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Buying and Growing a Small Business With Little to No Risk

The BiggerPockets Business Podcast
37 min read
Buying and Growing a Small Business With Little to No Risk

Have you ever considered buying a business but were terrified of paying more than the business is worth? Have you ever wondered what you can do to help ensure that a business you buy today will generate the numbers promised by the previous owner?

Well, today’s guest answers both those questions, helping us to minimize our financial risk when buying a small business!

Brit Foshee—real estate investor and small business owner—walks us through the process he used to buy his first five landscaping companies, how he consolidated them into one big company to increase their value, and how he did it all with minimal financial risk. And he tells us how we can do the same thing if we decide we want to go the route of buying a small business.

Brit tells us how he finds the businesses he buys, how he evaluates them, how he recruits partners to run them, and most importantly, how he gets the owners to all but guarantee their financial success. And for you real estate investors out there, you’ll be amazed at how similar buying a business is to buying real estate!

And make sure you listen for Brit’s recommendations on using “claw backs”—a way to literally guarantee that a business owner doesn’t misrepresent the numbers when selling you a business.

Check him out, and subscribe to the BiggerPockets Business Podcast so you won’t miss our next show!

Click here to listen on iTunes.

Listen to the Podcast Here

Read the Transcript Here

J: Let’s welcome Brit Foshee to the show. How are you doing today, Brit?

Brit: I’m doing great guys.

J: Awesome. We are so happy to have you here. Welcome to 2020 I guess we’re a couple of weeks in, but it’s never too late to say welcome to 2020.

Brit: That’s right. Yeah. It’s a great year. 2020.

Carol: It’s a great year and it’s great to have you here and we are so looking forward to digging into your backstory in all the adventures you have going on now and even what’s ahead. I know we have lots of great tips for our listeners, so this is going to be a really valuable episode.

J: Absolutely.

Brit: Yeah.

J: So Brit, we’re here today, we’re going to talk about a lot of the business stuff that you’ve done. You’ve had an amazing story with your businesses, buying businesses, consolidating businesses, small businesses. And I really want to get into that, but I think we’d be remiss not kind of starting with your backstory. Because I think a lot of our audience, a lot of our listeners kind of can relate with your backstory and I think that’ll really kind of give the information everybody needs to see that kind of like, you’re just like most of us when it comes to like when you jumped into business. So start with just a little bit about your backstory. Where did you start in the business world, in the investing world, and how did you kind of get to the point where you decided you wanted to be a business owner?

Brit: Yeah, so I really am just like most of the listeners out there, I started with nothing, J, my motivation was pretty simple at the time. It’s changed since, but my motivation was I didn’t want to be poor. And so I remember I had $8,000 to my name and I had friends that had made money in real estate and so I had bought a property and literally had about four to $500 left after I wrote the down payment check. I mean I was 23 at the time. I was all in, I had no idea what I was doing and they were running a program at the time, it was a first time home buyer tax credit. The economy was terrible and they were just trying to get people buy homes. And I remember they wrote me a check for $8,000 I took that $8,000 and I sunk it into the home.

Brit: I did most of the work myself. I had no idea what I was doing. I was trying to do tile and electric and it was crazy. And I bought this home. I was just smart enough to know that there was a tax break out there that if I held the home for two years, I could sell it and get tax-free gains. And so that’s what I did. Sold the 8,000 in and so I had no money left. I ended up selling that property two years to the day and I got a check for 30 grand and I thought I was rich and I took that check and that money and just sort of parlayed it into my next deal. And that’s really how I got my start. And so real estate is what got the ball rolling for me and I’m forever grateful to real estate for that.

J: And you’ve done a lot of real estate deals at this point. I know that’s not kind of the main topic of this show, but it’s worth mentioning that this point, you’re kind of a real estate investor as well as an entrepreneur and business owner. You own a bunch of rentals, is that right?

Brit: Yeah, so to be honest, I don’t even know what the count is right now, but at one point I had close to 50 doors and I think somewhere we’re in like the 30 range right now. We’ve been kind of unloading some of our portfolio, but yeah, ton of flips. We do some wholesaling and just about anything we can get our hands on, we’ll transact, so.

J: That’s awesome.

Carol: Love it.

J: Yeah, at some point you made this transition, you decided, okay, real estate is great, I’m doing well, I’m collecting doors. But presumably at some point you said, “I want to do something different, I want to do something more. I kind of want to jump over into the entrepreneurial business side of things.” What did that shift look like?

Brit: Yeah, so anyone that’s in real estate kind of knows how the game is played. If you’re doing a flip, you invest all this money, you do the project, it takes three, four or five months and before you ever get your money back it’s six, seven, sometimes nine months. Right. And so I was dealing with that and I was also dealing with this rental. So everyone knows about the burst strategy, which is exactly what I was doing. And so I would go and buy a property, I would put debt on it. And then after the debt and after the expenses I was making two to $300 a month and this is while I was grateful for the two to $300. And there were other things like appreciation that were happening in the background. Two to $300 was just not life changing and it wasn’t enough income to sustain any type of real lifestyle growth or even future investments.

