Acquisitions Anonymous - #1 for business buying, selling and operating - Sellers Lie about the numbers?! - Acquisitions Anonymous Episode 88

Episode Date: April 22, 2022

Michael Girdley (@Girdley) and Mills Snell (@thegeneralmills) are joined by Elliot Holland (@ElliottEHolland) to dig into Quality of Earnings, why you need it, what you pay for, what to expect, Due Diligence processes, how to budget it and more.-----* Do you love Acquanon and want to see our smiling faces? Subscribe to our Youtube channel.* Do you enjoy our content? Rate our show!* Follow us on Twitter @acquanon Learnings about small business acquisitions and operations.-----Show Notes:0:00 Intro1:57 What is Quality of Earnings (QoE) and what do you do at Guardian Due Diligence?3:12 I’m a buyer: What does Quality of Earnings do to prove the truthfulness of the seller’s numbers?5:23 Which are the added values and services that can be expected by a buyer?7:50 How much do you need to budget for a QoE? Does deal size matter?12:02 As a buyer, when do you need to expect to pay for the Diligence?17:20 What are other uses of a QoE report? Does it help with Banks, and potential LPs?20:21 How do you handle the seller to avoid deal fatigue?22:20 What do you request from a seller when performing a QoE? How do you cross-check that information?25:14 Have you caught a seller lying/misrepresenting stuff when performing an audit?28:14 How does a firm like yours organize structurally?30:29 What advice should you give a buyer looking for a QoE?33:14 What would you advise buyers, outside of your sphere of expertise?-----Past guests on Acquanon include Nick Huber, Brent Beshore, Aaron Rubin, Mike Botkin, Ari Ozick, Mitchell Baldridge, Xavier Helgelsen, Mike Loftus, Steve Divitkos, Dzmitry Miranovich, Morgan Tate and more.-----Additional episodes you might enjoy:#83 Can you grow a business in a shrinking market? Featuring baller @WilsonCompanies as a special guest!#82 How Great Operators Win! How PE does it like pros with Mark Brooks#48 Two Landscaping Businesses for Sale - Mike Botkin of Benchmark GroupSubscribe to weekly our Newsletter and get curated deals in your inboxAdvertise with us by clicking here Do you love Acquanon and want to see our smiling faces? Subscribe to our Youtube channel. Do you enjoy our content? Rate our show! Follow us on Twitter @acquanon Learnings about small business acquisitions and operations. For inquiries or suggestions, email us at [e-mail]

Hey, Michael here. Welcome to another episode of Acquisitions Anonymous. This week, we accomplished a miracle. We made financial due diligence exciting in this episode with our guest, Elliot Holland of Guardian due diligence. So we wanted a lot of stuff, quality of earnings, why you need it, why it's important for buyers, how it keeps you from losing millions of dollars on your transaction, all for a relatively low price of hiring a quality of earnings firm. Enjoyed this one. I hope you will too. All right, today we have Elliott Holland with us from Guardian Due diligence, and we're doing an amazing episode on Quality of Earnings. So, Elliot, thanks for being here. I am so glad to be here, and I'm going to make Quality of Earnings fun today. So let's have a fast in front. It's hard to do. All right. So let's get started. Elliot, tell us who you are and what you do and how you started doing it. Yeah, I'm a reformed engineer, Harvard MBA, former self-funded searcher and private equity guy, who saw that the diligent solutions in the market, particularly for smaller deals, were pretty terrible, in my opinion.

I didn't think they answered the same questions in smaller deals that they answered in larger deals. And on smaller deals, a lot of people are taking personal guarantee risk, personal family risk. And so the need for a great solution is higher, but I thought the availability was lower. And so I started Guardian to sort of be the service firm that I wish I had when I was a self-funded searcher, buyer, whatever, and really decided to focus on the SMB market, ETA market, acquisition entrepreneur market, because a lot of people are taking on personal risks. They don't have the same experience with deals. And it's really important that people don't get had when it's personal money online. Yeah, totally dig it.

