Shownotes
RainCatcher is a Denver-based national business and brokerage firm that helps entrepreneurs buy and sell their companies. In this episode, Brian Loring who is one of its senior brokers talks to us about the company and how he ended up working there. As a real estate expert, he offers advice to those who are starting out in the buy and sell businesses and shares some of the things that he does to help business owners readily sell their business. Learn more from Brian as he discusses further how they go about acquiring and helping clients and the typical mistakes business owners make.
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Buying And Selling Companies With Brian Loring
We have a guest from the West Coast, Brian Loring. He is a senior broker with RainCatcher. RainCatcher is a national brokerage firm based in Denver. Even though Brian is in their LA office, he’s holding down the West Coast version or location for RainCatcher. He joined the company a few months ago, but he’s been a broker since 2005. He has completed more than $150 million in business sales and commercial transactions during that time. Selling businesses is actually a second career for Brian. He spent many years in a very different line of work. He’s going to tell us more about that and how he got to this point. Brian, welcome to the show.
Thank you, Bob. I sure appreciate it. Thank you for having me on.
Thanks for taking time out.
You’re welcome.
Give us a quick snapshot of your background and how you got to this point.
I actually am a two-career person. I completely had nothing to do with transactions, brokerage or anything to do with real estate or business for many years. I started out as a journalist. I was a reporter and a television news anchor. I worked as an on-air reporter for many years. I also worked as a television anchor for a while. I’ve been lifelong in California. I worked in Santa Barbara, San Jose, San Francisco, Oakland, Sacramento and all the major cities of California for many years. I started as a newspaper reporter, television reporter and I eventually got into television production here in the Los Angeles area. I worked for a bunch of syndicated television shows back in the ’90s and the 2000s. I worked for NBC, Fox, CBS, numerous television networks on the national level. I covered all the national news. I won several Emmy Awards, Golden Mike Awards and produced several documentaries, hour-long pieces. I did a lot of production. I was mostly a writer and producer for many years. I got to my early 40s or late 30s and I was running ragged. I was getting on a plane at a moment’s notice to go run to a news story that had happened and it gets tiring. It got to a point where I needed something else and I wanted to serve in a way that I wasn’t serving before.
I wanted to feel like I was making a contribution and helping people in a way that I wasn’t. I completely left the television production realm behind. I had been an executive producer. I was promoted to a divisional manager of an IT department at CBS and at Fox where I was doing a lot of IT work, a lot of systems work and network administration. I decided to try something else. That was back in the early 2000s. I went into brokerage. I’ve been a broker since 2005 and done a lot of deals both in the commercial real estate side as well as the business brokerage side.
For most of my life, I’ve done both side-by-side. I started out with several mainstream business or real estate brokerages; CB Richard Ellis, Grubb & Ellis, NAI Capital here in the greater LA area. It was just in deals, but at the same time also did business deals. I found that after a while I got more not only accustomed to and used to doing the business side, but I enjoyed them more. I liked working on the business side. I like working in the financials. I like a lot of the people who were involved. I eventually sold a few gas stations, a few car washes, liquor stores and so on. Eventually, I made that transition from commercial real estate into business brokerage full-time many years ago. I have been doing that for many years now.
I think about your obvious communication skills from being in media prior to getting into commercial real estate in business brokerage and then you look at the business brokerage side of the house. Do you find many business transactions where there’s not a real estate component involved?
Occasionally, but when I was working for my own firm doing digital businesses at IBIS Advisors, there were a lot of deals that were not eCommerce deals, digital deals, online deals, lead generation websites. A lot of those will not have a tangible space. There are some of those components, but a lot of times the lease and the real estate is a big part of the deal. You have to be ready for either.
I think about that as a value-add I’m bringing to the table when you’re talking to a prospective seller of a business. If they’re predominantly real estate heavy in their facility and so on, I would think that would be a valuable add on to the discussion.
Absolutely, particularly on the leasing side. There are so many cases where the landlord becomes an obstacle or the discussions with the seller and the landlord become something that you need a little bit of experience with. That has helped me tremendously. Having come from a leasing background has paid off extremely well. The clients appreciate it. The sellers appreciate the fact that I can get into a discussion with a landlord or with the management group representing the landlord and feel comfortable, get through the language, get through the legal and have a sense of how to best represent the seller. They do appreciate that.
For the business owner that’s in a lease arrangement now with their business and considering selling at some point, let’s say their lease terms are coming up and they’re thinking, “We’re going to exit the business in the next three to five years,” is there a piece of advice about leasing you might offer?
