really becomes a failure in a sense to be able to execute on the how do I make this business an asset and not a lifestyle business? Yeah, and so, you know, I’ve seen some, some sort of incubator model, private equity groups that try to grab those businesses and what they, the ones that I know of that, that seem like they’re succeeding, bring somebody in and make the owner accountable to that plan, you know, so you, you, you give up something to participate. But a little bit like how startups sometimes need an accelerator or an incubator to help them just do the, the things that it takes to get from, you know, idea to product to market. You know, there aren’t that many though, to our point that there are a lot of small businesses sort of being tossed about in the, in the vast seas of, of the unknown. There are not enough salt, Cohen’s and there’s not enough of the, you know, sort of the, I’ll call it collectives that are trying to say, here’s the best practice. We’re going to charge you for you in equity or cash or both, to be accountable, to do things so you don’t slip into the bad habit of lifestyle business. You know, you have anything you can speak to along those lines? Is that, am I pontificating?

Saul Cohen:
Yeah, no, no. I, I think, I think the. I, I think it actually comes down to the way, the way entrepreneurs define success. And I think that’s what it is. Right. You probably see this all the time. Like, right, acquisitions is an emotive science. Right.

Saul Cohen:
It’s not really. I mean, it’s about the money. It is absolutely, you know, it’s about the numbers. Yeah, sure. But there’s a large part of it, maybe even the majority part. You know, some, some consultants that we work with say 80%, I say probably about 70%. It’s about the heart, right. It’s the emotion of, of the thing.

Saul Cohen:
And when, when you tell a business owner that Their business is worth X. What they’re hearing isn’t. Their business is worth X. They’re not even hearing, that’s how much money I’ve got for the rest of my life. What they’re really hearing is, this is your marker in the sand. That’s how successful you’ve been.

Dana Robinson:
Right?

Saul Cohen:
Yeah. And they don’t see. They don’t. But they don’t see it because they’re just not exposed to it. But they don’t see that if you can reach a business with like a million pound EBITDA. Yeah. I mean, you’re already in the top, like 0.5. Yeah.

Saul Cohen:
You. You are successful. Yeah. There is no shame in saying, even if you make a half a million pound, even though half a million dollars, even though whatever it is like that is. That is successful, that is incredibly rare. Businesses don’t get to that size. That’s not the norm. And so just to be able to do that and say, there is no shame in taking that and living your rest of your life at that level and saying, this is a conscious decision that I’m making.

Saul Cohen:
But as you say, I think most business owners would look at a lifestyle business as a bit of a failure. And so let’s say, yeah, it just is what it is. You know, it’s a shame I built this great business, but it was just so reliant on my skills and expertise. I’m just like, yeah, well, if it made you. If you. If it gave you a great lifestyle, that’s not failure, you know.

Dana Robinson:
Good.

Dana Robinson:
Dana Robinson here. Quick plug for my book, the King’s Fly Swatter.

Dana Robinson:
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Dana Robinson:
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Dana Robinson:
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Dana Robinson:
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Dana Robinson:
Yes, but it is a surprise when they get to the end of that cycle and they talk to a banker or they talk to buyers and the buyers go, well, you know, your 500,000 EBITDA business is worth 2 million bucks. Yeah, well, yeah, that pay taxes. We’re going to hold some of that back for indemnities. So you’re not going to get a lot of, you know, it’s, it’s a surprise because if they haven’t been thinking ahead and planning, then they feel, and, and they’re often hearing from their peers who maybe have an asset style business that, that they’ve made so much more on their exit. And, and why don’t I get that as well? You know, are you doing consulting around the, the person who says, you know, I got to get out of this in the next two years, you know, what can I, can I do it in that amount of time and what are the steps?

Saul Cohen:
Yes, there are a lot of people in that now. We’re actually, I’m writing a book actually on those people. I’m launching a, essentially a consulting product for them. So previously we’ve done it sort of very ad hoc, but actually we, we, we’re looking at what we’ve done over the past couple of years and saying, you know, is there actually, can we productize this a little bit and make it a more standard offering? Because we’re getting more and more of those inquiries in, you know, people who are, you know, you’ve got these boomers, the boomer generation, they’re, they’re looking at retiring now if, if they haven’t already, you know, there are still Lots of them looking to retire and no one’s given them this information. Right. It’s all well and good, us talking about it for someone who’s, you know, maybe in their 30s, 40s, even 50s, but if someone’s in their 60s, 70s, and really wants out in the next, as you say, in the next two, three years, you know, what can they do? And so we are looking at that at the moment and we have done that sort of consulting in the past. I think the first thing that I always do is, is draw a line in the sand and get someone. So actually we, we do a due diligence for them.

