Buying a Franchise vs. An Independent Business: What’s Right for You? | Richard Parker

Never Been Promoted Podcast with Thomas Helfrich

Richard Parker, an experienced business owner and founder of Diomo Corporation, delves into the intricacies of buying businesses and the importance of resilience in entrepreneurship. With a background that spans over three decades, Richard shares his journey from financial hardship to becoming a leading advisor in business acquisitions, emphasizing the value of knowledge and strategic thinking in achieving business success.

About Richard Parker:

Richard Parker is a renowned expert in the world of business acquisitions, with over 35 years of experience in buying and selling businesses. He is the founder of Diomo Corporation and the creator of the course "How to Buy a Good Business at a Great Price," which has helped thousands of aspiring entrepreneurs successfully acquire businesses. Richard is dedicated to providing practical, unbiased advice and is known for his hands-on approach in guiding individuals through the complex process of buying businesses.


In this episode, Thomas and Richard discuss:

• The Journey of Buying Businesses: Richard shares his personal story of overcoming financial struggles and his experiences in acquiring 14 businesses, highlighting the lessons learned along the way.
• Realistic Business Acquisitions: The importance of having realistic expectations and understanding the complexities involved in buying a business, including the 23 stages of the process.
• Avoiding Common Pitfalls: Insights into the common mistakes prospective buyers make, such as starting in the middle of the process and not identifying the right type of business for their skill set.

Key Takeaways:

• Strategic Approach

The necessity of a structured, step-by-step approach to business acquisitions, focusing on knowledge and preparation.

• Resilience and Adaptability

The role of resilience in overcoming setbacks and the importance of adapting to new opportunities in the business landscape.

• Ethical and Informed Decisions

Making ethical and informed decisions to avoid predatory practices and ensuring a sustainable business model.

"You have to start at the beginning and understand what type of business is right for you to succeed." — Richard Parker


CONNECT WITH RICHARD PARKER:

YouTube: https://www.youtube.com/@richardparkerdiomo

Facebook: https://www.facebook.com/RichardParkerDiomo

Instagram: https://www.instagram.com/richardparkerdiomo/

LinkedIn: https://www.linkedin.com/in/richparker1/

CONNECT WITH THOMAS:

X (Twitter): https://twitter.com/thelfrich | https://twitter.com/nevbeenpromoted 

Facebook: https://www.facebook.com/hovienko | https://www.facebook.com/neverbeenpromoted 

Website:

