David C. Barnett is an entrepreneur and author of three best-selling books. Today, David busts the myth of the easy entrepreneur and shares the two safest (and smartest) ways to leave corporate America and start your own business.
Successes at a glance:
- Entrepreneur and consultant, focusing on helping entrepreneurs buy and sell businesses
- Author of three best-selling books
- David has had the entrepreneurial mindset ever since he was a young boy. Growing up in Canada, David began by shoveling snow in the winter and then mowing those same lawns in the summer. Following high school, David enrolled in business school, thinking it would make him a “businessman” but found that b-school was more focused on creating “Fortune 500 bureaucrats.” Following school, David got a job in sales with a Yellow Pages publisher. Keep in mind, at this time, Google was in its infancy. This meant that David spent a great deal of his time sitting with local business owners, having conversations about what kind of customers they wanted to attract. From this experience, David learned a lot about many different kinds of businesses, eventually starting one of his own. David later sold his first business and went into commercial debt brokerage, helping buyers and sellers of businesses, with financing. David noticed a glaring issue: the buyers and sellers of those businesses had no idea what they were doing. As the financial crises of 2007-08 hit, David pivoted into business brokerage via a national franchise brand; helping other people buy and sell businesses.
Setback failure or time when things fell apart:
- David was in the business brokerage business for 3 years. While the demand and opportunity were ripe at the time, David ran into a bigger problem: the model didn’t work. The traditional business brokerage model was based on a similar one used for real estate transactions. David illustrates:
- A business owner would come to him, wanting to sell his or her business
- David would help evaluate the business and determine an asking price
- David would then match this business to a buyer
- Once the business was sold, David would earn a commission
- Sounds logical right? For real estate, when the process takes weeks or months at the most, a broker can do quite well. However, selling a business can take years which diminishes the value of the commission, time-wise. Case in point, David shares that a deal in which sold a fried chicken restaurant for 5-figures, took over three years to close. Moreover, David identified a structural problem. Since brokers were paid 10-12% commission from the business seller, buyers would inherently assume that the broker was not aligned with him or her. As a result, deals would regularly become delayed, thus creating lots of uncertainty for the broker to make a viable living. While David sold 36 businesses in 3-years, he went thru periods of 9-months with no closings and thus, no revenue or cash flow. With two young children, David could not plan or create a family budget. Things fell apart when David left business brokering, went back to a fulltime job and got a divorce, all at the same time.
The “aha” moment that sparked a pivot:
- David went back to corporate life, working as a banker. In his role, David did a lot of travel in the car. On one of the many road trips, David got a call from someone, who had been referred to him that was interested in selling his business and needed his help. At first, David declined, referring him to the person who he left his brokerage practice to. Then a week later, David got another call from someone who wanted to a buy a business. This was the start of David’s pivot but he wasn’t quite ready to leave his day job yet. David agreed to help but as a part-time consultant, meaning he would bill for his expertise by the hour. Soon, David began a “side hustle” of helping people buy and sell businesses, using an hourly rate model, to remove the risks inherent with a commission based fee. Within two years, this side gig ballooned and when it no longer made sense for him to keep his day job, he went into this fulltime. Today, David is a private transaction advisor and uses a valuation model for his services that makes sense. He now works with buyers and sellers, all around the world, coaching them thru the process and conducting the specialized tasks that these individuals can’t do on their own.
- David’s advice for starting a side gig:
- It has to be something where you can deliver extreme value while expending little of your time. In David’s case, he had very specific expertise in business valuation, so he could create high impact value for his clients while doing so on an evenings and weekends basis. Put simply “sell something with a big margin.”
- David’s advice for time management for starting a side gig:
- Don’t use lists, use blocks to schedule activities, meetings, calls. Blocks prioritize your time. The better you can prioritize your time, the better you will be at managing expectations for your clients.
- Favorite app/website/resource or productivity hack:
- How David recharges when facing a roadblock or challenge:
- Go hiking or biking. Get out amongst the trees and getting connected with nature.
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Advice to past self while going thru a difficult time:
- David wouldn’t change a thing (other than telling his 1999 self to sell that Nortel stock!). David has been thru some really painful places but sees every one of them as part of the trials he went thru to get to where he is today. There is one piece of sage advice he would share with his past self: “you are not your business.”
Parting wisdom (in a few words):
- “The terms are often more important than the price.”
Connect with David:
- David C. Barnett
- Business Buyer Advantage to learn more about the process of buying a business