How2Exit Podcast May 17, 2024

David C Barnett Small Business and Deal Making M&A SMB

Ron Skelton had me on his show, How2Exit. https://www.how2exit.com/ About the Guest(s): David Barnett is an experienced entrepreneur, consultant, author, and educator in buying, selling, and financing small and medium-sized businesses. With a background in sales and business education, he owned a business broker office before moving into banking. Since 2015, he has provided consultancy services for business transactions. Barnett shares his expertise through a YouTube channel and has written multiple books on investing, franchising, and buy-sell strategies, with a new book releasing this fall. Episode Summary: In the latest How2Exit podcast, host Ronald Skelton welcomes back David Barnett, an expert in small and medium-sized business transactions. They discuss the risks of over-leveraging in business acquisitions and offer insights on mastering business deals without financial pitfalls. Barnett shares his knowledge on proper business leverage, the impact of SBA interventions, and the challenges of buying a business with minimal down payment. He contrasts debt-equity structures in large companies with the small business sector and emphasizes prudence, long-term planning, and cash flow management for successful business purchases. Key Takeaways: • Typical leverage for large public companies is between 50-60% debt; anything higher is considered risky. • Zero-down deals are often more achievable by experienced individuals with substantial resources, not beginners with limited capital. • Relationships, trust, and a strong personal network are crucial when seeking investments in your business endeavors. • Minority equity holders in small businesses may face significant risks without majority control. • Prudent financial management and an understanding of potential business hazards are essential before taking on leverage.