Heroes in Business - Andy Cagnetta CEO Transworld, top ranked business brokerage, INC Magazine Franchise 500

Episode Date: December 9, 2021

What you need to succeed in the world of franchising. Andy Cagnetta, CEO Transworld, top ranked business brokerage company, INC Magazine Franchise 500 is interviewed by David Cogan famous celebrity host of the Eliances Heroes Show broadcast on am and fm, internet radio, online syndication.

Welcome back to Alliances Heroes, where heroes in business align. To be part of our super community and find out more about Alliances, visit www.alliances.com. That's right. You know what I never shared with you? That opening music was made by a couple of guitarists that are members of Alliances. was made by a couple of guitarists that are members of alliances and also by the way speaking of that it was so great because we continue to get feedback when i had on billy morrison the guitarist for billy idol and west gear guitarist for corn so make sure you check out those past interviews by going to alliances.com and click on the radio section that's e-l-i-a-n-c-e- alliances.com and click on the radio section. That's E-L-I-A-N-C-E-S.com. The only place where entrepreneurs align.

Okay, so what are you gonna do when you build a business and you're ready to sell it? Or you're ready to buy it? Or you're dreaming of it, of what you need to achieve to be able to buy or sell and that whole industry, because there's a lot of it, of what you need to achieve to be able to buy or sell. And that whole industry, because there's a lot of motions, there's a lot of things with numbers and much more. And we have with us the expert, and I'm honored to introduce you to the Alliances World here today,

Andy Cagnetta. He is the CEO, are you ready, for Transworld. They are the top ranked business brokerage company in 500 franchise 500, and you can reach them at tworld.com. Of course, we'll have it on our website at alliances.com. So Andy, welcome to the show. Thanks for having me. I'm really excited to be here. Yeah, this is going to be great. Okay. So, I mean, I have so many things to be able to ask you in that. And it's just so many things that are going on. So first of all is so many things have to take place for this match, right? Of someone buying and someone else selling a company. How do you go about, first of all, handling the logistics of that, of the person and the emotions and everything behind them when they're on the point of selling and or buying?

Because you represent either or side, correct? Yeah, correct. We're managing the process. And it is a very complicated process. And sometimes you have a hat on, you're helping people do due diligence, and you're talking about numbers, and're helping people do due diligence and you're talking about numbers and you kind of have an accounting and valuation hat on. And sometimes you have a hat on that you're a psychologist because like you said, it is emotional. It's their baby. It's their future. I mean, it's all these things wrapped up into one and then it's a lot of money. So people are very concerned about moving forward. And that's what we're here to do. We're here to help people, you know, take their shot at the American dream,

take a piece of the apple pie and, you know, buy a business or sell one. What are right now, what are the hot businesses that people are buying and or selling or are they the same? You know, not a lot has changed other than the demand for businesses has exploded. And there's been, you know, there's a lot of money on the street. The great resignation of baby boomers, of millennials out there and baby boomers needing to sell. So we're still short on inventory. So there's a lot of businesses that sell very quickly. But of course, always the things that are hot are, you know, technology and service businesses, things that people could jump into that maybe they don't have a big background in or they have other people to help them.

Where are you seeing as far as the buying opportunity? I ask that from the fact is given everything going on, you know, within the restaurants and, you know, the physical locations is now the time to buy. Are they low? Do you know what I'm saying? Kind of like the stock, you know, like when do you buy? When do you sell? Is there a timing?

You know, there really isn't a timing. I still think buying a business is an incredible deal for most people. I mean, you're buying a small business. Let's talk under a million dollars of EBITDA. We're talking about mom and pop businesses, the landscaping businesses, the restaurants, the small medical supply businesses, distribution, whatever it is. You know, you're talking about buying it at a two to three time multiple. You're making your money back in a couple of years. It really still is a good deal. Yes, do you have to pay a little bit more than you had to pay a few years ago

and there's not as many bargains or there's not as much on the market, but the market's getting better at, you know, more efficient. I should say, you know, the internet has made it much more, gives you much more ability to shop the marketplace. So it's still a good deal to buy a business, but you have to work at it. You have to get educated.

And again, we're talking with Andy Cagnetta, CEO of Transworld. Go to tworld.com, twrld.com or eddyalliances.com and we'll provide the link to you. Andy, I got like a million questions and we're getting questions from our listeners and stuff, ones that were pre-submitted. I mean, it's a hot topic what you're in, but I want to take a step back and stuff, ones that were pre-submitted. I mean, it's just, it's a hot topic what you're in.

