2198 - Why Your Next Business Move Should Be Buying, Not Starting: A Conversation with Baton's Chat Joglekar

0:05Hey there, thoughtful listener. Are you looking for introductions to partners, investors, influencers, influencers, influencers, and clients? Well, I've had private conversations with over 2 ,000 leaders asking them where their best business comes from. I've got a free video you can watch with no opt-in required where I'll share the exact steps necessary to be 100 % inbound in your industry over the next six to eight months with no spam, no ads, and no sales. What I teach has worked for me for over 15 years and has helped me create eight figures in revenue for my own companies. Just head to upmyinfluence.com and watch my free class on how to create endless high-ticket sales appointments.

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1:05with us right now chad joglikar chad you are the co-founder and ceo at baton you are at baton market.com chad it's great to have you thanks for having me yeah well well listen before we get going and talking about the marketplace uh which which i'm excited to talk about uh What are you currently doing for fun lately? Or what have you been geeking out on lately? Yeah, maybe two different things. Geeking out on college admissions, because my two oldest are in 11th grade. So using a lot of data and where folks are getting in from their high school. And actually with AI, it's been kind of fun to pull data from other sources.

1:53Oh my gosh. And I'm a bit of a Excel nerd too. So, you know, like how can we get all the data and help guide them on wherever they want to be? We just came back from some college tours in California. So, like geeky, but also digging into. And then I think for fun, trying to think what, you know, I actually don't have such a horrible memory of like what TV shows. but uh wheel of time i think our uh our kids wanted to like kick off and start the new season so a lot of times whenever they finish homework and i'm kind of done working yeah it's just to get the family together and uh and kind of do some stuff are you liking it or is there something that you like better uh it's too complicated i couldn't get it like i tried i think there's too many storylines my my kids are like yeah the elron is doing that you know like whatever like i I legitimately have no idea what you're talking about.

2:52So I need simpler. I mean, I can't wait for Slow Horses to come back. I think it's season four or five. Oh, yeah, yeah, yeah. That I like. What's Slow Horses about? It's like a spy show. Oh, yeah. MI5 agents. Yeah, yeah. Oh, my God. This is a 98 on Rotten Tomatoes. Josh, why am I not watching this? Oh, and it's got Gary Oldman in it. Like it's great. Oh, okay. I'm adding this to the queue. All right. So this is one of the greatest parts of this podcast is I get great TV show recommendations. All right. So let's talk about Baton. So I've got the website pulled up. Buy or sell your business with certainty.

3:3810 weeks from listing to LOI, 10 times more likely to close than other options. Half the cost of a typical broker. These sound like a pretty good bill of goods for the right person. Yeah. I mean, you know, if you think about it, so I was at Zillow for almost six years. And when you're a home seller or home buyer, you're empowered with a ton of great information on what's my home worth, you know, what's in the neighborhood, all these kinds of things. And like, really what we're trying to do at Bataan is bring that same empowerment and information to the ecosystem of small businesses. So you're a small business owner, you should know exactly what your business is worth, what it would trade for, because maybe that's your retirement.

4:22It's almost your 401k. And if you're a buyer, you have a good sense of, you know, what businesses are available, what you could get with an SBA loan, all these kinds of things. And we're really trying to, you know, turn on the lights and ensure that people can execute successfully in this space. Because I think right now there's a ton of interest and it's a great investment a lot of folks are coming out of you know tech sales or tech operations or finance saying like hey i want to be i'm entrepreneurial and then rather than being employee number you know 10 000 at some big company i can be the owner and control you know my future by owning a small business and buying something that frankly has already gone from the zero to one and maybe the one yeah but it's throwing off cash but you can come in and you Leverage AI, leverage your operations experience, leverage your sales experience, and actually then grow that business from, and we like to say, become an honorable successor to the existing owner and stand on their shoulders and grow it from there.

5:30I bet that you if if someone said, I'm going to give you the stage for a couple minutes, and I want you to talk about why it is so much better to start from one rather than start from zero. Do you mind talking about that topic? I feel like you got some you got some powder in the keg ready to expand on that topic. Yeah, I mean, you know, I like to say most people are not as crazy as I am starting something from zero to one. And the fact of the matter is most small businesses and most startups fail, right? It's like nine out of 10 fail. If you buy a business, let's call it a scaffolding business or a restaurant or a coffee distributor or whatever it is, and it's been around 10, 20 years, it's proven.

6:18It's literally proven that it can survive through boom and bust. And it is a, by definition, kind of cash flowing business and profitable. And so you're able to kind of take that on and not worry that you're going to run out of money or you have to go and like raise money from VCs or other investors. Maybe you have to get some investors in order to buy or you can use an SBA loan. But ultimately, like many other things, let's say on the checklist of what a business needs have been answered. And, you know, it could be like, hey, this is ripe for transformation in an AI world. this is ripe to actually extend and and like bolt on other stuff so you run you know a driveway resealing business you want to actually go and do a power you know side siding power wash uh add-on because you're going to everyone's uh house once a year and then you say actually we can also do you know mailbox repair we can also do like we can do things that are add-ons as opposed to trying to solve the like core business, if you will, which is what a lot of, you know, small businesses and startups do for the first five years, because you're trying to figure out if it's actually working or do you have customers, all that kind of stuff.