Brit: And so I just started thinking, what are ways that I can exponentially grow my income? And this led me to finding businesses that cashflow. And so that’s sort of how my brain started thinking. And this is where I started doing research and understanding business and how it worked and what ultimately led me into purchasing these companies.

Carol: So you’re talking about Brit, that you had this interest in it, you wanted to increase your cash flow, you wanted a more sustainable lifestyle. So you started doing research to figure out what that looked like. For our listeners, what type of research, like realistically, what were you doing for research? Were you talking with other people, were you looking up stuff online? What was your approach to really go about learning what the next step was?

Brit: Yeah, so a lot of people, they don’t even know that businesses sell like this. They think of a business selling and they think of just high level shares trading on the stock exchange. But I mean every day small businesses sell, they change hands. And so what I started doing was I started going to people that I knew who had either sold a business or had bought a business and I just started asking them what did you do? How did you evaluate it? And I was fortunate to have some really great connections to where they had some high level transactions where I could go, okay, so you did this $50 million deal, how did you evaluate it? And bottom launch and they sat down and they sort of went through the process with me.

Brit: And so if anyone’s out there and they want to know what the process is like, you’ve got to go find someone that has done it before you. And this is simply what I’ve done. Bigger pockets and resources like this are great. I wouldn’t be where I’m at today, honestly in real estate without bigger pockets. But you really need the one on one person that you can ask anything. And this is how I approached it and went after it.

J: So. Okay. So it sounds like from the very beginning you knew you wanted to buy a business, but what made you decide, “Hey, I’m going to go find a small business to buy as opposed to I’m going to start something from scratch or I’m going to go buy a franchise.” I mean, a lot of us, when we decide we want to do the business thing, the first thing we think of is it, let’s go buy a business. First thing we think of is I’m going to go start my own business. So what was different with you? Why the whole I’m going to buy a business?

Brit: That’s a great question, J and this is a question that everyone asks. So the reason for me is very simple. It is pain stakingly along to start a business. And I really believe that people underestimate what it takes to get something off the ground. And what I found was is I was sitting on enough capital and had access to enough capital to decide that the time and the money that it would take to launch something was not worth it. And I was willing to treat capital for speed. And so something that might take me 12, 24, 36 months to grow to $1 million in revenue, I could go out and write a check and potentially get financing and get that revenue immediately.

Brit: And so for me, that was an easy trade off and something that I thought was scalable. And so I love people who start things and more power to you. You’ve got a vision, you’ve got a dream. But for me, I just, I didn’t want to go through all of that and it wasn’t worth it to me. And so purchasing the revenue was a much quicker means to an end for me.

Carol: Excellent. So you realized you did want to buy a business, put that capital out there. So did you have a set of criteria for the type of business that you wanted to buy and what types of businesses were you considering?

Brit: Yeah, I didn’t really, because I didn’t know what I was doing. Right. So I was just sort of figuring it out. I knew one thing, this is what I knew is that I loved the stability of rental income. And so I wanted to mimic that in whatever business that I acquired. And so at first I was only looking at businesses that had reoccurring income, businesses where I was in more or less guaranteed a certain amount each month. And so this is what ultimately led me to service businesses with reoccurring contracts because I knew that if, as long as I did my job that most people were not going to go anywhere. And I could bank on their $1000 a month or $5,000 a month. And so that’s what steered me into the direction of those types of businesses.

Carol: Very cool. So it was all about the recurring income which you’d become accustomed to from your rental portfolio. Right? It was an easy transition. You saw a bigger picture.

Brit: Yeah. I didn’t like the idea of okay, there’s a product I’ve got to go sell it. Right? And even if it’s a service that’s not reoccurring, I’ve got to go sell it and then I’ve got to design it and then I’ve got to install it or do it. And then I’ve got to follow up with customer satisfaction. There’s no in my opinion, there’s no real good way to systematize that. But I found that in reoccurring businesses that it’s so easy to set up systems and processes and streamline things where the management is minimal and that’s just what I was looking for. So it’s worked out. It’s worked out really well so far.

J: Okay. I want to come back to that whole systems and processes because that really is tremendously important. But let’s get to the next step of the story. So you decide you want to buy a business, you have kind of an idea set of criteria for what type of business you’re looking for. You find some people that have done this before. You take them to lunch and you learn from them. What’s the next step, how do you get from I want to do this to, I actually find a business that I want to buy and you kind of commit to that business?

Brit: Yeah. So most people would look at me, my peer group and they would say, “Brit is crazy and he’s super risky and he takes a lot of chances.” And honestly it couldn’t be further from the truth. I am probably the most risk averse person that you know. And so I wanted to make sure that the first deal I did, all I cared about is that it wasn’t a loser. I wasn’t so much concerned about winning as I just didn’t want to lose money. I think that’s like Warren Buffet’s first rule, right? Never lose money. And so that was my approach. And so I was trying to find deals, I ended up going in the landscaping industry, right? And so I was trying to find deals where I could purchase a company for at or near the equipment value. Meaning I could purchase a company and if everything fell apart and perhaps the owner misrepresented information, there’s a lot of things that can go wrong.

