What I Wish I Knew Before Buying a Laundromat: Keira Hamilton on SBA Loans

Welcome to a new episode of Still Searching. Today, we've got Keira Hamilton. Welcome to the show, Keira. Jed, thanks so much for having me on. I'm really excited to have a conversation with you. I'm so excited to have you here because you're the girl of all trades. You have done real estate investing. You've bought a small business, a laundromat specifically. You sold that laundromat. You've done so many, and now you're a loan broker for SBA loans. You've been on every angle of the small business transaction and you're investing in real estate. There's so much for us to talk about, and I can't wait to get into it. Tell us a little bit about your background and get us up to speed. Yeah, definitely. I have what most would probably consider an unconventional background for what I'm doing now. Honestly, I never expected that whole list of things you just said like me 10 years ago would have never anticipated all that, but I have such a cool life, and I'm so grateful to be doing what I'm doing, and I really appreciate the opportunity to connect with your audience because I think that something you and I definitely share is a desire to put out accurate and nuanced information

about business ownership, real estate investing, these topics that a lot of gurus latch onto online to try to make money selling courses. I really care, and I know you really care about putting out actionable, accurate information because let's be honest, real estate investing, business acquisition, these are some of the most important investments that people will make in their life, and they have real-world implications on buyer's lives, on the lives of their family, so I appreciate the chance for the conversation. But anyways, a little bit about my background. I'm actually a former high school English teacher, so I went to college and grad school to become a teacher. I have a master's in education. I taught ninth grade English for five years, and then I decided, you know what, this is not for me anymore for a variety of reasons, and had kind of honestly a rough transition. It was at COVID time. I was originally thinking I was going to stay in education, but it was really hard to find a job at that time. Through kind of a series of random events, I ended up working in commercial

real estate. I got my real estate license, and then managed class A office buildings in San Francisco for a couple of years, and then through kind of another unexpected series of events, I got into SBA Loan Brokering and developed an interesting commercial finance. My husband and I, like you said, also bought a laundromat. We bought a multi-family building in Oakland, and then we sold our laundromat last year, and looking to sell our real estate investment as well. But now, really, my main focus is on helping people buy small businesses, mostly through SBA loans, and then I also create YouTube content on laundromats and other small business-related topics. That is incredible. Wow, what a resume, and you're right. It's quite a bit different than what you went to school for, but at the same time, I see that all the time. It's like, well, you go to school for one thing, and then you're like, yeah, this didn't really work out, especially with COVID. I feel like so many people, you know, reassessed where they were heading, both in their careers and their personal lives, and made a hard pivot, and that's exactly what you did. Wow, incredible.

Yeah, and you know, I do think I'll just make a quick pitch. I think that teachers have such a diverse set of skills that actually lend themselves well to a lot of different types of careers, just if there's a teacher out there listening. I had this feeling when I was leaving the classroom, like, no one will hire me for anything else. I can't do anything else. My skill set is so niche, but actually, I think that being a teacher really lends itself all to being an operator. You have to kind of like have your hands on everything and deal with a limited set of resources and deal with a lot of different types of people. So I feel like teacher to launch my owner on paper might seem like a strange transition, but actually skill-wise, I think, made a lot of sense. Wow. Yeah, that's amazing. And so let's kind of walk through these, you know, kind of step by step, because a lot of our listeners really, you know, they're interested in real estate investing, usually on the residential side, but there's always this curiosity about commercial real estate investing as well. And then obviously, people are interested in buying their own small business. So we're going to touch on all of these things. So starting one, you kind

of got into commercial real estate in your managing, correct? Yeah. So the piece of property that we own is technically residential. It's a four-unit building, but I did manage commercial real estate, so like large, class-I office buildings in San Francisco. Wow. And then what kind of got you and your husband interested in thinking, "Hey, I'm going to buy a multifamily property," you know, not just to get into real estate investing, but you're skipping single-family homes, you're like, "I'm going straight to getting a multifamily property." And what was that transition like? Yeah. So we actually did own a single family in Oakland. We bought it in 2019 and then sold it in '21 and bought a multifamily. And, you know, honestly, it was a lot of my husband driving it, just wanting to explore what it was like to invest in real estate, you know? We were getting into sort of like bigger pockets, that sort of online community and seeing like, how can we make our money work more for us? How can we invest it in a more effective vehicle? And I mean, I can get

more into this later, but I mentioned we're actually probably trying to sell our rental property, because it doesn't feel like the best fit for us as an investment. And I've learned a lot about real estate investing. Definitely don't regret it. We've had some big challenges with our real estate investment, but it was such a learning experience and I'm really glad we did it. So, yeah, we were kind of just looking for another way to invest our money beyond a single family, which of course you're building equity in, but you don't have any income coming in from that. So we decided to try out multifamily investing. And then we were actually initially thinking of making another real estate investment before we pivoted into the laundromat, but we just couldn't find anything that cash flowed with the amount of money that we had to invest. I didn't really want to do something out of state. I think the property manager in me is like, I want to be near my investment. So, you know, finding something in Ohio didn't really make sense. And so when- And you were in the Bay Area at the time, right? We were in the Bay Area. Yeah, we're in San Diego now, which is part of why I'm like, I don't really want this asset in the Bay Area anymore. But yeah, we were in the Bay Area at

the time. We were thinking of making another real estate investment, but it just like the numbers didn't work. And that's how we ended up pivoting into business acquisition. So it sounds like you and your husband are looking for new ways to invest your money to get a better return. Cash flow is super important, not just appreciation, even though like that's really important, especially in the Bay Area, because it's so expensive there. It's hard to buy property. So you're looking at a place where you can get a little bit more cash flow and get a little bit more quick return on your investment. And then that led you into small business acquisition. So, okay, wow. So you've got this multifamily property. How did you go about acquiring that one? The multifamily. So we were able to do a more traditional loan for that because it was owner occupied. So we were living in it until last month. So we did the more typical, like put 20% down. And something I do like to say to people, you know, because I think a question for a lot of people when they're getting into both real estate and business acquisition is like, how do you come

up with the money to start with to even get in? And I'll be honest, like we were just privileged enough to have help from family. I didn't spend like 10 years saving up all this money. It was in a position where we were able to get financial help from family for the down payment. And we actually got a family loan for the laundromat. So I like to be transparent about that because I think there are some people online who are like, look at this amazing thing that I did. And they make it seem like it's equally achievable for everyone out there. But they kind of don't like mention the advantages that they had along the way that helped them get there. So I do just like to put that out there. But yeah, we got kind of a traditional mortgage. We put, I don't remember the exact number, it was like 400 something into it. We bought it for 1.45 at the end of 2021. Wow. And then you were house hacking. So you're living in the property. How many units of the property have? Four units. And other than the single family home, this is the only other like property investment you had, right? Yes. Okay. So wow, that's quite a transition kind of learning how to be a multifamily landlord on the fly. Yeah, you know, I think I did walk into it

with a certain degree of confidence because I had worked in property management. So and I had a real estate license. So I was comfortable reading leases. And you know, I think a big part of it is finding the right tenants. And the one tenant that we, we had some challenges with who unfortunately we did end up evicting. And that was a long and expensive process was a tenant who had come with the property. So it wasn't someone that I had selected. Every tenant I have selected has been great. So I think that is really an important part of being a landlord is just, and I mean, look, this is the case with business too, working with the right people, right? Like it all ultimately comes down to relationships and how well you can work with someone. And you know, I really do like landlords in the Bay Area get a bad rap. And honestly, some of it is, is deserved because I've been a tenant also in Oakland, and I've had a shady landlord and I've seen people do illegal things. But I really strive to be an ethical landlord,