I generally give the advice of not to do anything different based on the perception or the idea that you’re going to sell any time, whatever the timeframe is. A lot of people will come to us with the idea of selling their business at a time anywhere from six months to a year out from having to do a lease renewal. It comes up a lot. It gets them to thinking, “Maybe I don’t want to go another three or five-year term. Maybe this is the time to start thinking about selling the business.” We do get small businesses that are in that category where they’re saying, “Should I or shouldn’t I or whatnot?” We usually have a discussion. We’ll find out if there is a month to month possibility in their tenancy so that when their term comes up, they don’t have to roll to another three years, another two years, and another five years. When you get to retail spaces, sometimes they want another ten years, if it’s restaurant space or something like that.
I think about the components when a potential buyer is getting ready to look at a business, are there things in the lease agreement that may make the transaction easier, harder, more expensive, less valuable and that kind of thing? I don’t have a good feel for that.
The relationships often have something to do with that. It’s not totally what’s on paper. If the seller has been able to maintain a good relationship with that landlord or with the property management or both, it does go a long way to being able to craft something that may be in a short-term solution would be a short-term solution. There have been many cases where I’ve recommended that they try to find a short-term solution and be honest and upfront with the landlords. There’s a natural hesitation towards a business owner who wants to sell their business to want to let the landlord know that they might want to sell.
I usually generally like to talk to the landlord at the very beginning of our listing and engagement period. There’s a bit of dynamics of people having different opinions on this as to whether it’s better to wait till much later in the process, wait until you have a buyer or wait until you’re under contract. I’m of the belief that you should do it in the beginning because I can’t tell you how many times I’ve gone to a landlord at the very beginning of the listing process after the seller has had that discussion with the landlord. At least prime them to let them know that we’re going to put it on the market pretty soon as a business sale and that it could have implications for our leasing situation.
There are so many times when we will find out information from the landlord that we didn’t know before. I can’t tell you how many times when I’ve been told by a seller of a business, “I have a great relationship with the landlord. He’ll be fine with it; no problem.” All of a sudden, we find out about nine different details that we didn’t know anything about, sometimes obstructions to being able to even execute some a lease assumption. I would definitely encourage in the vast majority cases to talk to your landlord at a time because landlords can be deal killers. I have had so many deals killed by landlords who are not agreeable to the new buyer coming in, their financials, their experience, their background, you name it. Landlords can throw a wrench into a deal. It’s good to massage that process from the very get-go as far as I’m concerned.
I appreciate that insight and thinking about it, how did you find RainCatcher and what was your decision process like that caused you to select RainCatcher as a place to do business brokerage through?
It’s mostly because of the CEO, Marla DiCarlo. She’s wonderful. I had met her actually through a couple of webinars that I first sat in on and I was blown away with the amount of passion that she has for small business. She really comes from a place of wanting to help people. It’s not transactionally-based, it’s not about commissions and fees. She does have a purpose in life about helping people and helping small businesses. It was very obvious from the very first webinar that I saw. Eventually, I sat in on about three or four of her webinars and wound up meeting her at a conference in Dallas. She blew me away. I said, “This is a great place. Their model is fantastic, their people are great.” It was not a hard fit for me to want to get on the RainCatcher train. It’s been a good one, a great train ride.
Handling Real Estate Buyers: Landlords can be deal breakers.
I’ve had the privilege of having her on as a guest and she’s a real big fan of the business owner. I’m obviously a fan of the business owner and I think about what you guys do to help business owners take and transition their business to the next generation for lack of a better term. That’s an extremely valuable and misunderstood skill.
Marla is this super sophisticated business person on her own. She’s an accountant and CFO. She started her own business at Kaizen. She understands the Sturm und Drang of business ownership and what that feels like and what an owner is going through. When you can feel that and have a sense of empathy with someone, it really goes a long way to not only building a good client relationship, but actually getting the deals. You can show and portray that you have a sense of what it means to make payroll and to have to figure out where your next $5,000 is coming from because you don’t know where it is. That helps.
It gives you a perspective.
The sellers really appreciate that.
For you, when you’re talking to that business owner that’s thinking about selling, what’s the most important thing you do to help them get ready to sell their business?
The greatest value we provide is context. Context through information. There are so many business owners, they come to us and they freely admit, “I have no idea how to sell a business. I have done this for 10 years or 20 years or 30 years, and I know my business. I know my industry. I know everybody in this industry, but I don’t have a clue on how to sell my business as a commodity to another person.” What I think is the best thing that we can do is provide context and provide them with an understanding, a sense of dimension. We get a lot of initial calls from people. Let’s use numbers and say there’ll be a $2 million revenue business and they net $200,000 in profits each year. They’ll call us up and they’ll want to get information about what the process is like. They’ll ask me, “Do you think I could get $3 million for my business?” I know absolutely that they’re not going to get $3 million for that business. There is no way that they’re going to get $3 million for that business. Instead of me saying that, it’s better for me to have some facts and figures to be able to back that up.
