Today’s guest on the Niche Pursuits podcast is Nate Ginsburg. Nate has a background in Amazon FBA and Business Acquisition. He owns several successful businesses and has a growing portfolio of investments in other companies that he helps to grow and prosper.
He recently acquired Centurica – a leading due diligence company that assists entrepreneurs who buy web-based businesses. And he joins Jared today to talk about purchasing a business, dropping lots of valuable knowledge bombs for anyone looking to acquire a business now or in the future.
The purchase of Centurica was around six months ago in a seven-figure deal. Nate explains why and how he acquired the company. He highlights how he overcame challenges and issues with the purchase and what the company excels at to help their clients.
He goes deep on due diligence and explains what’s involved when purchasing a company. Moreover, Nate dives into the importance of the three main buckets — financial diligence, operational diligence and commercial diligence.
Each of these buckets protects potential buyers in numerous ways, so it’s vital to know each and how they can help you. In addition, they are used to spot red flags and to clarify potential great investment opportunities.
Nate elaborates on the above by detailing the specific red flags to be aware of when buying a business. Then, he uses his recent purchase of Centurica to share his thoughts directly on what to be mindful of and the risks to spot, which is super helpful.
Other Topics Discussed:
- Busting The Myths Of Business Acquisition
- Key Personal Risk When Purchasing A Business
- What Due Diligence Looks Like
- Customer Concentration
- Margin & Revenue Trends
- The Great Opportunities For Buyers
- Tips For The Best Businesses To Buy For You & Your Business
- The Different Business Acquisition Strategies
- Where To Find Businesses To Buy
- Plus, Much More!
Towards the end of the interview, Nate shares how you can finance a deal. He shows you the multiple ways to use finance and the pros and cons of each model.
If you’ve ever thought about buying a business (now or in the future) or want to learn more about the process involved, this interview is for you. As always, take notes and enjoy this excellent episode.
Links & Resources:
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Jared: Welcome back to the Niche Pursuits podcast. My name is Jared Bauman, and today I’m joined by Nate Ginsburg with Centurica.com. Nate, welcome.
Nate: Hey, Jared. Thanks for having me.
Jared: Welcome. We have a lot of things that we get to talk about today. We were talking before we started recording, and there’s so many, I mean, different ways we could we could get some value out of what you have to offer.
I’m really excited about the direction this one’s gonna go Before we dive into some of the topics of the day. Can you spend a couple minutes and just catch us up on your business past and, and where you’re at maybe right now as we, as we start talking?
Nate: Yeah, absolutely. And so, so yeah. I mean, I think like, Broadly, you know, we’re very excited about acquisitions and talking about, and, you know, helping people and showing people different ways of growth via acquisition, strategic acquisitions and, and kinda like, you know, busting some myths that I think a lot of people have around that.
And, and really showing people what’s possible when it comes to acquisitions and demystifying some of the process. And so, you know, how did I get to that place? So my background, I. See, So I moved to Southeast Asia at the end of 2013, freelancing, moved to Homan City, Vietnam. And there was really an amazing community of online business, you know, entrepreneurs, expats that were living there.
That kind of, that became my scene. And, you know, fast forward a couple years later, you know, met amazing people, learned a ton, and knew some people that were doing e-commerce and selling on Amazon. You know, I was dabbling in a bunch of different businesses and business models and, and it was looking for something that really would, you know, be like stick or hit more than, you know.
I was doing some consulting, some, you know, services and, and yeah. Then got into Amazon fba, which like was the first business that really kind of took off for me. Through that, I I built a really great team to manage that business and so that’s one of. Kinda like core competencies is around people and hiring and leadership and remote teams is like, I, I really love and have a lot of experience with, and so, so grew that business.
Sold that business in 2017. And then after that mentioned, had this, you know, a core of a really great team and started offering services, which became my other company, Seller Plex. And so now Fast Forward Seller Plex is a variety of services for e-commerce sellers. We, Amazon account management, supply chain management, we have a content team.
It’s, it, it’s he, it’s a team of around 70 people globally. And, and with seller Plex last, so in the summer. Maybe the spring of 2021 cell plex started to get into some due diligence projects. And so for those that don’t know, due diligence is like the vetting and verification process when you’re doing an acquisition.
And so let’s say you have a business that you are, you know, that you’re looking to buy, you have a, an LOI or a letter of intent in that business that basically says like, Hey, I’m interested, I wanna buy you. And that. Then you enter this phase called due diligence. You know, open the kimono, go through the books, you know, really you’re, you’re, you’re, you know, diving through the business to, you know, make sure the numbers are what, you know, the seller says it is.
Identify, you know, risks and problems as well as kind of building the value creation plan and, and, you know, kind of the integration plan you know, for the, the acquisition, the acquisition thesis. And so, so Cplex started getting into due diligence projects. And yeah, like, you know, there was this huge, or I mean we’re still in it, it’s cooled off, but you know, this big FDA aggregator boom in you know, 2021.
And, and so, so our projects really were growing and, you know, I knew about this other company, Centa, that really was like the. The leader in this space, I mean, really strong brand, been around since 2013 and yeah, like I kind of had in my, you know, in my head like, oh, like maybe this could be a cool acquisition you know, for me.
And so long story short, one day I, I knew one of the co-owners reached out, you know, Hey, like, let’s catch up. Let’s have a chat. You know, turns out, you know, they were open to, you know, entertaining an acquisition. I was interested, which really kicked off this process, which lasted about six months. I used financing so primarily of sba, which then, you know, culminated in the close of the business.