obviously, following all of the housing laws, but then also just being like a decent person, getting things fixed quickly, being, you know, understanding when things happen. So I think that was a big piece of it, just kind of like using my interpersonal skills made the process of being a landlord a lot easier because I was able to pick, you know, good tenants. And for the most part, yeah, tenants have worked out well with with one notable exception. Well, that's good. And I want to touch on something there, though, you were talking about how you're very open about the fact that you had like family to help you out with the down payment, use conventional financing. And then, you know, when you do have a bad tenant, you have to go through an eviction, that is very expensive. And so it's very clear that like, even on a multifamily investment, something like this, it's not necessarily something that you can just come in off the street with not a whole lot of money and kind of get yourself into. Even if you found a way to get yourself into the ownership position, you know, in a building with four units like this, like, you would still need to have some significant amount of cash if you're going to move forward with an eviction or something, something large happens, right? I mean, imagine if that replaced

the roof. Yeah, you know, something I feel like has really learned over the last few years is the importance of liquidity. You know, I don't know if it's something that I quite appreciated as much when I was younger, and that's something that I feel like I see people who are looking to buy businesses overlooking, they're like, you know, kind of okay with all of their cash being wiped out for the deal. And obviously lenders want to see post-close liquidity, but it's important for you as a borrower too, to your point where, okay, let's say you do one of these crazy deals where you get like 100% seller financing on a property, which I don't think is a good idea. But let's just say you can kind of like get into an investment with little cash. If you don't have cash left in your bank account, you can run into some serious issues. I mean, just as an example, the eviction, the whole process, and this is including like the money we lost from not receiving the rent, but then also the repair cost was about $30,000. We had a $10,000 cleaning bill,

because we had to hire a special biohazard company to come deal with the unit afterwards. Yeah, I was shocked. I was like, okay, maybe those would be a couple thousand dollars, and they were like, it's like over $9,000. So you can really run into challenges, yeah, or you need to replace a roof. You know, there are a lot of things that come up with properties. I mean, talk about, you know, what's going on in Los Angeles right now with the fires, like lots of things can happen to properties. Yeah, you mentioned that, but that's actually something I talk to, you know, first time buyers all the time about, because there's a lot of talk about, you know, 100% seller financing and getting into the deal with no money. And those are actually very legit strategies, both in property management, excuse me, property investment, and in small business acquisition. But it only really works if you've got a lot of capital, because you're buying yourself into a situation that is most likely going to require a lot of capital, like once you get in there. Because, you know, if you're buying a small business, then, and you're doing 100% seller financing, it's really only for two

reasons. Either A, you've got a really good relationship with the owner, it's close and personal, and they have a lot of trust in you, or B, the business is not really financeable. And as a result, it doesn't qualify for, you know, an SBA loan or something like that, which means it could be a decline, the finances could be a mess, the equipment is old and deteriorated, it's going to require a lot of cash once you get in. And I think that's something a lot of people don't really factor in. I know as a person on buyer, I didn't fully appreciate the amount of liquidity required, like once you close, because you can have one or two really catastrophic things, and all of a sudden, your working capital is down to nothing. I completely agree, Jed, and that is always what I tell people. I would have only done 100% seller financing, or honestly, like over 50, I don't know, even 30% felt like a high amount to me, right? But I'm only doing a high amount of seller financing in two cases. I'm selling to a family member, someone I want to give an advantage to or a trusted friend, or I'm desperate to get rid of my business for some of the reasons that you mentioned, you know, I don't think I can finance

it, or I don't think a cash buyer is going to be willing to come in and do that. So I completely agree with that point. Yeah, so now you've got this multi-family unit, it's cash flowing, you're kind of getting your feet wet as far as real estate investing. What's the thought process about why not just getting more multi-family buildings and kind of building that portfolio of doors, you know, much like the bigger pockets community are all trying to do, as opposed to, oh, why not buy a laundromat or another small business? Like what was the thought process of pivoting in a completely different acquisition vertical? Yeah, that's a good question. So we tried to stay in real estate, but with the amount of money we had, we had about $200,000 that we could invest, could not find something in the Bay Area that was going to make sense, that was in like good enough condition that we would want to get in on it. And didn't really want to go out of state because, I mean, you, like, I'm by no means any expert in out of state investing, and we didn't go,

like, I would say too far into that, we maybe spent a couple months researching opportunities, but it was hard to find something that cash flowed, particularly when you take into account paying for a management company. I mean, that can be like six to 10%, you know, which, which can kind of like wipe out anything that you're making from the deal. And just personally, I do like to be closer to my investments. You can save money. I mean, there are so many things, can't do this now, because we live in San Diego, but when we were living in the Bay Area, there's so many things where it's like, oh, you know, a light fixture needs to be replaced, I can do that. But if I hire someone to do that, it could be a couple hundred bucks, you know, for the materials in the time. So I didn't really want to do something out of state. And yeah, just in the Bay Area, couldn't find something with the amount of money that we had. So then we started looking at business acquisition. And I'm hesitant to say this, but I can't think of a better word. We were looking for something that was like more passive on the more passive end of things. But I mean,

you know how I feel feel about that word. I don't think that there's any such things like a passive investment in business acquisition. But we were looking for something that could be a little more hands off, maybe is a is a better phrase, like something where we didn't need to be there, you know, every hour that the business was open. And so that's how we got into thinking about laundromats. It's, it's not passive income, I think even completely self-serve laundromats are not passive. But it is the type of model where, you know, you as the owner don't need to be there all the time. And you don't even need to have an employee there all the time. Certainly, I think having someone on staff or someone on site only helps the business and can help mitigate a lot of issues. But you don't need to. So we were looking for something that was like, I feel like laundromats are a little bit adjacent to real estate investing. And I think that there are some crossover in the people who are considering real estate investing, maybe particularly multifamily and laundromats.

I don't think that either investment is passive. I feel like the last year I had with my rental property, I'm like, once you have to get attorneys involved, that is not passive income. So I don't think that either are passive, but they kind of like both, both spark, I think, a similar interest in like something that can be more hands off than a nine to five job. Yeah, I love that you talked about that too, because right now there's such a focus of people who are interested in kind of finding a more passive income approach, whether that's the real estate or small business. And even coming from a real estate background, as a first time small business buyer, you admit, I was looking for something a little bit more hands off. And that's kind of what drew you to something like laundromats. Like you said, kind of real estate adjacent, it's close by, something you feel like is mostly automated, but still obviously would require a little bit of input. And I think that's really interesting because as we get into it, you find as a laundromat owner that it certainly wasn't passive at all. And a lot of our first

time buyers don't realize, look, if a laundromat's not passive, if a car wash is not passive, then a landscaping and a plumbing or an HVAC company is certainly not passive. So talk to us a little bit about like how you're in this small business, you've acquired this business. Now, did you use the SBA or did you go all cash or what was the, what did that deal look like? No, we used all cash. So we got a loan from a family member on, you know, good family terms, but we use that to make a cash offer. This others were only taking cash offers. And I don't think it would have been SBA-able. They had bought it as a zombie mat, which is kind of just a neglected launch mat. It wasn't completely closed down, but it had been kind of neglected during COVID. And they'd owned it for less than a year. So we didn't even have like a set of tax returns for it. And it just didn't have a historical cash flow, maybe a conventional lender, but I think even that's unlikely. But they were only taking cash offers. And so that's what we went with. And seeing that kind of disarray is actually really common, especially in those very small

