How to Be the Buyer a Seller Picks

Robert came to brokering the long way round, through five years running an affiliate network and then a skincare company that landed partnerships with Costco and Nordstrom, with a background in financial analysis from his corporate days underneath both.

The premise of the episode is a question every competitive buyer eventually runs into. When several people want the same business, what makes a seller choose one of them? The answer turns out to be less about money than most buyers assume.

The diligence mistake almost every first-time buyer makes

Asked what buyers most commonly get wrong, Robert's answer is not a technical oversight. It is that they do not dig deep enough, usually because they are afraid of looking inexperienced.

You can tell a first-timer, he says, because they are not asking many questions. The fix is simply to be relentlessly curious and follow every thread to the end. Verify the income properly: bank statements, tax returns, and whether the basic arithmetic holds together. Trace every add-back through to its source. If the seller runs expenses through another business they own, follow that too and confirm the money is actually being paid.

Two questions in the episode are worth stealing outright. Ask the seller or the broker what you have not asked that other buyers have brought up. And ask the seller directly what you are not seeing in the business that you ought to know.

What add-backs are actually for

On a profit and loss statement, the add-backs at the bottom typically include the owner's salary, vehicle expenses, depreciation, and interest. The purpose of adding them back is to show what the business genuinely produces, independent of how the current owner has chosen to run it.

That number is what a buyer needs. It tells you the real cash flow you would inherit, how long it would take to earn back your investment, and how much room you would have to increase marketing or make other changes.

Robert's caution is about the gray areas. If you see five vehicles or an unusual amount of travel, ask how much of it the business actually requires. Genuinely personal spending is a fair add-back. But if the travel or the vehicle is necessary to operate the company, that expense has to stay in the numbers, because you will be paying it.

Buy a business you can actually understand

Robert is unusually direct about his own limits. He would not buy a business that depends heavily on SEO or content marketing, because those are not his areas. That is not a judgment about those businesses, just a recognition that he would be the wrong operator for them.

His advice to a first-time buyer follows from that: play to what you know. If you are a capable performance marketer and you find a business running Facebook and Google ads that you are confident you could substantially improve, that is the one to pursue, because you are bringing something the business does not already have.

It also helps if the business model is simple enough to hold in your head. The host's own first acquisition was a drop shipping business, chosen because the mechanics were easy to follow: buy from a wholesaler, they ship to the customer, you keep the margin. As he puts it, the maths is addition and subtraction rather than calculus.

Underlying all of it is knowing your criteria before you start. Buyers who approach a broker with a clear specification get taken seriously. Buyers who are open to anything have no way of judging whether what they are shown is a fit.

The three ways these deals get structured

SBA financing is the most common route for US businesses. The buyer puts down somewhere between ten and twenty percent, the loan covers the rest, and the seller walks away with the full amount in cash at closing.

A seller note is the usual way to finance part of a deal outside that. A buyer might offer seventy percent in cash at closing and ask the seller to carry the remaining thirty percent over two or three years, with interest paid quarterly. It gives the buyer some protection and keeps the seller invested in a clean handover.

An earn-out ties part of the payment to the business hitting revenue or profit targets after the sale. If the targets are missed, the later payments reduce accordingly. Robert notes these are relatively uncommon and tend to appear only on larger transactions.

Negotiate on more than the price

This is the most useful idea in the episode for anyone competing against other offers. Price is only one of the things a seller cares about, and often not the one they care about most.

Find out what the seller actually wants and build the offer around it. Do they need to close quickly? Offering a twenty-day diligence period may be worth more to them than another few percent. Would a consulting arrangement for six months after the sale help, both to spread the payments and to keep them involved during the handover? There is far more room to be creative here than most buyers realize, and it costs less than simply bidding higher.

Why sellers sometimes take less money

Being an attractive buyer, in the end, comes down to being someone a seller trusts to follow through.

The behaviors are unglamorous. Do what you said you would do. Turn up when you said you would. If you tell someone an offer is coming next week, send it next week. Failing to follow through on small commitments tells a seller exactly how the rest of the process is likely to go, and brokers notice it too. A buyer who is straightforward to deal with is one a broker will keep working with even when a particular deal falls apart.

What raises the stakes is what happens after closing. On a larger transaction the seller may stay involved for a year or more, through a transition period or an earn-out. They are not only choosing who gets their business, they are choosing who they will be working alongside while the rest of their money arrives. Sellers routinely ask their broker which buyer has their act together, and they are asking in earnest.

Which is why, as Robert puts it, a seller will sometimes accept somewhat less from the buyer who is simply easier to deal with. Certainty and a clean handover have real value, and the buyer who offers them is competing on something their rivals have usually ignored.

Don't buy out of desperation

The closing advice is about motive. Wanting out of a job is a perfectly good reason to start looking, but it should not be the only thing driving a purchase. Robert has seen buyers in that position, and the outcomes are not good.

His specific cautions: do not stretch to a deal you cannot comfortably afford, and do not buy something simply to hold as an income stream. Have a plan to grow it. The process itself is the same whether this is your first acquisition or your tenth, and the deals he has worked on have closed anywhere from one month to nine. What changes the outcome is whether the buyer chose something they can genuinely run.

For more on what makes a good acquisition target, see our recap of Loren Vandegrift's conversation on Deal Flow.