7:36Yeah. And what if someone says, but I want to, you know, it's like, I've got this great idea, you know, and I've always had this dream of starting a company and, you know, I'm going to do this and do what no one else has ever done before and buying another company might feel boring. And I'm just, I'm just trying to spit ball, maybe some objections that might be out there, you know, from someone with that entrepreneurial spirit. And I'm hoping chat that maybe you and I can reach them and say, I don't think you want to go through what we've had to go through. It's sure. If you hit it, it can be great, but boy, can it suck?

8:15Yeah. No. And it's kind of like, okay, you have a one in 10 chance that that's right and that's true? Or do you want the kind of 10 out of 10 chance that this one company that might kind of, you know, closely be aligned with your thesis? Like you have an idea, let's make, you know, use my bad example of mailbox or yeah, like mailbox repair. If that's your big idea, then actually buy something that's already visiting a bunch of customers in Columbus, Ohio, and use that as your platform to then expand. Because fundamentally, starting from scratch means you're doing all of the things. You're trying to figure out whether people, customers actually want it.

8:57You're getting to product market fit. Whereas most of these small businesses have product market fit, and you're taking the the case that you can actually improve the margins, you can bring in some improvement, or you can increase sales, or tack something on. So it's like, way easier to be successful with something that's already, you know, like you talked to like Jensen Wong at Nvidia, right? He's like, would you ever do this again? And he's been he's one of the most successful entrepreneurs of our generation. He's like, no, knowing now what I know, it's like chewing broken glass, right? It's like really hard.

9:36And I think it's easy to see him or a Bill Gates or Steve Jobs or whatever and say like, oh, that'd be amazing if you can do it. But that's a, you know, thousandth of 1 % outcome. And rather than having something that you can have, like your sphere of control, is enabling something to be more successful, not just to be successful, period, which is kind of when you start something from scratch. I feel like this is such a grown-up conversation that we're having in the entrepreneurial world because I think there's far too many, for many years, there were far too many people that were out there, gurus enriching themselves, saying, start a business and you can have free passive income and you can sip martinis on the beach in no time.

10:25And it's like, it's awful because there are a lot of people that kind of fell for it and realized, okay, no, when you start a business from scratch, this is the big boy, big girls club, and you better have a strong constitution. So getting to the benefits of taking an established business, one objection obviously may be I don't have the startup capital, which is why I was thinking of starting something from scratch, because I wouldn't have to put dump a bunch of money into it necessarily. I could just kind of come up with an MVP with minimal dollars. But now we're looking at acquiring funding to take over, you know, an existing company.

11:03And you had mentioned investors and SBA money. I'm a huge fan of the SBA. God bless, I hope it doesn't get interrupted like other government systems right now. But let's say that the SBA is available. Would you mind talking about options for an interested, you know, business acquirer and entrepreneur who can take something and really take it to the next level with their vision and drive? Yeah. Yeah. And I think it's, you know, under$5 million business, you can get up to$5 million from the SBA and, you know, better terms than you'll see going just walking into a bank saying I have a great idea or whatever, right?

11:46Oh, yeah. So they're doing it similar to like FHA home loans. There's a bit of overhead, right? It's a government institution. So you're going to have to get more deep underwriting. But the payoff is a 10-year loan at rates that are way better. You know, we're talking 10 % maybe right now interest versus you go to a bank. You're probably taking in the high teens in interest. And the ability, you know, it's ultimately right. The government wants to incentivize folks to buy small businesses and invest in their small business. And so ultimately, it's a great source of capital that you can use. The best part of buying an existing business is it's already throwing off a bunch of cash, right?

12:35Let's say it's throwing off half a million dollars in cash flow. You're going to get an SBA loan and some of that cash will go to pay the debt on the loan, the interest on the loan. And then you can still use and have more to invest in the business, to pay yourself a salary, all these kind of things. So it's not like you're buying again if you do a startup from scratch. There is no money coming in the door. So you're already kind of negative. bootstrapping is great and there are some things and even in small businesses you can immediately sell stuff like at a bakery you're buying all the raw materials but then very quickly you're able to turn those around into selling cupcakes or selling something else and then you're using those proceeds to grow in this case you're already using the proceeds of the existing business that you are purchasing and really what the sba wants to see is that do you have a thesis you effectively write a business plan just like you would with anything else and say, hey, whatever my thesis is, I am a plumber.

13:35I am buying another plumbing company that's like slam dunk to the SBA. But you can be, you know, I'm in finance, but like here is my thesis on why I can buy this plumbing company because I see a ton of opportunity to improve the margins. There's a bunch of operational improvements that we can make, whatever the case is. And here's why essentially from a SBA or the bank consideration set, they feel confident that you are not going to default on the loan. And so that's what you're doing. Yeah, right now. So if I go to batonmarket.com, you have 925 businesses listed for sale. This is so exciting because not only like right on, This is really smart.