business landscape. So let's stick on the passive portion though, because as you get in the business, there must have been like an expectation of the amount of work required on your part and what you were kind of expecting to get into as opposed to the reality of what it turned out to be. So what was the difference there? You know, I think the big maybe shift in expectation kind of happens in like the second half of owning the launch mat, where we just had a string of employee challenges. We had like a few employees, a couple of employees in a row who didn't work out and lost a lot of time training them, getting them up to speed and then having them leave or having people call out sick a lot. I think that, you know, the employee that the previous owners had, they were like, she never calls out sick, like we've never had to come in and do, you know, extra laundry, whatever. And that definitely could have been true. It's just she she actually put in her notice right after we bought the business. And so then we were kind of scrambling to find

someone new, which I think can be fairly common probably in transitions, especially in smaller sized businesses. And we went through periods where we did have stable employees, like we had an employee there who, you know, was there for over six months and super reliable. And that was a little bit more of a chill time. But when we got into the season of challenges with employees, it was like, there was a month where we had an employee who needed to get an emergency surgery, and she had to be out for a month. And I wanted to hold her job for her. So I was going in to the city a lot to do laundry. And I think the expectation when we bought it was like, we'll go in one to two days a week, you know, we'll have like a day where we go in and do a shift, and then maybe like a second day if need be, if there's a lot of laundry. But, you know, we had at most two employees on payroll at any one time. And so majority of the time if an employee called out sick, the other one just wasn't able to cover. And so I was going in and doing laundry and rearranging

my schedule. And so I think just like the amount of the amount of times I needed to like last minute go in and do something, I wasn't quite expecting. I knew that the proximity was going to be challenging. So we lived in Oakland, it was in San Francisco, it could take an hour and a half to get in, you know, depending on traffic. And I knew that was going to be challenging. But it just like that really wore on me right and not being able to go over and fix something quickly. Like, I think people have this idea with laundromats that you can buy one and it's just going to like sit there nice and polite and make you money. And that's not the case. There's, there's a can always be something, you know, and if you don't have the flexibility to deal with that, it's hard. I think that's something I learned is like, it's not so much that you need a certain amount of hours in your week, like, oh, you absolutely must have 20 hours set aside to work on this business.

It might be five or 10 hours in a week, but you don't know when those hours are going to happen. You can't guarantee, right? You can be like, okay, on Tuesdays, I'm going to be there from nine to three, you can set that up for yourself. But then what happens on a Saturday when an employee is not there, and someone gets a tide pod second machine and it's leaking water, and someone needs to go in and, you know, flip the power on the machine to shut it off and restart it, and you live an hour away, right? Like, then what are you going to do? People will often tell me, like, if they want to work a full-time job and they're talking to me about their laundromat ambitions, I'll ask a question like that, like, okay, what are you going to do at three p.m. on a Tuesday if something happens? And they're like, oh, I'm going to have a manager for that. And that's such an, it's just like such an easy go to answer for people. But the fact of the matter is, I think if you own one business, I can just speak for laundromats and my laundromat, we did not have the cash flow to hire a quality full-time manager

who we'd be able to hand the phone to and be like, okay, like, you're answering the phone every hour that the business is open, right? And still have enough money left over for the investment to be worth it to us. So not to say that you can't work a full-time job and own a laundromat, there are people who do, I'm sure there are people who, you know, do that with other types of businesses, but I just want to make the point that your business is going to be demanding things of you at inconvenient and random times. And so if you do want to work a full-time job, what is your plan for dealing with those inconvenient and random problems? Yeah, I think you hit it right on the head too, because it's not so much the total number of hours, it's that you have no idea when those hours are going to come up. I talked to a lot of, you know, prospective first-time buyers. And one of the things that people, that a lot of them are looking for is they want to be able to buy a business that's mostly passive, like they're at least, you know, stuff aware enough to say, hey, I'm not looking for 100% passive, but they're like, I want to find something that minimal requirement, five to 10 hours a week, because they want to

maintain their full-time job. Maybe they've got like a higher paying corporate job, or one of the cases that they don't want this, they don't want to take the risk, the security risk of leaving their full-time job. But they still want to invest in this small business. And they think, oh, well, I can put in a minimum amount of time, but again, they don't know when those hours are going to come up. Or the other part is, I'm going to hire a manager. And just in your response about like, one, there's almost never cash flow to hire a full-time manager. And two, the employee issues you run into, what happens if your manager or your frontline employee, you know, has to call in sick, or their kid is in the hospital, or they go on vacation, or they get a better job, and like, all the things that come up with employees, you know, who's stepping in at the last minute to step in and actually make things work? Because even in a large amount, you still need someone physically there, even in a coin-operated machine. It comes down to you. I think that's what irks me a little bit about when people are like, I'll just have a manager do it. And I'm like,

but this is your business. Like, you are the one who's ultimately responsible for it. And to your point, managers get sick. Managers have emergencies. Managers can quit the last minute. And you know, if you do have someone quit with little notice, would you be able to step in and keep things going? And if not, like, you're the one, you and your customers are the one who are going to be hurt by that. And one other advantage, though, you talked about how you bought your laundromat in all cash. Now, you took out a family loan, but obviously it was probably very, you know, very positive terms. It's 10 times worse when we're buying a business, especially if you're something like the SBA. And it is a leveraged buyout. And I think that's part of the conversation that gets lost, especially on social media, is that we're talking about a leveraged buyout. We're talking about you taking on a loan anywhere between 70% and 90% of the enterprise value of that business, which means the moment you take over 45% of the cash for that business is gone because you're paying down the loan. And no, and even if you want to incentivize an employee or a manager

with a cash bonus or something to help them work more, or even I've seen, you know, equity being offered as well, those things don't work because they're not the one at risk when it comes to, you know, whether or not the debt has to be paid. An employee can always get another job, but you are, you're stuck with the debt regardless. You're the one on the hook. Yep, absolutely. Wow. Okay. So how long did you end up owning the laundromat? We owned it for 16 months and sold just a few months ago. Wow. Congratulations. Thank you. Yes. Very, very big stuff. Yeah. And not just for selling, but, you know, we hear it all the time, most small businesses never sell. And so to be able to buy and sell in that short timeframe at a profit, I mean, that's pretty phenomenal. Not just speaking to your skills, but also just to the timing. That's really great. Yeah, we're happy with things, with how things turned out. Just kind of give an overview. We bought it for 190 in 2023, and then we sold it for 300, like you said, a few

months ago. We did it without a broker. So we listed it and sold it all ourselves. We just used an M&A attorney, which I definitely think is a worthwhile deal expense having an attorney involved. And I think that, you know, business brokers can be very valuable as well. It really just depends on where your skill set lies. I think I felt like I know this business better than anyone. I want to be the one to set up the data room. I want to be the one talking to leads. I want to be the one negotiating. So just made sense for us to be in the driver's seat of that. Wow. All right. And you're still operating the multifamily property this entire time, right? Yes, yes. There was a tough period where the eviction process we went through with our tenant was about six months. And we're, you know, operating the laundromat at that time and dealing with that. And I'm brokering SBA loans. And I had surgery not too long ago. So it was like,