So you call your business guardian due diligence. I'm most familiar with quality of earnings, which I guess is a subset of that. So how do you maybe tell us what you guys do at your firm and then tell us kind of what classical kind of quality of earnings is? Sure. So great question. So think about due diligence as an umbrella. And due diligence is really everything you need to do to vet a deal. So that's talking to the seller, that's visiting, that's counting inventory.

in the private equity world, to make it simple, we talked about financial diligence, operational diligence, which is checking out the company, how it works, who runs it, and commercial diligence, which is the industry it's in, how is the world moving around the industry. What we do now is financial diligence, which is the quality of earnings, which principally is just kicking the tires on the numbers. We'll get into what that means in a second. But we also are moving into more operational and commercial. commercial diligence with some of our upgraded services. So getting into industry analysis and getting

into managing key man risk. So really what we're bringing to market is sort of a complete diligence solution that's kind of started with QOE and we're moving into a more complete solution as we grow. Great. Super cool. Okay. So let's say I'm a buyer, right? And I'm interested in quality of earnings, right? And so like I'm getting these books from a seller, right, the financial numbers and I have to figure out like are those truthful or not one way or another in my favor and the seller's favor. So like walk me through like what does quality of earnings do for me kind of to solve that that thing from your perspective? So let me answer that by walking through the journey of my typical client. And I'll sort of

answer it that way. So typically I just say I'm the buyer. So I get, a packet of materials that could be two years tax return and a one-paid summary or a confidential information memorandum as sturdy pages and then a set of financials. Most of the people that come to Guardian are first-time buyers don't have a huge financial background and we'll look at the financials, see the taxes don't match what's in the adjusted EBITDA and the confidential information memorandum. Be a bit worried about that and say, how do I know if the financials are good and say, I need a third party to help me here, and that's when they seek a quality of earnings. What does the quality of earnings do? A quality of earnings ingests

this crazy material from sellers, cash, accrual, printouts, quickbooks, all this stuff, right? And puts it into a financial package that not only clients who are first-time buyers can read, but lenders, equity investors, and everybody else can read in a common language. And so essentially for those who wouldn't be able to take disparate taxes, financials, bank statements, and create a full picture of the financials of a business, or let's be honest, Mills and Michael, you could probably do it, but is that your highest and best use in a 90-day process? Probably not. The quality of earnings takes the disparate information, puts in a nice packet. Yeah, take it. Well, Mills could probably do it. I'm terrible at accounting, and that's intentional. I don't want to have anything to do with it. Well, Ellie, you bring up a good point in terms of time and turnaround time. You know, in the Q of E providers that I've talked with and interacted with in the past,

a lot of the value add and services, hey, look, you have other things to focus on in this due diligence process. As long as we get access to a good data room, we're going to turn things around in. Help us understand what those expectations are for most buyers, because time is short. and there's a pathway to close. And if there's going to be any red flags or hiccups, you want to get them out on the table as early as possible. So for most of the deals that I'm doing, they're around $2 million in enterprise value. Now, we go up to $70, even working on some $100 million deals.

But if I did the average, it's about $2 to $3 million. In that case, the financials are typically terrible. And one of the biggest differentiation points is me being a former buyer. and entrepreneur, we can get data quicker than a typical CPA firm because of the way that we go at it. We're speaking eye to eye with the owner, and we just have a lot of creative ways to get the data. So what used to take two weeks, you know, you're pulling, you're asking, you're getting a bunch of printouts. We can typically get the data in three or four days. From the point where we get the data, we land our quality of earnings in four weeks.

So we can get bank statements, financials, taxes, and probably two or three other things. We can start our process in four weeks we're done. What you get with the quality of earnings is the packet of information, but really what you're trying to do. Another way that we differentiate our service is typically the quality of earnings used to stop at here's the trillion 12-month EBITDA. So here's the cash flow that this is made last year. Here's the working capital pay. Hey, buyer, go forth and be great. I know from my personal experience, when I was getting in quality of earnings, the question I was trying to answer is, is this business worth when I'm paying for it?

which is a function of trailing 12-month EBITDA, has some implications around working capital, but really is this business worth what you're paying for? And so we take it that extra step to talk to our clients who are often first-time buyers about now that you have this 30-page document that you honestly may or may not understand fully, here's what you need to know,

here's what's interesting, but ignore it, and here's the implications for should you pay this price for this business. Yep. can we talk about cost? I know that you don't, I'm asking you to kind of spill the beans, so to speak, but what does somebody need to budget and plan for, for let's just say, kind of base case financial Q of E. It sounds like $2 million enterprise value deal. That's much smaller, I think, than where most providers will go. So I hear you. That's pretty different. Help us understand how much does somebody

pay for something like this? Sure. So there's a couple of, levels of diligence. So if you want to do the quick and dirty, which leaves some risk on the table for you, but I understand because when you're paying for it yourself, it matters. Five to $10,000 can get you some piece of analysis. For us, it'll be a proof of cash. For others, they'll do a mini workbook. It's not going to be the whole thing, but five to ten will get you something from a third party that you can consume. If you want to talk about a quality of earnings where you not only understand the cash flows of the business, but really the trends, because once again, you're not buying last year's cash flow that's in the report.

