Sam Penny (00:00)
Welcome back to Built to Sell, Built to Buy, the show where we take you behind the scenes of buying and selling businesses. What works, what doesn't.
and how to make your next deal a winning one. I'm Sam Penny and today we're joined by someone who's been on both sides of the table as a business owner and as a broker guiding others to their best possible exit. Nathan Hulls, he's a business broker and exit advisor with Link Business Brokers experience owning and selling businesses in...
industries from tech to fitness to retail with a background in accounting and computing, Nathan takes a data driven yet human approach to positioning businesses for maximum value. Whether you're a business owner preparing to sell or simply want to understand what makes a buyer say yes, Nathan's insights today will give you a clear roadmap for a smarter, more profitable sale. Nathan, welcome.
Nathan Hulls (00:58)
Sam, thank you.
Sam Penny (01:00)
Mate, before we jump into the mechanics of selling a business, I really want to rewind a bit because you've worn a lot of hats in your career. tell me, what was the first business that you had and how did that come about?
Nathan Hulls (01:12)
We go all the way back right to the beginning. The very first business I started was when I was 12 and I started a lawn mowing business with one of my best mates, Rick. And so that was back in 1991. And so I don't know the exact stats on it, but the joke goes then Jim came along and stole my idea, but I'm going to stick to that story.
Sam Penny (01:35)
Interesting. I've actually just interviewed Jim Penman from Jim's Mowing and what a fascinating story that is. today's about you. you've run companies in quite a number of different industries. You've been in tech, you've been in franchise, in retail and fitness. Is there a common thread that runs through all of these?
Nathan Hulls (01:42)
Amazing.
⁓ probably craziness. ⁓ I think the thing with me personally, and I'll talk about my ADHD brain or entrepreneurial brain, ⁓ I just love, I love the game of business. I love the idea of building something from nothing. I love the idea of solving problems from a capital or an economic perspective, helping people solve, you know, the more problems you can solve, the more money you can make. ⁓
Sam Penny (01:59)
Haha.
Nathan Hulls (02:24)
But as well as the human element and I love, really passionate about probably two things. I'm passionate about business, but I'm also passionate about people. ⁓ I love, I'm fascinated by human behavior, understanding the psychology behind why people do what they do. And so the variety of businesses for me has been more around, guess, getting my toe, dipping my toe into lots of different industries, getting lots of different experience in those industries.
It's been around identifying opportunities and finding solutions for those opportunities, I guess, each step that I've taken.
Sam Penny (02:59)
It's interesting, Nathan, I've been in business, same as you, 25 years, and I've been across a number of different industries, medical device, had a chain of hair salons, e-commerce, cheese, and I've recognised in hindsight that there is a common thread with everything that I do, it's in making people feel good. And when you've got...
this core value, which you have a very clear set of core values that we'll probably get into a little bit later. It really does align with the people that you're working with, with the business owners, but also the buyers. Now, taking your experiences of the last 25 years of entrepreneurship, what made you decide to step into business breaking?
Nathan Hulls (03:48)
It was probably scratching the itch of, I joke about it, I've had the addiction of jumping on business sales websites all my life and even, I know myself well enough now that I'll go through these cycles and sometimes they're six month cycles, sometimes they're a couple of years, but I get bored and I jump on a business sales website and think, ⁓ that might be a good opportunity, something else.
I guess, you as I've gotten a little bit more mature, as I've gotten a family and kids and realized that I can't just keep jumping from one opportunity to the next, it was realizing that combination of my passion for business and my passion for people, ⁓ being able to put myself in a position where I've got the variety, that's something that is, I guess, a high core need for me. If we talk about human needs, ⁓ I have a high need for variety, probably the entrepreneurial ADHD brain. ⁓ And so, you know,
Sam Penny (04:40)
Mm-hmm.
Nathan Hulls (04:42)
The thing that I needed to find a ⁓ solution for or a resourceful way of meeting that need was that I wasn't just, I've never been built for a nine to five job sitting in an office. I always just get bored. being able to work with lots of different business owners, lots of different types of businesses, lots of different locations, meets that need for that variety where I love working in the nitty gritty, seeing under the hood of a business, looking through the P &Ls, helping.
business owners understand what their business is worth, helping them develop a strategy for exit. And it gives me that ability to do that side in terms of lots of different business opportunities. But then the people side of things, like I said, my two passions, business and people, working with people around being able to transition into the next season of their life. And it might be transitioning out of one business to enter another business, or it might be transitioning out of business because they want to retire.
know, transition, the psychology of helping people, helping people transition, helping people get maximum value out of the hard work that they've put in over the years of building their business. Brokerage was a really good fit, allowing me to do those, to work with those two elements that I'm really passionate about.
Sam Penny (05:59)
So one of the things, ⁓ Nathan, particularly you as a business broker is that you're excellent at helping business owners exit their business. It's one of your skills. Was there a particular moment when you recognized that in yourself that you are great at being able to help business owners exit better?