Brit: I knew that I could sell the equipment and just rinse my hands and get out. To me, that was my safety barrier. And so I was able to find that. And what was cool, J, is that I purchased it for the equipment value and then I got what’s called goodwill, like the goodwill of the company. I got all of that for free. And so to me it was, I couldn’t lose and that was the first deal I wanted to do. And that’s what I was able to do. And it was a good starting point for me.

Carol: I love that. It’s almost, I really love that whole strategy because it’s almost like you’re looking at worst case scenario is you never get another get a contract, whatever. Right? And the whole thing just falls apart. But you go and you resell everything and you’re back where you started. So you saw nothing but upside in that type of situation. So that’s very cool.

Brit: That’s right. Yeah.

J: So where did that landscaping company come from, where did that first company, how did you find it, did you go out on the internet? Did you contact a business broker? I know there are a lot of ways to buy businesses. What are some of the avenues that you considered?

Brit: Yeah, so what’s interesting about buying businesses is, is actually there’s a lot of parallels to buying real estate and there are a lot of differences. So I don’t want to, it’s not apples to apples, but in real estate, if you’re an investor, you’re going to be better off finding people who are distressed. Right? And so it’s the same in business. And so if you can find an owner that is just tired of doing whatever it is they’re doing or they’re ready to move to Mexico or whatever the case may be, you’re going to find that you’re going to get a better price. And this is what happened. I ran into a couple of owners who basically were running into some health issues and they had been running the business themselves and they were just done.

Brit: And I the business was on the market and I’d been keeping an eye on it and the price was slowly dropping and just like real estate, you watch it on the market, the price comes down, price comes down. And before you know it you could make that offer and get that good deal and that’s essentially what I did. And I came in and offered a deal that was a win-win for us and they liked it. I liked it. And that’s how I went after it.

Carol: Very cool. So I have a follow up question to that. You mentioned that the business was on the market and so you were able to track the price kept coming down and coming down and coming down. What are those avenues our listeners can be looking for to find… See I’m comparing it just like you did to the parallels in real estate.

Brit: That’s right.

Carol: For businesses that are on the market versus properties that a lot of us are accustomed to. Where are the types of places that you search for businesses that are on the market first time?

Brit: Sure. So ironically, all the companies that I have bought so far, I’m trying to just think back, but I believe that they’ve all come from different avenues and so the first one that I bought was on the market and you can find businesses that are on the market. You can actually find some on the MLS, depending on your area. But there’s a website that I generally use called BizBuySell and I will look up companies and it’s great there because you can search for criteria and things that you’re looking for. But I’ve actually found companies on Craigslist. So Craigslist in some ways for real estate is sort of a dying thing. 10 years ago you could find great deals on Craigslist, but I found deals on Craigslist and then word of mouth. And so actually, the way I bought my second deal, which was my best deal in my opinion, was a friend just heard that I was buying companies and they connected me to someone that they knew and I had lunch and struck a great deal.

Brit: And not only did I get a business out of it, I actually got a really nice piece of real estate out of the deal as well. And so, yeah, so word of mouth, Craigslist, there’s a lot of Facebook groups out there that talk about buying and selling businesses that I’m a part of. And yeah, so.

Carol: Awesome. Go ahead, J.

J: No, I was just going to say, it really is it’s very analogous to real estate. And I say this a lot, not necessarily on this show, but when I’m talking to people in real life that are thinking about businesses, I often say especially if they’re real estate investors, there are so many synergies, so many analogies there. In real estate, I mean you have on market deals and off market deals. Same thing with businesses. You can go on Craigslist, you can go on BizBuySell or you can go to a business broker and you can find these ‘one market deals’ these public deals that anybody has access to. But then there are a lot of people who are looking to buy a business that kind of go the off-market route. They do the same things they do in real estate.

J: They might cold call, they might drive into an auto mechanic shop and just say, “Hey, can I talk to the owner? Hey, have you thought about selling? I’m looking to buy a mechanic shop.” Or send direct mail. I mean all the same ways we get properties off market properties in real estate, you can do the exact same thing in business. And typically speaking, if you can find a distressed seller, if you can find a distressed business owner that’s off market that isn’t publicly listing their business, you can often get better deals, much better deals than if you just try and buy something that’s listed on one of these business sites or through a business broker. Right?

Brit: You are 100% right, J, and the irony here is in 2020 my staff and I, we’ve actually committed to doing some of these. We’ve always done sort of the traditional way of acquiring them, but we’ve committed to sending some letters to these owners and you’re 100% right.

Carol: Yeah. The parallels are just fascinating. So in these first couple landscaping businesses that you purchased, I’m just curious, did you keep on any of the original staff or how did that whole transition go from them owning and running the business to you owning and running the business? How did that work out?