You're buying the next five, ten years, forever years. And so really it's how the past and forms the future. That's going to cost somewhere 15 to, on the high end, if we're talking Grant Thornton, Deloitte, PWC, or even top regional firms, it can be over $100,000, depending on who's doing it in the level of specificity. In the S&B market, I think the range is a bit smaller, probably 15,000 to 40, 45 is probably what people are paying. And why is there a range? There's a range because each firm's process is different.

It involves different resources, different amounts of work. The scope is slightly different. The report is slightly different. The way you'll feel about the service is slightly different. And so it just depends on what you want to pay. And then if you want to get into added services, you know, I want a detailed look on inventory or whatever, then you're talking sort of higher than that. And I would think deal size, right, plays a big part in this.

If you're a $2 million enterprise value deal, just Q of E and transaction costs as a percentage of the deal, right, it starts to probably bump into something. But if it's a, you know, $5, 10, $15, $20 million enterprise value deal, the QAV is probably going to be a little bit more involved and maybe more comprehensive just as a function of the deal size? Here's what's funny, guys. I'm going to disagree a little bit here. Good, good.

None of my clients can stand to lose $2 million. None of my clients can stand to lose their house. Most of their partners will have a really hard time swallowing their kids not being able to go to the schools, the house not being theirs anymore. And so what's interesting about and why I love the part of the market that I serve is the private equity market is investing other people's money. And typically there's no personal guarantee. So it's a quality of range a great tool for that market. Absolutely.

But the people that I focus on are those that are putting up personal guarantees, first-time buyers, who really are going to have a hard time even digesting a clean set of financials, let alone a messy one. And also need help with the process so they don't get. had on things like there's no fixed asset list or we do accrual financing or we do cruel financials but they look like cash or other big things. So really at a $2 million deal, a $20,000 quality of earnings is 1% of the deal. So would you pay 1% of $2 million bucks to protect your interest? I think everybody would say yes. The challenge sometimes is is the buyer willing to put the cash up up front. And I think the smart ones are. This is an investment. This is a bet. Any other investments you made, you do the research. So if you can't do the research in this capacity,

you still need to get the research done because you can't stand to lose. So I think what's nice about the market I serve, that money really matters to those people. Yeah. What about the timing, Elliot, of being, right, if I'm a buyer and I'm engaging Q of E, when do I, I need to expect to pay for that because obviously cash, you know, preservation is really important, whether you're self-funded or a funded searcher or just doing a deal on your own. In the grand scheme of things, you could kind of imagine a scenario where the Q of E and the legal is getting rolled into the transaction cost, but you obviously have to get paid for the Q of the Q of whether the deal closes or not. Talk to us a little bit about the timing of, you know,

what people should expect cash outlays was? Sure. So there's a range here. A lot of the bigger firms are willing to roll the fees until the deal closes, mainly because they have bigger budgets, they also can pick up other services to kind of cover their behinds there. Some smaller businesses, me being one of them, we have real expenses on every piece of work that we do, so we can't float the cost until the deal closes, particularly on a

$2 million deal, I would argue the financials are significantly messier than the $10 million deal. So even though the deal is smaller, the stuff that we're ingesting is crazier. So, for instance, what we do is we charge half of our fee up front. And then we have a four-week process. So at the end of week one, we do an executive summary where we spread all the numbers. Typically, we're pretty close on a proof of cash or recreating the financial from the bank statements. And we schedule a meeting with our clients to say, hey, look, here's where we are. Week one, we get rid of 80% of the deal breakers.