Transcript

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We are back at Never Been Promoted Podcast. And he listened. Today, I'm joined by a really, really cool business owner, Richard Parker. But before we meet him, I'm just teasing this right now. If this is your first time here, I hope it's the first of many. And if you've been here before, thank you for returning. My mission is to create more entrepreneurs in the world. It's to create entrepreneurs everywhere. In particular, I want to make them better, better in entrepreneurship and better at life. And they can do this through learning from the journeys of others. And and no matter what kind of entrepreneur you want to become, if it's a side hustle, your full time thing, whatever your situation is, maybe you've been asked to leave from your job or maybe you're just fed up or maybe it's just you you're just graduated college and, you know, you're you're like, I'm not working for somebody. No matter where you are in your journey, you can learn something from any entrepreneur. And I take this to heart, and I have a high passion for it. And our entrepreneur today is Richard Parker. He is the founder and CEO of Diomo. I think I said that right. Yeah. You did. Richard parker.com. You know, he helps you buy businesses, and that's a great path to start. So let's meet Richard. Richard, thank you, by the way, for coming on. Thank you. I appreciate you having me. I was very intrigued by the, title of your podcast,
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And, that is, you know, the genesis of why a lot of people get into what I do.
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Well, absolutely. And, and and I and we're gonna talk about what you do. I'll ask the question. I don't always ask it, but have you ever been promoted?
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Yes. I have been. Let me it you know? I have to think about it for a second because it's been so damn long since I worked for anybody. And, which it's like 35 years ago. So, yes, I was promoted. I was also demoted. I was also fired. So, yes, I've, but I was fired at a young age. So yes. But in answer to your question, I was promoted.
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The, my next book won't be called Never Been Promoted. It will be called Ask to Leave. And hopefully hopefully, that's just confined to, to to the job. Yeah. Yeah. Let's hope so. And it could be and that could be the greatest blessing for anybody when they're asked to leave their job. Oh, it is. Absolutely. Well, let's back up a minute. So Yep. To talk about yours, you just give you a little high overview of what you guys do today, and then maybe share, you know, briefly how you got there in your journey.
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Okay. Sure. So I've been in the world of buying and selling businesses for 35 years. I was 29 years old. I had pissed away $60,000 into the stock market because I was an absolute idiot buying stock on margin, which all sounded great, but I never found out what happens if the stock goes down. And, my wife my then wife, I'm married, since subsequently married again for 23 years. My then wife was pregnant with our first child, and I realized that the, the only way I'm gonna get out of this mess is I've gotta get into a scenario where I don't have any limit to my upside. And that was the incentive to going out and buying a business. I had just a little bit of money left, so I had to use it wisely. And then buying a business Subsequent to that, bought a a bunch of them. I bought 14 at this point. And then in 2001, as a result of a failed transaction, I became very intrigued with the idea of how individuals who didn't have my experience buying businesses and how do they go about buying businesses? Because I almost got trapped into acquiring one, which would have proven to be an absolute disaster. And it's only because I had done it many times before that I found the real problems in this business that I was looking at. And that really set me on a path financially. I was in really good shape, so I took up took off about a year and researched the world of business buying for individuals. And this was in 2001, so it's not like the Internet provided the information that it does today. And, research with business owners, business perspective, business buyers, lots of business buyers would fail to buy businesses, business brokers, lenders, etcetera, and started, learning very quickly that the statistics in this world are abysmal. Like, 94% of the people who begin to search to buy a business never complete a transaction. And that just was became astonishing to me because I'm I'm not the brightest guy in the room, and I never wanna be. But it was, like, hey. I was able to do this, and I did this a bunch of times. How come all these people are failing who have these hopes and dreams and aspirations to buy a business, and they can't get to the finish line? And I realized that there's a lot of reasons for that, which we can touch upon. But the overarching theme was a lack of knowledge and information because they really there was no one they could turn to to help provide them with unbiased proven advice. All the stakeholders, you know, the, the, the business brokers as an example, they're they're not on their side. And I I do business brokerage or, you know, investment banking. So I'm not saying anything disparaging outside to to an industry that I'm already involved in, but there's no help. So that sent me on this journey to take the hundreds of businesses that I'd looked at, and it always taken unbelievable notes and put them into a a course in effect that would not only teach people what they need to know for each of the 23 stages in the buying process, but what they need to do and how to do it. And I wanted to make sure, that I was made myself available to people who anytime someone wants to call me or get on get on to a phone call or send an email with a question, to to help hold, you know, to help them hold their hand. I really got to you know, I I really was my agenda was strictly to help people. It was I I never thought it would turn into a business. I just wanted to write the material and memorialize my years of work. And here we are a number of years later, materials constantly updated. We sold over a 100,000 copies and held tens of thousands of people Wow. Acquire businesses. So it's like mind blowing. Right? You start off with this idea, and you the the only agenda is to help people. And look what it turns into. It's just it's it's craziness.
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No. I I love that because, you know, my mission is to help people. If it makes money along the way, that's that's an outcome of just being a good, a good idea. Right. And intent is to build a community of in a similar way that you're doing it, not the autobiography, but, like, you're trying to help people buy businesses and you make money doing it. They also buy businesses to help them make money in their lives. And the person selling it gets an exit that they desired. And that's a really you know, I hate the synergy win win win term. Right. I used to I used to love taking those terms and just being like, well, the synergistic.
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Anyway. That's a good one. Well, one day we could play this game called bullshit bingo, and it's it's all these jargon terms. And you sit in a meeting and it's and it it like, and they're on a grid. Right? And you listen to all these, you know, these Wall Street guys or tech guys, and they're talking about them throwing out all these terms. You check them off, and as soon as you got a line, you yell bullshit. And a buddy of mine did that in a big aerospace meeting. So it's it's a terrific game, but I'm with you. The jargon is nuts. It is. You know, what is a Ponzi scheme is the answer. So so