Nathan Hulls (06:20)
To me, I think the exit in my mind and in my experience is really an outcome of being well-prepared. So setting your business up for being exit-ready, there's a lot of things and the things that you do with your coaching clients that allow them to be exit-ready, then the natural fruit of being exit-ready is being able to exit. in the earlier days of being a broker,
often you'll just kind of take on any business that wants to sell. And so you're working with business owners who they've woken up one morning, they're like, I've had enough, I want to get out of this thing. And so they ring up the office and we get handed a lead and we give them a call and we say, you know, yep, we'll take it on. And then they're nowhere near exit ready. They are a ⁓ dumpster fire. You know, they're just looking to get out. And so they're really hard to sell. And so they're really hard to exit. But the natural fruit of or the natural outcome of being exit ready is that exit. And so
I don't know that it's so much being good at helping a business exit as much as it is, is helping a business being exit ready and then walking them through the process in a really human way. And I guess one element when we talk about brokerage is brokerage is a pretty easy game to get into. You only need a cert four in real estate. ⁓ In that cert four you don't learn anything about brokerage. you
Effectively, you're a real estate agent who can sell houses, but you know nothing about business But that gives you the ticket to be able to be a business broker And so you know you might have a business owner who wants to exit they come to you and that type of business broker who doesn't necessarily have a lot of skills or experience ⁓ in business, you know, they list a business on the website and then they wait for people to inquire and they hope that when they send out the IM there's enough information in it that's going to entice them enough to want to buy it but
Now, there's a lot more to it than just signing the documents, putting it online, waiting for the inquiries to come in, and then hoping that someone's going to buy it. So I guess there's the art of the exit, there's the psychology of the exit, but there's also that preparation period of being exit ready that makes it easy or hard to sell.
Sam Penny (08:32)
So then have your own buying and selling experiences really shaped your approach as a broker.
Nathan Hulls (08:39)
It's working probably the harder ones, the ones that are harder to sell has made me even more aware of the steps that are necessary. so being realistic with business owners when they come to you and they say, hey, can you walk me through the process of what it's like to work with you? ⁓ Being ⁓ a bit more of a coach and a bit more of a, almost a counselor, I guess, ⁓ the accidental counselor where you're willing to ask the tough questions.
and willing to dive deeper into their business and talk to them about the things that are either going to make their business easier or harder to sell and being willing to have a process rather than just look for a listing and look to take them on because you just want another listing to take on. So, it might mean that your process pre-listing goes 6, 12, 18, 24 months where you're working with that business owner to allow them to be more exit ready.
⁓ And not just say hey, yeah, I'll take you on I'll list your business and you've just got a huge list of listings ⁓ And you're hoping that they're going to sell
Sam Penny (09:44)
So you've been a seller yourself, ⁓ but now you're really guiding the owners through the whole process. So I want to talk about what you focus on when you're representing a seller. When you first meet an owner about selling their business, what's the first thing you look for?
Nathan Hulls (09:59)
I think understanding what their motivation is, is a huge key. Understanding why they want to sell. Is it that they're burnt out and they're looking just to get out? Is it that they have created a strategy and it's part of their plan and they're ready to execute that plan? ⁓ Also understanding, obviously understanding the business, making sure that you've got an awareness of what are the elements once we take this business to market.
There's that awareness of what are buyers looking for. So what are the main questions? Pretty much straight away, you get an inquiry, you qualify that inquiry and you send out the information memorandum, which has got a higher level overview of their financials and it's got a selling story of the business. But with enough experience, you know what the next questions are going to be. so, making sure that we've got the documents prepared, we've got the... ⁓
the deal room or the data room ready. We've got all of the old chart. We've got all of the documents that we know that buyers are going to be looking for. And so having those conversations, looking for those elements, looking for what is the expectation, I think is another real key conversation. We do our own appraisal. Link has a proprietary software system which looks at seven plus years worth of actual business sales data. So we're not just basing it on accounting.
multiples, but we're basing it on real world businesses in your industry that have sold over the last seven years and how we can look for comparable sales to give us an idea of what the market is saying right now. And so, we use that appraisal as the foundation for the conversation between, okay, this is what we think the market's saying it's worth. What do you think it's worth? What would you like it to be worth? Where is the gap between reality and expectation and not just
having the conversation to say, okay, well, yeah, we'll list it at your price because we want to get your listing because you need to have the conversation around expectation of price expectation of timeframes expectation of what they hope to happen because you you want to make sure that expectations are communicated and you know, you're not you're kind of setting yourself up for failure.
Sam Penny (12:12)
It's so important, I think, Nathan, what you spoke about there of getting the appraisal done early, because the whole process of getting a business ready sell can be 18 months, two years, maybe three years to line everything up and getting the appraisal done as your very first step is so important because it lets you know what's good and what's bad about the business. But also from the
the business owner's perspective, how do you help them see their business from the buyer's eyes?