I tell people like, I loved owning a laundromat. There really was someone who I loved about it and truly enjoyed and I learned a lot. And I love not owning a laundromat too. Like there's a lot, I'm getting out of that experience as well. Wow. That puts you in such a unique position because outside of even the real estate investing, you bought a small business, you operated that small business and now you've sold that business as well. So, you know, most people who are looking to buy have not sold and most people who have sold have not bought. And so you've actually been in both of those seats within a two-year window. So tell me a little bit about what it was like, you know, transitioning into the seller's role and tips you have, you know, things, things you didn't realize like, you know, for buyers who are looking to acquire a business because, you know, now that you're the seller, you know, how do you view the situation differently? And what are some tips you'd give to potential buyers? Totally. It was really interesting being in the seller seat. And I feel like I did learn a lot if I ever want to buy another business about how to approach a seller. And

you know, I think there were really two questions that I had in my mind when I was evaluating buyers because I wasn't going to take an offer from just anyone. I needed to or I wasn't going to like sign an LOI with just anyone. I needed to know two things. One, what is your ability to execute? How confident am I that you are actually going to close on this transaction? And then two, will you make for a good operator of this business? Are you the right operator for this business? And we weren't doing a partial buyout, like we weren't staying on. So some people might think like, well, why is that second question important? Why do you care about their ability or fit as an operator? Right. You've got your money. Why do you care? Yeah, it's a reasonable question. But one, like I genuinely cared about the business, right? Like I thought it was such a cute little laundromat. I love that laundromat. And I cared about my customers. And I really viewed it as a community

resource. Like you don't have your, if you need to use a laundromat, you want your local laundromat, the one you can walk to, to be a nice place to do laundry, right? You want it to be well maintained, you want the machines to work. And it's, look, it's a, it's like a small part of people's day, but it's so annoying if you're going to do this task that's already maybe not very fun to do. And then it's like a crappy laundromat, right? And I was like, how can I make just a small part of people's week better? Just have this like task that they need to do be pleasant, right? So I cared about that. I did care about the business's continuing success. But the second reason it was important for me to find the right fit is I knew that, you know, between LOI to close, there was going to be some time in there, right? Where the buyer is still doing some further due diligence. They're still, you know, kind of considering the deal. We haven't closed yet. And I did not want to end up in a situation where I signed with someone and then they backed out. My goal was to sign one LOI and close with that buyer. And that's what I did. And the reason I needed to make sure they were going to be a good fit is because if I couldn't

picture them running the business, my concern was they're going to soon realize that they can't picture themselves running this business. They're going to back out. And now I'm going to be back to square one as far as finding a buyer. So I really needed to believe that they wanted to operate the business, not just own a laundromat, but operate the business. And I ended up finding a buyer who, you know, answered both of those questions so well. And so I think that for people who are looking to buy a business, you know, just consider those questions might be on the seller's mind. Like one, they want to know that you can execute. So do you have proof of funds? Or do you have an SBA prequel? Do you have something to show that you're serious? Right? I had people who didn't want to show me their proof of funds. Like it's said on our listing, we're taking all cash offers. And then you get on the phone with someone and they're like, oh, I just don't want to, I don't even know what their answer was. Like, I don't want to reveal that information. And I'm like, okay, then buy. Like if you don't want to show me, you can buy this business. Why did I keep talking to you? Right? And then there were people who it just like, it didn't, it wasn't going to make

sense for them to be operators. Like both them and their partner had full-time jobs. And it was like with this business, at least in the beginning, like you really do need to be more hands-on. And something that I did that I think is a bit different than I see some sellers doing out here is I put a lot of information up front. Like in my data room, I had all my financials, but I also did a 30-minute overview of the business with a slide deck. And in that, I was very at friend about like, this is what I think is going well in the business. These are the challenges. If you have these circumstances in your life, it's probably going to be hard to operate this. Like the ideal buyer probably has these circumstances. And I got together a whole video presentation of your business. Yeah, 30-minute overview of the business. I've never seen that. Yeah. And I think that sometimes my feeling is that sometimes sellers are a little like hesitant to give out information. I'm not saying give out your customer list. I'm not saying give out something that a competitor could take, right? But I feel like because I put so much

information out there up front, I got to know with people a lot faster, which is great. I don't want to spend, you know, extra hours on the phone with you if this isn't going to work out. So a lot of people saw the video and a lot of people were like, this is a fantastic video and I don't want to buy this business. And I was like, great, on to the next one, right? Like that's what I'm going for. So I think that putting so much information up front and honestly being transparent about like, these are the challenges. If you don't want to deal with them, look at another opportunity. If you're down for it, then this might be for you. Yeah. So many great nuggets there. I remember thinking like right in the beginning, you know, we look at these things, you know, as capturing assets like houses and businesses. And we think, oh, well, if you're going to sell it once you get your payment, then what do you care happens to that business? What happens to that house? But the truth is that we're emotional creatures, like we do care. And you need to understand that the vast majority of sellers do care what happens, you know, to their asset. We sold our home in San Diego just a year ago. And I remember that even when we were looking to sell, like we really cared who bought because, you know, we had, we had planted roses in the

front yard. We put in a brand new palm tree, you know, my wife had very much, she'd picked the exterior color and she's like, we can remodel, but don't change the color. It's so beautiful, you know? And in reality, like none of these things matter. Like once you sell the house, obviously, you want to find someone who's going to fit into the neighborhood. And that's very similar to what you're talking about. You want to find somebody who's going to, you know, really invest their time and their energy into this business and become a part of the community. So for a potential buyer to overlook that and think that it doesn't matter because it's not on a spreadsheet is detrimental at this day, the least. I absolutely agree. I mean, I think business is personal, you know, it's really not just about the numbers on a spreadsheet. And I, I felt like there were buyers I interacted with who were not thinking about that. Like I literally had people in their first outreach to me say they thought the business was overpriced. And it's like, look, it's, well, one, business valuation is subjective, particularly when you're not getting financing. When you're only taking cash offers and you don't have the constraints of like the

requirements from the lender, that becomes a pretty subjective process. And so we can have a discussion about the price. Absolutely. We can negotiate on that. But on the first conversation? Well, on the first conversation. And also, if I don't like you, I'm not going to lower my price. Like, I'm not going to give you a deal just because you like came out aggressive. I think that a lot of people just did not know how to negotiate. And if I could give one tip, it would be read the book Never Split the Difference by Chris Voss, former FBI hostage negotiator. We actually used like strategies from that book in our negotiation. And I really think that that helped drive, you know, us towards our goals. And I just saw so many people like, just kind of falling right out the gate, not even doing like a proper introduction, you know, just coming out like, how much seller financing are you willing to offer? I'm like, whoa, like, I don't even know you yet. And the people who I did get to know, who I really liked, like, when seller financing came up later in the

conversation, I was totally willing to entertain it, right? Like, okay, do I need to do 15% seller financing to make it work? I'm willing to do that because I really like this person. I think they can execute and I think they'd be a great operator. We didn't end up doing seller financing because we got an all cash offer. But my point is just, if people like you, they're going to be more willing to give you a good deal. And you can't come right out the gate trying to haggle or talking about the asking price or anything like that, you really need to come out, make an introduction of yourself, explain why you're interested in the business, and then like get to know what's going on, ask a lot of questions. If you're, you know, if you disagree with the asking price, I wouldn't come out and say that I would ask like, walk me through how you came to this price, right? Like, let's have a conversation about it, see what things they say, because you can uncover a lot by listening. And that's one of the things that the book talks about, like, really listening a lot, because you may make some assumptions about the business or you may make some assumptions about the seller

and what's important to them and how they came up with their asking price. But if you listen, you might realize like, Oh, actually, this is what's important to them. And I can, this particular thing work in the deal, like, then I've got something here. You're so right. And I can't recommend never split the difference enough. I think it's a fantastic book. And it's so actionable. One of the things I found that I constantly tell first time buyers, I'm like, look, that first phone call or video chat or in person meeting with a seller has nothing to do with the business. And it's everything to do with a seller, you know, consider it like a date. Like, you're just there to say hi and get to know this person, you know, ask them about people love talking about themselves and especially their business, especially if they've been in that business for 30 plus years, they want to tell you all about it. So just sit back and ask the questions, be genuinely impressed and amazed by what they put together. Like, even if you realize, you know, during the course of the conversation, this business is not for you. It's still like, it takes so little effort from you to show the respect to somebody else for the time and effort they put into a business that has sustained their family for so many years.