Brit: Yeah. So different levels of businesses are, they require different personnel. And so just good thing to think about in my opinion is that $1 million is a very crucial revenue point. And the reason I say that is this is if a business has reached $1 million in revenue, it is likely sustainable without the owner. All right? Really important. If you’re going to look at businesses, if it’s sub million dollars, it’s likely not always but likely that the owner is really involved and the owner’s job is going to be hard to replace. And so anytime you’re looking at a company you want to say, I obviously didn’t want to go out and mow grass, right? That’s not why I bought landscaping companies. So all of the companies that I have bought, the owners were working in the business. And so I needed to account for that as I hired staff into my numbers.

Brit: And so that’s exactly what I did. So I actually hired a GM partner and I struck a deal with him and basically he came along before me and over time he gained equity in the company. And this is a great tip for anyone out there that is interested in acquiring businesses but is not comfortable with running it, is find someone who’s comfortable with running that and give them a portion of the company. I cannot stress this enough. The guy that I have running my company is unbelievable and I believe that he would not be unbelievable if he did not own a portion of the company. It is his company. When I call him, he acts like he owns it and it is because he does own it. Right. And so I couldn’t stress that enough. So I hired that guy and honestly he runs 98% of everything with the company. I look at high level stuff like financials, profits and losses, balance sheets, and really that’s what I’m good at. And so that’s what I do.

J: Yeah, I love that. And it’s funny, I’m not trying to take this away from you and make it about me, but I talked a couple of weeks ago when I did my podcast episode about the business that I recently started and we did the exact same thing. We want to open multiple locations. So we found for the first location that we just launched an owner operator, somebody that could literally run the day to day aspect. So I could focus on the strategy, I can focus on building the business. I can focus on the second, third and 10th locations. And I gave him equity to do that. I didn’t want him to feel like an employee. I didn’t want him to feel like he’s getting the salary and there’s no upside. I wanted him to know that if this business is successful, he’s going to make a lot of money too. So I’m just going to do that as equity. So 1001% agree and I know a lot of people that are buying and starting small businesses. That’s kind of the strategy they’re going after. So I love that.

Brit: Yeah, come work with me and not for me is such a better pitch. And people, I mean, if I was to go ever work for someone, that would be the only way, right? Is if I was a partner with you. And so I don’t even, I can’t imagine a scenario where it would work otherwise. And so I highly recommend for those out there looking to buy a business.

J: Love that.

Carol: Fantastic.

J: So I want to hear, we kind of skipped over the details of that first deal and just like any good real estate show, and we’re talking about how this is kind of is analogous to real estate, let’s do a deal analysis. Tell us about that first deal exactly where it came from and how it started.

Brit: Okay. So this is the one that was on the market and I saw it drop, saw it drop, saw it drop and this company had about $80,000 worth of equipment and they were doing, if I recall about $400,000 a year in revenue. And essentially I came in and on this first one I just wrote the check. So I paid them $80,000 for the company and took over. And would I do that again? Maybe, maybe not. But that was the first one. And again going back to my rule was I knew that I could sell all that equipment, worst case scenario. And so I stroked a check, I hired the guy to run the company and we were sort of off to the races there. The second one is probably a little more interesting and the second one was I was able to negotiate some really great financing.

Brit: And for the listeners out there that are going to buy a company, I highly recommend you go the owner financing route and it’s not for your own benefit. I actually think it’s for the benefit of the deals. It’s really important to me. I always want to do deals where people like that they did the deal with me. I don’t want to just go and get a good deal and go, “Look what I did. I got this business for next to nothing. I really took them.” No, no, no. I want to do a deal that I feel good about and I want to do a deal that they feel good about. And so that’s what we did.

Brit: And the reason the owner financing is so important is that it aligns your interests. All right? If someone is willing to owner finance you their business, it means they believe it will do what they say it does. And if they’re not willing to do owner financing as a general rule, I don’t do the deal. And that’s because I don’t trust everyone. And so, and it’s okay. So in real estate, very hard to misrepresent things, in businesses it’s so easy to misrepresent things and you can hide things and you can hide things and financials.

Brit: And so you can do all the due diligence that you want and it’s not until you take over and you start getting that income and you start paying those expenses that you’ll really find out if what they were saying is true. And so that’s why to me, owner financing, and there’s a term in the business buying world called clawbacks. This is also very important. What clawbacks are, is essentially says the business must perform like you say it performs or we’re going to claw back and get some of that purchase price that we agreed to. And so after the first deal, this is how I started setting up all my deals was with owner financing and clawbacks making sure that the business has performed like they should.

J: I love that. So I mean and so many of us think about owner financing from the not putting in as much cash and being able to buy bigger business with less out-of-pocket. But just that second piece of an owner’s not going to finance his business if he doesn’t truly believe that it can be successful. And if he doesn’t really kind of warrant that information that he’s given you about the revenue and the income, the margin data. So I love that and it’s really, it’s just another piece of due diligence doing that owner financing. Even if you don’t need the owner financing, it just, it gives you confidence that the seller, the business owner really believes what he’s telling you.