Saul Cohen:
Right? That, that’s the first thing we do. We go in and we’re like, okay, let’s, let’s, let’s do it. Not, not heavy. Let’s do a light touch due diligence on your, on your business. And why don’t I show you what an investor is going to see. Nice. Yeah, because that, that’s the first time anyone’s ever looked at their business like that and said, oh wait, yeah, because their accountant, yeah, again, you probably see this all the time, but the biggest killer of deals are, are well meaning advisors. Yeah, yeah, right.

Saul Cohen:
And they’re coming, accountant might not understand acquisitions, particularly SME acquisitions, because they’re different. They might not get the fact that the multiples are different in the SME world than they are in the book. It’s, it’s, it’s a specialist area. And so people might have told them X, Y, Z. And no one’s, no one’s looked at their business and said, no, no, this is the cash generating power of your business. This is what our view of the risk potential of your business is. And therefore, you know, the valuation would be X, you know, between maybe this, this band, these are what your risk, this is what the key risks are in your business. And therefore this is what we need to do over the next two, three years.

Saul Cohen:
This is what we need to fix. Because that’s what it is. Right. At that point they’re going to be limited to how much they’re going to be able to change the business. And you know, how much, you know, if, if you’ve had a steady business maybe generating, let’s say 2 million pounds with like maybe 300, 400 EBITDA, you know, their, their ability to turn that into 2 million EBITDA is going to be really minimal. You know, they’ve been at 400 for 20 years and you know, they’re not going to change it tomorrow. But what they can change is the risk factors. Right.

Saul Cohen:
And if you can make the, if you can make the acquisition less risky for an investor, it’s inherently more valuable and particularly for like a private investor who’s maybe just looking at something that’s going to be a little bit hands off, you know, maybe like a small private, you know, investment house or something like that. You know, something that they might be able to have a little bit of a hand in and you can give them a really good business that’s generating a decent income. Really, you know, quite low risk. That, that’s going to be a fantastic. Now you’ve got a different type of offering, right? As opposed to. Oh yeah, look, here’s this business. It generates a really good EBITDA. Half a million EBITDA, but it’s 100 dependent on me.

Saul Cohen:
And when I leave. Yeah, you’re probably going to lose half the, half the clients. It’s a different offering. And just having someone looking at that business in that way, as I said. Yeah, the, the faces that we get when we, when we present those reports, I used to give it to people, but now we do it over zoom. I love doing it over zoom because I, I can see their faces. We used to just send it to them like and I never got to see the responses, but now we see the responses. Great.

Saul Cohen:
You know, and I, I always say to them, I’m like, well, aren’t you happy you’ve done this three years out?

Dana Robinson:
Yeah, yeah, yeah. The, the work is worth it on, on that. But they’re never, they’re not going to, as you say, they’re not gonna, they’re not going to go from 300,000 to, to, to 2 million, let alone a million. And it would be a little incredulous to a buyer if you went, you know, tripled your EBITDA in a two year period. So your two year, three year exit, you know, you’re optimizing for, for risk. You have a different playbook than someone who’s got a little more time horizon. You said earlier you’ve done some, you’re doing consulting around acquisitions as a means of growth as well. You in the small medium enterprise, that kind of SME business.

Dana Robinson:
How, you know, how’s that going? What are, you know, are you seeing some success stories for people who are winning at small acquisitions?

Saul Cohen:
Yeah. So I think, I think there’s a huge opportunity for young entrepreneurs right now or it doesn’t even need to be young entrepreneurs. I say hungry entrepreneurs right now because there is an abundance of, of businesses Being sold. You know, we are in, in the entrepreneurial world. This is, this is our wealth transfer of our generation. Yeah, yeah. Like this is, you know, it’s the property boom that happened maybe 20 years ago. Right.