And just let them talk about it. They're going to tell you stuff that you're that you never find in the sim. They're going to be able to build that relationship with you. You're, and this is one of the key times when you're able to assess EQ, the integrity of the seller. In my opinion, the number one red flag is a seller you can't trust. In that first meeting, if you just shut up and let them talk and, you know, have them tell you about the business, you can assess so many things about them personally and the deal itself that you wouldn't have found otherwise. And I think that's one of the key things that a lot of buyers, they just miss on that first date, so to speak. I completely agree, Judd. I mean, I think that that is probably the most overlooked part of due diligence is the seller themselves. And I can say as someone who sold a business, there are things they could have hidden. You know, there are things that would not have, would have been really hard to find just in like, I don't know, interactions with customers or like the amount of problems we had with the delivery service. Not that it was a high amount, but I'm just saying like, it would have been possible for me to be like, we've never had an issue with this and you wouldn't

really be able to verify that during the due diligence process. And the fact of the matter is like, you're never going to know exactly what it's like to operate a business until you do it. And your experience of operating it is not going to be exactly the same as the sellers. You're different people, right? So there could be just like a difference of perspective on things. But I think, you know, to your point, you know, when you're not getting a good feeling from someone, you know, when you're like, doesn't really seem like this person is giving me the whole story. And if I were buying another business and everything looked great on paper, but I wasn't getting a good feeling from the seller, I'm probably not buying that business because you just don't know what you don't know. Like it would be so hard for me to move forward without trust in that situation. And, you know, once the deal closes, that is your business. Unless you've done a partial buyout, that's your business. And there's not like a ton that you can do if the seller doesn't hold up their end of the bargain as far as training. Like you may have it written in the contract,

they're going to give you two months of training or whatever. But if they just don't do a very good job, or if they don't really hold up that end, like you're the one stuck with the business and with the loan. Yeah, exactly right. And if you decide, like say, like they don't hold up their end, or there's something in the business that was undisclosed, or, you know, they don't do the transfer or whatever, they break something in the contract. Well, then it comes up to you to say, well, I'm either just going to let that go because it's not worth pursuing, or I'm going to sue them, which costs money and takes a lot of time. I think a lot of things I see buyers, especially first on fires, a lot of pitfalls they fall into is they put way too much faith in their contract. You know, it is true, you should have a really good lawyer and you should take the time to make sure it's written to protect you that the representations of warranties are there that you've got, you know, a seller's note or earn out or all the other different protections you can put in place. But at the end of the day, the only way those protections are enforceable is if you sue the person, which takes time and money. And in the meantime, if something critical happened, that business is going to fail, or it's going to be impacted while you're still trying to

operate it. And so there's a whole bunch of things that could happen on the back end. And I love that even in a small business like your laundromat, you're very forthright in the fact that you're like, look, I could hide stuff, you'd never know. And those types of situations only get compounded with the size of the business because it becomes even more complex. And there's more places where you could hide a skeleton in a closet somewhere. And again, just like you put too much faith in the contract, a lot of times you put too much faith in our quality of earnings check or our legal review, or any of the other due diligence pieces that we pursue. Although those things are critically important because they help mitigate the risk, but they never remove it entirely. And that's why, you know, if you can't trust the seller, you have to walk away because they will hide things that you simply will never find. And, you know, I know for people who've been following me on LinkedIn for a while, they know that I really harp on this. And, you know, we had a conversation with Joe O'Dell just a couple of weeks ago where, you know, he was a fully funded search fund and had a ton of money behind him and did all the due diligence,

and they still miss stuff. So the idea that you're going to catch everything in due diligence on a good deal is unlikely, especially on one where, you know, maybe the seller can't be trusted. Absolutely. I mean, I, the way I think about it and the way I encourage people to think about it is you are entering into a business partnership. It's limited, right? If you're doing a full buyout, it's limited to the period of, you know, the LOI, the negotiations, the close, the training, but it's still during that period. Most likely you're going to have a problem you need to solve together. You're going to have something unexpected come up because these things can take months and chances are, you know, something is going to happen. I mean, like with ours, our buyer was going out of town. And so we had to figure out how we were going to manage the business for him for a couple of weeks post close and what that was going to look like, how he was going to compensate us for that. You know, there are other things too, even after the close, like, you know, there are utility bills to transfer over their accounts. They're like, you know, customers who

may still reach out to your phone number, whatever, like, it's not a, it's not a like totally clean. It's not just like one day you're like, okay, everything's done. And I know everything about this business, like you're going to need things from the seller. So if you wouldn't go into business with that person, I don't know why you would buy a business from that person. Yeah, exactly. Right. I love how you said that it's a limited partnership. It could be very limited, but it's still a partnership and you need to make sure you understand who you're getting in bed with when you do these types of deals, especially if it's not limited, especially if they're keeping a piece of it. Because in a vast majority of cases, you know, you're going to own this business for a very, very long time. And you're making a very long term decision by keeping the seller involved in an equity standpoint. So wow, yeah, very, very wise words of advice. Thanks, Kira. All right. So you've now sold your business and you still have the multifamily, although you've now moved to San Diego, you're considering selling that as well. And you've moved into SBA Loan Broker.

So this is a whole different area that I think doesn't get enough attention, because especially for first time buyers, you know, they know that using the SBA is one of the best pieces of letters they can have to buy a business, especially if they've never done it before. And there's no shortage of SBA lenders nationwide who would love to have your business. But how does a broker fit into that? And what exactly are they trying to do to help a buyer? Yeah, that's a great question. So, you know, the way that I put it is I think that the value that I offer as a broker really depends on what you're looking for. I bring more value to some people than I do to others. Essentially, how I work is I have a wide network of mostly SBA lenders. They work with a couple of conventional and personal lenders, but mostly SBA lenders. And they all have, you know, different credit boxes, different niches. I think that something that people often maybe misunderstand about the SBA is sure there's the SBA SOP, but it's really less black and white than people think. There's a lot

of gray area. There's a lot of room for lenders to interpret things differently or put their own requirements on top of it. Or just because the SBA says the lender can do something doesn't mean a majority of lenders will do that, right? Some lenders prefer different industries. Lenders think about ad backs differently. They have different DSDR requirements, right? There's a lot of nuance in the space. And so really the value that I bring to the table is understanding who the players are in the field and who's going to be the best fit for a particular deal. For example, some, you know, lenders are comfortable with a lower level of cash injection from a buyer. Some say, no, we have to have 5%. They think about leveraging seller notes differently. So if you're coming in as a first time buyer and you're not familiar with the SBA space, I think it might be a little overwhelming and time consuming to talk to five different lenders about your deal. I offer one point of contact that gets you in touch with multiple lenders to figure out who's going to be the best fit. I think the best news to buyers is that I'm paid directly by lenders when a deal closes. So there's