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great. That's not what we're talking about here. I we have taken a derivative That is correct. Flip. You wanna stay away from those. Rule number 1. Step 1, is it a Ponzi scheme? So okay. So you you had, just to kinda I was like trying to bring it back for the entrepreneur listening. You you had you had a you know, it sounds like you went through a divorce of some sort or you went through some kind of, hey. I made some bad choices with money, honey. And maybe you didn't know I was doing it on March 9th. Both. Whatever. Both. I'm a I'm a presuming I don't know you very well, but I'm a presume there's something around that. And Safe assumption. Exits. That test the relationship, and it didn't work. But you came back in with a new man. And and I think the the lesson there was you saw that you couldn't, you got back up from getting knocked down in, like, in every way possible, it sounds like. And you made the errors. It might have been on you on your spot. You got back up and said, I still wanna have the risk. I still wanna get out of this by having a limit. I don't wanna go work 20 years to pay this off. I wanna go figure out how to pay this off again. And that resilience
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and that drive is not often found in a lot of people. So I really applaud you for that. Thank you. And more so to take another leave of marriage. Because if mine's going to be done, let's be clear. I'm not getting married again. Well, I got it right the second time. I have 3 beautiful wonderful kids from the first one, so I got part of it right. Of good learning. I learned a lot more from the first one. Right? As far as things I need to do wrong, which I've applied to my a lot of parts of my life, and we can that's a whole different philosophical question. But, yes, I appreciate I appreciate what you're saying because it's the, you know, the resilience factor. Right? I mean, that's It is. That's that's a big that's a big piece of it. It's not that hard to do, if if you push yourself through it. And and any entrepreneur you could and I've worked with crazy successful people from Main Street, businesses to billionaires who have helped. And, no nobody's gone to to the nobody has gotten to the point of success without a couple of good punches in the stomach and a good few well, probably kick in the nuts too, but, you know, and really pull themselves up and manage to get over that hump. You just you you you just have to push through. Yeah. And and for our female listener, a kick in the ovaries. Just wanna make sure it's equitable. Yeah. That's right. We wanna make sure we cover everything. Good point. Sometimes getting kicked in the balls
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by accident is worse than actually know it's coming. Just so you know, just throw it out there. I can't. Fair assumption. Yeah. I can't I can't speak the overshot. I'm thinking of Will Ferrell right now. Straight shot to the overies. Anyway, we're gonna move this conversation forward. Okay. So you've fired it back up. You've bought lots of businesses. Let's get in. So so there's a lot of shadiness around buying a business. And and it's and the 94% to me sounds incredibly low. I I can't believe it's not even higher, because I look at it. I've looked into it at times, and I saw where a bunch of ex mortgage guys trying to get commission and not somebody who's really on my side. And I don't mean that meaning the mortgage industry, but it just seemed like a lot of guys are trying to score cocaine, and they need a commission to do it. Or they came to Wall Street, and they they knew how to talk, but they ran into a better talker. That's what happened. Tell me about you, your approach, your differentiator. I know you've systemized it and stuff, but and
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Bemid laid out simple terms. What is it you gotta avoid? And then we'll we'll dive into that, and maybe we'll come back into what is it you gotta do? Well, I think the first thing that you gotta do is you gotta start breathing oxygen from this planet and understand what's realistic and what happens in the real world and what and what's true. And I think that plays to part of what you're saying because the Internet has become the the greatest blessing and the worst curse related to buying a business because it is it's sensationalized. It's loaded with opportunistic individuals, which is a polite word for calling them con artists and and scammers who are, you know, present this nonsense that you can buy these good businesses for no money down and and throwing off 100 and 100 of 1,000 of dollars of profit and close these deals in 30 days. And I read one recently where this guy got an email from someone who said he closed the deal in in in, in 19 hours. So, you know, the first thing is you got you you gotta start getting realistic. And, you know, I guess if, you know, we've sold a 100,000 copies of our course. If I had presented ourselves as a delusional or hallucinogenic, plan where we could we would be telling people that you could do the things that I just talked to you about. We probably would have sold 10,000,000 copies. But I don't believe in that. I don't operate that way. And I just think it's I I I think it's horrible because you're taking advantage of people that probably the most vulnerable time when someone's someone has hopes and dreams to buy a business, change their life, improve the lives of others, build some value, and then you're gonna rip them off and charge them 1,000 or tens of 1,000 of dollars for a plan that doesn't work. So that's that, you know, that bleeds into what you're talking about, you know, brokers or any type of individuals that are trying to be, you know, predatory, if you will. So the first thing is I take a realistic approach. I've done this 14 times. I know it works. And I walk through people. I I I I break this down. It's very important. You know, buying a business isn't difficult, but it's complex. There's a lot of pieces to the process. And so it's the old proverbial, if you wanna eat an elephant, you can how do you do it? You like, one bite at a time. Right? So you break this down, and it's there's 23 stages in the process. So I you know, I I'm not I'm not a bright guy. So for me, simplicity is really, is beautiful. And that's the the approach that I've always had to any new project or any new business that I was going to acquire. I wanna learn it I wanna learn about it in bite sized pieces, and I that's very easy for people to digest, especially because this is something that's new to them. And it's also as they go through and learn about this process, questions questions always beget more questions, and so you have to have an ability to go back and be able to find the answer. So that's really, you know, the the foundation to to our program. And I I and I don't want our conversation to sound like an infomercial for our materials, but it's it's breaking it down into into manageable pieces.
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Well, yeah, it's not infomercial because the truth is, I want to I mean, anybody here who's looking to buy a business, if you can't learn from what you're about to say and you take it as infomercial, then you're you're you're too skeptical. I mean, the reason I've asked for to come on this because he's he's reputable and he's done this a lot. And so break us through it. Like, I mean, just take me through how do you begin? What do you do next? Like, just, you know, without going through all the details, maybe of ultimately, you gotta get your course for that, let's just be clear. But, like, or work with you. But, like, how does someone begin and and and where in in the 94, where is the resilience needed, or where should they dive in to get them through the the part when people give up?