Saul Cohen:
This is, this is, it’s the dot com bubble. It’s like is acquisitions right now. Yeah, that’s, that’s what’s there. There are so many really good, healthy businesses that, you know, I’m, I’ve seen it. I’ve seen, you know, clients, they’ve just not managed to sell a business and what they end up doing is they, they switch off the lights, they liquidate and they take what’s left. You know, it’s a shame that’s not what you want. But to, to have an entrepreneur who’s a little bit hungry, who’s willing to take that off the table and say, no, no, don’t worry about it. We can structure this in, will give you what you need.

Saul Cohen:
You know, it’s win, win for everyone and the business keeps going. So yes, we’ve seen some fantastic deals. You know, I, I, I’m working with a client. My, literally every time he comes to me I’m like, wow, this is the best deal ever I’ve ever seen. And I’ve, I’ve seen quite a lot now. And every time he comes to me I’m like, how did you beat that one? He’s got a deal. It’s pretty much, it’s, he’s got no money in, which is fantastic in of itself. He’s financed the initial, the initial payment and the remainder is paid over a period of 5% of 50 of gross profit.

Saul Cohen:
Um, so it’s, it’s cash flow positive for him from day one. And, and you know, it’s just structured really nicely for him. It’s going to give them an income and it’s basically going to double their existing business, which is, you know, it’s fantastic. They’re actually, they’re due to close in like five days time. So. Yeah, yeah. Like, and, and what’s amazing about the acquisition space is that the more time that I’m spending in it, the more, you know, we’ve done, I’m, I’ve done close well, not been fully involved in all of them, but you know, based on either buy side or sell side or you know, just doing evaluation or something, we, we’ve done approaching 200 now, which is an insane number. And what’s, what’s really interesting about that is that the more you’re in that world, you probably see this all the time.

Saul Cohen:
There’s just so much opportunity and there’s so much like there’s so many options and you know, there’s so much, there’s, yeah, it’s a fantastic wealth transfer, a fantastic time to be buying a business. And so actually our clients, because we are a standard accountancy practice in the UK as well and so we just work with that. And so we do get clients who come in just for a little bit of tax planning and then end up staying. And we sort of say to them, I’m like, you know, make, you might be ready for an acquisition now. You know, you’ve got 2 million pound business, there’s no reason why you can, you know, you can keep growing at the rate you’ve been going or, or you can make an acquisition and really start, you know, playing a leverage game and making quick acquisitions. It’s not without, it’s, it’s not without its drawbacks. You know, you’re going to have different challenges, sure, but going through that process is going to be great for you because it’s going to get you thinking like an investor so that when you do come to exit, you know, how, how they’re thinking, you know, the process which is inherently valuable and then it’s also going to be able to be a really fast way for you to expand growth. And people always say, oh yeah, but you need a lot of money and you need, you know, I’m just not ready for it.

Saul Cohen:
But actually I think it’s just, it’s an education piece as well. It’s. People just don’t know what they don’t know and they’re not exposed to it and therefore it seems intimidating.

Dana Robinson:
Yeah, yeah, yeah. I think it’s the, that hopefully the people listening are hearing, you know, us talk about it and that takes some of that intimidating out of the idea. You could go buy a business and you know, the, there are plenty of info product kind of American style, you know, sales, sales pitches about how you can make, you know, millions by buying a business. And, and it sounds easier than it is. It certainly makes a lot of sense for someone who’s in a business to be constantly on the outward look to say hey, retire retiring boomers. We, we’d love to buy your business and to understand that you can carry back paper, you know, owe the seller, pay their retiring, they’ll take payments in most cases that you can borrow, borrow pretty aggressively as well from, you know, government funded loans here. So there’s a lot of that. But let’s talk about the, the brand New entrepreneur going to the market is hearing from big influencers that you can sort of swagger in and get a business with no money down.

Dana Robinson:
And you know, once you own it, then you control this economy and then you can scale it. You know, it’s easy. It’s easy. It goes down easy. I, I get, you know, I get plenty of people reaching out and, and asking, how do I do this kind of thing? And again, like, it’s easy to sell the idea, but there aren’t a lot of advisors that, and whatever incubators. There’s not a lot of resources, I don’t think, to take someone who’s in their 20s who wants to buy that, you know, that little business that a retiree is willing to hand them with. What, what are they going to do to not have that fall apart in their hands? Because there’s a lot of execution. There’s a, there’s a lot of, there’s a business to run, there’s a playbook to run.

Dana Robinson:
There’s, there’s a lot that they don’t know. That they don’t know.