So if something's like grossly off, we're talking about it. And for those deals, if the stuff is that messy, we just stop the process and give them half of their half the half back because they've only been in for four weeks. So we prorate the full amount over four weeks. And then if we continue going, it's a different thought process now. So if you know that the business is plus or minus the size that you thought it was, now, now. instead of thinking, am I putting money into a deal where the numbers are fictitious, now you're in the land of how do I know if I should make a decision to make a one to two or three million dollar bet? And typically the buyer's willingness to pay is different. However, deals end up breaking

up. And one of the ways that we handle that is for people who have been our clients, oftentimes we're working on a second or third deal. And we don't charge them as much because we kind of understand, like I've paid those fees myself. So there's kind of a gammon of how people handle it. The thing I would caution people about is ain't nothing in life free. So I've seen and I've heard situations where you might get your quality of earnings rolled into the deal. And let's say one or two deals blow up and you're so happy that you didn't have to pay. But now you need a QOV done in three weeks because the seller's about to bail, you're trying to push your provider to do a special piece of analysis. They're already three QOEs deep. Their business instinct is not going to be to do extra work

on your deal, and they're not going to be able to tell you that. But you're still making the same bet. So I would caution people about generally, can you do things to push the fee? Sure. But if it's really your money and your bet, I think you want somebody who's looking out for your interest in getting paid. For instance, if you're going somewhere and you need security, Do you want security wondering if they're getting paid if things get hot? I don't think that's the time you want somebody to say, hey, man, I don't think I got paid enough for this. So be careful. I like it.

I like it. What about instances, Elliot, when I've had cases where sellers will do a sell side Q of E ahead of time, typically upmarket, right? It's larger deals that people are willing to spend, you know, that kind of money on the front end as almost just, hey, point out my blind spots, show me what I look like in a mirror to potential buyers. What's been your experience with that? Is it helpful? I mean, I know for me as a buyer, if I'm looking at a deal and they say, hey, look, once you get into the data room, we have a sell side Q of E that shows some seriousness, some buy-in. I love it. And I know the CEO of one of the

largest business brokers firms in the nation. And he pushes all of his brokers to do it because it streamlines the deal. I know it because when I was a buyer, they'll same as you. I would think in most of the deals, the numbers were plus or minus 30%. So a range of 60%, right? When I see a sell-side QOE, I know the seller paid for it. So there's going to be things that are going to be favorable for them, but now I'm thinking plus or minus 5%. And so now when I'm making my offer, now when I'm doing diligence, now when I'm investing time to go visit with the seller, talking to talk to you, talk to my financing sources, I'm able to do significant pieces of the process earlier, which makes it better on the seller. So I think it's a great investment. I think it can be a hard sell for

sellers, but I think it's a lovely thing when you can get your hands on it. Elliot, where other ways, what are the other ways I can use a Q of E report in terms of kind of lubricating my deal to get done? Obviously, you know, I can validate my own financial model that I've put together based on what you have and validate what the seller tells us, what other ways can I use it? Does it help me with banks, with potential LPs, investors in my deal? Like, what are the ways you see your reports being utilized? Yeah, so I'll answer that by taking a step back. A lot of the S&B world hasn't been taught this, but one of the things you have to be careful of, everybody wants to show their financials

to their capital providers right away because the capital providers want to see it right away and can't wait to see it is what they say. But when you hand messy financials to a banker on an SBA loan or a mezzanine lender on a bigger loan, what they're having to do is more work to get to something and the something on day one stinks. And so now they're making assumptions

and telling stories about your deal before you had a chance to understand what it really is. And so you get into some trouble. I've had a couple of clients that I advise to not show their capital partners, the data until we got a little bit into the QOE, they went against those wishes and their deal blew up because the capital provider just couldn't consume the data as it improved in its clarity. So to answer your question, Michael, every investor wants to see clean financials.

If you can look at a report and in two minutes understand what's the revenue, what's the trends, what's the profit, what are my risk? You can not only make a decision, but you know the person that brought that information to you is serious. Whether they did it themselves or they paid for it, they're not playing around. And when you can call them and say, hey, I have three questions. And that person knows those questions because they've been through long discussions to present this report. Like the heartbeat of a typical investor goes from like something that's jumping out of their chest to something that's pity-pack. And you can get through investment committees quicker. And so the QE helps you

with your SBA loan helps you with your equity if you're doing even like smaller deals where there's other people in the equity stack. The other thing people don't realize sometimes, Michael, is you can use a QOE to show your seller that you're invested in the process. So a lot of times a couple of weeks into my client's process, the seller doesn't say he's scared and doesn't think the buyer has money, but that's what's happening. They're asking for proof of funds. They're asking, does this guy have any money? And the broker's calling him and asking, and funny things. One way to help the buyer or the seller recognize that works being done is to start the QOE or reference to QOE is, look, I'm spending real dollars on analysis on this deal.