no fee to utilize my services. It's free to clients. It's not a fee that lenders can pass through to you and your closing costs. That's not allowed by SBA. But like I said, there's some people who, you know, maybe they're coming from a banking background and they're like, I already know the SBA lenders. Like I'm going to shop the deal myself, right? And for them, a broker wouldn't really be added value. And then there's some people who are like, I never opened the SBA SOP. I don't know how this works. I want to have one person I'm talking to who's going to explain this process to me and help me find a lender. So, you know, like I said, when I sold my business, I didn't use a business broker. I think business brokers can be very valuable in some situations. I just happen to have the skill set to do it myself. So I really think it depends on, excuse me, I really think it depends on your background, the connections that you have and your skill set, whether a loan broker is going to be valuable to you. Yeah. So in a lot of ways, it sounds like you're the relationship connector. So like you've already built all these relationships with SBA lenders across the country. And one key thing that first

time buyers don't realize is not all SBA lenders are created equal. Like every bank, every lender, they all have different types of industries they'd like to lend on. They have different requirements. They have different credit ratings. They have different buy boxes. And so being able as a buyer to skip all that and not have those relationships and instead team up with a broker who already has built all those relationships and knows, you know, based on the deal that I'm looking for, what kind of lender would be the best fit for me? Not just from a working standpoint, but from like the kind of deal I'm putting together, the kind of credit they're allowed to ask, do they offer like an SBA express line of credit as well? Like what are the working capital requirements? Like all of these things are factors that as a first time buyer, I may not be thinking about and I certainly don't have the time or experience to build out those relationships. So that's where someone like you could come in. Yeah. And I think, you know, vetting people too, like we talked about the importance of relationships. I'm, well, I only work with lenders that I like, right? Like I only work with lenders who are responsive and who are nice and who like take

the time to explain things and who I will be comfortable putting on a call with a client, right? So I think, you know, if people, a lot of times people like find me on YouTube and I think they already sort of have a sense of trust with me because they've consumed some of my content. And so it's important to me if I'm connecting you with a lender, like this is someone that I trust. So I think knowing that if you're working with me, you're getting access to not just like people who can do a deal, but people who are going to be pleasant to work with along the way. Yeah, that's so huge. Having a deal team that you actually like and you can get along with. And like you said, working with lenders that you know, like and trust, because the worst thing as a buyer is if you connect me to a lender and then, you know, we're going through due diligence, we're getting all the way up to closing and then the lender pulls funding. And then all of a sudden I'm out of exclusivity and maybe I lose the deal because of that. So yeah, building these kinds of connections, it takes a lot of trust. Absolutely. And clarify it for the buyers, especially those who aren't familiar with it, how is it,

so you're free for a buyer to use, how do you get compensated in this? Yeah, so I'm paid directly by the lender, it's kind of a like a marketing or referral cost for them, right? Lenders are making money off of your loan, off the interest that you're paying, but they're only making that money if they have deals coming in, right? So they're paying me for bringing them the deal, for bringing them the client. There are some brokers out there, I've heard of this, who charge an upfront fee once you start engaging their services. I feel like I'm compensated fairly, I don't charge any fee on top of that. So it truly is free for borrowers to use my service. And not a sense. Hold on a second. Cut that part out, dogs losing his mind. Oh no, I can't hear you again. All right, well, I love that you were able to clarify that for me because I know as a first time buyer, I was brand new, did not understand the broker space. And so,

you know, understanding like what the incentives are for everyone in your deal team is really important. And that's one of the things I really drive to first time buyers. I'm like, look, everybody in the deal team has a different incentive for being there. If it's the SBA broker, their incentive is to find a lender who they're confident can close on your deal. Because that's the only way they're going to get compensated. If it's the business broker, it's closing the deal for the seller at the highest possible price. You know, and sometimes buyers get off put by that because they're like, well, at the highest possible price, they're trying to watch out for their price. But the other part is closing the deal. If a good business broker is going to work with you and the seller, especially the seller to close that deal. And so that can be valuable to you as well as a buyer. And then understanding the incentives from like a lawyer or QV, like, where do your incentives align? And how does that impact your overall deal structure? It's really important. Absolutely. And you know, like similar to to business brokers, I'm paid based off the loan total. But at the same time, it's not my goal to try to get the borrower to take on the biggest

loan possible in the deal, right? If it's like, if we can leverage some seller financing, and that helps the deal, but it brings down the loan cost, great, because it means we're getting the deal done. Because one, I want to feel good about the deal that the borrower is doing, like I've also bought a business, I want you to, you know, start off on the right foot, I want everything to go smoothly. But two, if the deal doesn't close, then I make zero money. Right? So I want whatever structure is going to be good for everyone, follows the rules, is ethical, is fair, but then can also get the deal done, because that's how I get paid. Yeah. Okay, so now you have your real estate investment that you're looking to potentially sell, you bought this business, you operated, you sold a business, now you're an SVA broker, and now you've uprooted everything moved away from Beria, and now you're in San Diego. So what's the next step here? Oh my gosh, this year, you know, I really want to create more content. I started making content on YouTube last year. And, you

know, I like you really care about putting accurate information out there. I have come across some wacky stuff online about LaunchMap. Let me tell you, and a lot of misinformation and about buying businesses too, you know, I talk to people who aren't necessarily interested in buying LaunchMap, but they want to leverage an SVA loan for a different type of acquisition. And there's, I think, just some maybe misunderstanding about what's realistic to do with the SVA, and again, a little bit of disconnect between what the SOP says a lender can do, and what in reality is going to be feasible. So I want to create, continue creating content that educates people, particularly first time business buyers on what it's actually like to buy a business, what it's actually like to get an SVA loan. And then, of course, I want to help a bunch of people buy small businesses. That's wonderful. We're going to have to have you back so we can really dive into the SVA process, because I mean, I'd be lying if I said I knew everything, you know, all the details of how the SVA program is put together. But especially for a first time buyer, like understanding

what the SVA field looks like, you know, what lenders are looking for, how I can best position myself as a high quality buyer, who can actually close a deal. Because I mean, the worst case, the worst thing in the world is to find a deal that you've really fall in love with, and then you can't qualify for the loan. Like that's the worst. Yeah, yeah. And unfortunately, I do, I do see that happen. So yeah, we'll have to talk more about that sometime. Okay, well, before I let you go, I want to talk a little bit about first time buyers, because you've been a buyer, you've been a seller, and now you're a broker. So you talk to first time buyers all the time, especially, you know, through your YouTube channel and through your other social media outlets. What are some of the things that some of the biggest questions first time buyers or hopeful buyers have? And what could a potential buyer be doing to set themselves up for success? Like if they actually want to close on a business? Yeah, oh my gosh, there's so many questions I get. I get a lot of questions specifically about laundromats, and can I use an SBA loan to buy a laundromat?