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Okay. So that's a great question because you start at the beginning. And what typically happens, people in this process who have, you know, entertaining thoughts about buying a business, they they don't start at the beginning. They start in the middle, and that's why they fall off the cliff. Starting at the beginning, which means the first thing is think about the considerations that are involved with buying a business because it is a life changing event. Make sure everybody's on board. And I don't mean everybody on board as far as the sellers and the lenders. I mean, everybody's on board in your life, your your family. Yeah. Make sure that everybody understands what you're trying to do and that they agree with you. Even at the beginning, if they think you're taking, you know, the oh, this is a huge risk or don't just keep them informed along the way. So first thing is thinking about your considerations and why you wanna do this. And, of course, there's the the common reasons of you wanna control your own destiny, you wanna have a chance of to have unlimited upside, etcetera. And then the next step and the most important things where people go off fall off the go off the reservation is like this. They typically jump in. They start looking at business for sale online databases. They search business after business after business and try to figure out which, if any, of those are right for them. And that's asked backwards. The first thing you have to do is figure out the type of business that's right for you, then it's very easy to find and buy it. And so that lends itself and bleeds into the fact that knowledge is the foundational piece to all of this. This is not like buying a house. This is not like buying a car. This is not like booking a vacation. There's tons of moving parts. I'm doing this for 34 years. I still learn something new in every deal. So the first thing people have to do is they have to educate themselves of what's going to be involved. Then they're going through and you're looking at businesses. You have to figure out what business is right for you because you there's lots of good businesses out there. But if you if you're the wrong person to buy it, that business is going south and bankrupt within a year. And I guarantee it. So without question. So,
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you know, in looking at online, I look I always looked at that as typically if you want to find the really good house you want when you're buying a home, it doesn't stay on market long enough to hit a list. True. Yes. If it's that good, meaning, like, the because it's either price, actual business location, someone's passed on it to get into that database. Yes. That's the business of that database is just giving you to pay to look at it. And and there's no doubt about that,
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in my opinion. But is that what you're seeing as well? If you're looking at a list, it's too old. Well, it's it's part of it is too old. The other thing, though, which there's a tremendous benefit to those databases, which is the following. You you are correct because good business is typically coming to market and they're under contract in 30 to 45 days. And so they and if you look at the the data from those business for sale websites, 75% of those businesses never sell. However, it's a terrific laboratory because most people who go into this process, while they may think they know what type of business is right for them, by and large, they're always wrong because you have to match your best, your number one skill set to the right business, to a business where the revenue and profits are driven by that particular skill set. That's the ultimate marriage. But it's a great laboratory because you could pick out a number of sectors and 4 or 5 sellers in each one of those sectors and go and and meet with them and do a hands on test of what that business requires for it to be successful. Who's the ideal owner? Questions you can ask so you can do tremendous research using that as your laboratory. And I've always termed those business for sale websites as a laboratory because that's where you do your preliminary work, and it's like a funnel. You start out with 4 different types of categories, you know, business services or commercial landscaping or durable medical equipment, whatever they may be, and you meet with 4 or 5 sellers in each one. And then you start to understand what does it take to drive that business? What's involved? What do I need? What is the skill set that I need to drive that business? Is it for me? Is that my skill set? And then when you start to whittle it down and say, okay. Now I know that I'm ideally suited to buy this type of business. Right? Then you can find and buy it easily with direct searches. Some of our clients use direct searches of, you know, 40% return. But once you make that match, then you're you've got you've got half you're halfway home. Well, so that's good to know. So it's how you use the data is what I'm hearing from Matt. Relevant to your own comfort data, your preset that you should come in with. So not looking at maybe margins and stuff, which is important, but it's more of because that's margins giving us the right owner.
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Yeah. Absolutely. Yes. But another manager heard you said, so, you know, 2 autobiographies for a second, just if you're a marketing agency. I'm a mark I have a marketing agency. So I already pay for marketing. I can get creative done. We can make websites. We can do all this stuff that, when I take that advantage I have, that that I already have this capability and resource in place, and say, hey. I have this capability. I want to be hands off to some degree. I want a business that needs that, that runs itself, but that's the part that really struggles. Is that the other piece is that you have a competitive advantage that can come in and say, I can get that actually, you know, a cost like, they have, let's say, 4 or 5 marketers. They're paying US, but I can go do the whole thing out of Philippines for a 15th of the cost. Yeah. Because if that's what drives the rev absolutely.
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Absolutely. Because if that's what drives the revenue and profits of the business, and that's what your greatest skill set is, then you've matched that. Right? You've made that match. And, again, the key is you want to the mantra that I've been teaching and preaching for decades is whatever it is that you do best has to be the single most important driving factor, the revenue and profits of any business you consider purchasing because for everything else, you can hire. And so when you make that match and you bring your skill set, the example that you just used, and a business a particular business needs that to drive the business. And here, you're able to offer it in a more efficient way. I mean, that's like bonus times 2. Right? And so labor or labor arbitrage or something like that. I mean, that's so that's the right lens to be looking at it, not through the lens of, oh, this is what I would like to do, or here's what I'm a passionate about. I had this conversation recently when someone's talking about passion and the need to have passion for a particular product or service in order to buy that business. And my answer was, your passion is overrated. Okay. And when it comes to acquiring businesses, because what happens is the passion comes after. The first thing is get the business right. Because once you're in it and you've got the right business, you're right person to run it, and you're making more money, and you're building something every day, and you're contributing to the lives of others, and you're not working for a boss. Okay? And you've you've had enough. Okay? And you're happily fired from wherever it was that you were before and you're on a a great new path, right, you become very passionate. However, on the flip side, if you're passionate, you say, well, I wanna buy I wanna do something related to pets and animals because I'm passionate about that. And you buy a pet store or a chain of pet stores, and you're the wrong person, you're not a retail merchant, you're wrong wrong person to it. You'll lose your passion pretty quickly for the for the pets. Okay? So that comes afterwards. That example. It's great. Right? You love pets. I heard people, I wanna be a veterinarian when I grow up. And I'm like, you do realize you're on the worst end of the pet side of that. That. Yeah. If you hear You're like, you gotta go first.