I need to get to a finish point, but I'm not wasting my time and money. So give me the time. And I've seen it. It worked really well because entrepreneurs understand when somebody invests money to figure something out. Yeah. Well, maybe to invert that a little bit, a lot of sellers get like deal fatigue, right? Where they, they weigh underestimate how much work it is to actually sell a business. Buying one is relatively easy. In my experience, the selling is like super, super hard and people way underestimate how much effort is required.

Like, how do you kind of manage that fatigue or try to like minimize it, you know, because you can't do your job unless you get the right information from the seller? So, Michael, I wish I could get some of my clients on here to tell you, we are wicked, efficient in our process to not bother the seller because I know. I've been there and I promise my clients I'm not going to blow up your deal or upset your seller. How do we do that and how do we do it differently? Our due diligence list is just as robust but shorter. There's fewer items. We really anchor hard on getting Quickbook backups files so we can do 80% of the analysis without having to bug the seller. We have far fewer questions. We only

involved the seller and questions the seller knows, I think oftentimes accountants can ask the seller cash or accrual accounting questions, like this guy who, you know, graduated high school and started selling trucks 20 years ago, knows cash versus accrual accounting. So we'll say it's at the bookkeeper, or is it the CPA. And so we'll have one to three calls with the seller, typically 15 to 45 minutes. And so we try our best not to contribute to deal fatigue. Others have way long list and hour plus meetings and it can add to deal fatigue. The other thing that happens is that the sellers don't like this process. And so sometimes us just saying it, hey, I know this is not fun.

But if we get through it, you're going to get a big check. I think reminding people of that helps manage why everybody's on these calls going through this meticulous data. Yeah, dig it. So just to step back a little bit, you talked about requesting things like the QuickBooks file. And it just occurred to me that at the size of deal that you're getting involved in, right, this very small Main Street, you know, two to, two to five million EV type size,

it, you actually have a huge advantage compared to say some of the bigger Q of E providers where these big enterprise 50 million, $200 million businesses, they have stuff in all kinds of crazy systems, spreadsheets going everywhere. So beyond kind of that, that QuickBooks hack that you can do at this size, what other things are you typically requesting of a seller and examining in terms of doing your work? The big items are financials in any form. So QuickBooks is prevailing, but there's SAGE software, there's P Street software. And sometimes I've had a couple this year that had no software, it had spreadsheets, Michael. So all their invoices in one spreadsheet, all their costs and another,

which I actually love because it's simple. And we know how to get around that. bank statements are key in taxes. And the other things that help, you need to understand the employees, so like W-9s, 1099s, those things. If there's any kind of budget or audit, so things that the sellers have done to project or to further communicate, how the financials grow, shrink, are expected to move forward. And a few other questions about debt, ownership, and really we get into a little bit of marketing to understand how the revenue is created. Because once again, we're trying to answer the question,

is the business worth for our clients paying for it? And so not just revenue trends, but sort of is it ad revenue? Is it marketing revenue? Is it events? What's driving? And so we understand. So those are the core pieces of data. And then you didn't ask, but I'll just go into it.

What we're trying to do is triangulate data points from different sources. So I'll just talk about revenue because it's the simplest one. So revenue is on your taxes. as revenue. Revenue is in your financials as revenue. And then it's also the sum of all the deposits in the bank, net transfers, and a bunch of other things that I'm not going to bore anybody with. IBADA is on the income statement from the QuickBooks. So revenue minus cost, adjust EBIDA, right? It's also on the taxes, you know, taxable income, make some adjustments. It's also in the bank statements. And so we start looking at two or three different ways of each data

point. So when we present the data, the number is not just from one source, it's from three that have very different reasons for existing, very different governing features. And my favorite one is the bank statements because you can't walk into a bank with five bucks, but say, hey, tell Mills, it's 100. So the rigidity of the bank that frustrates us sometimes actually gives, I think, the best view of diligence for most quality of earnings analysis. Yeah. So what, have you caught sellers? like lying about stuff. I mean, I know if you supply a fraudulent tax return, that's a problem.

That's a big problem. You can go to jail for that. But is there other things that you're seeing where, you know, it's just been clear that the seller was misrepresenting stuff to potential buyers? All the time. All the time. And that's not to scare people. So here's how I categorize it.