The short answer is yes, but it's challenging. I actually just put out a YouTube video that goes into more detail about this, but just one thing I'll put out there to kind of set some realistic expectations. And this is not just the case for laundromats. This is I think the case for a lot of small businesses, but a lot of laundromats are being sold for under $500,000, particularly when there's not real estate involved. And at that level, you are going to run into competition from cash buyers. Like you that that's just kind of the fact of the matter. And like I said, that can help happen with any smaller size business, but I think laundromats and other businesses that people view as passive income and that are more require a more general skill set than say like an auto shop. If you want to buy an auto shop, you should probably know how automobiles work, right? And laundromats are just easier for a wide variety of people to get in the game. So you're going to see more competition. So I think, you know, these are like laundromats, car washes, like these general small businesses. Yeah, you're going to see competition from cash buyers at the

smaller end of things. So it may seem counterintuitive, but sometimes I think it's actually easier to go a little bit bigger and become a little more specialized in the business simply because once a lender or sorry, once a seller knows they're most likely going to need to take an SBA offer, I think it does change how they view the deal because now their valuation has to be accepted by an SBA lender. Now all their documents need to be in place. Now we need probably three years of cash flow, right? And kind of like I was mentioning earlier, when you're dealing with cash offers, it's kind of just like up to you to negotiate what makes sense. You don't really have like these constraints on the seller as far as how they can value the business, the documents required, etc. So there can be more constraints that are positive for you as a buyer, I think, once a seller knows they need to work with an SBA lender. And then two, if you can stay in your lane as much as possible, that's going to be really helpful to you. And I don't want to discourage

people from like, I don't mean to say you can only buy a business that's directly related to something that you've done. I think it's possible to be successful in an industry you haven't worked in. But I really encourage people to think, can you operate this business, right? Like, I see a lot of people going into buying their first business who have some type of background in finance, like a lot of people coming from private equity, they know how to make a mean spreadsheet, Jed. Their spreadsheets are off the hook, right? But they've never hired someone. They've never fired someone. They've never, you know, been on call on a phone with customers calling to make complaints that they have to resolve, right? They've never been responsible for a business loan before, right? And I'm not saying that it's impossible for those people to be successful. I'm just saying, like, have a reality check with yourself. You know, there are people out here who want to buy HVAC companies, and they've never worked in HVAC. And like, maybe they've never

even worked in a blue collar setting, right? And it's just, it's, it's different. It's a different, it could be a different work culture than what you're used to a different way of interacting with people, right? And like the people skills are so important. So what I encourage for people is, think about the size you're going after and think about the type of business. And do you have the liquidity and the experience to back those things up? The more you can stand your lane, I think the higher chance of success you have, because one, you will be a better operator, right? You're just more successful business, but it'll be easier to get financing. Like I see people struggle because they're trying to buy like an HVAC or roofing company and they have no experience in that space, and they don't have really the liquidity to back that up. And by that, I mean, like, you know, they're not even at 10% of the project total. Maybe they have three to 5% or less than that, right? Like I do see people with $100,000 trying to buy $5 million companies. And that's, and they

don't have industry experience. And that's really tough. Not to say it can't be done, but you know, just seller notes, for example, SBA technically allows you to leverage a seller note towards the cash injection. There are certain rules around it, but you can completely cover it. But in practice, most lenders aren't going to do that unless you have direct industry experience. You know, a lot of lenders want to see at least a 5% cash injection from you as the borrower. Not that many are willing to go below that unless you have strong experience. So I think a lot of people are out here like trying to hit a home run on the first go. And they're like, Oh, I can get up to $5 million SBA. And then they hear about per pursue. And I'm like, well, calm down, like, let's not, we don't need to get into that yet. Which is just extra loan on top of your SBA loan. So you can borrow more money. You can borrow more money. Exactly. Yeah, SBA plus conventional. They get excited. I'm like, hold your horses, buddy. So I, if I were to kind of like synthesize all this, you know, it would be to start smaller. And again, I know I mentioned like, sometimes the super small deals, like if you're

trying to buy a business for $250,000, that might actually be tough to do with SBA because you run into cash competition. But if you can start like smaller than $3 million for your first acquisition, you can always expand, right? But you're, you're lowering your risk a little bit by taking on a smaller loan. And you're allowing yourself to kind of like get your feet wet and perhaps a lower risk environment. So I know I just said a lot of things, Jed. I'll pause there. So many wonderful, valuable things. That's why I just let you go. That's why I'm so excited to have you here. And, you know, everything you said, it makes a lot of sense, especially from the SBA route. And I know we, we really like the SBA 7A loan program because it is the only program in the country that allows somebody with little to no assets to borrow up to $5 million to buy a business. That's incredible. That's an incredible amount of leverage. There's risk involved. There's all kinds of things involved, but it is an incredible opportunity. Now hearing every, all the advice

you just put out there, what would you say to the listener who's like, well, that's all fun and nice, you know, for SBA, but I'm not going to use SBA because I'm going to find a hundred percent seller financing deal. So that doesn't bother me at all. What do you have to say to someone like that? I would say don't do that deal. No, I don't know. I mean, I don't, you'd like to say that things are impossible. I'm sure there's someone out there who's done a hundred percent seller financing deal that worked out for them. But, you know, to the point we were both making earlier, like I heard someone claim about laundromats that there's zero risk to a seller with seller financing. I'm like, that's just, how can you say there's zero risk? Like we were saying earlier, sure, let's say I have an agreement that I sell my business to you with seller financing, you stop paying me, I take the business back. But at that point, what is my business worth if you're not able to pay me anymore? Right? Like you probably tanked it if you can't make those payments. So I actually see a pretty high amount of risk to a seller in seller financing. And I know some people would say like, oh, there could be a tax advantage to it. And maybe that

works for some people, but I'm still weighing the risk of what if I never get paid this money? And even if you have it in an agreement, is it going to be worth it for me to take on the legal fees to go after you? And will there be anything there to get? You know, so I see high amounts of seller financing as a red flag. Now, seller financing just in and of itself is very legitimate and often done in SBA, but we're talking like five, 10, 15% in SBA deals, right? I don't see like a ton of seller notes that are higher than that. So 100% seller financing, if I were a buyer in that situation, I would just want to understand why the seller is offering this. It's possible they have a reason that I can get on board with. I'm not ruling that out. But I'd really want to understand what that reason is. Maybe I'm just making something up, but maybe it's like they have a family member who's sick and they need to move really quickly and like they're willing to take on this high amount of risk because of whatever personal situation, right? Like maybe there's a good reason, but I think

it would just be really important to understand what that is because it is a risk to the seller. And because it's a risk to the seller, I think it presents a risk to you as the buyer, right? Like why isn't there someone coming along who's offering them cash? Why can't you get an SBA loan for this, right? Like answer those questions because I mean, I'm sure this is a case for other businesses, but they talk about it a lot with laundromats like get a free laundromat, get a laundromat with no money down. Well, it's not really going to end up being free because after you buy it, maybe you need to spend $200,000 on equipment or maybe there's like such a bad problem in the area with theft or something that you're just like, this is a huge headache. So I would say maybe not totally steer clear of all those deals, but you just got to get to the bottom of why a seller is willing to structure it that way. Yeah, exactly right. Preach, preach, preach. Because like we said before, there's only really two reasons why someone would sell at that level of self-financing.

