This week’s Misfit Entrepreneur is Chad Peterson. Chad has been a serial entrepreneur going back to when he was a kid. He is the founder of Peterson Acquisitions, a business broker that helps people buy and sell businesses through the U.S. and abroad and his been ranked the #1 business broker in the country.
Chad is also the author of multiple best-sellers including From Blue to White: Quit Your J.O.B., A Working Man's Guide to Self-Employment and Swinging Doors.
Chad has done deals of all sizes upwards of $550 million and has a created a unique process that can help any business owner prepare and maximize the value of their business, as well as help them in their next great adventure. I’m excited to have him on today to discuss what he’s learned along his Misfit Entrepreneur journey and the principles he can teach you about buying and selling a business.
As Chad says, he got where he is at by sure determination, will, tenacity, and fire in his belly. He went out and did it. But he had his hard times. He was raised in a tumultuous household – no silver spoon. He realized at an early age that “if it’s meant to be, it’s up to me.”
He started as young kid knocking on doors and did everything from yard work to walking dogs, odd jobs and more. Anything he could do to succeed, he did it. Chad says, that “those customers taught him more about life than the school system or even his parents. Business raised Chad. He’s had multiple successes and multiple failures.
In your book, Blue to White, you open it up by saying that when someone asks you what you do, you tell them, “I live for a living.” Explain that.
- Too many people get wrapped up in what they do or their title.
- They wear the mask too much.
- But, we are not that, we are many things.
- Chad makes the most out of his life and doesn’t rest on his laurels.
- Chad’s favorite saying, Live Deliberately”
- His life is not an accident. It’s thought out. He knows his end goal and his intentionality.
What was it that you learned about life from your customers when you were a kid?
- You have to tell someone what you are going to do and you have to follow through with it.
- The importance of laser focus.
- How to conduct business and give good service.
- How to bill and collect money.
- How to market yourself and your business.
- And much more!
At the 11:30 mark, Chad talks about his biggest failure in business with his mortgage business and what he took away from it…
- He got crushed in 2008.
- He could have sold the company in 2007 for $10 million.
- Up to 2008, the company was doing incredible. It had 120 employees, multiple locations, and was doing almost a million per month.
- Then 2008 happened and almost overnight it was all gone. Chad was at the epicenter of the subprime meltdown.
- He had just expanded and signed new mult-year leases and was basically broke.
- He didn’t file for bankruptcy though. He lost everything, but ultimately got through it and shut things down without having to do that. It took him 5 years.
- The lesson learned, “When you’re doing well, it’s the time to sell.” Never wait until you’re not doing well and the ship is sinking to sell. Go out on top.
- That is when his Peterson Acquisitions was born.
“Where there is no passion, there is no profit.”
At the 16:38 mark, Chad shares how he does, what he does with clients…
- First, Chad helps business owners understand what their business is really worth today. As part of that process, tax returns have to be recast to come up with “seller’s discretionary earnings.”
- Seller’s discretionary earnings are really cashflow and that is the real value of a business.
- This is adding everything that the business down for them back in – Meals, Travel, etc. Any owner benefit.
- Once they get the number, they take that and look at the industry to see what the multiple is.
- Manufacturing can get up to 4x. Service businesses can go as low as 2x. Online businesses can go higher.
- Additionally, he helps them evaluate where they are psychologically to see if they are ready to move on to their next adventure.
How do you do the 2nd part, the discussion around whether someone is psychologically ready to sell their business?
- The hardest thing to do is to tell people and show them the truth.
- A lot of brokers need a paycheck – Chad does not at this point.
- Chad wants to do good business for good people.
- The key is getting to where the owner is at right now – what is their passion?
- If it is not a 10 on a scale of 1-10, then it is time to get out. Remember, where there is not passion, there is no profit.
- People become very emotionally involved in their business or investments.
- Everybody is replaceable. Sometimes that is the owner.
What are things people should be thinking about or doing ahead of time or as they are growing their business to be prepared to sell it?
- You must have the mindset that your business can and one day will be sold.
- Make sure you are keeping in contact with a qualified broker and keep up with valuations.
- Business owners think about selling their business for 1000-2000 hours before they make the decision to even sell.
- People do this without keeping up at least annually on the valuation of the business and what is worth. You can’t make a decision if you don’t know what your business is worth.
What are the elements of a great deal? How does someone know that deal that is put together is a good one for them for their business?
- A good deal starts with a good seller and a good buyer.
- Chad’s job is not to sell people on the idea of selling their company, it’s to sell the company.
- You must be serious about selling as an owner.
- Business owners need to learn the real value and understand it. Many times, it’s not what they think.
- What a business takes from someone emotionally affects what they thing is the price, but the buyer doesn’t have that baggage and there is not a value for that.
- The bank or loan company for the transaction also must get behind it. That is a reality that impacts the price.
- If the seller understands the value, the buyer understands, and the bank can get behind it – and all parties are good with it, then things are good to proceed.
- The business must also have good strong 3M’s – Market, Message, and Management.
Tell us more about the 3 M’s…
- They are the 3 areas that are most important to focus on in the business.
- Marketing, Messaging, Management
- Is marketing being maximized and done right for the business?
- Is the messaging for the business consistent and easy to understand?
- Does the business have good management - systems that work well without the owner?
What is one thing that you think every entrepreneur should know?
- You must be truly aligned with what you want to do before you get started.
- There is a million ways to make a million dollars, but only a certain few are a fit for you.
- Your business must be aligned with your passion for it.
- Passion defeats education.
- Passion breeds desire….desire drives success.
- You have to have a healthy obsession.
Best Quote: Where there is no passion, there is no profit.
Chad's Misfit 3:
- If you are going to do something, go all the way. In order to go all the way, you need to be prepared to go further than what you think “all they way” is.
- Personal responsibility. If it’s meant to be, it’s up to me.
- Don’t let yourself have “rocking chair regret” or let the music die inside you. Accomplish your dreams and goals