Brit: Right. And there’s so many creative ways to do this I mean, if a seller is really pushing on a lump sum, what I’ll do is I’ll start at something like three or four years and say, look, I’ll do a balloon, I’ll do a full payment in three to four years. And if they push back the shortest I’ll do is a year. But if they’re not willing to basically give me 12 months of surety that the business is going to perform, then it’s not worth the risk for me. And there’s a lot of other owners who would. And so I generally will move to those businesses, so.

J: I love that. Okay. So you said earlier, get to $1 million in revenue and that’s kind of a good benchmark, a nice round benchmark for where a business can sustain itself without the owner. You bought that first business, it was doing about 400 in revenue. So presumably you wanted to either grow that business or you wanted to build that business or bring another businesses, consolidate them to get over that one million mark I assume that was kind of one of your goals. And it sounds like you kept buying businesses. So were you thinking I’m going to buy other landscaping companies and kind of consolidate them to hit that million dollar mark or were you running each of these businesses independently and growing them independently? What was your strategy? What was your goal with buying multiple businesses?

Brit: Yeah, so I would say two things. The first thing that we did, and this is somewhat controversial, but the day that we took over the business, we raised the prices. And the reason that we did this was because we first, we felt that they were under-priced, number one. But number two, we felt that by raising prices we could actually reduce expenses and increase our net income. And so this is exactly what happened. We sort of put a predictive model out there and we thought if we raised prices 10% that we would lose about 10% of clients, but our revenue numbers would basically stay the same. And so a simple way to think about this is we would be doing less work for the same money, right? And so this is what we did. And so that was the first way that we really started to increase our bottom line while maintaining the top line.

Brit: And secondly, as you suggested, is we started acquiring other companies. And so we started looking at other companies that would offer the owner financing, which is what happened in the second deal. And went in and this guy was doing, I want to say he was doing like 350 a year. What I loved about his company was that he was completely out of it. And that was evident to me. I could see the evidence of that. And so we went in and struck an owner finance deal with him and added that revenue into the first company and just started snowballing from there.

J: That’s great. And again, let’s go back to the analogies to real estate. Because I know a lot of our listeners are in real estate, but for anybody that’s owned buy and hold real estate, anybody that’s owned, especially multifamily real estate, they realize that the value of that income stream, the value of that asset is directly related to the bottom line, the what we call the NOI, the net operating income. And there’s basically two ways to increase that bottom line. You increase revenue or you decrease expenses. Hopefully it’s doing both.

Brit: That’s right.

J: So when somebody wants to do a value add, what we call in the real estate world, they buy a building, they try to increase the revenue, they try and decrease the expenses. That increases the NOI, that increases the bottom line. Which increases the value of the asset. Same thing with the business. You’re looking to increase the revenue, decrease the expenses. That’s increases your bottom line, which increases the value of the business. I know you basically said that and I’m just kind of-

Brit: No.

J: I wasn’t trying to take it away from you, but like just for our real estate listeners, the analogy is so good.

Brit: 100% and here’s what I found in landscaping specifically. So there benefits to this business and there’s also detriments and the benefits are this, generally speaking, and I know there’s probably some landscapers listening and I don’t want to offend you, right? But generally speaking, the people that I buy from are not very sophisticated business owners. It’s just the truth. And the reality is, is that someone who’s good with numbers, who’s good with math, who’s good in business, can come in and immediately improve these businesses. This is not complex, is not rocket science. And so that is a benefit, now the detriment to a business like this is, it’s what we would call a low barrier of entry business. Meaning the first thing that people do when they get laid off from their job is they go mow grass or shovel snow. Right? Like if things get tough, that’s what they do. And so-

J: You’re they’re competing with the 13 year old kid who’s-

Brit: Exactly.

J: … Mowing grass during the summers.

Brit: Exactly. He’s like raising money for a trip and you’re like, how do I compete with this? So that’s what we’re up against. But we’ve been able to put things in place that I tell my team all the time, no one else is doing this in this industry. And that’s what’s awesome about it is we’ve been able to put systems, processes and we’ve implemented technology even to streamline, make us more profitable. And we have a massive leg up on our competition because of this, so.

Carol: That’s great. So how many businesses did you buy in total in the whole landscaping world?

Brit: So I believe we acquired five. We are currently under contract on a sixth and then we have one that we’re sort of in verbal negotiations on, so.

Carol: Excellent.

J: Is it all similar geographic area. So you can kind of run them as one or are they in different areas that you manage separately?

Brit: Yeah, so where we’re at there’s a pretty big metropolitan area so everything’s pretty concise to my area. I’ve not gotten the itch and I don’t think it’s the time to get outside into other markets, but when that day comes obviously we’ll be ready to go.

Carol: Excellent. So it sounds like you already have consolidated several of these businesses. How does one go about doing that, right? You’ve got all these separate entities, what have you done? What are the steps you have to take personnel wise, systems wise, all of those things to actually physically consolidate these businesses into one well-oiled machine?