Nathan Hulls (12:48)
Yeah, look, I guess that conversation around helping them understand what a buyer is looking for. Now, what a buyer is going to ask, what questions are they going to ask, what documents are they going to look for, what are the things that a buyer is going to be wanting to know about their business. you know, having those conversations as early as possible. The other challenging thing, I think, from an appraisal perspective, you talked about getting an appraisal done as early as possible.
So many business owners have an unrealistic expectation as to what their business is really worth. Very much talking at average ⁓ and a generalization, most typically most businesses really are only worth two to three times profit or two to three times EBITDA. it depends on the industry, depends on the size of the business, depends on the location, so many different factors which could increase or decrease the multiple.
No, but when I say that to a business owner and they're like, well, I could just work for another two years. I could work for another three years and make that money again. Like I said earlier, one of the important things to understand is what is their motivation? Because they'll start to flip-flop between, well, if I work for another three years, I can make that money and I've still got the business. But if their motivation to sell was on
ready to sell, I'm out of here, I've got one foot out the door, I'm burnt out, when I get up in the morning, I just hate going back to the business. Whatever that motivation is, you need to bring them back to, the reality is this is what your business is worth now, do you have another three years in you? Why did you come to me in the first place to have this conversation? because if they're looking at, this is not this, I thought it was worth a million, it's only worth 300,000, there's a $700,000 gap.
Is my $700,000 gap worth three years of continuing to burn myself out, losing my family, losing my marriage? You know, it's, the psychology conversation around what's your real motivation. so understanding what your business is worth now as early as possible. I'd bring it back to one of the businesses that I own, still own right now is a gym. And in the gym, we've got a body composition scanner.
Which you you stand on and it gives you a picture of where your body is at it gives you a picture of your weight your fat levels your muscle levels your visceral fat levels and the reason we do that is because we want a current picture of the health of your body But then that allows us to prescribe what do we need to do next if you're not where you want to be right now Okay, your fat levels are too high your muscle levels are too low, but you want to change that so what is the prescription of?
the plan that we need to put in place to reduce your fat levels, increase your muscle levels. And so it's just a snapshot. And then we create a plan and then we do another scan and we hope to see that things have changed. So by getting an appraisal, think an appraisal should be in most business owners minds. Okay, if I've got a plan that in 10 years time, I want to exit this business, I should get an appraisal today. Because that's going to give me a picture of right, if I saw my business today, this is what it's worth.
but then that's going to prescribe the plan moving forward. In the next five years, I'm going to do A, B, C, D. I'm going to increase the revenue by X. I'm going to increase my profit margins by X. I'm going to invest in capital equipment. So that's going to allow me to grow. And all of those things should be prescribed by an exit strategy, even if it is 10 years down the track.
Sam Penny (16:19)
That was a great analogy, Nathan, loved it. ⁓ You spoke about the valuation method of profit times the multiple. And I think it's important to point out and most business owners when they're going to sell lose sight of how a business is actually valued. Because when we're looking at the profit, the profit is a snapshot of the last three years. The profit is all in the back mirror. But when we look at the multiple, the multiple is
the future of the business. It's where the risk is. Is there risk in the business or is it reduced? And things such as your standard operating procedures, how owner independent is the business, IP, technology, key staff, key customers, all those kinds of things, which a business owner can start to make changes on now. And if they're looking to sell in say the next 12 months, two years,
That is really where much of that great valuation is going to come from. When a company gets the fundamentals right, I'm sure you must have some great examples. When they get clean financials, strong systems, even the timing of when they want to go to market, and it adds huge value. Have you seen this in any of your clients?
Nathan Hulls (17:39)
Yeah, and it's also industry dependent a bit. There's clients or there's businesses that are well prepared. They've got standard operating procedures. They've got everything systemized. They're not dependent on the owner. The team is really well structured ⁓ and the owner is essentially managing from a higher level. So they might have a practice manager within the business. They've got a consistent level of growth over time.
And so all of those things line up not only to impact the multiple, so it increases the valuation, but it also means that it's a quicker sell. You know, when you've got a buyer coming in and looking at it, everything's ready to go. It's packaged up really well. They can see everything that they need to see quickly and easily. I think, ⁓ I think it was one of your other podcasts that I listened to, ⁓ that spoke about being prepared in your selling.
story and in the documentation. If you're slow to get back to prospects, if they ask for the financials and you have to wait three weeks because the accountant's still finishing them off, time kills all deals. And the challenge, if you're not well prepared, it makes it harder to sell. But if you are well prepared, it also increases the value, but it also makes ⁓ the business quicker to sell and easier to sell because it creates less questions in the
Sam Penny (18:50)
Mm-hmm.
Nathan Hulls (19:04)
the mind of the buyers around, okay, if we're waiting for this, what else is not ⁓ in line? What other I's are not dotted and what other T's are not crossed? And so, there's lots of different elements to it, but absolutely, there are businesses that come to us that we go to market with that sell a lot quicker because they've had all of those ducks lined up and they're well prepared and it helps both from a valuation perspective, from a sale price perspective, but also from a speed to sale perspective.
