Deal qualification for purchasing

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Every negotiation to me is a collaboration. It's not, I'm on the other side of the table from somebody. And as a matter of fact, when I'm negotiating, I typically do not sit on the other side of the table. You can build complete financial models for things, and if you're super geeky and Excel, like I am than you do, and there's always a pivot table. So this is just kind of a sheet that I use because it's got the things that will tell me, what's my deal stack. Look like the deal stack is how am I going to get this without having to come out of pocket any money. So I want to know what all the assets are that have the potential to be carved out of the deal to let the seller have them. So that's going to reduce the purchase price by the amount of those assets or that I can finance through some third party to get cash so that I can get the company to pay for itself. So the other things after I've get those, like, it's just, these are all assets that are turnable into something, right? Cash accounts, receivable, notes, receivable, certificates of deposit, money, market accounts, and T-bills securities accounts, raw materials. If it's a manufacturer, they've got raw materials, they've got work in process, which is somewhere between a raw material and inventory. And then when it gets finished, it becomes inventory. They've got that FF and E P P E furniture, fixtures and equipment plant property and equipment vehicles and real estate. So those are kind of like the top things I look to to see is this something that can help this business by itself? They don't have any of those. It's going to be harder. I can still do it, but it's going to be harder. So then I want to know, what are they asking for the business? What is the SDE or EBITDA? What is the multiple, what are sales? Is there any annual recurring revenue or monthly recurring revenue? What our AP is, accounts payable. Is there a note payable on against any real estate also known as a mortgage? Um, is there any defensible, IP, do they have any, any moat that they've built by having IP intellectual property that's protected? And if it's anything that runs in multiple shifts, how far are they using their capacity? How far into capacity are they? How do they market? How do they sell? And what's going to happen with the person who is the CFO, CEO, and COO. And if they don't have those people, it might be owner manager, right? Accountant. So that's, that's the lower level version of those things. And then how many customers do they have that are active? How many prospects do they have? And of course the big, big, big thing is the RFL. What's the reason the seller's leaving. What's the reason for leaving. And then what do they want once I have that I'll say is the multiple reasonable. So to figure that out, I'll say what's the asking price. And then I'll take the real estate out to figure out what's the net net ask. Cause I'm probably going to sell the real estate anyway. Maybe I'll keep it, but I'll probably sell it. And then that'll give me the ass multiple. And I'll compare that to the industry, multiple that's on those sheets that I handed out that have all the industry things, right. I'll probably actually run a biz comp search because I'll use the software, but, but those sheets would be a good place to start case study. Just their show analysis, accessories manufacturer. They're doing 2.6 million gross, about 10% in EBITDA. They're asking 1.2 million. That's a 1.4 multiple. You'll see, this just follows the format that I gave you. Um, I know now if I'm and my thumbnail fair market value, I just multiply by the SDE and the average Ste and the average EBITDA, multiple numbers. Remember SDE was 2.5 EBITDA 3.7. So if I multiply their EBITDA by those numbers, F fair market value is between six 63 and 980. They're asking 1.2. So they, maybe there's some reason that it's worth more than 3.7, but maybe there's not, I don't know, but I'm looking into it. It doesn't look like a great deal, but we've got to find out a little more. Why, because they had declining sales, they were bored and had shiny object syndrome because he wanted to start a new business. The strategy was an in and out and the opportunities that identified where we could work the ad chain, they expand the ad channels cause they weren't advertising anywhere except in print media work the list because they weren't marketing to their list. Somehow though, they were making a couple million dollars. They were making a couple million dollars a year and taking home almost 300 grand without doing any of that stuff. So huge opportunities here. Um, they hadn't, even though they had dealer and wholesaler inquiries, they had just told them, no, we're a direct response by placing magazine ads only in one magazine. That's how we do business. We don't do dealers. It was like, okay, great opportunity print. They were only doing print. And in one affinity magazine, um, the opportunity to add products cause they only sold one. And I knew that we could flip to the manufacturer who they were buying their goods from. And we could also expand the avatar because it was very narrowly defined. So he said, what would you do with the money? Well, they wanted $200,000 because remember they're they want to do a new business. That's the shiny object thing. And they needed $200,000 for molds and the rest of it, they were just going to invest. So that tells me, I probably only need to get them either $200,000 or the ability to have these molds. Cause maybe I can just get them the molds and I don't have to spend the 200 K. So the negotiation strategy was collaborating and every negotiation to me is a collaboration. It's not I'm on the other side of the table from somebody. And as a matter of fact, when I'm negotiating, I typically do not sit on the other side of the table. I'll intentionally sit on an end of the table. And if they, if they, if my only option is to sit on the other side of the table, I will grab the chair and I'll bring it to the end. And then when I get to the negotiating point, once we started talking and I say, let's figure out how to do this. I'll pull my chair around and get on the same side because you're literally showing them that you're moving to the same side and it might sound like BS, but it absolutely works. And it makes sense too, right? It just, it makes you feel we're going to solve this together. And that has to be your spirit. Not I'm going to negotiate out, negotiate you. I'm going to collaborate to get where we want. So the deal stack was a combination of one, two, three, four different things. How many things can you think of that will get the seller? What they want.