The end of April, beginning of May was when we finally closed. And so, You know, Well, and then fast forward, you know, been running, integrating, Taking Over Centa, which, which yeah. Provides due diligence services. And so, you know, we’re working with people that are buying, buying online businesses, e-commerce businesses, content businesses, SaaS businesses, agency businesses.
And this is, you know, this has kind of become my, my world. And you know, like we were chatting about earlier, just. All my calls every day are, you know, with leads that are interested in acquiring businesses or clients that are in the middle of deals or talking about engaging us for help or connecting with other people in the industry that are interested in doing acquisitions or have done or this or that.
And, and, you know, the more that I dive into it, it’s really, I mean, it’s a fascinating world and, and what really excites me, or one of the things that really excites. Is if you go up the, the value ladder, you know, m and a, you know, big public companies and private equity firms, you know, they’ve been doing m and a for, you know, for a long time.
This is a very established, you know, business strategy. And what’s, what’s really interesting, and I think, and, and is exciting for, for, you know, us and, and the listeners is, you know, a lot of these. M and a used to be kind of reserved for like public companies, you know, investment bankers, private equity firms, like very, like a different level of operator.
And now like m and a is kind of trickling down and becoming a lot more available. And, and, you know, people are doing some really cool moves with these, you know, our kind of small online business space, whether it’s, you know, less than a million dollars or more than a million. Multiple seven, eight figure businesses.
There’s, there’s a lot of moves that people are making now, whether you’re small, medium, large, that, that yeah, I think is super exciting and, and a lot of really cool possibilities when it comes to m and a that a lot of people candidly, you know, aren’t familiar with and don’t know about. And so I think, yeah, that’s a lot of what I’m excited about is to be able to help, you know, educate and.
Explain some of these cool opportunities that people, you know, you don’t know what you don’t know, and a lot of people just haven’t been exposed to these things. And yeah, hope that there can be some, you know, light bulbs or insight or, you know, new ideas with people when they do understand some of the things that, that could be possible with m and a.
Jared: Well, we talk a lot on the podcast about acquisition. Acquisition as as maybe opportunity to get into a market acquisition is an opportunity to bolt on to a brand you already have, and you’ve kind of touched on each of those. I’m curious for you, did you see Sinica as like a Bolton to the company you were already running, or did you see it as just a completely new opportunity and so now you’re really targeting and going after two different demographics with your two C?
Nate: Yeah, good question. So I originally saw it as, so Suplex has a much bigger team and infrastructure, but Centa has a much stronger brand and you know, lead flow. And so I thought that, and in Suplex was doing, and still, I mean now it’s understand Chica, but like, you know, was doing due diligence services.
Right. And so you mentioned there. You know, some kind, I mean, I thought that like, Oh, I’ll just, you know, I buy this Insure brand, which has, you know, been around for a really long time pretty well known in the space, and I’ll just plug in my, you know, due diligence department and, you know, that would be the transition.
I’ll tell you and can talk about like mistakes that I made or what I would do differently, because looking back now, there are a number of things that like, you know, have identified of what I would’ve done differently. Never does quote quite according to Plan . Yeah. Right. And so, you know, but, but, but everything, you know, it turns into, you know, learning and growth and, and so, so yeah.
I mean, Centa has, you know, it has a lot of leads. It has a lot of, you know, it’s got a, you know, medium sized email list and so, so yeah, the thought was that Centa would be, Kinda like the beachhead that opportunities come to. And then, and then, yeah, seller plex could be like a backend, you know, we’re working with, and, and this is, you know, there are some synergies here where like we do due diligence on an e-commerce business.
And, you know, I had a call with a guy yesterday and they’re, he’s looking at an e-commerce business and he’s really, he has a sales background and he is trying to buy into e-commerce, but he doesn’t, you know, supply chain logistics, pos, freight, all this kind of, So that’s a big concern of his. And like, we had a call and I’m like, Look, you know, if interesting or you know, if he did like, like sell, you know, Suplex has like a 20 person supply chain department.
You know, we do a lot of freight logistics. It’s like, I know we can solve that problem from you, for you super easily, and, and look like, you know, he can, There’s a variety of ways that he can solve that, you know, learning curve, but, Seller Plex is an option. And so, so yeah, like there, there are, and you know, have been, and I think will be more opportunities where we can yeah.
Seller Plex can provide backend services, but, but also a lot of it’s like, yeah. Centa is a more established brand. And so whether it’s, for me personally, that’s opening up a lot of interesting introductions, relationships, conversations, and, and kind of just giving me like, You know, I’d say a, you know, a crash course in just m and a because this is what I’m, you know, doing and seeing all the time, and it’s, it’s forcing me to just get on that level, which, you know, I think is exciting and opens up a lot of more opportunities, you know, in my career to do more m and a.
You, Let’s see if I
Jared: do the math right. You’ve had Cent Chica for, what, six months maybe? I mean, it hasn’t been right about that long. What are some of the early wins, you know, the early successes or, or gains you saw, You touched on some of the, the challenges. Maybe you could share some of those as us too, if you don’t mind.
Nate: yeah. So, so yeah, looking back, I mean, man, it’s been you know, honestly it’s, it’s, it’s been a wild you know, first six months of this business. The first big challenge and objective was really taking over the operations, and so the business was previously run. There was two co-owners and one of them Brian was doing, he was like the main project manager, account manager.