Sam Penny (19:33)
I think Nathan, one of the greatest value drivers is creating a business that is owner independent because then you're opening that business up for a sale to different types of buyers, whether they're the mechanic who's going to work in it, but also then the investors or groups or a merger with another company. I think that so many business owners are focusing too much on the profit.
my business, it's all about the profit, but no, it's about all these other things that are going to increase the valuation, but also reduce the risk for the buyer because the buyer buys confidence. That's what they're buying. Yeah, you might have done a million dollars in profit over the last three years, but what they're buying is the future of the business. So are there any common mistakes that you see that
so many owners make when they're trying to sell.
Nathan Hulls (20:26)
think what you're talking about there, often, the old book from Michael Gerber, the E-Myth, a lot of business owners become business owners because they're a good practitioner. And so, like the mechanic, he's a good mechanic and so he ends up going out on his own and then he grows enough that he needs to put on another staff member and he grows a mechanic shop, but he's still in his mindset and in his practice.
Sam Penny (20:36)
Hmm.
Nathan Hulls (20:50)
he's still very much the mechanic and still very much the hands-on, he's almost become an accidental business owner. And so some of the elements of that, I think, are the psychology and the mindset behind actually going beyond being the mechanic into a business owner, a business manager. And not only is it just the psychology and the mindset, but it's the time that it takes to work out how do I reduce my...
time on the tools to how do I become that manager? And then also the fear of becoming a manager, the fear of not being hands on and the control freak element of I'm really good at this, but it gives me control. ⁓ But also I think, you know, some mechanics don't want to be managers. They want to be mechanics because they're really good at it. They're passionate about it. One business that I've got for sale at the moment ⁓ is a
an allied health practitioner, she's really great at it, she's built up a great practice with three locations, but when it comes to it, she's a great practitioner and she doesn't necessarily want to be a business owner who's managing three locations now. And she's gotten to a stage where it needs to be transitioned to someone who is a business owner who wants to manage that level of practice. So ⁓ yeah, look, I think there's lots of different elements. Often it is the journey that
the business owner has been on to get to where they are today and the skills that they lack, the insight that they lack, the mindset that they have. It's that human element and the psychology element ⁓ that often prescribes where they are right now. And it can't happen overnight. For them to step away, it requires that time for them to have a coach come alongside them or an advisor to come alongside them to help them see if they want to exit.
These are some of the things that are going to make your business more valuable. These are some of the things that are going to make your business easier to sell. And if you've got the time left in you, it might be five year transition, but transitioning from being the mechanic on the tools to employing a couple more staff to take over your role to stepping into that more management role that will allow you to have a business that you can sell, which isn't dependent on you as the owner, as the practitioner.
Sam Penny (23:07)
Now, how much of selling a business is the numbers versus telling the right story?
Nathan Hulls (23:12)
I think the numbers is the beginning because that's where everyone tends to look for starters, but a lot can be hidden in the numbers. So you have to be able to tell the stories. think 50-50 goes hand in hand. ⁓ If the numbers aren't there, you probably don't go to the next stage. lot of people will purely look at the numbers. And even if you tell a story, ⁓ the story may not be able to convince them that the business is what it is.
But I think it, I would say in my own opinion, 50-50, there's the numbers which tell the history, the profitability, tells the revenue, it tells what hopefully paints the picture of what is possible for them moving forward. But the story is just as important.
Sam Penny (23:56)
So what's the most surprising factor that you've seen that has affected the final sale price?
Nathan Hulls (24:02)
nothing too much that has been, I would say, surprising. I think from what I was taught from day one at Link has very much been to base our conversation around pricing on the market appraisal. Typically, our businesses sell when we list them 10 % either side of our market appraisal. So our tool, when it brings back a real market appraisal,
typically 10 % either side we're looking at is what businesses are selling for. So the most challenging thing from a pricing perspective is the gap between the seller's expectation and our market appraisal. if we're influenced by the seller enough ⁓ to go with their idea, their opinion, what they would like, then that's when you have the questionable
period of lack of leads, lack of inquiry because you know, the market, ultimately the market will tell you what the business is worth. And so if you price it too high, you won't get the inquiries coming in. But I guess, you know, as I've thought about that, there is one scenario, it wasn't a listing of mine, but it's a listing story that comes from the Melbourne office. And there was a business which our market appraisal came in at around 5 million. The vendor wanted 8 million.
And so one of the strategies that often we will use either if there's a discrepancy between the vendor's opinion and the market appraisal, or even if it's a business that we know will have significant ⁓ demand from a buyer perspective is we'll go with an expression of interest campaign rather than a price on the business. And so, like I said, the appraisal came in at 5 million, the vendor wanted 8 million. So running it as an expression of interest, actually the sale ended up happening at 12 million.
Sam Penny (25:54)
Wow.