But I want to take a step back and go, how did you become, you know, the CEO of Transworld? Again, the top brokerage in the company for, you know, Inklist and all of that. I mean, that's a big job, big responsibility. Yeah, well, it started small. I mean, I was a small business owner, bought and sold a small business. I mean, literally bought it for $45,000, sold it for $65, well, it started small. I mean, I was a small business owner, bought and sold a small business. I mean, literally bought it for 45, sold it for $65,000, moved to Florida at the begging of my wife who grew up down here and looked to buy a business. Didn't know what a business broker was, but there was a bunch of them down here. And one of them invited me to join the firm as a salesperson. I worked as a salesperson for two years and I looked at him and I said, let me buy this company. So we bought the company, grew from one office to 10 offices here in Florida, which we still own and operate. And then with a partnership with United Franchise Group, who own Sinorama and many other brands, they helped us become a franchise and, you know,

taken us worldwide. And so now I'm the CEO of that company as well. Wow. So someone has the opportunity now to be able to buy a franchise of Transworld. They do. Yes. And we have amazing franchisees. Do they all talk to one another for listings and that, or how does that all work? It is a very dynamic marketplace. We have a lot of ways that we come together. We have an incredible CRM system that we use and we're just really sharing deals. That's the whole idea is to have that ability to find the right buyer and find the right seller. We want to do good deals for good people. You want to put people in a position to succeed and we want to give them those tools. Right, right. No, absolutely. Great things. So

what are you seeing as far as the multiple factor when companies are being sold? And one industry has a stronger multiple maybe than others. And for those of you that may not understand, we're talking about, is it typically X times net, correct? Yeah, it's usually a multiple of, again, Yeah, it's usually a multiple of, again, small businesses, sub-million dollar EBITDAs or sub-million dollar net. You're talking about a two to three time multiple. Once you get toward the million dollars, you can get up to a four or five multiple. And if you get much bigger than that, the multiples can go up. So as the quality and quantity of earnings go up, so do the multiples.

And what we're seeing is, you know, demand pressure. I mean, there's people who want to buy businesses. And so that multiple has been creeping up a little bit, not significantly. We talked to, you know, the people that do SBA loans and do valuations for them, and they have not the value. The average sub-million dollar business would be 2.7. All right. So now we've got ones, some of these questions were submitted ahead of time. Investors, they're looking to buy.

Where do they start? How do they know? What are kind of some of the key factors? Do they look at industries? Do they look at net profit? Do they look at gross revenue? Do they look at ones that can, you know, online,

offline ones that can survive if there's another something going on in the world? Yeah, all of the above, right? So you're looking for a good deal. And I always say to people, you have like a report card, right? You know, something that doesn't have a customer concentration issue, something has a good history, something that has been around for a long time, something that's in a growing industry. All those things come into play. And the way to is dive in. You know, you could go to our website, tworld.com.

Of course, it look at deals. But biz by sell is one of the bigger places out there that you can look at businesses. And what I tell people is just go out there and start looking. Of course, work with me. Send me the ad numbers. I will hunt those businesses down for you or one of our staff will, and we will, you know, start getting into the feel and we could understand what you're looking for and match you up to the right business. All right. That's great. I mean, again, it's just, it's such a thing. How long are you seeing as far as from the, when the match is made for the due diligence and all that to take place and someone to say, I've got it or I sold it? Yeah, it's 30 to 90 days to get a deal done. Once everybody has

come to a meeting of the minds, you know, the average sale right from they've decided to sell their business and they've listed the business with us till the sold date is usually about nine months. And then how do I know as far as whether do I buy an existing business or do I buy a new franchise or do I buy an existed franchise? Is it based upon budget or experience or how do you guide people through that? Because it's incredible how many different things there are to buy. Yeah, you have opportunities, right?

And so entrepreneurs, I always say the people, if you woke up on Christmas or Hanukkah morning and you opened up toys and you read the instructions first and you like to follow instructions, maybe you're a franchise buyer. But if you woke up in the morning and opened up your toy and played with it and broke it before it even started and then fixed it yourself, you might not be a good franchise owner. You might

want to do something that's more entrepreneurial, something that you could create and do whatever you want. So it really, and it comes down to, you know, again, I own a franchise now and I started as an entrepreneur. So there there are great investments in both. It's about having the right fit and the right risk tolerance and the right expectations of what you're going to make into the future. But it all boils down to if you're going to buy a business, it's going to be work. How about funding? How do people go about getting funding for buying a business? Yeah, I mean, these days, there's lots of ways to get it funded. The SBA program has been very prolific over the last several years.

At the beginning of economic downturn, about 2009,10, they went from $2 million to $5 million. So there's a lot of available capital for an existing business that's making money on the books that you can prove to a buyer. And you have good credit as a buyer and you fit the profile. You can get SBA financing by business with about 10% to 20% down. to 20% down. There is, you know, if that is not available to you, sometimes there's seller financing where the sellers will finance the business themselves. And then of course there, there are some other ways to leverage your, you know, retirement account with, there's a couple of businesses, companies out there and they're good programs. It's just a matter of how you want to do it. So is it best, uh, where are you seeing as far as

most of the profit coming out of what I mean by that is, is, is it, and people buying, is it the brick and mortar? Is it the online? Is it the service industry? Like, is there, or are they all? They're all, they're all kind of hitting their stride. Of course, traditional retail might be something that people are afraid to go into. I think that there will be ways that people make money in retail moving forward. It just may look and feel differently in the past. But those service businesses, construction is huge right now. Dep depends on where you are in the country, but most places, construction is, you know, housing is still in demand. So anything that has to do with decorating or contracting or building or servicing homes is hot business right now. And again, you're listening, watching me, David Kogan,

host of the Alliance's Hero Show, interviewing Andy Cagnito, CEO of Transworld. And thank you again to one of our sponsors, Hirect.com. That's H-I-R-E-C-T.com. Chat directly, hire quickly using the first chat-based app for startups. So make sure you go ahead and use them. I know many people that do. They're happy with it.