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Yeah. That's that's right. Down. Like, you're gonna You know what? Tell you what? Buy a dog. Right? Yeah. Buy a dog and and then go. And then it used to be like a pet store to me is not a pet store. It is it is the the skill set is like, in that example or anything, it's customer facing. It's dealing with problems. It's inventory control. It's dealing with it's the management of employees and rent and keeping things clean. That has nothing that you can fill in the blank what you put in there from home goods to space hardware or whatever. Like, that's the skill set that makes that place go. They like the people. The place seems respectfully clean. I they have nice service.
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The execution of what it is is fill in the blank. That's right. So that's why you fall in love with the profit, not the product.
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Right. And and, oh, it would say, hey. I buy it for this much, and it, you know, turns green and here's another one to do it. Right. This person just doesn't wanna or I think the other scenario that and maybe you you can tell me if it's wrong or not. But my other thought was, exiting founder, patriarch, whatever, you know, matriarch, kids don't win. And so it's like the kids are just trying to get it off the trust books and they're trying to dump. Is that is that another one that comes up where it truly is? It's a business running and there's a there's a team or something in flux because the the owner has died.
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Yes. So you have a couple of reasons. I mean, personally, I love all the morbid reasons, death, divorce, health issues, because then you have a highly motivated seller.
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Then, you know is completely gone at that point. 1 is complete yeah. 1
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one one is completely gone. Then you have as far as retiring owners, I think everybody has this this idea, oh, I wanna find a business with a retiring owner. It's similar to your situation. There's no succession plan. And a few years ago, that was more, dreamy than it is now, because now it's much more realistic because you have this, you know, silver tsunami of all these baby boomers like myself that are that are gonna be retiring in the majority. You know, do not have boomer or or late gen x? I'm a be I'm 62. Early gen x? I'm a I'm a late baby boomer. I'm 62. Okay. Yeah. So See? How do I look for 62? He looks like he likes Star Trek. Those who pearl jam in but favors Van Halen. That's something. Okay. That's what you think. Not close, but worth a shot. Alright. Well k. So so you do have a lot of retiring owners right now. I mean, it is called the silver tsunami. So, yes, you're a 100% in that regard that that's happening right now. I mean, there's also some wonderful things at play related to to the economy that's that's, leading itself to what I call beautiful upheaval in the market that's really advantageous to buyers where they could really put together some terrific deals. So it's it really is a a a terrific time for aspiring,
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entrepreneurs. Yeah. Give me the one thing you never do. Give it tell it's like just don't whatever you don't ever do this. Well, I never buy a business with customer concentration.
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What does that mean? I'm sorry. When too much of the business resides with too few customers. Oh, so like whales. You have you have too many whale accounts and none of them Yeah. I never do that. I have 5 golden rules. I teach people the importance. It's very important to assemble your 5 golden rules of buying a business. And they they they evolve as you're learning as you as you're going through the laboratory of meeting with these business owners, you start to you have to massage and compile your 5 golden rules. But for me, it's I like a business. Now I'll only buy business that has all 5. So it's gotta be sales and marketing driven. It's gotta have high margins. It's gotta have demand in place. There's gotta be an element of exclusivity, and I don't wanna compete on price. And the reason for all of those is sales and marketing are my number one skill set in a business. So if it has high margins, I don't really care what the revenues are because I know that I'm gonna be able to scale the business. The profit will follow because it has high margins. I I want demand in place because it's too damn hard to create a demand and it's too expensive. I want I want the public to know about this product or service. And I like an element of exclusivity, so I'm not necessarily competing with too many people all the time. And that could be geographically or or the product. And I don't want a a business where you where you compete solely on price because it's not a sustainable business model. You go back into business every every every day. And so individuals need to form their own 5 golden rules. So when you ask me a question, the one thing I won't do, those 5, for example, I will never buy a business that has all 4.
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It's got to have all 5. And I'm very disciplined. Describe the discipline in here. So the thing I think you do have to have is discipline to your golden to have is discipline to your golden rules and check emotion out of it no matter how bad you want it. Yes. Unless that business is a beachfront bar that has a place to live above it where you're like, I don't care if this thing runs or not. I'm going to live in this
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thing runs or not. I'm gonna live in this apartment. I'm gonna live in this place. Yes. I I yeah. I could think I think at that point, you may wanna consider just shoving you at least get 3 out of 5. You know? But yeah. Right. I'm I'm I'm with I'm with you. I'm with you. Yeah. No argument. Yeah. No no argument there. You could yeah. No argument. But the reality is, it you know, we we joke about that. But if someone is looking at this as a vehicle to drive rep you know, generate revenue to replace an income or generate an income, then as as wonderful as that sounds, you actually have to you need the discipline not to do it. What's, the usually financial requirements
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for buying a business?
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So as far as buying a business is concerned, banks don't lend money to small individuals who are looking to buy business. Their ads look pretty good on TV and on the Internet. The defaults are opening. They're dispensing cash for you to buy a business, but that reality doesn't happen, especially because you don't have a track record. I can go get a I can go get a bank to lend me money to buy a business, but I have a track record of 30 years and and and, you know, 14 acquisitions. And so but for an individual with no track record, that's just not happening. And so the the way you wanna go about this and the way that works and the way that has worked repeatedly, like 91% of our clients do this, is you get the seller to finance the deal. Now they're not gonna finance a 100%. You're only gonna finance a 100% in a shit business. Like, all of these things that you see online, you know, buying distressed businesses or businesses for no money down. Yeah. You could buy those all day long, but those are garbage businesses. So you don't want that. You want a good rock solid business that you could take over because, you know, fundamentally, if you do it the right way, you get the keys on Monday, you take a paycheck on Friday. To get the money, there are terrific, especially, you know, in the United States, SBA loans, which provide unbelievable leverage, will end up to $5,000,000. Sometimes you you can come in there with little or no money down, believe it or not. Most of the time, it's 10% plus. Seller finance deals, which again,