Nathan Hulls (25:54)
And
the reason for it is, to one buyer, any business is worth something different to another buyer. So you might have, like we said earlier, a strategic buyer, they already own a bunch of these businesses and they can acquire this business, bring it into their current ecosystem. And they've already got expenses that they're covering in terms of administration, they've got software systems, they've got an ecosystem which is already operating multiple of these businesses. And when they acquire it,
the value to them is higher than just an owner operator requiring that business who's going to run it as an owner operator. sometimes, and it's a great story because it does paint a picture, which from a vendor perspective gives them hope that it might be worth more than they actually think. You need to balance that out with the reality of the market will tell you what it's worth. we always look as a broker, there are active buyers. So people that are searching on the
the business sales websites, people that are in our database, they've inquired on other businesses, but they're also passive buyers. And so we work with, you we've got database generators, we've got ways of reaching out and identifying business owners who may not be actively looking on those websites. You know, they might have in their mind acquisition is a good way to grow, but we'll directly target ⁓ complementary businesses in
particular industry that we know could be a good acquisition because that also allows us to potentially put a business in front of buyers who may be willing to pay a little bit higher price because we know that they've got those ecosystems already and by acquiring this business would allow them to grow into a new region or it would allow them to expand their current client base. So yeah, that's probably one surprising story from a positive perspective where you can actually
attract a higher price than both our market appraisal and both from a vendor's perspective.
Sam Penny (27:49)
And I guess, Nathan, this is one of the real key important points of why you would engage a broker as opposed to trying to do it yourself because, know, Link has a database from what I understand of about 220,000 buyers.
Amazing. Now, of course, you're also helping buyers find the right business. ⁓ So let's flip that perspective right now. When a buyer comes to you, how do you figure out what is the right fit for them?
Nathan Hulls (28:19)
Most of that from our perspective as a broker ⁓ is based on whatever checklist that they've got. So they generally a buyer has an understanding and an awareness of, okay, this is my level of investment. I had a buyer come to me and I always ask the question, what's your level of investment? And they're a bit coy in the way that they are.
answering my question, I get it, you they've just called me up on the phone, they don't know me and you know, sometimes I want to keep their cards close to their chest. But I said them, it's not a blank check, is it? No, so they've got an idea of, know, this is the cash in the bank, this is the level of finance that we've got access to. at least, you know, starting point, we know what's the level of investment? Is there a particular industry that they're looking in? Is there a particular location?
know what's their level of experience in that particular industry? Are they looking for owner operated? Are they looking for under management? And so from our perspective, you know, there's probably that next level of fit from a buyer with a specific business that they're looking at. ⁓ But the initial early stages are fairly high level checklist of, okay, these are the things that you're looking for. Can we shortlist some businesses that we've currently got?
on our for sale database. But beyond that, I had a buyer come to me recently who they inquired on one of my listings. ⁓ They were unsuccessful in the offer that they put in. So they moved on from that particular listing. And so I had the conversation with them, as I always do, ⁓ working both on the sell side and the buy side. Okay, what's your dream business? What would be an ideal acquisition for you? And so we got a short list of types of businesses, we got a short list of
specifics that he wanted from an acquisition perspective and even down to this specific business in this location would be my dream business. And so then I reached out to that specific business, got in touch with one of the directors, had a conversation, are you open to a potential sale? And so we've started a conversation like that.
a broker will be as lazy or as active as they choose to be. And so, you know, I guess something that I pride myself on is being as proactive and as active as I can be. Ultimately, the more active I am, the more proactive I am both in having conversations with sellers to get right down to the nitty gritty of how can I help them sell their business at the highest price and as quickly as possible, but then also getting as active and proactive with sellers. So I might, you know, be able to
connect a seller with a business that is not off on market and do an off market deal and connect them and create the right opportunity for them in that way.
Sam Penny (31:04)
So how do you stop buyers falling in love with the wrong business then?
Nathan Hulls (31:08)
How do you stop humans falling in love with the wrong person? I'm not sure that there is an answer to that one. I don't just want to connect a buyer with a business and then buy that business for the sake of making a sale and making a commission. But at the same time, there's a level of adulting that's required for them to,
know what they're looking for, know that they're the right fit. So we can provide the right advice from a financial perspective, from ⁓ a due diligence perspective. And that's probably an element. If they're not highly experienced in acquisition, giving them due diligence checklists, giving them things that they need to be aware of and need to ⁓ dig into to make sure that they're making the right decision. But I don't know if you could stop an acquirer.
falling in love with the wrong business. And that's sometimes falling in love. Sometimes it's that emotion that kicks in when you, whether it's if they're driven financially and they see the profits Because the emotion of
an opportunity or the emotion of a deal or the emotion of the future possibilities. I'm the eternal optimist. But you've got to do your due diligence. You've got to put in the time and you've got to put in the effort and you've got to get the accountant to look over the numbers in the proper way. You've got to get your lawyers to look over the legals in the proper way. You've got to do all of those things that dot the I's and cross the T's ⁓ and make sure that it's not an emotional purchase.
Sam Penny (32:33)
So when the buyer is going through the process of due diligence, are there specific red flags that you highlight to them?