So use HireAct.com. Andy, it's amazing the type of business. I really love the type of business that you're in. And having had the experience of having sold businesses that I've started and stuff, I got to tell you from a seller standpoint, it's almost like you're giving your child, you're almost selling your child because it truly becomes a part of you. I have never been on the buying side of that. Can you maybe go

through kind of what emotions, what things are going through is when someone is buying an established business, so not a new franchise or that buying established, how do they best integrate quickly with if there's employees and customers? Communication. They have to do a really good job of coming in and doing the right thing. The employees specifically, everybody's going through hiring issues right now and human capital is in demand. So people don't want to lose people when they buy a business. So the first thing you got to do is communicate, tell the employees that you're

there to make things better, to grow things and actually give them more opportunity. You might even want to give some people raises right off the bat. A lot of owners that are on their way out were kind of burnt out, maybe not paying attention, not, you know, making it a great place to work. So there's plenty of opportunities that buyers could come in and make it a better place to work and to live and to earn money. So there's usually opportunities for that. And on the customer side, you know, a lot of times you just want to keep it as low profile as it is, keep up the good service, introduce yourself perhaps as a new partner or somebody that's going to help expand the business or even make it better. And, you know,

90 something percent of the time, everything is pretty seamless when we're, when people are buying businesses. And what about those that do carrybacks? Are you seeing as far as what's going on with those carrybacks? Do they eventually get those carrybacks? Do they get a percent? Is that something that's negotiated or what percent are there any stats out there where they don't get it? Almost a hundred percent. Can you explain, Andy, before we go into that a little bit, what a carryback is for maybe we may have some listeners that may not know. Yeah. So sellers, when they sell a business, they're probably not going to get 100% cash at the closing. So there's going to be some seller carryback or a seller note that they're going to have to wait for the money.

If it is 100% cash, even then, sometimes there is a note or something held back for liabilities that a buyer might come in and the seller might not even know of the liabilities, but the buyer wants to feel good about it. But even the SBA, when there's an SBA loan in effect, the banks want the sellers to have some skin in the game just in case something goes wrong and their sellers needed that they come back. And, you know, again, 99% of the time we see those sellers get 100% of that money plus a nice interest rate these days. And, you know, and the buyers feel good about it. It makes it, you know, you talked about earlier about the buyers being

very emotional and it being scary. I, you know, I always tell the sellers, listen, you know, everything about your business, the buyer knows nothing. So they're scared. They're coming into a black box. You know, you're showing them your financials, you're showing them that they're going to do well, but they don't know that. And so you have to give them a little comfort and seller carry back is a great way to do that. Andy, I think it's incredible. You went to go work for Transworld, then you bought it. Now you're expanding it and growing it. I mean, that like, do you ever just sit back and go like, what a story? Yeah. You know, it's I pinched myself every once in a while. It's, it's been an incredible ride. I have an incredible team of people here. That's what it's

all about. Putting, you know, the right people in place, giving them the tools to succeed. And I've been very fortunate and I've had some, you know, great family as well to support me. And talking about family, what kind of advice do you give to those that, you know, you know, young children, you know, it's everything's on the internet and they're reading a lot on that. And, you know, people, you know, a lot of them, I've seen it either want to go into the gig sector or be their own boss or own their own company. What, what, what kind of advice do you have for children who want to make an impact in the world like you've been able to do? Yeah. I mean, I've told my own two daughters, I, you know, just go out there and do it. I mean, there's, you don't worry about that. Something you're picking. I see this great consternation that the people are, are picking their, there's, you don't worry about that. Something you're picking. I see this great

consternation that the people are picking their, what's going to be their career forever. And it's like, no, that's not going to be the case. I have a wall full of cards of all the businesses that I was in before I came to trans world. And there's at least 18 of them. And I was in there for a year or something, just trying different things out. And I always tell you, and that's great. Be a gig economy person and check out an industry. And if you like it, you might want to buy a business in it or expand your own business in it. I mean, or start acquiring businesses. There's so many ways to get into business. I think it's super exciting for young people. And I think young people should just get over it. Don't worry about it. If I have one advice for myself as a young person,

I would just tell myself to calm down. Just calm down. It's going to be okay. That's great. Well, excellent. Well, I got to tell you, Andy, you have helped companies look at their business and model the right way to grow, the right way to sell. That's a hero. Andy Cagnita, CEO of Transworld. Make sure you go to tworld.com. You've been watching, listening, me, David Kogan, host of the Alliance's Hero Show. And thank you to Hirect.com, H-I-R-E-C-T dot com. to hirect.com, H-I-R-E-C-T.com. Chat directly, hire quickly using the first chat-based hiring app or that's right, to interview,

hire candidates, hirect.com, H-I-R-E-C-T.com. This has been David Hogan with the Alliance's Hero Show..