Sellers selling businesses know they're selling at a multiple. pull of cash flow. In my world, three to five, but let's just say seven, eight, whatever it is, right? So it's probably the highest motivation for any reasonable man or woman to lie in their whole life. Because every dollar, they convince a buyer that's there that's not, they don't get a dollar for dollar back. They get three to five to eight times that dollar. So you have to understand the playground that you're in, right? Now, you get some financials from the seller or the seller's broker and they're messed up. So now you have to diagnose who's at fault. And here's why. If it's malicious and meant to defraud you, you have to stop immediately no matter what the

numbers say. So if we're in the land of fraud and malicious intent, like cut, do something else, right? If we're in the land of seller isn't financially sophisticated, hasn't overpaid for a bookkeeper, pays a tax person, $2,500 you're going to do taxes and things are messed up, you have to realize that might just be poor financial systems and people who don't need to know because they spent the money, they know it's there. Then you have broker impacted craziness, right?

So this is seller presented fair financials to broker. Broker did magic tricks, pulled rabbits out of hats, and presented something. And I'm not saying all do. This is just an example. And now you have to say, okay, did the seller give fictitious stuff or did the broker juice this up so much that the broker's the fault? And if you kind of understand why that's important, it's because all of that happens, Michael. And in fact, a lot of times it's something simple. Like the seller says, hey, we're on cruel

financing, right? And you look at it and it's accrual-ish and way closer to cash. Is that malicious shut the deal down? No. Somebody says, hey, I would have was 500,000 bucks. You get in there and you realize they actually spent some things they should have capitalized it, vice versa. Is that malicious? Probably not. So I would say most times, like 70% of the time, the false level of the financials are like 15% or so, where most people still push through the deal, maybe renegotiate. But in a few rare cases, it's out of control wrong.

Super scary. Well, and then, so I'm just curious, like, how, how does a firm like yours organize internally? So do you, are you a one-man shop with people that work with you? And then I've seen, you know, I've seen Palm Tree and Grant Thornton and folks like that and how they do stuff kind of at scale for bigger deals. And, you know, they deploy a very, you know, they've got pods of people. They deploy on tasks and that sort of thing. So, you know, what are the different models of how, say, a firm like yours is operated that that operates down at the lower end of the spectrum versus. versus kind of the mid-market and then the high-end firms? Yeah, we focus and design our business around helping the first-time buyer who needs a real personal touch. So I'm still at the point of my business where I deal directly with each client because a big piece of what I do is translate these quality of earnings reports that people understand at different levels to information that people can make decisions with and get comfortable with. I think I'm almost like the key comfort officer in deals for people. How are we set up? I have a team of 21 accountants to work for me, and they work in deal teams that they've

been working with for years. And so depending on the deal size and the deal industry and who's busy or not, you know, I'll push the deal to one particular accounting team. Having ran so many processes, I'll push them to get things efficiently and clearly to the client so that we're not going back and forth on a new show. we're focused on the big stuff. And then, of course, to keep the dollars coming inside, I have a few marketing folks working for me too.

So at some point, there'll probably be another level of management, like a general manager that come in and manage some of the client relationships, but right now I'm still managing those. Yeah, dig it. And those are all, you have 21 full-time folks working for you? That's amazing. And some of them are a little bit less than full-time. I mean, I'm dealing with the same labor shortages that every,

everybody else is. So part of the reason why it's 21 is that, you know, people just, people are people, employers, employees. So what we try to do is always have extra capacity because we have a lot of repeat business. And so it's one thing to have a new person come in and want a QOE and we don't have capacity. But I just had a former client come and say, hey, I got four more QOEs, Elliot. Do you have capacity? And I always want to be able to say yes. Yeah, totally dig it. So what, you know, what advice would you give? for someone who is shopping for a Q of the provider, right? Obviously, they should choose you, but let's say you're too busy.

What advice should a buyer look for? What would you advise to them in terms of how they select the right provider for them? Yeah, and let me just throw myself out of it because I think the process is the process, same one I used. Everybody, I think, uses this if you think about it. If you know someone that does good work, use them. If your friends or somebody you trust has someone that they've had good experiences with that's in your price range, use them. If you can't get word of mouth, then you should look at places that have some mechanism for ratings. So, like, SearchFunder has a great mechanism to rate people.