Nathan Hulls (32:41)
It is horses for courses, case by case. are obviously different businesses in different industries are going to have ⁓ different elements. So stock levels, age of stock, what they're paying for the stock, things like that, that are going to be specific, whether it's for a manufacturing business or for retail business. ⁓ One business that I've got listed, we had a ⁓ meeting recently with a buyer, going through those questions of, you valued stock at X.
But what is the age of that stock? Is that stock really working? So doing proper stock takes ⁓ and whether that's even bringing someone in from an external perspective who can do a third party stock take. ⁓ How have assets been valued? All of the things that you know you're paying for ⁓ as much as possible, getting down to the nitty gritty of, and even as financial years take over, a business that may have been listed nine months ago,
if they haven't received the most recent financials, 24, 25 financials, if they're putting an offer on a business today that was listed nine months ago, they want to make sure that the financials have continued to track in the way that they have. ⁓ And even from a product perspective, we had a buyer looking at one of the businesses that I had listed, which unfortunately fell over because in due diligence, there was a particular product or service that they were offering, which was the main attraction to that business.
And in the last 12 months, which the business was on the market for about 10 months. And so in the last 10 months, they hadn't seen the sales figures of that specific line item. And so when you got into due diligence and you have that ability to look at more ⁓ granular sales figures, more granular client concentrations, all of those elements, which kind of get you to that in that due diligence phase.
is often where you kind of find the deal, potential deal breakers.
Sam Penny (34:43)
Earlier you mentioned that some investors are highly focused on the financials and the returns and that's what their motivators are. But how important is things such as cultural and operational fit in the buying process?
Nathan Hulls (34:58)
think it's huge because obviously the financials are like what you said earlier, are a snapshot of history, historical financial performance. But the culture, if you're reliant on the team to take you forward, the culture of the team, the fit of the team, how connected the team are to the owner, if they leave, how you're going to be in bringing a new leadership culture or your style of leadership.
Obviously, transition into the future of that business, if it is reliant on the current team, is significantly important because they're the ones who are dealing with the clients, they're the ones who are fulfilling the services or the products, they're the ones who are going to either make or break your historical picture of what the business has been and either allow that to continue to grow into the future or not.
Sam Penny (35:50)
Have you got an example then Nathan, where that buyer seller match just clicked, everything just worked.
Nathan Hulls (35:58)
the easiest example is like the smaller and my own particular focus predominantly is regional Victoria, South Australia. I've got some businesses that I list in Melbourne, some in Adelaide as well, a regional community cafe and it's not a big picture example, but a business where there is a culture of almost like a family culture.
And someone coming into that which carries that same culture, same country values, same regional values, they want to treat their business like a family. so similar story, they've been able to take over this cafe, which was a 10 year long profitable, one of the main cafes in town. But like I said, I guess the elements of it were that they were a really good cultural fit. They didn't try and screw down the price.
They were willing to invest the value of the business and you know all of those elements put together Painted the right picture for them to carry that business on and the team to stay on so that I didn't lose team They allowed the revenue to continue growing and they stepped into that business as a Transition and I guess it's you know, sometimes it a business sells they do their two weeks a Sorry business owner sells they do their two weeks handover and then they're at the door that they disappear
But I think one of the elements that makes it a really good fit when you've got a really good seller and you've got a really good buyer and there's a really good fit together is almost like that relay race where they're handing the baton on to the next leader. And often that comes from a seller having as much buy-in to the future of the business, even when they're not owning it or operating it themselves, but they love it so much because it's been the baby that they've created or it's been the business that they've
journeyed through over the last 10, 15, 20 years, they want it to succeed into the future. And they're not just looking for a sale and not just looking to sail off into the sunset and take their check, but they are invested. so part of that, it comes out in the transition process, the training process, helping that new buyer and setting them up for success into the future.
Sam Penny (38:10)
Yeah, cool. Love it. Look, Nathan, one of the things that really stands out about you, I think is you've got the mix of the technical and also the business experience. So let's talk about how that benefits your clients. How does having built and sold businesses yourself, how does that change the way that you communicate with owners?
Nathan Hulls (38:30)
think having had leases, having had a landlord, having had staff, having been in a franchise, one of the stories of the franchise was that I was in a franchise with the gym that I still own and then COVID happened and that franchise went broke. And so our franchise became an independent brand of our own. the elements that I'm dealing with in terms of business owners who are in franchises or business owners who have bricks and mortar businesses and they've got the landlords and they've got
leases, you know, so there are so many moving parts to the sale of a business, you know, often people forget that if I'm buying a bricks and mortar business, I need to become the new tenant of that bricks and mortar facility and I need to be accepted as the tenant by the landlord. And so one of the challenges in selling a business is sometimes a landlord can say, no, we don't want you so they can put a kibosh on the deal and the deal doesn't go ahead because they haven't accepted the new owner
as the tenant of that business. all of those elements allow me to know I've walked in those shoes, I have done the journey, the good, bad and the otherwise, I've experienced it for myself and it's not just that I've done an accounting degree and I understand numbers and then I've gone and done a real estate certificate and now I'm a business broker. But I'm someone who's passionate about business and I'm passionate not just about business but about the strategy behind how do you make a business successful.