You know, he had some, some support around him, but he was doing the majority of the deliverables. And so, and I knew this going in that, oh, replacing Brian getting my team in. You know, I knew that going in. But, you know, we can say like area of learning number one, of really, you know, underestimating what.
Takes or needed in order to, you know, match the deliverables at the level that in Chica is, you know, the, the, the standard that, you know, we need to deliver for our clients. And so, yeah, that’s been, I mean, like, has been a big challenge. Certain people that I hired, you know, I thought were the right fit.
Turns out they weren’t the right fit. I, I realized that I didn’t even fully understand. The degree of the scope of what was needed. And, and also, you know, for context due diligence, deliverables are very, very tricky. Like, I have a lot of experience with service businesses, seller plex, you know, we do PPC management, we do account management, we do content.
We have a supply chain department. You know, I’m a, a partner investor in another agency that does you know, ppc. I’m an advisor to, you know Facebook marketing agency. Like I, I have a lot of exposure into, you know, services. The deliverables for due diligence are by far the most difficult. You know, it’s, it’s audit accounting, and so, you know, we need like, X big four auditors, which I didn’t even, I mean, I’m learning about, but I don’t even know if this audience of like, you know, online business, you know, Big four are these, you know, really professional, you know, accounting consulting firms, you know, Ernston Young or ey, pwc.
You say Pricewater Cooper house. Yeah. Yeah, exactly. And so like, Our work is the core of the deliverable, which I can also get into of like what the core of the DD scope is. It’s, it’s rebuilding and, and matching a p and l. So let’s say, you know, you’re, you’re buying a business and you’re hiring us for due diligence.
You know, the seller’s gonna give you their p and l, their profit and loss statement. And let’s say it says it’s a, you know, a million dollar business with $250,000 profit and. A core part of the scope is you’re hiring us to verify that. And so we gotta go in, we get access to all the pri, you know, the channels, Oh, their Stripe account, their AdWords account, their, this, their, you know, Amazon shop, wherever they’re selling and wherever money’s coming in or out.
We gotta get access plus their bank statements and, you know, we’re rebuilding their financials from scratch. And then, you know, it. Well, we’re, we’re hopefully gonna match it, but we’ll see. It’s, Oh, well, the seller said that, you know, their profit was $250,000, but when we did it, profit was only $220,000.
And okay, if you’re paying at a three x multiple, we’re like, okay, there’s, you know, there’s a delta there. And so anyway, it like the deliverables are, it’s, it’s like high level audit accounting. There’s no margin for error and. Every project is under, you know, quite a bit of usually time pressure. And so the combination of everything, like these are really difficult deliverables to deliver.
And, and on top of it, like it’s intense, you know, the, the, like, these are, these are million or multimillion or eight figure decisions that people are ba. They’re using our work to make these really, really important decisions. So they’re just, you know, it’s, it’s intense. And so, so, you know, the deliverables really, really challenging.
Like I said, that’s been a huge learning curve. And like, man, you know, the first attempt didn’t work, the second attempt didn’t work. I think now we’re on attempt, like, I guess this would be maybe four or like three and a half, four. Roundabout way, the big win has been now finally getting, you know, some people in pieces in place that like, you know, I can build around and I’m confident, you know in being able to deliver the work.
It’s still a work in progress. But, but yeah, but I’ll say so this was a big thing. So I was at Burning Man a couple weeks ago and, you know, a couple of weeks prior to that, you know, candidly, like I was. I was getting pulled into account management, project management, you know it was, it was hectic and, you know, fortunately onboarded some of these key people leading up to Burning Man.
And I had this, you know, Burning Man, you know, was looming in the future. And, you know, I’m stressed and oh, like, can I even go? Am I gonna have to cancel? Like, you know, can the business handle it? And, and fortunately, you know, just in the right time, got some of these people in place, which then allowed me.
Take a step back, you know, have my Burning Man experience and you know, you’re not, I’m not checking email, I’m not in Slack, You know, you’re totally off the grid. And then, and then, yeah, be able to come back to a business that like, and look, it’s still a work in progress. We’re still improving, but but yeah, like a big win of getting some of the right people in place now that like I can build with and grow with which, which yeah, was a huge challenge.
You know, has, yeah. Has made a lot of good progress. Well,
Jared: congrats. It’s a big deal. It sounds like you were able to kind of keep some of the secret sauce that made Centa so great while slowly starting to get better systems in place to allow you guys to actually deliver that complicated deliverable in a like a, I don’t wanna put words in your mouth at like a more organized and a more repeatable fashion.
And , I don’t envy you for having to try to figure that.
Nate: Let’s talk a bit about what due
Jared: diligence looks like nowadays. I, I’m gonna go ahead and guess that the majority of people who are listening have either considered purchasing a business, looked into purchasing a business, or maybe already purchased a business.
And, you know, it’s it’s a decision that comes with a lot of fraught and worry. I remember when I bought my first website, for example, I sat in the sidelines for at least a year because I just wasn’t sure if the evaluators I was gonna use to, to kind of measure things. Were gonna be good enough, were gonna be correct, like so I’m sure there’s a lot of trepidation that goes into that.
What, what does a due diligence process look like and what are some of the things you can share that you typically find that maybe the average business buyer wouldn’t?