Most of the time when I do an evaluation call or when I first meet someone, I like to have some facts about what previous deals have sold for in the past. I will talk to that business owner and say, “Before our call, we have several services that we can go back and look at previous deals in your industry and in your geography and in your recent timeframe. I went back and looked at 60 and 70 deals in the past ten years and here’s what they traded for. What they traded for is somewhere in this narrow range of 2.5 to 3 times your profits. If you take that 2.5 or 3 times your profits and you’re telling me that you think you have $200,000 in profit, you have a ballpark right there as to what this business probably will sell for.” If you tell them that from the standpoint of providing dimension, providing information and providing some context, they really appreciate that. It’s not just me having an opinion that I’m spewing onto them. They really understand that, “This is a marketplace. We are selling a business and you have to have to take it a little bit like a commodity because we are selling something. That does have a price and I’d have to put a price on it.”
That context is what I think is the most fun part. We were talking about my history as a reporter. One of the reasons why I like this job so much is because I get to meet people and interview people. That’s what I miss about journalism. There’s a lot I don’t miss, but that’s the part that I miss the most. I like to interview people and get into their lives and understand what they’re doing because we get to meet so many incredibly talented people who have done tremendous things with their businesses. That information gathering, they also appreciate the fact that I’m curious and I want to know how we can help them and move forward.
When the business owner reaches out to you guys and says, “I’m considering selling my business.” If you were going to characterize the first call with that business owner, what are the types of information or questions that you asked that potential business owner?
I want to get a little bit better sense of their motivation. What’s driving them to call us? What’s driving them to ultimately want to figure out what their business is worth? What do they think is going to happen once they do sell? What’s going to happen with their own families of their own day in and day out workspace, their own employees? A lot of people don’t have a sense of that. It’s not flushed out. They know that they’re tired of what they’re doing. They’ve been doing it for 15 or 30 years and they want something else, but they don’t have a sense of context. They don’t know what it’s going to look like. We try to help them with that and we try to give them a better understanding of that. We have a couple of proprietary tools at RainCatcher that are fantastic. One is that is called a sellability assessment where we’re able to put numbers and put scores on their business.
The greatest value that can be provided is context through information.
Another one that we have that is an incredibly valuable tool is called the pre-score assessment. That one is relatively new that we rolled out within the last few months. That is a fantastic tool that doesn’t necessarily deal with the business. It deals with the owner and it deals with the motivation of the owner and the background and the goals of the owner. I have found that to be as equally or more phenomenal in understanding and getting into the meat of what’s driving this deal. Those questions relate to what’s going to happen with their employees when the deal is done. It’s a wonderful tool that takes only ten minutes to do online, but it really provides a tremendous amount of insight as to how we can proceed.
I think about some of the statistics behind that. There was this statistic that said about 75% of business owners within the first twelve months of selling their business have remorse. That’s that group of people that haven’t really planned for step three after post-sale, what am I going to do with myself?
That is an amazing statistic. I don’t doubt it. We try to work really hard to not contribute to that 75%.
That pre-score thing that you’re talking about, it would absolutely contribute to that not happening.
It’s because that tool asks a lot of questions that don’t really come up in the course of a regular conversation. It really gets into what’s in their minds. We’ve had people who took this free score assessment and came back to us and said, “Maybe selling is not exactly what I want to do,” and it gets them thinking in a way that is incredibly valuable.
I think about as you guys are serving the business community and in conversations with Marla, she says, “We want to serve the business owner and do what’s best for them.” That permeates your organization and it’s really important for the business owner. You go on Monday morning when you don’t have to go to work on Monday morning, what’s your plan? What are you going to do? If you’re a pillar of the community and you don’t own the business anymore, what’s your identity? There are a lot of things.
I had to sit down for coffee with a husband and wife, a client who has a terrific manufacturing business here in the Los Angeles area. She started out our conversation by saying, “I have talked to five people in the last couple of weeks about the idea of selling the business and every single one of them came back to me and said that they were disappointed in how it came out and they didn’t like the results.” I said, “That’s interesting.” In my experience, that is not the case. I have to presume from my experience that it’s relatively normal. The deals that I’ve done, if I made a bunch of calls right now and went back to them, the majority of the ones