14:21So right now, like I'm browsing through these, you get the asking price, the gross revenue, adjusted cash flow and the multiple. This is so cool because now it's like, look, you know, if you it's great, like, let's say that you make the best pies in the world. Right. And so you think you can start a pie business. Good luck with that. You know, your chance of succeeding is just going to be so tiny, tiny, tiny compared to something. Wouldn't you rather get a bunch of entrepreneurial cash flow coming in? By the way, the terms on SBA can be fantastic. Like, and, you know, you could, I don't know what you're, what are you currently seeing in terms of like time to pay back?

15:09Like five years, 10 years? Yeah, generally 10 years. Yeah. Yeah. But it's like a reasonable amount of time. Oh, sure. You're not having to do it within three years or five years. So it's like eating up tons of the cash flow. It's way better terms from an interest rate and a term perspective than you can get anywhere else. And the defaults on SBA loans are super low because, again, they've done a bunch of the homework to understand that we feel very confident. So like not everyone gets approved if you have bad credit and like, you know, some of these other things, there are reasons that people will not get approved.

15:46But I think if you make it through the gauntlet, which can sometimes be frustrating and talking through, you know, with the bank, but it is a very worthwhile thing, certainly under a$5 million purchase price. And to your point, then you're buying a pie company or a bomboloni company or a cupcake company or something that has proven over maybe 17 years and the owner is looking to retire and spend more time with their grandkids. You can take that over. People are going to walk in, you know, day one that you buy that business. There are people showing up to, you know, buy cupcakes and you can add pies.

16:28and see how that goes. Your obligation monthly is a couple thousand dollars. You just take that from the profit that you're already generating to pay that back. It's probably gonna be maybe lean times in the first little bit until you get your footing or whatever, but you'll get there. Like it's already been proven or whatever. And as long as you got good advisors, aside from just matchmaking, does Baton assist with education around this in any way? Yeah, and we actually act effectively as the sell side advisor all the way through, because unlike some, some bigger sort of classifieds or listing sites, which are just matching you to a buyer, if you're an owner, you know, or vice versa, we actually think the job to be done is successfully selling your business or successfully buying a business.

17:14And the, the simple matter, you know, matter of fact here is that 99 % of small business owners are first-time sellers and 98 % of buyers are first-time buyers. And so imagine Zillow, right? If 100 % of the people selling their home, it was the first time they were doing it and virtually 100 % was the first time buying, we need to provide a huge amount of education along the process. And, you know, we've seen thousands of letters of intent and offers on businesses at this point. So we are really the experts when an owner gets an offer, we can say like, this is a strong offer, this is a weak offer, we're going to go back with this.

17:58And so we we provide that support. And we essentially, you know, most of our money comes from making a success fee from a successful sale of that business. And so we're incentivized to sit on the side of that owner and advise them all the way through. And the good news is you can list your business privately for free and get interest from serious buyers. Let's talk next steps for our friends that are listening, both potential buyers and potential sellers. Yeah, maybe the first simple one, if you're a potential buyer or interested, 100 % free for buyers. Think of this as like going and signing up for Zillow and getting a safe search and seeing what's in your local area, in industries you're interested, whatever.

18:43So super simple, five minutes, and then you're done. And then you'll just start to hear about stuff. And like you said, you can look into asking prices, multiple, start to educate yourself. And then if you're an owner, the amazing thing is that an evaluation, which is running seven different models on valuation, is completely free for you. And if you went out and tried to do this with a CPA, it's probably three weeks and$3 ,000,$4 ,000. dollars. We'll turn that around in a day because we've built software to support on this front and have a ton of recent sales comps so that we can actually provide you a super detailed view.

19:27And then, like you said, it's free to do a private listing and see if you've listed your, you know, e-commerce retailer or you have a landscape company in denver colorado you can lift it and then you know the 20 000 plus buyers on the platform will look at that and be like this is super interesting i would love to catch up so it's real buyers like reaching out to you and then you make the decision like actually i was looking to sell in three to five years but i'm i actually got a couple informal offers. So I'm going to like upgrade to a full for sale listings that I can actually get more offers and then see what the true kind of purchase price should be and the proceeds that I'll get.

20:16And like, then we support that whole way. Love it. The fees, by the way, you know, obviously you can upgrade to different levels and then the success fee is a 6 % fee, which is super reasonable in terms of brokers. I've seen a lot bigger for fees from brokers. Yeah, no, exactly. It's like, you know, the biggest brokerage out there, their standard is 12%, right? Go up from there. I like sort of counterintuitively, the smaller the business, the higher the rate is, which seems wrong to us. So it just means they're taking more of a smaller pie. And so, yeah, we feel that, you know, with the scale that we're operating at, with the software that we've implemented, we're able to make this work for us, but also, you know, bring more people into the fold because they can understand what their sale price will be and how to move through it really quickly.

21:13Chad Jaglakar, co-founder and CEO at Baton, the website, batonmarket.com. Go browse the businesses so you can see what we're talking about. If you're considering selling your business, you can list it for free. Again, that's all at batonmarket.com. Chat, great conversation. Thank you so much. Yeah, I loved it. Thanks again.

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