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I would never buy a business without seller financing because I want their cojones in the in the deal, and I want them to have skin in the game and also because the only way to validate everything that they've represented. And so the next piece I was gonna ask you. So you you can do a you know, a leverage buy, basically. Like, maybe a little bit of your money. You're doing some SBA money. Some someone's got a chunk of money. But for them to get the rest and or risk the rest or even the money you give them from a suit standpoint, you're saying some kind of number, something's got to hold true based on your due diligence and findings. And if you know, if customers start exiting or you're exiting or do like, or whatever it is, then the deal falls apart and you owe me some money back or something like that. Correct. Like and you could have performance based deals where you buy the business for x mounted you value the business at x. I'm just gonna pick an arbitrary number. You're you're valuing the business at $1,000,000,
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but there's a concern related to continuation of the business for a certain percentage of it and say, well, if this customer leaves or this certain thing happens or doesn't happen, this business is not worth a million. It's actually only worth 600,000. And so that gap can be bridged by a performance clause whereby if x, y, and z happens in a certain period of time, you earn the other $400,000. And I've done those deals, I mean, countless times, and especially now because over over the last few years, they've had such up and down, performances, many deals or or many businesses that you can't necessarily put your finger on what's exactly true as far as what the business is gonna look like going forward. You have a sense in the past, but it's been a roller coaster. And so that's why right now is such a wonderful time because you could put terms and conditions and performance based deals and earn outs, they're called, into place where it forces,
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you know, your your the valuation and the seller gets all their money if the business performs as it's represented that it will that that it should. Well, until you so so I I think this is great. And and if at this point, you're not interested in talking with Richard. You're you're just not interested in buying a business. I I can't I mean, I mean, I don't wanna call it a shameless plug time, but how does somebody start with you?
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Well, the easiest way is go to richardparker.com. I I think I mentioned to you at the beginning. I went into this too. I never thought this would turn into a business of hundreds of articles, free articles, and reports where people could learn about the process of buying business and dig into all the various stages, and learn a lot about it. And then they could decide whether or not, you know, this type of thing holds some interest for them. We our main course, how to buy a good business at a great price, you can link to that through through the website. It's it's very apparent. And the one thing that we provide, someone buys our course, I'm I'm always available. I spend I mean, as as much as I enjoy these type of conversations, I love spending my time with with prospective buyers. And I answer emails for hours and hours and hours every day and get on the phone with prospective buyers and help walk them through. We're we're some are stuck at the beginning and some are stuck near the end. But it doesn't from my standpoint is I just wanna help them get unstuck and present them with some unbiased advice through scenarios that I've been, you know, been lucky enough to go through. So go, you know, go to richardparker.com, and, there there's there's there's enough information that you could really start to crystallize whether or not this makes sense for you. The one thing I can assure people, this is doable. I mean, I I'm just a regular guy from a middle class background who started with a couple of bucks, not a lot. No college education. And I'm not, I'm not pleading a, rags to riches story, but it's pretty close. And, it's it's really doable. You just have to do it in if you do it in a good way, this is really doable. Would you would you say it's true then,
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let's say I'm interested in buying a business and I have my 5 rules I'm going to follow. And I say, hey, I have this money and cash sitting there in a CD. And if I find the right one, we're going to pull the trigger. Patience becomes part of this. Is your role to kind of keep tabs on that? Does, hey, I found 1. Is that part of it like, hey. I know you're looking at your business. I found 1. It hits all 5. Let's go talk to them. Is it is it like that? Or how do you because I wouldn't wanna dump in just all the market that's available, and you get you don't get the house you wanted when you wanna want with a pool. Right? So my point is, how do you push patients, and what's your role into that to help? Well, the first part of that is I make it abundantly clear to people how important patients is, and I'm glad you brought up that point. Because
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going into this process, you wanna have a healthy combination of excitement and fear. The excitement is gonna keep you motivated. The fear is gonna force you to do things in a diligent manner. And so, certainly, what happens with the majority client, because I deal with thousands of people, they they'll get to a certain point during the course, and they'll understand how to go about finding the right business. And then they they're faced with a couple of questions. So they'll typically run them by me, And I'll drill them related to their 5 golden rules or their background, their strengths, their weaknesses, and whether or not that type of business makes sense. And, of course, during my travels, if I come across any businesses that I know is a good business and could make sense for someone, of course, I'm going to, put one in touch with the other. I don't do any buy side representation. I did consulting for many years. I was paid $750 an hour by buyers, and then I decided, you know what? Like, I don't do this for financial reasons. And and so I've I've foregone all of that, and now I just do I oh, it sounds crazy to some people, but I actually just do it for free. I'm at this stage of my life. I'm like, I'm at the teaching stage of my life. And so, you know, I really, I'll get on the phone with people. Once once I understand from them what they're looking for, they will generally I'll I'll look at the business. I'll ask them in in in very short order. I can get to I can get to the key points and be able to articulate whether or not based upon their skill set that type of business makes sense. Because oftentimes, you know, they're not asking the right questions early on. As they go through the process and they're going through the course modules, then you know exactly what questions to ask. But especially early on, they they really need some, you know, some some molding to keep them to keep them patient, keep them diligent keep them diligent.
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Yeah. And and the patience for me would be that because but the thing is, like, you know, and the other piece is just expectations of revenue. So what I will say, a 50 k to spend towards to buy a business. And or that's what you have to put down. And, you know, SBA loans with, you know, are a little scarier now because rates are higher. But let's say the thing cash flows with the loan and, you know, it looks like you can run it or I would I would I would know if it's right term, run it green. Meaning, like, you're not there to take revenue. You're there to just pay off the debt and get to the point where you have a cash cow positive thing. What's the actual expect I know it can range, but, like, is is reality, it's not 100 of 1,000 a month. It might be $5,000 extra a month coming in. But what's the what's the reality of of just cash flow or of cash? Like or kind of, you know just a common scenario of common Joe. Like, what would be a common scenario? For that? And you're saying from a standpoint of what they're they're selling for and what can someone can expect? Yeah. Exactly. So you put for every 100 you put in, you you know, if you if if you were to buy a $1,000,000 business only requires a 100 k, and you're gonna go get a loan for a 100 k. You can you should expect you could expect these types of numbers.