Nate: Sure. So, so yeah. So when you think about due diligence you can kind of think about three, three main buckets, I think especially for, for this audience.
So you’ve got financial diligence, you’ve got operational diligence, and you’ve got, it’s called commercial diligence, but it’s really like marketing, like market diligence. Mm-hmm. and so on. The financial diligence, really the main questions that you’re trying to answer is, Are the numbers, Are the numbers that the seller’s presenting accurate?
Is the profit repre, you know, is the profit that the seller is proposing, You know, is that accurate? Versus Well, yeah. Is that accurate? Is the business worth what, you know, the seller says it’s worth, so, so that’s financial. On the operational side, it’s looking. It’s looking at things like, are there any skeletons in the closet?
Are there any, you know, red flags? What are the risks? As well as getting into potential for value creation of like, Oh, we can save, you know, save costs here. Or there could be, you know, Oh, I have a person who can, you know, solve this problem. And so that’s the operational. And then on the, you know, it is called commercial, but really it’s like the market diligence of like, Oh, Where’s the industry going?
How is this business positioned within the industry? Is the, you know, is it a rising tide? Is it a falling tide? You know, what are competitors doing? And, and that’s also kind of more, more forward thinking. So you can think about the financials is really around the numbers. What’s the value of the business?
The, the operational diligence is like looking, you know, inside the business you. Are there red flags? What can we improve? What can we optimize? And then the commercial is more like outward looking. You know, what’s the market look like? What are the, what’s the competitive landscape? You know, what’s the vision potentially for this business, You know, moving forward and.
And Yeah. Do you, I mean, I’m just
Jared: curious, do do most of the deals that you guys end up doing due diligence on, do, do most of ’em go through or do, do a lot of them end up falling apart for a variety of reasons? I mean, I have, we have no idea how many actually end up going all
Nate: the way to the finish line.
Yeah. So most of them, most of them do go through, The biggest, The thing is, there’s a lot of reasons why a deal doesn’t go through, and I’d say on the deals that we work that, you know, in, since my, you know, tenure as CEO of Inca, yeah, there, there have been a number of businesses that haven’t gone through, but I don’t think any of them have actually been where it’s like we do the diligence or like, Hey, like this is a huge red flag.
You know, abort, abort, you know, it’s more for other reasons of. Financing falling through, or, you know, having some like legal you know, no APA purchase agreement, you know, things that they weren’t able to come to agreement on or, Yeah, Or just more like the, you know, the relationship between the buyer and the seller sort of deteriorating mm-hmm.
and so, so yeah, we do see things not go through, but, but yeah. But it hasn’t been as much where it’s, I mean, and yeah, there. You know, like a core of our scope, like I was mentioning, is really, you know, getting into the numbers, verifying the p and l and and identifying the deltas where it’s like, Hey, look, you know, your cost of goods, you said it was, you know, $4 a unit and our cost of goods is four 50, you know, 50 cents higher and that, you know, you’re selling a million units, so this is like, you know, a hundred thousand dollars or five, you know, And so, you know, really getting into the.
Yeah. You know, like diving into the deltas and understanding the deltas and, and something also to, to understand about, you know, due diligence and, and, and just buying a business in general. It’s, it’s not about like there’s, everything has risk. It’s not about finding an opportunity with no risk. It’s about understanding the risks and being comfortable with them.
Mm-hmm. . And so, and what that means, depend. A ton on who you are and your experience and what pieces you have. But again, it’s like in due diligence, you know, cuz we’ll, we’ll identify risks in a business, but that doesn’t, again, like that doesn’t mean that it’s like a no go and, you know, abort. It’s just okay.
You know? Do you understand the risks? You know, are you comfortable with it? And so, Speaking. It’s great,
Jared: great transition. Speaking of risks, like what are common risks or red flags that buyers
Nate: I guess should be aware of
Jared: or at least be cognizant of going in? You
Nate: know, Yeah. I mean, I’ll say some of the biggest ones.
So if I’m buying a business, I’ll tell you, you know, the risks that I’m, I’m on the lookout for, Oh, there you go. I’ll, let’s go that route. . Yeah. Yeah. So a lot of it depends on the model. And yeah, some examples, I mean, you know, one, one of the most common risks that. Have since become much more intimately familiar with through my experience, and that’s what they call key person risk.
And so with Centa, and so this is gonna be, I mean it’s, it’s applicable to a lot of business models. You know, with Centa, the key person risk was around you know, the, with Brian being, you know, this main operational person and having to replace Brian. And, and yeah, this was something, again, like I was aware of it, I knew this risk, but, you know, honestly I didn’t, I didn’t appreciate like, like how much of a project or challenge this was gonna be, and, and that’s on me.
And so, you know, and so looking back like. You know, it’s ironic. I, I should have done much better due diligence on this key person risk that, you know, I mean, I since have learned and so, but, but yeah. You know, so this is applicable to agencies. It’s applicable. It’s a really, I mean, to every business model.
So if you have, you know, maybe it’s Whatever, it’s a, it’s a content site or it’s an e-commerce business and you know, the owner is just really well connected in the industry and, you know, gets all these deals and opportunities because they, you know, have all these friends and, and you know, so like that, you know, Yeah.
That’s also key person risk. And so you know, agencies you know, yeah. Software, but you know, the owner like is the one who. Built all the code and understands the code and he’s the only one who really gets it. You know, so, So yeah, key person risk is, is a big one. And that’s relevant for, you know, any business model.