Brit: That is a great question. So when I first did it, I did not know how to do it, right. And so we just sort of figured it out. And so I would say to your listeners, if they ever are involved in combining companies, your number one priority, and this is not even in combining companies, if you are a business owner, your number one priority needs to be your employees, period. Not your customers. Your employees are number one. And so we always want to make sure that our employees are informed and they’re prepared for what’s about to happen. What you don’t want to do is spring things on to your people. It makes them nervous. They feel like things are changing. Am I going to have a job? What’s going to happen? So the first thing that we do is we inform employees of both parties.

Brit: “Hey, we own this company and we own this company and this is what’s about to happen.” We have meetings, we have written letters that we send out. And then secondly, what’s important is we want to inform our clients. And you need to do this very, very gingerly, right? Because the same reason an employee will get nervous, a client will get nervous. So they start asking questions, “Oh is my service going to change? Is the quality going to go down? Who do I send the check to?” And so we try to make things as easy as possible for everyone involved. And so what we do usually for the first 12 months is we do what’s called a DBA. And a DBA is simply a doing business as, in a State of Florida you can actually go in and file this on some biz and it allows us to receive checks in the name of the company and then still deposit them into the same operating account. Does that make sense?

Carol: Absolutely.

Brit: And so, yeah, that gives the clients about 12 months to continue writing the same check to the same name. So, “Hey Ms. Susie, there’s nothing to worry about. Just keep writing the checks, nothing’s changing.” Right? And then over time we start to inform them that, “Hey, we’re moving to this name. And so as of this date, if you can.” And we’ll usually give them about six months, start writing it to this. And then we hardly ever have this problem. But worst case scenario, if we weren’t into that 12 month deadline, we’d get on the phone and say, “Hey, this company’s not in existence anymore, please write the checks to this.” And so we have letters and documents and what’s nice is we’ve done this five or six times now. And so it’s just, “All right, this is our letter.”

Brit: We just change out the names of the companies and this is what we send and it’s worked out really well. But there is some complexity and as long as you deal with the complexity and you communicate well, we’ve really had zero issues. The biggest issues that we’ve had in transition has always been with companies where the owner is very involved. And this is where it goes back to always want to know how involved is the owner. Because if Josh has been showing up and all they know is Josh the owner and he’s not there anymore. It can come as a shock. And that’s when we’ve experienced potentially lost clients. And so that is the hardest sort of water to tread in my opinion. And so that’s why businesses that the owner is not involved in my opinion are so much more valuable.

J: Got it. So you now have five businesses, you’re working on the sixth, have you combined them all under the same brand? Is it all the same name your customers all write? Well after they transition, now all write the checks to the same company. So you just have one big company that doesn’t look like five separate companies anymore.

Brit: That’s right. Yeah. And so, but I mean if you think about it, like when we take over a company’s equipment, that equipment has that company’s lettering and their naming and so it is a process. It’s not like you can just do it overnight. And so we’ll use language like this. We’ll say Greenleaf and Down to Earth are partnering. We use language that’s just not like Down to Earth it’s going to die and Greenleaf is going to survive. So be very careful with your language. And then over time we just slowly, we’ll re-letter the equipment and start, one thing that we do is anytime we send a document, whether it’s an invoice, we’ll put both logos just so they know, “Hey you’re still with this company.” And then over time we’ll phase that logo out. So I think the advice would be do it slowly. As entrepreneurs we’re like speed and fast and let’s go and let’s make the change, let’s buy five more companies. And I think the advice when you’re transitioning is transition slowly and I think you’ll find you’ll retain a lot more customers that way.

Carol: Excellent. That’s a really, really good piece of advice and I really think it’s very notable that you’ve got this outstanding process all worked out around your communication and your branding transition and just all the DBA. Just all of those little steps, like you said within your employees of your business and with your clients as well. So that that same process is followed over and over and it just makes it, I guess a lot easier the next time you go through it all. So that’s very cool how you’ve gone ahead and made that happen every step of the way, I like that.

J: Yeah. I want to go back to something we were talking about earlier because you made a fantastic point earlier that we were talking about which is finding a great partner, giving them equity and helping them grow the business with you as opposed to just for you. How do you find these partners? Are these people that were previously running the company, are these outside people? Are these employees that you promoted? What should we be doing if we want to find somebody that can partner with us and help us run these companies? Where should we be looking?

Brit: Yeah, so it’s all about your network, right? So this particular partner is a guy that I had actually done some real estate deals with in the past and he had gone to work for Hertz. I really just liked this guy. He was a standup guy. He seemed very smart. He seemed very trustworthy and I had gotten word that he went to work for Hertz. All right. And I had just heard he was frustrated with kind of some of the things that were happening and he didn’t like his manager and this and that. And for me that was an opportunity. And so I said, “Hey I want to meet with this guy.” I met with him, shared with him the opportunity. And again, this is not rocket science. This is like finding a distressed employee, right?

Brit: It’s like you find distressed real estate and you find distress businesses. I found a distressed employee, an employee who wasn’t happy with where they were, but I didn’t think was his fault. Right. Some people are unhappy because it’s their own fault. I felt like this guy, he could really add value and so I sat down and had lunch with him. Sort of told him what I was trying to do and what I could do in terms of ownership. And he was on board and this was just a guy that I had known in the past, so.