Saul Cohen:
Yeah. And I, I think that it’s really funny actually, because someone asked me recently, they were like, do you think there’s any value in someone starting their own business? And I said to them, I was. The value in running your own business has nothing to do with building the business because it’s quicker to buy a business and easier. Yeah, right. The value in running your own business and building it to a certain size, let’s say a million, 2 million pound revenue, whatever it is, the value in that is the person that you must become to do that. Right. Because becoming that person allows you to achieve a different level of success. And I, I often, I often think, you know, because I have seen people make acquisitions and fail tremendously.

Saul Cohen:
Right.

Dana Robinson:
Yeah.

Saul Cohen:
Actually, I should say to his credit, one of the, one, one of our best acquirers of businesses at the moment, his first acquisition absolutely tanked. Absolutely tanked. Right. They made all the mistakes in the book. You know, on paper it looked great, but they didn’t even think about looking at cash flow. And the cash flow was shot from day one. And you know, the whole thing just blew up and it was a fantastic business and it was just over leveraged on the deal because they didn’t, they didn’t listen and look at the cash flow. But you know what, that’s a mistake you only make once.

Saul Cohen:
And going through that, as you say, right. Going through those failures toughens a person up. Right. They grow, they, they You, a failure will either knock you out or Willow, it allows you space to grow.

Dana Robinson:
Right.

Saul Cohen:
Yeah. And, and I, I think that’s what it is. You don’t need to have run a business like that. I’ve seen people who’ve been senior executives come in and, but, but they’ve got the same. I don’t know if it’s a maturity, it’s a knowledge, it’s a humility. Maybe it’s, it. There’s a value of I don’t know everything and I want to surround myself by people who do and I’m going to listen to them and you know, but I’m confident enough to make my own decisions. I’m not just going to be a yes man and you know.

Saul Cohen:
Yeah, I think that that is, I think, I think it’s that maybe let’s call it a humility that, that I think is required from a sort of. Yeah. A humble confidence. Yeah. Yeah. And when, when a person achieves that they can make acquisitions, they can do anything, you know, that the option for them to go out and make more money and make leverage plays and whatever is, is infinite is infinitely in front of them.

Dana Robinson:
I love that. That’s it. I, I’ll just say we don’t, maybe we don’t maturity enough. But your maturity might be the right word because, you know, you could be mature in your 20s with no business experience and the, that humbleness of saying like, I just don’t know what, I don’t know. Beginner’s mind gives you the ability to find great advisors and hire and work with smart people and to take a business that you haven’t, you know, maybe been a seasoned operator in and become one. Yeah, as you say. Yeah, more, more and more. I mean I, I believed in the startup myth for most of my early career and, and you know, been dashed on the rocks of, of what it takes to do that.

Dana Robinson:
The, the best startup, a story I have is we, we started an audiobook production company. Took us 13 years to sell that in a, in a private equity transaction. It was a roll up that recorded audio books. That sort of consolidated consolidation. The group that bought us was kind of a bottom of the market consolidator of businesses. They hell, I don’t think they held us for three or four years and made four or five times what they paid us. So you know, one let, when you consider leverage, you know, 10x their money. It took us 13 years to, you know, to grow to a single digit in value.

Dana Robinson:
It took them three years to 10x their investment in us. So, you know, imagine for every small, you know, small business not doing a million a year, it’s still to get a business up from the ground. As you know, from starting your first business to get, to get that business up to a million in revenue is heroic and takes years and risk versus buying a business that’s already doing that revenue structure the payment so that the revenue pays the payment. And now you’re doing what the, what, what the Wall street calls a leverage buyout. Right. As a, as a 20 or 30 something business owner.

Saul Cohen:
Yeah. And yeah, it is incredible. And yeah, my only, my only thing about taking it away from that, you know, experience and sort of knowledge and, you know, sort of age is. I don’t want to make it an age thing because, I mean, this morning I spoke to a fantastic business owner. He’s 29 years old, he’s been running a business, he’s grown it to £1.5 million. Right. You know, and it’s just, it’s not fair on people like him who are incredibly impressive and you know, have just, they’ve, I don’t want to say they’ve done everything right because they haven’t they, but they’ve, they’ve dealt with everything in the right way and you know, they, they’ve already got this humidity and they are ready to make acquisitions. There’s no reason why not.