Some other ones that we look at is, you know, really like revenue and margin trends. And so we see this a lot in e-commerce businesses, especially fba, where, you know, Amazon fees are rising. The, the product price that you’re selling at is, you know, decreasing, you know, your, your margin is going down. Your, your ad spend is increasing your cost to acquire.
Like, and so, you know, these are trend lines also to really be aware of. And this is, you know, really for any business that is fueled by paid media you know, that’s a big one. So looking at, oh, What is the, you know, ACO over time or Yeah. You know, looking at the Facebook ads or the Amazon ads or the Google ads and just like, how are those, you know, what do those trend lines look like?
And, and looking at this, I mean, if it’s e-commerce, you wanna look at it like, even on a per product basis, because it’s one thing, Oh, maybe the, the portfolio, you know, the, the brand as a whole revenue’s up and, you know, costs are moderate, but, Oh, but maybe within that, there’s really. Three SKUs are doing amazing, and three of them are, you know, tanking and so, so, so yeah, like getting optics really into, into margins and, and, and, you know, and, and, you know, revenue trends, profit trends you know, those can be big, you know?
Yeah. I’m gonna take a real good look at those. Another big one is, you know, is looking. Like customer concentration. And so this is getting into like market diligence sort of, of like, okay, well, so let’s say you’re a you know, it’s a niche site for, you know, car dealerships and it’s like, okay, well like, you know, your main advertisers are car dealerships and you know, you get paid cuz they’re advertising with you or what you’re doing.
Lead gen for them. And then it’s like, okay. You know, the economy, like, who knows what’s going on, where it’s going, recession, blah, blah, blah. And it’s like, okay, well, like, you know, how is that gonna affect this industry? Oh, like what happens if, you know, if the economy goes into a recession, like what does that mean for, you know, the market that we’re serving?
You know, is that gonna go up, down, sideways? And so, so yeah, like being aware of like, you know, who, what industry is this business? You know, operating in, or what’s the client, you know, maybe you do, you know, maybe it’s, it’s AdWords and you know, ad words, you know, as a service is, you know, yeah, it could be up or down, but it’s like, oh, like what is the customer concentration that you’re servicing?
What is their, you know, future outlook look like? And yeah. You know, being aware of that is like another big. Risk and so, so yeah, I think those are three big ones, honestly. Key person risk customer concentration, and, you know, margin, you know, margin and revenue trends are, I mean, yeah, three, three big ones.
Speaking of trends.
Jared: So and I don’t know if you guys, if you were behind this or if this was kind of getting published before you came around. I, I know there’s, there’s a 20, there’s a 2022 market watch update that you guys published, and it’s got all this really interesting data about. Online business acquisitions, what are some of the trends around where things are going?
And I’ve gotta imagine we’re recording this, you know, nearing the end of the tail end of 2022. So it’s just been kind of a rollercoaster of craziness for the last couple years. In terms of where you’ve talked about FBA is going, You talked about where online businesses are going. I mean, what are some of the trends that are, that you can kind of, you know, breed life into?
Nate: Yeah, so with that, we are so we’ve started publishing. Like, you know, sections of the report we’re, we’re finalizing editing. I mean, the whole thing’s taken way longer than I thought, but it’s getting closer to like the actual, you know Yeah. Publishing the whole report. But yeah, you know, some trends, you know, at a high level we’re seeing, you know, over the last like three years, The volume of listings is going up.
You know, in, in some of the, in some of the charts, there’s data that suggests that like, you know, there’s kind of been this like, wave of increase in listings and, you know, for a while there was also, you know this wave of increase in, in you know, in, in buyers and interest. But yeah, we’ll see. I’d have to you know, pull it up exactly, but I think.
Mid 2021 or, you know, early 2021, we kind of saw like a peak in terms of the, you know, the delta between listings and listings sold was the smallest. And then moving on from there, the delta has been increasing. And, and one thing to note, the way that our data’s collected, I mean, it’s not perfect. We don’t have a hundred percent.
Like, you know, we don’t have data, a hundred percent of transactions and, and the way that it’s, it’s, it’s also the data’s collected. You know, it kind of, it like, it skews towards it like the way that our sold listings are calculated. It’s like sold that we’re listed in a period. And so if a business is listed yesterday, It’s gonna count as not sold in this period, versus if you fast forward six months from now, maybe it does sell.
But anyway, but, but even with that, there still is some clear trend lines of like, you know, listing the, the percentage, the delta of percentage sold listings versus, you know, listing sold. You know, there was like, it, it was smallest in, I think it was beginning of 2020. And then since then, you know that that delta has been growing.
And so, so what I think this means, and really if we’re zooming out this means a few things. And I mean, I think as we go into whatever the economy you know, buyers are becoming more discerning. You know, even six months ago, a year ago, I mean, you look at fba like people were paying outrageous multiples.
If you had any product, someone would. And and now, you know, and we know we’re working with aggregators that like are more discerning, you know, they’re, Yeah. Like a lot of the ones that just bought anything and everything are struggling. And so the ones that are surviving are, you know, more discerning.
And so, so yeah. So if you’re looking to sell your business, look, there’s still buyers out there for quality businesses for sure. But, but yeah, it needs to be a quality business. They’re not just buying, you know, anything. But then on the flip side, and what I think is most exciting is, you know, for, for savvy acquirers, I think this, we could be coming into a really interesting, you know, time and opportunities where, you know, like, let’s, you know, let’s be honest, like there’s a lot of uncertainty out there and what’s happening in the future and economy and the businesses and all this kind of stuff.