Either they have a very close personal relationship with you, like a family member or a very close friend where they understand the risks they're taking as the seller, but they only take it because they want you to have an advantage and they're still basically around to help you get it done. Or B, the business doesn't qualify for financing because I hear that all the time too. It's like, well, if I take a seller's note, then I'll save money on taxes. Maybe, but you're also putting at risk the 90% of the payout on closing that you could possibly never get, that actual cash in pocket. I mean, I could do all kinds of tax strategies to help mitigate my taxes there, but not getting the money is the biggest risk. And so I see these deals all the time. 100% seller financing, especially in business does work, but typically it works to a well-capitalized buyer who already owns a business or more than one and is looking to add to their customer list. For instance, if I already own an HVAC company and I've got like three or four locations and I want to buy another location, maybe that other location, maybe they're going down in revenue,

maybe there's some issues in the back end that would make it unfinanceable, or maybe it's just on the verge of collapse, but I care about their customer list. So I'm willing to buy, they're willing to sell for seller financing, and it works because I've got the money. And I know the industry, I know what I'm doing. I will just add, I don't think that if there's a business that doesn't qualify for SBA, I don't necessarily think that makes it a bad deal, or that means you shouldn't buy that business. Like when I bought my lounge mat, it wasn't going to work for SBA because we didn't have three years of historical cash flow. But at $190,000, that was a risk I was willing to take on, that we didn't have three years of cash flow. If I was buying business for $3 million, then I'm going to get more particular about that. So I think it's ultimately up to assessing your personal risk, right? And if a deal can't be done through SBA, just understand why, right? Because maybe the reason actually is a huge red flag,

and maybe the reason, once you understand it, you're like, okay, I'm willing to take on this risk, also do this deal. I really, I've come to believe I don't really think there's such a thing as a good, like an all good deal or an all bad deal. I think is, is this the right deal for you, right? Because there could be a business that has fantastic cash flow, been around for 20 years, whatever, but you may not be the right operator. So that might be a terrible deal for you. And then there could be another deal where it's like, the business is losing money, the customers are leaving whatever, but I've worked in the industry for 20 years, and I've turned businesses around before, and I know how to do this. And this is the perfect deal for me, right? It's totally about fit between the business and the operator at that moment in their life. And that's so true. And one of the key things, especially as a first time buyer is risk mitigation, because you don't know what you don't know. And that's one of the key reasons why I always push first time buyers to go to the SBA route. Because I'm like, look, there are a million things that can go wrong. Maybe you misjudge the seller. Maybe you, you know, miss something in a quality of earnings or didn't

get a quality of earnings done at all. You know, maybe there was a legal issue that was in play, or you didn't understand the customer concentration. There's so many things, especially the first time buyer, that maybe you didn't wrap your head around when you closed this deal. But at the very least, at least you had a banker look at it and say, yeah, we think the cash flow can cover the debt. You know, at least you had, at least you had that, at least you had something, you know, that has helped give you a few more guardrails as you're closing in on that first deal, because you learn so much just in that first deal. And that may be the only deal you ever do, but you learn so much to where you can now understand like, hey, now that I know the rules, I understand, you know, why those rules are there, and which ones maybe I can bend, which ones I can break, which ones I can ignore. And when I'm moving on to the second, third, or fourth, because again, one of the other questions I get from people who've never bought a business is, how can I start a hold code? I'm gonna buy 10 businesses. Oh my gosh, I get the whole thing so often, yes. Just buy one, buy one, prove to the world that you can operate one business, please.

Yes, I call them the hold code bros. Yep, they've never managed an employee, they've never operated a business, they've got like $30,000, but they want to start a hold code. Yeah, yep, yeah. Yeah, and I think you make a great point about the SBA, some people gripe about the process and how long it takes, but I think it's a value add though, right? Of like, look, you're professionals who do this all day, every day, combing through your deal, are they going to catch everything? No, but are they going to catch more than you as someone who's never bought a business before would like, yeah, most likely. Yeah, and the last thing I throw on there is the personal guarantee. And so many people, especially a first time buyers, they try, you know, they get really scared of the personal guarantee. And I think, I think that's healthy though. I think you should be scared of the personal guarantee, especially if you've never bought a business before, because it's going to align your incentive. Like we talked earlier about like, oh, I'm going to buy this business, it's going to require very little work for me and I'll hire a GM. Well, when you've got the personal guarantee, you're the one responsible for the

debt. Like maybe the business grows, maybe it doesn't grow, but at the end of the day, you're the one who signed for the debt. And so if the business doesn't at least service its debt, you're on the hook for that. And that means personal bankruptcy for you, if you don't come through. And I think that is very healthy, because it makes sure that you're getting into this for the right reasons. I mean, why else would a bank give you millions of dollars of debt, and you have no collateral? Like if you didn't need the bank, go buy it in cash, but you need the bank. And how are you going to prove to the bank that you're serious and you're committed, and you're not just going to, you're not full of shit, to be honest with you? Yeah, why would you expect a lender to give you $3 million if you're not willing to put something along on the line as well? And just another point on that, kind of speaking to people who are trying to, I see this lot in the searcher community, where people are looking to come to the deal, they don't have industry experience, they're not bringing cash, they're coming from investors, they don't really have assets to speak of. And it's like, what are you bringing to the

deal? And they're like, well, I'm the one who's going to PG. I'm like, but you don't have anything on your personal financial statement. Like what is the value? And so I think, just another tip to buyers is think like, what is the value that you're bringing to the table? Right? Is it experience? Is it liquidity? Is it assets? If you don't have those things, I guess, is this the right deal for you? Or how are you going to mitigate those things? There are ways that people can mitigate for their lack of experience, can mitigate for their lack of assets. They're not strategies that everyone wants to do, but there are ways that people can do that. So I think being realistic about the size and type of deal you can go after and doing a gut check with yourself. I agree. I agree with you about the PG, right? If like, a lot of people want to know my options that don't require a PG. And I'm like, even conventional lenders are most likely, even if you have the liquidity for a conventional deal, most likely they're going to require a PG unless there's a lot of real estate involved. So I think it's like, I don't think it's about trying to get around the PG. I think it's about

finding the deal you are willing to personally guarantee. Yeah, I think that's all it is. Finding the deal that's right for you that you're willing to commit to. Because that without taking the risk, there's no real reward. And if you're not willing to write your name on the dotted line and take the risk, then you're just looking for a handout. You're looking for something easy that's not going to require anything from you. And when the headwinds come, not if, but as a small business owner, when those headwinds come, are you going to stick it out? Are you going to plow through? You're going to find a way to make it work? Or are you going to bail out and say, Hey, I don't have any money in this deal. It didn't work. Oh, well, I'll try again later. Where's your focus? Well, what would happen to our economy if we didn't have a high level of commitment from small business owners, right? Yeah, I think that it's good to be that invested in the work that you do. And I think it's a huge privilege. I felt very privileged to own a small business and to have had that experience. Like not everyone is going to have the opportunity in their lifetime. It is a lot

of work, but it can, it can afford a lot of autonomy. It can afford a lot of financial gain, right? And like, if you want to be in the group of people who can do that, you have to be willing to do what other people aren't willing to do, which is take on some risk and invest yourself personally in your transaction. 100%. Kira, thank you so much for being here. This has been just phenomenal. And we're going to have you back so we can really dive into the SBA. Your role as a broker and how first time buyers can really navigate and get a better understanding of the whole SBA process because like, like you said earlier, it is a behemoth. So understanding how that works is really great. Thank you so much. Wonderful words of wisdom for all of our first time would be buyers. Yeah, dead. Thank you so much for having me on. This was super fun. I always love talking about launch rats and SBA and you're a super fun person to chat with. I think we're we're very aligned on on some fundamental things when it comes to business and putting out content. I really appreciate all the content that you're putting out and how transparent you are about

the journey that you've been through. I think that's a provide so much value to people out there looking to buy businesses. So here's to us both making some great content this year. Thanks, Kira. Appreciate that. Yeah, failing a business with a personal guarantee is not a fun trip. And I would like to help other people avoid that. So maybe we'll talk about that next time. Okay, okay. All right. Thanks, Kira. Bye.