Saul Cohen:
Yeah. And you know, I, why on the other side, I, I know that my business is just not ready for an acquisition as well. Right. And I think that, that, that, you know, that takes a level of maturity, particularly when you are, you know, you’ve got an activating personality and all you want to do is grow and, and be money and you’re working with acquisitions all day long and they’re great deals and fantastic and you know that you can go out and negotiate a fantastic deal. And I know it’s a bit, but, but I choose not to right now because I know that that’s just not what is right for my business.

Dana Robinson:
Yeah. Where’s deal flow coming from? I mean, you see, you’re working with a lot of sort of small, medium business acquisitions, you know, in the, once you’re above 2 million of EBITDA, we know there’s a market, you know, that is full of bankers and, and all of that. But when you’ a couple hundred, few hundred thousand of ebitda, where are the deals coming from? And are you finding that your buyers are, are able to negotiate, you know, not crazy valuations in that space?

Saul Cohen:
Yeah, I think it’s really interesting actually. The deal flow used to be, Deal flow used to be something that was really hard to come by. Right. Really good deal flow. In the last few years, I don’t know if people have just got much better at it, but they treat deal flow as they would any other type of marketing activity. And you know, they go out, they go at it with different forms. You know, some people use letters, some people use emails. I like the letters because I think, I think it’s professional.

Saul Cohen:
Right. And I think there’s an element of people expect professionalism with business acquisitions. But yeah, I’ve seen people even do now, you know, LinkedIn, LinkedIn outreaches and, and LinkedIn. I actually recently saw someone come up on my, on my feed doing a link with LinkedIn AD. Yeah. So I’m like people, people are clearly they’re playing, they’re playing the outreach game as they would and they’re approaching the outreach reach game as they would any other marketing activity. I think that feels uncomfortable for lots of people because they see it as this professional service that should be very professional. But I, I think that unfortunately there’s lots of brokers in the UK who do a disservice and I imagine you probably have this similar scenario.

Saul Cohen:
You know, people take big upfront payments and deliver very little other than set really high expectations and actually make the deal much less likely. And you know, that gives the whole acquisition world a really bad name and it’s a real shame. And so I think that actually this direct marketing approach is doing really well as a result of that. I think that business owners, the, the deals that go through tend to be business owners who are very well prepared for, you know, what’s coming, that they’re motivated to sell. And most people, most of the time I always say to, to my clients, I’m like, you know, tread very carefully if you’re the first buyer that they’ve looked spoken to.

Dana Robinson:
Yeah.

Saul Cohen:
Because if, if you’re the first. Do you remember what I said about marker in the Sands and that that’s their, that’s their level of success. You don’t want to be the person to tell them that, that actually their marker is way, way lower than they thought it was. And yeah. And if you are going to be, you need to make sure that you’ve got enough rapport and you know, you’ve built that connection with them. Because I think that buyers, buyers often try and rush that. They try and rush that rapport building and they don’t. Yeah.

Saul Cohen:
Particularly new first time buyers, they don’t get that, you know, acquisitions is about people buying people more than it is about businesses buying a business.

Dana Robinson:
Yes. Yeah. 100. 100. I I to make two comments. One that the, the sort of biz buy sell websites are that they’re, they’re solid but they’re also full of brokers who are playing a numbers game and have probably not well advised their client that you know, they’re going to have to take a 10 year, 5 year payment plan. They’re going to not get very much up upfront. Their, their valuation is, is not you know, and that private equity, although might be paying 10x for a 10 million, you know, top line H vac business are not paying 10x for a 3 million top line, you know, in the same space.

Dana Robinson:
So the, those brokers, I I unfortunately I feel like I agree with you. They do a disservice by not managing expectations well. I think up market, even in an auction is going to an upmarket banker is going to hold the expectations at market because they’re, they’re market makers. I do have a, an anecdote about one of my business ventures. I, my wife and I have been in and out of the property management business for 25 years. We’re out of it right now. Luckily. It’s a hard business to run, but we, we had a, an effort to roll up.