And, and, and so that means that there are business owners out there. You know, are uncertain. They could be scared also. I mean, there’s a whole other trend of just retiring baby boomer, baby boomers that own, you know, all kinds of businesses that like, you know, for a, you know, for a savvy and creative, you know investor acquirer.
These can all equal opportunities. And so, so yeah, that’s stuff that I think we’re coming into. I mean, if you’re selling, you gotta have a really good business. And if you’re interested in buying, you know, there could be some really interesting opportunities for you to expand via acquisition, grow, market, share, you know, what’s the, what’s the phrase be, Be greedy when others are fearful and be fearful when others are greedy.
And. You know? Yeah. Now, it could be a time there moves to be made for, for people interested in, in, you know, growing via acquisition. Talk about that a bit because
Jared: that’s, in essence kind of what you did. You, with Centura, you, you found an acquisition that you then bolted onto what you were already starting to do, and you, you harnessed a lot of efficiencies through that.
Jared: like, give people an idea for how they can think through. From acquisitions rather than growth,
Nate: kind of through slogging it away in the trenches if you’ll, Yeah. So, so yeah, this is again, this is something I’m really excited about and stuff that I think a lot of people haven’t thought about as much as they probably, you know, could or should and stuff that I’m really excited to hopefully, you know, spread more awareness of.
But, you know I. We could say that you can use acquisitions to solve, you know, whatever your biggest business challenge you could use acquisitions to solve. And so let’s look at some examples. Like, okay, let’s say, you know, you’ve got a great you know, content engine, but you’re really bad at sales.
We’re like, Okay, well what if you went out and acquired a business? Was already selling to your target customers that you could go out and merge or acquire or partner with. Where like, okay, now you know, you all of a sudden have this whole portfolio of clients that you can, you know, sell into like, Oh, that could solve your sales problem.
Or like, oh, maybe. You know, maybe you’re really good at sales, but operations is the problem. And oh, you could find a business to merge or acquire that. Oh, like they’ve got a great HR recruiting team and really good people, infrastructure that, you know, you could plug into and, you know, take advantage of their systems and, you know, you can do your sales thing and grow on top of that.
You know, and, and, You can bolt on different business models as well. So like, let’s say you’ve got a content side and you have a big audience of, you know, of I mean, it works the best with b2b, but, but not even, I mean, it could be, let’s say you have a weight loss, you know, website and you’re making money via ads and oh, you know what, if you went out and acquired a.
You know, some type of a, a, you know, a health coaching program or, you know, some service that helps people with, you know, dieting or meal prep, and then, oh, now you have this, all this audience in traffic and now you can just plug this, you know, service or consulting or coaching, you know, into that as well.
And so, I mean, really like, They’re really interesting moves that you can make, you know, depending on your business, your model, and what your, you know, challenges and goals are. But yeah, those are just a few examples of, you know, ways that you can, you know, think of like, all right, like what’s my, what’s my current biggest challenge?
And then like, what could I acquire or merge or partner with that, you know, would solve that? Where am I strong? Where am I weak? And, you know, how could I acquire to, you know, balance out my strengths and, and. Yeah, fortify the weaknesses. That
Jared: is a very interesting approach. I, I think a lot of people maybe think through acquisition in terms of just supercharging growth, almost like, Well, I already do this.
Well, we’re already succeeding here. Let’s go out and find more of that. But that almost flips the model in your head and you’re actually, you know, what do they call it? Like an aqua hire where you acquire the talent that you, that you are actually just trying to hire in the first place, but you get so many other things because you acquire the business on top of that.
It kinda reminds me of, of, of hearing about that in the past.
Nate: Yeah, sure. I mean, you know, Aqua hire, acquiring the team, you know, that’s also a strategy. But, but also to what you were saying, and you’re right, there’s a whole other, you know, the more kind of classic like roll up strategy, right? Where great, you know, you’ve got one content site that’s doing, you know, X dollars and then, you know, you buy another one and, you know, maybe you can leverage some economies of scale where, okay, like you’ve got a great writer that you can now use, right?
For both. And then you acquire another one and you know, you have now you’re doing more volume and so your costs go down. And so, you know, there’s some economies of, so there’s some savings as well. Well, so there’s savings. But then there’s also, you know, the way that the, the roll up strategy works is it’s like a one plus one plus one equals five or 10 sort of thing.
Because if you’ve got, you know, let’s just say for round numbers, let’s say you got, you know, a million dollar business and then you’ve got another million dollar business, then you got another million dollar business if you, if you combine them together, The, the value, you know, it’s, it’s probably, it’s not gonna be 3 million.
It’s probably gonna be, I mean, you know, we’re napkin mapping, but it could be 4 million, 5 million, 6 million, you know, depending on a variety of factors. But, but yeah, there, I mean there are just kind of roll up opportunities for sure. Where All right, great. I’ve got a good this business and I’m just gonna, you know, bolt on similar.
You know, business models and similar companies that just to kind of grow our market, share that, that’s definitely a move as well as, you know, like leveraging infrastructure for cost savings or some of these different synergies where it’s like, all right, great, well we’re doing this business model really well, and if we go out and acquire another business, you know, we can cross sell between them.