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So here's some, some good numbers to help you. Businesses in the lower market, there's there's a range of what they'll sell for, but let's take an average of about 3 times, which is a little higher than the norm. It's about 1.97 at the real low market, but let's talk about three times. So business is gonna be cash flowing with the call owner benefits, which is legitimate cash flow. I mean, and cash flow again is not profit. So there. But understanding that we what they call owner benefits or what that number is supposed to represent, what a new owner owner, all things remaining status quo, should have available to pay them to pay themselves a salary, service the debt, and grow the business. So the 3 times multiple, that business thrown off $333,000. That debt is gonna cost you about a $160,000 at the high crazy high interest rates at FSBA today, but typically it'll cost about in normal in in common times over the last 20 years, that cost you about a $120,000 a year. So let's say about $200,000 after servicing the debt. Right? So you're you're left with, you're left with $200,000. Cost about a $120,000. So if it's throwing off 333, you're left with $200,000. That's a pretty damn good return on your $100,000 investment.
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Yeah. And absolutely. And in that scenario, right, that this is where some people I'm dead adverse. Right? Some of those people who don't like the leverage. Like You gotta love you gotta learn to love it. I mean, because if if you do if you love it in a good way,
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if you love it in a good way, it you could really mitigate the risk. And even in the interest rates like Wall Street Prime today, plus the upcharge from SBA, interest rates are at 11 and a quarter plus. So for every for every $1,000,000 you you you board cost you a $160,000 a year. So think about it this way. Big ship. Right? If the old days if if if when interest rates were low, it cost you a 120, now it cost you 1.60. So are you gonna get paralyzed by the $40,000? Or you're gonna look at this and say, okay. Well, it's just $40,000 less at the beginning, but rates may may go down. I could recapitalize it. But at the end of the day, I still have 200,000 dollars,000 from my $100,000 investment. And so embracing leverage, as long as you do this in a good way, leverage really gets you to the promised land.
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Now if you look at this, but, like, if you don't need the revenue
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and you take that 200 and say, I'm gonna service the debt down Yes. The idea that there's a 5 Even better. Now you've paid it off this now when you get it in, now you're you're you're collecting n 30 k a month instead of Oh, absolutely. And that's right. And and, you know, for me Now you can resell a debt free business for a whole lot more. Well, a debt free business and demonstrated that it has the, you know, track record to keep throwing off that number. So, potentially, the multiple could potentially go up. But even if it doesn't, and even if you come with the same thing in 5 years from when the numbers are still the same, you still have this business that's been a cash cow. In my world, after my first business was a real struggle, my second one was less of a struggle. Then after that, every business that I bought, I never took money up. I just used all the money to build a business and pay off the debt. And then you all of a sudden, you, you know, you have it's like having a house, home free, you know, and and debt free. I I love the idea of this.
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What what you know, is we kinda, you know, conscious of just kinda we keep the time on these things. What's a question I didn't ask you that I should have?
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A question that you asked me that that that I shouldn't have. I think Or the question I didn't ask you though. The question that you didn't ask me. Is it the other way? It's a question I asked you. Good point. I think one of the things is people the the risk. I think that would be something because people should someone start, you know, what where where the risk involved in are people better off to start a business or buy a business? I think that's something that people always come across and wrestle with. Mhmm. And, you know, startups, I've done a lot of them. I don't have the stomach for them anymore. Thank God I don't have to do them anymore. They're romantic and sexy and all those fun things, but they're also they'll tear your guts out. And so, you know and the and the start up rate is really, really, horrific. I think, you know, numbers change, but it's like something like 96% of them failed in the 1st 5 years. Right? And so I look at this sorry. I'm gonna put my light back on so you can see my gorgeous face. The if someone is looking for this on a part time basis or a side hustle type basis and with very little money and a start up is really only something they could do, it's well, it's something to consider. But buying a business is so realistic, and and the thing is you've got everything in place. Start ups are just a it's a guess. I mean, you don't even have paper clips. You know? And in my experience, the sales have always come in twice as slow and the expenses are double. And so when people are doing the comparison whether or not they should start a business or buy a business and even you get the people who when they're looking to buy a business, say, well, it's gonna cost me. I'm gonna spend $1,000,000 for this business. Maybe I could just start something similar for less money. And that may be true, but you don't have anything in place. And so Oh, you're still gonna spend a1000000? Oh, you oh, you'll spend more. Chances are. I mean, chances are you'll spend more because yeah. You can probably because you're gonna spend more than that on Excedrin. Right? And and Pepsi and Pepsi at AC for all the hard work. It's gonna be it's gonna be on espressos and vodka. That's what you're And espresso vodka. We got my espresso here, so we're good. But so I think, you know, one of the questions that wasn't asked is start up versus buying a business. And to me, if you want to jump into entrepreneurship, I mean, it you've got a running start. I I mean, you've got something that's got customers, employees, product, processes, systems, profit.
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Right? And so that's, you know, definitely the way to go. Yeah. Well, and that's a great question because as someone who's who did the 0 to hero route, in business and wrote a book about it and I and I've written my book, never been promoted on a very visceral, authentic, and, what do you call it? Vulnerable? Right. If how I felt, how you, you know, you're you wanna cry in the corner. Sometimes you do. I'm not gonna tell you I did or didn't. I gotta probably add that to the book. You did. But you know what I mean? Like, I wanna add the couch in my in my office here just so I can lay down occasionally and just really do this. And you and I'm not kidding. If you're gonna go the 0 to hero route, you're going to want to quit 50 times a day. And I mean, it is an emotional roller coaster. And I'm not saying buying a business isn't. You know, the other idea is a franchise. I don't know if that's one of those things you kind of use Yes. I talked about that extensively. Yes. So I think that's another option is a franchise that came with a playbook that someone has built, and their their model the owner was to build that franchise and go resell it now. That one sounds very attractive, but I bet it's pretty expensive too. Well, it's not it's it's it's relative. You know, the franchise world, there are some,