Carol: That’s really cool. I have one more around the whole, not even employees around your partners in with equity and that type of thing. And you had mentioned this when we had talked a little bit before and in prepping for the show that you’re just such a big believer in delegating those big tasks and delegating such big parts of the business to different people that work with you. Can you talk more about just any advice that you have for us as business owners, because clearly so many of us who decide we want to run our own business, it’s because we like to be in charge, we like to be in control. What types of tips do you have for people to let some of that go and trust other people to do those tasks, to make your job easier and focus on other things?

Brit: Yeah. So I got to be honest. I don’t get it. I’m just wired differently I guess, but the number one mistake that I see business owners making is they do too much. It sounds so counterintuitive, but they do too much. It’s like, why are you out there doing that? Your time is so much more valuable doing other tasks. And so for me, I don’t know, I just see things differently. It’s like there is no way that I’m going to be able to grow this company if I’m answering the phones, there’s no way I’m going to be able to grow this company if I’m doing payroll. Right. And so for me, it was very simple. I wanted to find the time consuming tasks and I wanted to hire them out. And I just, I don’t understand why that’s hard for people to get, but I see it over and over and over again.

Brit: It’s almost like they get trapped and here’s how I would politely say it. You know what I think the root of it is? I’ve said this before, is I think it’s pride. I really do. There’s a lot of pride in business owners that say, “No one can do it like I can do it. No one can sell like I can sell.” And honestly, I just think that’s baloney. And if you want to be a good leader and you want to grow, it’s going to have to come with humility. And so I’m the first guy to go, I would be terrible at that. I would be awful at that job. And so I need to hire for it. And so I think if you’re going to really grow and you want to expand, you’re going to have to do it with humility and you’re going to have to hire people that you trust. And I’d like to think that’s what I’ve done, so.

Carol: Excellent.

J: I often like to say that the best business owners are the ones that are really bad at everything else because it forces you to surround yourself with smart people, capable people, people who can do the things that you’re just not good at, which is for a lot of us, most things.

Brit: That’s right. I would boil it down for the listeners out there, you want to be successful at something, anything, real estate business, it is going to depend on how good of a leader you are, period. Your growth in anything is going to depend on how well you can lead. If not, you’re going to be one man show and you’re going to be very, very limited. And so not only am I trying to foster those skills and abilities to communicate, but I’m trying to foster them in the people that are under me, right? So I’m trying to go, “Hey, the only way that you’re going to grow this area of our company is dependent on how good of a leader you are.” And I’m big on leadership. And humility and communication. And I think those are life skills that so many business owners just aren’t that great at. And when someone can come in and actually provide that, it’s amazing what can happen.

Carol: Excellent. That is such a great tip.

J: Okay. I’m going to put you on the spot here a little bit. Are you comfortable talking about any of the numbers in your business now that you’ve acquired five of these? You don’t have to be specific. I understand that that’s a private business and we don’t always want to divulge our secrets, but just what kind of business is landscaping business, what kind of numbers do you see in landscaping business?

Brit: For sure. So last year we did just shy of a million and this year we’re going to do well over a million. My projections are like 1.2 it really will depend on acquisitions, things like that. It could really quickly change that. So in landscaping, the margins in the reoccurring are actually thinner than normal. And so, and the reason that they’re thinner is because, like I said before, the processes are easier, everything’s systematized. And then in landscaping actually installing those types of things, the margins are much larger. And so we started whenever I take over business, it’s normally running between 10 and 18% margin.

Brit: And usually when I’m done implementing everything that I implement, I can get that business quickly to 30% margin. And I mean again, and we’re usually doing 30% margin and doing less work by the time I’m done with it. And so our business next year should profit somewhere around three to 400 grand. And again, depending on how many acquisitions we do this year, but I will kind of give you an idea of what we’re capable of, so.

Carol: Excellent. Thank you for sharing those numbers. That’s great. So what’s next for the landscaping business in addition to maybe acquisitions and just growing your numbers, growing your client base, what’s next for the business and what’s next for you, Brit?

Brit: Yeah. So right now I’m focused on taking this model that I’ve built and putting it in and laying it over top of other industries. And so I love landscaping. It’s sort of how I got my start in the business world. But I am very fascinated by food. I’m fascinated by other service industries and so I’ve sort of built, I’ve got like working documents for everything we do, whether it’s hiring and or it’s marketing. And so I want to take these and go find and other companies and essentially lay this platform on top of their company. And so I’m planning on doing this a couple of ways. The first way would just be consulting, right? You have a small business that’s it’s not working. You’re working too many hours. It’s not profitable. I can come in and consult with you and fix, that’s actually not what I want to do, but I’m willing to do it.

Brit: The second way that I’m going to do this is essentially how I’ve done the landscaping, which is come in and partner with you. And so if you’ve got a business that’s failing, it’s not working. Same thing. I’ll come in and I’ll actually buy a portion of your business from you and work alongside you to get it to where you want it to go. And so that’s my goal for 2020 to expand into other industries and we’ve got our eyes on a few things and so we’ll see where it goes.