And then how do you, I guess the other element I think of my ADHD brain, my entrepreneurial brain is that I like the shortest distance between A and B. I like to know, right, how can we make this as efficient as possible? And how can we make this as effective as possible? And so part of what I guess I bring to my own clients is I want them to succeed. want them to have a high value business. want them to be able to get the price that they want. want them to
be able to get the sale process in a time frame that suits them and not just with a hope for that, but let's think about how do we set their business up for success to be able to, as best we possibly can, achieve those outcomes.
Sam Penny (40:38)
So how, Nathan, tell me, does your accounting and your computing qualifications, how do they help in the valuations and the positioning of the business?
Nathan Hulls (40:50)
Not sure about the computing side of things. I joke and say that my major was in cut and paste back in those days. ⁓ You could get away with having good friends in programming. So I wasn't, I wasn't the technical programming brain, but I loved the multimedia and the graphic design and ⁓ more of the creative elements. So, you know, I like doing a podcast, you know, there's more than happy to jump on a podcast, more than happy to, to, to create videos and to create some of those social media elements.
Sam Penny (40:56)
Ha
Nathan Hulls (41:18)
So that's probably the computing side. And I guess, you know, from a computer perspective, you know, very much I fire with using the technology, but beyond that, don't ask me to program anything. The accounting side of things, from the perspective of understanding profit loss statement, understanding balance sheets, understanding all of the elements that their accountant is working with them. Now, it's an interesting...
balance as well when I talk about accountants because accountants are there to help you reduce your profit to save tax. And so sometimes when it comes to selling time and we look at the P &Ls and their profit at the bottom line is $12,000, which means they've had to pay no tax, we'd run an appraisal and obviously you can look at all of the ad backs. You can look at the things that you've been running through your business, which might be a personal car, might be ⁓ X, Y and Z. But the reality
from a buyer's perspective is really the cleaner your books are, the less personal expenses that you're running through your books, the higher the profit is. In those three years leading up to sale, you want to be paying as much tax as possible. And so, from a perspective of I am trained, I'm not a CPA, but I'm trained up to the stages of becoming a CPA. So I understand everything from an accounting perspective, but I'm also able to communicate to the vendor who may be
for the last 20 years has worked with their accountant around how do we reduce our profits and how do we pay as little tax as possible into a conversation of we actually need to maximise your profits for a period to show the reality of what your business could be for a new owner ⁓ who isn't running their personal expenses through their books, if that makes sense.
Sam Penny (43:02)
Yeah, definitely. Now you mentioned earlier, Nathan, that there's a lot of emotion in the deal process, you whether you're on the buyer side or the seller side. So how do you balance empathy in ensuring that the deal keeps moving forward?
Nathan Hulls (43:18)
Yeah, it's super important. ⁓ Helping and communication, think is the key. Communicating. Obviously, empathy is connecting on their level and helping be aware of the emotions that a buyer may be going through. They may have had a lowball offer, working out how best to communicate that. They may have had a deal fall over. They've had an offer and they thought it was all in the bag and then got to due diligence and then it's fallen over again.
knowing how best to communicate that, how to help provide enough hope, real hope, make sure that we're not just telling them stories and we're not lying to them for the sake of trying to change their emotions. helping the journey because it's an up and down journey, even as a broker, we go through the emotions with the owner because we are just as invested in the potential deal as they are, we get paid at the successful sale.
So, you know, from a financial perspective, we are as invested as the, shouldn't say as invested, it's their baby and it's their business, but we are invested for that sale to be successful. know, empathy, like I said, is the key. It's communicating in appropriate ways, making sure that the communication is ⁓ regular, making sure that they're, you know, always being updated with what's going on. And then when some of those negative things happen,
helping them understand the process. And I think some of it also is preempting or pre-framing the potential journey ahead. Having some really good conversations, I'll always say from a pricing perspective, we might put it to market at this price. ⁓ If in two, three, four weeks time, we've had low levels of interest, we might need to have a... ⁓
challenging conversation and say, you know, these are the things we might need to consider. We might need to consider reducing the price. We might need to consider how do we rework the marketing campaign to generate some more interest. ⁓ But those type of conversations, whether it's around price, whether it's around due diligence, whether it's around the things that they need to have prepared, whether it's around some of the potential pitfalls that may come up or the challenging emotions that may come up along the journey.
having some of those challenging conversations or communicating some of those things right at the beginning so that they're not just a slap in the face when they do happen.
Sam Penny (45:48)
What is the top one piece of advice you'd give to a business owner right now who wants to sell in the next 12 months?
Nathan Hulls (45:54)
that three years ago.
Sam Penny (45:56)
It's true. It's true, isn't it? It does take a bloody long time to get your business ready to sell.
Nathan Hulls (45:58)
Yeah.