Like that’s, Yeah, I mean, So, so if, you know, if you find that type of an opportunity, you still benefit from the cost savings and you know, just by rolling them together you get a bigger pie as well as, you know. Yeah. Growing the business, selling to the different customers. Where
Jared: are, what are some ideas for where people can find, visit?
Let’s say that, you know, someone’s listening and they’re like, Man, I’m all about that. So where where would they look to find them? Are there any, there’s typical places, I’m sure there’s maybe some non-typical or off the beaten path type of places. Like any, any
Nate: ideas there? Yeah, so, so one would wanna direct people to the Centa market watch.
So if you had a centa.com/marketwatch. So that is our like listing . You know, website or platform. And, and it, you know, I think it, it syncs with maybe a dozen or 15 different business brokers and you can sort by business model, you can sort by size and, and that’s just, you know, one centralized place that is Yeah.
You know aggregates, listings. And so, so I mean, that’s a good place to start, you know, additionally, and I’ll say like, you know, most, like a lot of my opportunities, they’ve come from my network and so, You know, Cent Chica, I knew the owner and I reached out and that turned into an opportunity, you know, I’ve made a number of other, you know, investments or partnerships or advisory and, and, and yeah, it’s really like within my network.
So that’s another place, you know, to look and, and there’s stuff like, you know, I made a, so recently, I mean, I know we’ve been talking about this, but I’m really excited about, you know, growth via acquisition and mergers. And I’m trying to think of, okay, well what assets do I have and how do they, you know, fit together?
and and so, so yeah, you know, I made some, you know, social media posts and some people responded and now I’m having conversations with people that like, you know, are interested in exploring. And so, yeah, a lot of it depends on what your, you know, I mean, what your community or audience or, you know, kind of personal.
You know, relationships are like, but, but yeah, but that’s a big one too, of just, and a lot of it’s just kinda, you know, you can just make it known and when you’re meeting people, it’s like, Hey, nice to meet you. Oh, I own a, I own a content website, but we’re really focused on growth via acquisition. Eh? Have you ever thought about selling?
Or, you know, and you just kinda like start a conversation and, and and, Yeah, like, cuz the thing is a lot of people just never thought about this. And so when you bring it up, it’s like, Huh? Like, that’s interesting. Like, you know, maybe there are some things there. So I totally, I’ve sold two
Jared: businesses in my life, and I’ve never listed one of them anywhere.
It was all just through relationships and, and talking and conversations and yeah. It’s, it’s a really interesting point that you bring up. Mm-hmm. .
Nate: Let me ask
Jared: about financing. Maybe to kind of start to bring us back to the, to the conclusion here. You financed with sba. You said there’s, you know, a number of different ways to, to think about it.
I mean, you know, you don’t obviously you don’t have to pay for it necessarily with all cash. If you’re sitting out there thinking about buying a business thinking, Hey, this is, we’re entering a season that could be really advantageous to purchase, what are the different kind of financing buckets or methods that you see people taking advantage of right
Sure. So, so yeah, there, there are a number and, and I’d say a lot of it really depends on, It depends on the, like, what the relationship with the seller is like. And, and so a lot of it is, is honestly like, are they, you know, using and being represented by a broker or are they, you know, or are they not? Hmm.
And so, and look like we, you know, I love brokers. You know, Wheat Centa does a lot of business with brokers. If you’re a seller, especially, there is a ton of value in working with a broker. And if you’re a buyer as well, you know, brokers, you know, they, they, they deliver you great businesses, they’re prevented.
You know, there’s just like inventory available. It’s, it’s way easier to find, you know, you go to the Market watch and those are all broker listed businesses, and so yeah, there’s, you know, there’s benefits to, you know, broker listed businesses. The challenge, however, The sellers are probably gonna be less flexible when it comes to, you know, deal terms and, and you know, how the deal is structured.
And so, so yeah. So that’s one thing. So like different options depending on if you’re working directly with the seller or if there’s a broker. And that being said, you know, there’s, there’s sba, which is, you know, one financing option. That is, you know, that’s what I. And so, you know, benefit of SBA is, it’s pretty, you know, it’s cheap.
It’s it’s low interest rate. You know, pretty long term. You can get up to like 5 million, you know, you only put 10% or so, you know, down and the. So that’s good that the, the disadvantage is it takes a long time. It’s just ballpark, six months. And, you know, you’re also on a personal guarantee. And so it’s like if the business, you know, for whatever reason goes under, you know, you’re personally on the hook.
Also a lot of, like, not every business qualifies for sba. So for sba, you, it needs to. In American or a US based business with like two plus years of tax returns and you have to be in American with, you know, tax returns and this, and so, so a lot of businesses just don’t fall into that category for sba.
You know, there have been popping up a lot of other, you know, types of lending options and so on. Is this company that Yeah, we’re, we’re friends with and really cool guys. It’s called BPOs B O O P O S. And this is like, it’s acquisition financing. So with BU it’s, it’s a lot faster. I mean, they still need to vet the deal.
It’s a lot faster. You’re not able to, you know, the, the, the ceiling or the cap on it is lower and their, you know, their rates are gonna be higher than sba, but, you know, it’s, it’s, it’s faster. It’s more flexible and pretty sure you don’t have a personal guarantee, So, so there’s that, you know, there’s, you know, friends and family just kind of like, you know, Yeah.