J: That’s awesome.

Carol: That’s a great year ahead for you for sure.

J: Absolutely. Okay, well with that said, I want to jump into the last segment of the show, something we call Four More and that’s where we’re going to ask you the same four questions we ask everybody that comes on the show. And then the more part of the Four More is where you get to tell us more about where our listeners can connect with you and find out more about you. Sound good?

Brit: Sounds great.

J: Okay, so I’m going to take the first question. What was your first or your worst job and what lessons did you take from it?

Brit: So my first job was my worst job. It was working for my dad and he had a business and it was called an exotic tree removal business. And essentially what he did was he would enter into these forests where you couldn’t take machines and he would cut down exotic trees and drag them out of the forest by hand, which is what I did. So we would go in with chainsaws, cut these massive trees down and drag them out and it was terrible. All right. And so that is quickly learned that I did not want to do that the rest of my life, so.

Carol: Yeah, I can definitely say that’s the first and worst all wrapped up into one.

Brit: That’s right.

Carol: But you got to find the humor and the fact of how semi full circle this whole thing has come and you are working in plant-based issues as well a long time ago. And look what you got going on now. There’s something that stuck.

Brit: It leaves plenty of room for me, joking with my dad all the time about the slave labor that I gave him. Yeah, so.

Carol: I think that’s perfect. Well, I’d like to know Brit for our second question in the Four More, what is that defining moment where you realized that you had an entrepreneurial edge?

Brit: Man, I had an entrepreneurial edge really early on and so I was the guy that was buying five packs of gum for a dollar and then selling them for 50 cents a piece and making my dollar. And so I have flipped anything that you can possibly imagine I have bought and resold it. I’ve done cars and equipment and lawn mowers and boats and obviously real estate. And so I knew early on that I was an entrepreneur and it’s not dying anytime soon, so.

J: So funny. Everybody talks about like, yeah, I knew in third grade I was the guy flipping Hershey bars and buying packs of gum. I was that guy that was buying those things from you guys. Jeez. I’m so far behind all of you.

Brit: I’ve got some real estate I want to sell. Are you interested?

Carol: That is great.

J: Okay. Question number three, and this is a new question, but this is one that I’ve been doing a lot of reading recently and I’m looking for some great books. So I’m sure our listeners are looking for some great books out there. So in the business world, so great business book, what’s a great business book that you’ve read recently that you would recommend to our listeners?

Brit: So this book is unbelievable, and this is the kind of book where normally you read a book and you highlight, you get five or six things in there. This book, every little article, every paragraph has got winning tools in it and it’s called Scaling Up. Highly, highly recommend this book. I opened it and couldn’t stop reading it, so.

Carol: Excellent. Thank you. That’s a great tip for our listeners. Scaling Up. Okay. And then the fourth and one of my very favorite questions is what Brit is something that you have splurged on in either your personal or professional life that was totally worth it.

Brit: Yeah. So I’m not a splurger, but last year about a Tesla and I am so happy I did. It’s unbelievable car and I love it. So that’s my splurge.

Carol: That’s awesome. Which one did you get?

Brit: I got the model three so I got the cheap man’s version, but-

Carol: There’s nothing cheap about, that’s an awesome car.

Brit: Is an awesome car. You get the full Tesla experience and for any Tesla haters out there, if you hate Tesla it’s because you’ve never been in one. So once you’re in it you’ll love it.

J: I’m not going to take sides, but I agree with you. Awesome.

Carol: Fantastic.

J: So, cool. So that was the four part of the Four More. Let’s jump into the more part of the Four More, where can our listeners find out more about Brit Foshee, where can we connect with you and yeah, tell us how we can find out more and where.

Brit: Sure. So I’m on all the social platforms. LinkedIn, Instagram, Facebook. You can go to my website. It’s my name, britfoshee.com and if you have any questions or I can help you, any business questions, I’d love to sit down and chat with you.

J: That’s awesome, Brit. Thank you so much. This was absolutely awesome, inspiring, and we are looking forward to checking back in with you later in the year just to see how the acquisition and the consolidation has been going for you.

Brit: Looking forward to it guys.

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In This Episode We Cover:

  • Brit’s story from buying a property to buying businesses
  • How people underestimate what it takes to get a business off the ground
  • How he finds available businesses on the market
  • Similarities between his business model and buying real estate
  • How a business with $1M in revenue is likely sustainable without the owner
  • Why he made a partner a part-owner
  • Come work “with me” vs. come work “for me
  • Why he recommends the owner financing route when buying a business
  • How he reduces expenses and increases income right after buying
  • Why he thinks employees are #1
  • The top mistake owners make
  • And SO much more!

Links from the Show

Books Mentioned in this Show

Tweetable Topics:

  • “You’ve got to find someone who has done it before you.” (Tweet This!)
  • “A million dollars is a very crucial revenue point.” (Tweet This!)
  • “I want to do a deal I feel good about.” (Tweet This!)
  • “As long as you deal with the complexities and communicate well, you will have zero issues.” (Tweet This!)

Connect with Brit

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.