I think SB Twitter has a great job or sort of thumbs up, thumbs down people. So you want to get some information on other people good or not. If you can't really get that, then I think what you want to look at is when you talk about, when you talk about, talk to the person at the firm, are you talking to the person that's going to manage your deal or not? Do they know the team that's going to be working on it? And have they done deals your size, your industry recently? So one of the things you should ask for is a sample report. People can get messy around that, but I just call BS. I think if you want to charge somebody, you know, $15,000, $35,000 of their own money, they should be able to see that you can complete the work

on similar deals. And then as a buyer, what do you do with that report, Elliot? Like, what if I don't know accounting and I'm looking at some weird report? Well, here's the thing. As a buyer, you should look and say, if I was making a decision on this deal, could I make it with this piece of information?

And if you can make a decision based on the information in their report, that's your person. And so it shouldn't take all 30 pages to get to an answer. And the clarity of the writing, the presentation, all matters because as messy as the financials may be on deals, the buyer deserves a clear picture that they can actually make decisions over. So that's how I'd go about the process of finding a good provider.

That's really good. And I think, I mean, this is a really good kind of crash course on, you know, hey, at a 30,000 foot level, what do you know, what do you need to know, and where are those blind spots for buyers? And obviously, part of your business, I would think, Elliot, is fielding these kind of questions and inquiries and helping either, you know, validate people and, you know, qualify them or disqualify them and say, hey, you're not, you're not far enough along. One kind of closing question for you that I'm curious about. If you had to tell buyers one thing deal related that is not on the

topic of Q of E or due diligence, what do you want to tell them? You sit in a really interesting seat and you see a lot of deals. What's your kind of one piece of advice that's outside of your sphere? That is an amazing question, Mills. I tell buyers that they need to carve out the time to be present for this diligence process because it matters so much, either to their investors' money or their own and personal guarantees. And if they can't devote the time themselves to make sure that they have support to do it, and the reason why that's not a QOE thing, it's a every piece of data you get from letter of intent to close is a piece of data you need to evaluate in the context of can I trust the seller or not.

Is this business set up appropriately or not? Do I get warm fuzzies with this one or do I get queasy butterflies? Do the employees run away every time the seller walks around or are they coming into that person's office asking questions? You got to be present. So I tell people to put the clipboard down, spend the extra time. People want to fly in, spend an hour, get out. Oh, I had a great meeting. Spend a half day.

I just say be present because although my buyers, the typical ones or first-time buyers, they might not be expert deal folks, they're smart people. When you're willing to put down a million dollar bet of your money or somebody else's or a $10 million bet, you're wicked smart with a lot of entrepreneurial vigor. Leverage that to be a smart evaluator just like you would evaluate. way anything else. Man, that's really good. And you're right. You sit down for a site visit. There's numbers flying around in your head. You got this checklist you want to work through. You know, put your clipboard down. I really like that because there is a lot to just say, hey, read the room,

feel out the intangibles. What kind of subjective, you know, vibes are in this business and with this seller. That's a really good word, man. One thing I'm going to toss in here. There's another podcast out there that had a guy that bought a business and didn't realize the seller was like riding around in the truck doing the work all day, right? And the question was asked, well, what could the buyer have asked to figure that out? And when that podcast host asked me, I was like, there's nothing he could have asked. Nobody's going to tell you certain things. So the second thing I tell people, Mills, is that you should be thoughtful about the list of things the seller won't tell you. Like, my bookkeeper is incompetent and I wish I could fire them.

I spent all my time in the Bahamas fishing, and so I don't know squat about this business, but I can't tell you that. I spent all my time in this business, but the only way it'll sell with an SDE level that's appropriate for the broker is to say that I'm remote. I'm not going to tell you that. And so a lot of people who are sort of academically wicked smart from their previous life, in this one, there's a lot of things that people can't tell you. You have to actually evaluate yourself. That's good. That's a good inversion tool. Right. Invert. Always invert. All right, Elliot, as a parting question, we always ask, what can our listeners do to follow along with your journey, support you, and just be attuned to what you're doing?

Cool. Well, I want to support them. So I am on Twitter at Elliott E. Holland, E-L-L-I-O-T-T. I'm also on search funder. My website is guardian-dudiligence.com. If you type in anything close to that, and you're, your search bar you'll find me and then i'll give some value for folks if you're thinking about a loi putting an offer together doing a valuation on the business you can go to offer from elliott com and i offer free letter of intent and company valuation reviews so if you're kind of figuring out if that's good right left or up down um i'm more than willing to help you out with that i'd love to be a support system for anyone looking to do a deal and thanks for having you guys Thanks for being here, man. Those are good resources.

And thanks for joining us. This is a good one. Yeah, I have fun. All right. Talk to you later.