Within your network. Some other, So, so that’s kind of for like, okay, like how do you get, you know, cash? There’s also some of these other, like SBA Express or you know, there’s some like different lenders that specialize in, you know, finding money and, and you know, interest rates vary and some of them are, you know, some of them are available.
It’s like if you have an existing business, you’re more able to get lending because you can kind of like, Yeah, you’re more able to. Lending for your business that you could use for acquisitions. Track record. Right. And, and it’s just like, like if you have an existing business, Yeah. It’s easier to get, cause you can show, you know, cash flow and profit and anyway, so, but then there’s all these other more of like deal structure kind of things.
And so this is where you can really get you know, much more creative when it comes, when you’re dealing directly with the seller and. So a big one is, is is called seller financing. And so let’s say I’m buying your business, it’s, it’s a, you know, million dollar business. And I can say to you like, All right, look, you know, I love your, and let’s say you’re running it and you know what, You just wanna get onto new things and you know, you’re, you’re tired, you wanna move on.
I can say, All right, look, Jared, I love your business. You know, I wanna help you to, you know, spend more time with your family move on and focus on, you know, you’ve got your other project that you’re excited about. All right, great. Look, you know, you want a million bucks for the business. I agree. It’s worth a million bucks.
But here’s what we’re gonna do. You know, I’m gonna give you 10% outta pocket now, so you know, you can do that. Go on vacation, whatever you want. And then, you know, over the next one year, two years, you know, you’re gonna get payments every month for, you know, $30,000 or four, you know, I mean, whatever making up these numbers.
But, you know, then it’s just an earn out portion where, okay, great, you know, you’re gonna get, you know, for the next two years you’re gonna get monthly payments or the next five years. You know, a friend of mine sold a business a couple months ago, or maybe a year ago now, and it was like he got, he got about.
You know, cash up front and then half on an earn out. So over the next five years he’s gonna get, you know, quarterly payments and and so, so I mean, so that’s a big one. Seller financing is like the biggest, or you know, certainly one of the biggest levers that you can, you know, play with as a buyer to, you know, decrease your cash outta pocket, you know.
But then there’s other things of like, you know, tying. You know, tying things to performance. So it’s like, okay, you know, we’re buying at this valuation. And that’s, you know, with the, with the understanding that like, sales remain at this level. And so, you know, you can have the, you know, you can have the payments tied to different performance markers where it’s like, all right, look, if in the next 12 months if the business maintains this, You get this much money, if it goes down, it’s this much money.
If it goes up, you get this much money and, you know, really aligning incentives. And, and the thing is, when it’s, when you’re working directly with the seller, it’s a lot of times it’s much more of like a collaboration and a partnership and you wanna align. I mean, as the buyer, you wanna reduce risk as much as possible.
So that means the least amount of money outta pocket as well as. You know, tying things to different milestones where it’s like, okay, let’s say there is key person risk and you’re gonna need to, you know, build a transition or replace people. And, and so, you know, with that let’s say you, it’s like, okay, you know, there’s a six month transition, so okay, you’re gonna get, you know, X percent, you know, at closing.
After a six month transition period, meeting these requirements that, you know, I have these people in place and these processes are taken over successfully, that triggers, you know, another lump payment. And then, you know, six months later we look at, oh, is revenue matching this and that? Okay. That triggers another lump payment, you know, a year from now.
Okay. Like are these metrics being met that triggers another payment and. Yeah, I mean, you really can get you know, there’s, there’s an infinite way of, of structuring things and you know, to make it Yeah. Work for you and the seller. And yeah. You know, and that’s where you can, when the sellers are approaching it more of like a collaboration.
As a partnership, there’s a lot more flexible with the terms and. And Yeah. And you can piece together things like, Oh, okay, well, like, you know, you want X money down and you’re willing to do an earn out over this. And Oh, so like, I’m gonna use Boo Post and I’m gonna get a chunk of money that then that goes to the down payment.
And then there’s, you know, these milestones that I’ll take the cash out of the business and then use that. And so, you know, you can really piece together these different Yeah. You know, different, you know, financing, you know, blocks to then, you know, put together the whole. Lot of options there.
Jared: Lot of things to consider.
A lot of ways people can get involved in a deal if they want. Nate, this has been awesome. The hour has flown by. Let’s see, I know that you’re at centrua.com. Where else can people follow along with what you’re doing?
Nate: Yeah, you know, I’m fairly active on social, you know, anything at Nate Ginsburg aside from business entrepreneurship, I’ve, you know, I’ve been doing yoga for 10 years, so you’ll get some, you know, handstand pictures and whatnot and, and, and yeah, and I’d say for anyone listening, like I’m really just looking to.
Yeah, like connect with more people that are interested in doing cool, you know, acquisitions and, you know, growing via acquisition, exploring strategic acquisitions. And if any of this sounds interesting you know, just to hop over to centa.com or you know, add me on social, send me a dm. And yeah.
Would love to better understand your business and you know, you, your business, what types of opportunities you’re interested in. If any of the things that you heard, you know, sound, you know, were new or, or interesting or exciting to you, like Yeah. Would love to hear because I’m, you know, Yeah. With Insur, you know, we we’re looking at a number of different, you know, ways that we can continue to grow and continue to expand and, you know, be of service to.
People that are looking to make acquisitions and, and, and yeah, would love to understand what’s exciting for you and what you wanna do and, you know, hop in a call, we can jam and see if there’s any ways to support. Well, thanks so much for
Jared: coming on board. Appreciate having you and until we talk next time, thank you