Dana Robinson:
We sent a very courteous email to, you know, a few dozen local small property management companies and just said hey, we’re in this business, here’s who we are. If you hit a point where you’d like to retire, you know, we’re happy to be the people who look to take over your team and your owners and do the best work we can for them and, and give you an economic outcome that’s, that’s hopefully satisfactory. And that spawned, you know, 30 emails, spawned three or four conversations, got us a great deal. And that deal still took eight months of just kind of rapport building back and forth and that turned into, you know, the ability to combine a couple of businesses, synthesize them and then, and then exit that. Like for us it was building something that someone bigger than us would find attractive. But the letter writing to your point was, you know, not cheesy, not salesy and, and had some integrity and humbleness to it and, and it worked. So I, I think that is, and it would have taken us, I, I don’t think any deal I’ve seen on Biz Buy Sell or Biz Ben or any of these big platforms, I don’t Think we. I don’t think I’ve seen and I watch.

Dana Robinson:
I watch property management businesses in that feed for years. Not a single deal look like any of the deals we were getting from just direct solicitation from this size expectation. You know, all of that. They were all some. Somebody selling something too small for too much with a, with a broker that probably had not helped them set their expectations.

Saul Cohen:
Yeah, they do really fancy information memorandums though.

Dana Robinson:
Yes. They love their book. They love the book. Their book. Their book is worth the. The price that in their mind of the service that they’re giving.

Saul Cohen:
Yeah. What else?

Dana Robinson:
As we. As we kind of come to the end. Saul, appreciate you being on. We could just keep talking for hours, but you know, you’re, you’re a high expert in this space. What have we not touched on that you think you. You’d want to take as a. Some takeaways for, for the listeners, Joe?

Saul Cohen:
Maybe I’ll. Because I think we were talking before about. We, We. We. We were saying a business owner who’s maybe like a few years out and looking to exit and what can they do. And the thing is is that I think that what I would. What I don’t want them to get from this conversation is that their hopes us. Right.

Saul Cohen:
Because you know, the best time to do anything is right at the beginning. You know, the best time to start anything is right at the beginning. And the next best time is today. And you know, I’ll. I’ll leave with a story of hope actually that we had. We had someone come to us. They were referred in from another business consultant, sort of saying, listen, look, they’ve got this deal. It’s our heads of terms valuations at 3x.

Saul Cohen:
You know, can you help them get their financials together? And their financials were an absolute tip. Right. Yeah, we, and by the time we. We took it in, the buyer had. Was already like getting quite flaky and whatever. We, we managed to get the accounts together but it was like almost too little too late. The deal fell through. But we worked with them over sort of the next 18 months and in that time we, we prepped.

Saul Cohen:
We made sure that we were prepping the data room, keeping everything up up, you know, just making sure that their bookkeeping was up to scratch. Right. It really wasn’t anything big for them. It was literally, let’s just keep your accounts in really good shape. You know, let’s show that you’ve got really regular management accounts. Really simple things, really not changing the world. We managed to exit that business six months ago at 4.5 times multiple and the deal completed. Right.

Saul Cohen:
So it’s, and, and, and actually the deal completed in two and a half months, which I think is pretty quick or definitely quite reasonable. And it’s because they were just ready, they were ready for the acquisition and therefore it looked a lot less risky and an opportunity for the investor and therefore they got better multiple and they actually got the deal completed which they wouldn’t have done before. So yeah, it doesn’t need to necessarily be big changes. Sometimes just a little tweak here and there going for the low hanging fruit can make a really big difference.

Dana Robinson:
That’s awesome. I think that’s a great story and that’s, that’s a great sales pitch because. Well, I’m going to tell people that, that they should go find you and, and figure out if they can work with you. Saul, what’s, what’s the best way to connect with Saul Cohen?

Saul Cohen:
Yeah, I mean so I’m on LinkedIn. I’m posting every day so you can definitely get loads of little tips on there. And if you’d like, I’m, yeah, we got a book coming out in the summer, so we’ve got a wait list. We have just capped the number that we’re accepting on the wait list. But we, it is still open so I can give you the link for that as well.

Dana Robinson:
Awesome, I appreciate that. I’ll, for everybody’s listening, I’ll post in the show notes. I’ll Cohen C O H E N so that you all can connect with with Saul and you know, hopefully get the last shot at getting on the, the wait list for the book. Appreciate you coming on today, Saul. It’s evening for you, so have a good rest of your evening and thanks for coming on.

Saul Cohen:
Thank you so much for having me on this. Pat. A great chat.

Dana Robinson:
Thanks for joining me on this episode of the Exit Plan podcast. I’d love to hear from you. Feel free to hit me up with questions or comments by emailing me at hello@danarobinson.com or leave comments and questions by calling 858-252-7785. Call 858-252-7785 and leave a message.