Yeah, it looks there's there's so many variables in that it depends if they've been building their business to sell like you teach ⁓ If they've you know, if they're exit ready and they want to sell in 12 months time number one get an appraisal Let me know happy to do a free appraisal ⁓ But work out where you're at right now, but that also like I said earlier They might have this idea they want to sell in 12 months time they get the appraisal and they're like, no, it's not going to hit the mark it's not worth what we want it to be worth and
there's not a lot that they can do in 12 months time to increase it significantly. So number one thing is get an appraisal because that'll give you a picture of this is what we're saying right now, the market is saying it's worth. That also gives us the ability to have the conversation around, you do need to sell, you absolutely want to sell 12 months time is when you want it to sell. And I guess that's the other conversation, do they want to start listing in 12 months or do they want to actually have it sold and exited in 12 months?
If they want to be out of their business in 12 months, they've got to start today. They've got to get on the market today. So number one, get an appraisal, understand what the market is saying about their business right now, and then also make sure that they've got everything that they need in terms of a due ⁓ diligence ready checklist that I can provide free as a resource. But that helps them know, right, when we get to market and we start getting inquiries, these are typically the things that they're going to
a buyer is going to ask for ⁓ some in the initial stages, some in the due diligence phase. But these are the things I'm going to need to have prepared. then they need to look at right. for example, one business that I'm working with at the moment, they are still an owner operator, they are still working 38 hours plus per week, they are busy head down bum up in the business.
And so the challenge sometimes is when I get an inquiry and I need to communicate with them and I need something back from them that they haven't already had prepared, the time that it takes, like we talked about earlier, can slow down the deal and sometimes kill an inquiry. So all of those things, as prepared as they can be, make sure they've got them ready. And then it's all about, right, let's go to market. Let's work out how we can best connect with the most appropriate buyer for you who's going to pay the highest price and be the best deal for you.
Sam Penny (48:17)
Right, so then what is one piece of advice for someone who's going to go out and buy their first business?
Nathan Hulls (48:23)
I would say be super granular and ask as many detailed questions as possible
Initially, I'd say like there's so many different elements, but initially I would say into the financials. Cause one of the, I think it comes hand in hand from the perspective of most buyers initially look at the financials. It's kind of the dashboard that we go to. And because of that, then brokers, sellers put a big focus on presenting the financials and in the initial IM, typically it's a high level overview. It's sales as one line.
then it might be cost of goods, and then it might be a few high level expenses that give you the total operating expenses or capex. And then it gives you a bottom line profit EBITDA or normalized owner operator profits. And so it can be easy to hide certain things in sales figures, in expense figures, in add backs.
So make sure that you know exactly what you're looking at from that perspective. And then beyond that, I've always, whether it's a buying a business, whether it's starting a business, number one, it's going to be probably twice as expensive as you think. It's probably going to take twice as long, if not 10 times as long as you think. So whether it's a dream that you've got something that you want to achieve,
me being the eternal optimist, I always think the straightest line, I'm going to get there in the shortest amount of time, but usually it's going to take at least twice as long, it's going to probably be twice as expensive. And so make sure that if you're like most entrepreneurs, looking for a great deal, looking for a highly profitable business, make sure you're not being just drinking the Kool-Aid, taking the financial figures as they come to you, but make sure you're asking fairly granular questions to get
dig down deep into them.
Sam Penny (50:13)
All right, now Nathan, before we wrap up, I always love to finish with the quick fire five. It's five questions. Quick questions, quick answers. First thing that pops into your head. You ready to go? All right, what's the biggest myth about selling a business?
Nathan Hulls (50:24)
Ready.
It's easy.
Sam Penny (50:30)
What's one thing you wish more buyers understood?
Nathan Hulls (50:34)
the emotion and the story behind the business.
Sam Penny (50:38)
What's the first thing you do when you wake up in the morning?
Nathan Hulls (50:40)
I shouldn't, but I check social media.
Sam Penny (50:43)
Alright, now what's a deal you will never forget?
Nathan Hulls (50:46)
⁓ My wife saying yes.
Sam Penny (50:49)
Jeez. And what's one piece of advice you give every business owner today?
Nathan Hulls (50:56)
Start building your business right now with an exit in mind.
Sam Penny (51:01)
Nathan, thanks so much for joining me today and sharing not just your expertise, but also the practical actionable steps business owners can take right now to prepare for a great exit.
If you're listening to this and you're thinking about selling your business, whether it's next year in a few years time, Nathan is someone you definitely want in your corner. Now, Nathan, how can people get in touch with you?
Nathan Hulls (51:25)
So, main social's probably LinkedIn, if they search for Nathan Hulls, H-U-L-L-S on LinkedIn, ⁓ or email nathan.hulls@linkbusiness.com.au.
Sam Penny (51:37)
Excellent. Thanks, Nathan. And I'll pop all those into the show notes. As always, if you found today's valuable, this great conversation, make sure you hit that follow button in your podcast app so you don't miss the next episode. And if you know a business owner who's planning an exit, share this episode with them. It could literally change their outcome. Until next time, I'm Sam Penny and this is Built to Sell, Built to Buy, helping you sell smart, buy right, and build something extraordinary.