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more parameters that are in place because there's that's one area where there are businesses are very similar, and so valuations oftentimes can get a little more set. But you brought up a a terrific point because franchises for people that that either lack the confidence or operating experience, they're a terrific entry point to entrepreneurship. They have their limits to what you could potentially get out of them, but it's a great way to get into the world of entrepreneurship. And the one thing that I tell people is if you're gonna do that, then what you should do is marry the best of franchises with the best of existing businesses and buy a franchise resale. Don't start one. Don't buy a new franchise no matter how good the banner is, because then that's that's really a start up that has been proven to work in some cases, but there's nothing guaranteed by a resale. And there's lots of resales. And so then you get the best of both worlds.
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And I'll tell you, you know, one of your YouTube channel videos is, like, you avoid this 94 the mistake that 94% of people make. Tell me, what is it?
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They don't start off right. They they they have no idea how to identify what type of business is right for them. And what happens is as you're going through the process, if you have not identified that from the beginning, every business that you look at, you're gonna eventually reach the conclusion that I'm hey. I'm not sure if I can do this. So the deep you get in any business, it doesn't matter if the financials make sense, if you've negotiated a great deal, if you've done your due diligence, you will always arrive to the same at this to the same conclusion, which is, oh, no. I don't know if I can run this business, and they abort. They all abort for the same reason. It happens repeatedly. It's happened for decades. It'll happen for another decades long after I'm gone from here. If you don't establish
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what is the right business for you, you are not going to get to the finish line. That I can guarantee. And if you do get to the finish line, your business is going to fail. You know, you you describe it. I love analogies. And so I look at that as like you're driving, and you've come to a a multiple you know, a fork in the road, if you will, and you just ignore the dead end sign.
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Yeah. You need to get a lot of people. Yeah. 100%. And you and they're going about the same way, but this is gonna shop a little bit short of where you wanna go. And you're like, damn it. Now Spot on. Yep. Spot on. I I, you know, I used the example of saying, you know, you're just gonna drive at a 100 miles an hour into a brick wall. Right. Because it's it the outcome is not gonna be good.
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Actually, I I was it a 100 miles per hour, or is it, like, the scene in Austin Powers where the guy's like, no.
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His speed roller going really slow anyway. Great great great movie. Great movie. The the shagua. Yeah. I love that movie. Yeah. Isn't yeah. Got a lot of mileage out of that movie fat bastard. I mean, he is like he he is good. Oh, dude. Yeah. No. He he's really good. This conversation went. Alright.
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I always like to ask this question. You know, beyond the YouTube channel you started and it's a lot of the free stuff you have at richardparker.com, is there any are there any business books you recommend people reading just from, you know, you're going to get into entrepreneurship, you're going to get into this game of buying a business, or any you know, anything influential in your life
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that you've read or listened to that would be recommended? One that I bought by accident because I saw it on the on the shelf at a bookstore. It was called From Good TO Great, and I just was enamored with fact that it it was closely resembled the title of my course, which is how to buy a good business at a great price. So I picked this up. It's written by Jim Collins. It's a phenomenal book, Phenomenal book related to business. The E Myth is quite good, by Michael Gerber. And one that I highly recommend, which is written by a very dear friend of mine and someone who would, always in partnership to they it was Ray Dalio. His family hired me to, kinda work with the Dalio family. I was partners with Ray and his late son, Devin, in acquiring businesses. They hired me to teach Devin how to buy businesses. Devin and I were very close. And, unfortunately, he was killed in a car accident in December 2020. But Ray's book, principles is phenomenal. Phenomenal. It'll provide people with a a whole different way of looking at business, certainly life, and I highly, highly recommend it. Phenomenal read. So those are 3 that I mean, really, I put them in your, library. The 4th one
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what's that? I had never heard of that one. I I look forward to reading that. And the other one is,
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is How to Decide by Annie Duke. She's a world series of poker champion. I was involved with her with the Education for Education Alliance, great organization. And, she really puts a a a great, a real not a spin, but a very different way of how to look at making decisions related to probabilities versus typical, you know, pros and cons list, that type of thing. And and I think and she uses that and she used that methodology to win the World Series of Poker Championship. And so I think people would find that very, very, very interesting read. So those are those are my top 4. And the number 5, of course, is my course, but I mean, that's that's
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it. Go on. Go Actually, let let's go and do this. Listen. If you got to this point in the show, don't leave. This is the Richard Parker giveaway or whatever it's gonna be. I'm I'm setting you up to say a giveaway. Although, you know, I'm just conscious of time here. Well, tell me how people should get ahold of you, and and and specifically, I mean, that course is a good way to kind of,
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help you out. I think go to richardparker.com. There's lots of free articles. Right at the top, there's a a a link for courses, and you can go in there and and link right to the course and purchase the material. I've made it very affordable for people. It's a $197, includes all my consulting. Because, again, my goal was just to help people. That'll always remain my goal. And, hopefully, and and notwithstanding any of that, if anybody has any questions, my life doesn't change if I never sell another course. So if someone has any questions, if you wanna go to richardparker.com and have a question for me, you can go to the contact us page, send it a note through, tell them to send it to my attention. I'm happy to help anybody answer and and, of course, answer any of their questions.
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Oh, that sounds great. It's very generous of you too. And it's nice when you I see I meet people who have success in life, and they've gone plenty plenty of punches and kicks and parts of the body, and you're still Yeah. You know, you're wanting to give it away. And that's, that's that's dear to my heart because that's that's how, I'm entering my teaching stage stage at 48. So I feel like I'll be full on by the time of my fifties. Yes. You will be. I have faith in you. Richard, thank you so much for for coming on today. Thank you. I appreciate you having me. This is great. Hey. Listen. If this was your first time on the show, thank you for making it to this point. I, will occasionally give away dad points. We get 10 for making it to this point. And this is your 2nd time on the show. You get 20. So that means the 10 pointer, come back. You get more points. What you do with the dad points? No one knows. Not even my children. They have 1,000,000,000. But thank you. Until we meet again, I really want you to go out there. And if you're an entrepreneur, help somebody else. Go mentor somebody else. Go find make it a point to to help someone on their journey. And if you wanna get mentored, it it just, you know, reach out. Like, get out there and reach out to another entrepreneur you know and ask for the help. But until we meet again, go out there and really unleash your entrepreneur. And thanks for watching and listening to the Never Been Promoted podcast.