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A Due Diligence Professional Shares His War Stories
Elliott Holland is the Founder and Managing Director of Guardian Due Diligence, a boutique firm that supports ETA, acquisition entrepreneurs, and self-funded searchers looking to execute business acquisitions. Elliott has over 10 years of experience executing middle market deals and has worked with the nation’s best family offices, independent business buyers, and management consulting firms.
In addition to this, Elliott is the Chief Financial Officer of Collab Capital, a growth solution that leverages financial, human, and social capital to aid Black founders as they build sustainable, innovative businesses. He is also the Chief Financial Officer of TTI USA, a boutique telecommunications installation service provider.
Here’s a glimpse of what you’ll learn:
- Elliott Holland talks about his background in search funding and private equity
- Elliott’s motivation for founding Guardian Due Diligence: a lack of cost-effective, efficient, and reliable advisors
- The stories behind some of the most significant lessons Elliott has learned in his 10-year career
- How to lay the foundation for a great deal to take place
- One of the most vital aspects of buying or selling a business: communication
- Three ways to check how trustworthy a seller is before a sale
- Elliott talks about Guardian Due Diligence’s broad range of services
In this episode…
Do you want to ensure a seamless transfer when buying or selling a business? If so, Elliott Holland has one word for you: communication.
Communication is one of the most important skills to master when buying or selling a business. That’s because it not only sets clear expectations for the exit process, but it also builds trust, establishes credibility, and ensures the smoothest transfer possible. However, there are quite a few roadblocks that hinder effective communication during the transfer process—so how do you know exactly what to communicate and when to communicate it?
In this episode of the Quiet Light Podcast, Mark Daoust sits down with Elliott Holland, the Founder and Managing Director of Guardian Due Diligence, to discuss the vital lessons he has learned throughout his career in the due diligence space. Listen in as Elliott reveals the importance of building trust during a sale, the secrets to ensuring a great deal, and the value of consistent—and honest—communication when transferring a business. Stay tuned!
Resources Mentioned in this episode
- Elliott Holland on LinkedIn
- Guardian Due Diligence
- Collab Capital
- TTI USA
- Quiet Light
- Quiet Light Podcast email: [email protected]
- Royce Yudkoff on the Quiet Light Podcast
- Mark Daoust
- Joe Valley
- How To Win Friends and Influence People by Dale Carnegie
Sponsor for this episode…
This episode is brought to you by Quiet Light, a brokerage firm that wants to help you successfully sell your online business.
There is no wrong reason for selling your business. However, there is a right time and a right way. The team of leading entrepreneurs at Quiet Light wants to help you discover the right time and strategy for selling your business. By providing trustworthy advice, effective strategies, and honest valuations, your Quiet Light advisor isn’t your every-day broker—they’re your partner and friend through every phase of the exit planning process.
If you’re new to the prospect of buying and selling, Quiet Light is here to support you. Their plethora of top-notch resources will provide everything you need to know about when and how to buy or sell an online business. Quiet Light offers high-quality videos, articles, podcasts, and guides to help you make the best decision for your online business.
Not sure what your business is really worth? No worries. Quiet Light offers a free valuation and marketplace-ready assessment on their website. That’s right—this quick, easy, and free valuation has no strings attached. Knowing the true value of your business has never been easier!
What are you waiting for? Quiet Light is offering the best experience, strategies, and advice to make your exit successful. To learn more, go to quietlight.com, email [email protected], or call 800.746.5034 today.
Hi, folks, it’s the Quiet Light Podcast where we share relentlessly honest insights, actionable tips, and entrepreneurial stories that will help founders identify and reach their goals.
Mark Daoust 0:29
Hey, welcome back to the Quiet Light Podcast. I’m super excited to have Elliott Holland. Elliott, I keep saying your name wrong. Elliott Holland from Guardian Due Diligence. Obviously, you’re in the due diligence space. But your background is super interesting. You started out as a search funder, which would be looking for deals backed by private equity or family offices, and then morphed in 2017 into this due diligence firm, which is doing both offline and online deals, doing everything from q v to quality of deals to reviewing marketing materials, really helping out buyers in that process of trying to make sure that they’re making a good acquisition. And look, my recommendation has always been if you’re going to spend this much money, using the due diligence company is good. Just a good sense. Real quick, before we jump in, I just want to remind people that this is sponsored by Quiet Light brokerage, we have been around for 14 years, helping entrepreneurs in the online space, prepare and exit their businesses for maximum value. We work on the sell side. So we’re on the different side, then Elliott is for the most part, but we work hand in hand on these deals. So Hey, welcome, Elliott after that, kind of messy intro.
Elliott Holland 1:38
Hey, know, good to be here. It’s exciting. You know, I know you guys in the marketplace. So it’s exciting to be here speaking to you.
Mark Daoust 1:44
Yeah, it’s always fun to talk to somebody that works. I say on the other side of the table, but really, you know, due diligence companies and advisors like we are I think we work, not adversarially I think we work hand in hand. You know, maybe there’s a disagreement at some point on valuations or a collaborative effort. But we’re trying to get a good deal done at the end of the day,
Elliott Holland 2:00
Right? Both of us are trying to get a good deal done. And the negotiation around a good deal is just that, right? I mean, there’s a buyer angle, there’s a seller angle, and when they meet a good deal gets done.
Mark Daoust 2:10
That’s right. I you know, I love boiling things down to this, this level of simplicity. And I’ve done this on just hundreds of deals that I’ve been the advisor on this show when we see that butting heads, right, and you’re right, you’ve been there where, of course, they’re fighting and I just a backup, right? You want to buy? Yes, he also details.
Elliott Holland 2:30
Yes, everything else is details. And and there are a lot of sharp elbows in this business, right, maybe a little bit less in some of the smaller deals that we deal with. But in the medium and larger size deals that we deal with. People are sharp elbows, when people are putting, you know, hundreds of 1000s or millions of dollars up, they should be very prudent and thoughtful. But at the end of the day, sharp elbows can ruin good deals. And so I think on both sides, we have to sometimes grab our client and put them in timeout, as weird as that may be to enable them to see that a good deal is sort of in the midst, right? And don’t overlook it because there’s $1 of EBITda missing, or the buyer won’t give you the deal that you want. The exact way you want. He might want to primer 10 degrees different, right?
Mark Daoust 3:17
You know, my business partner, Joe Valley used to tell clients when he when they started with him, because I’m gonna ask you to write down your what you want to see out of this deal on a piece of paper, I want you to put an envelope and put in your desk drawer. Yeah, that’s it. And then when you would get into due diligence, we would get those sharp levels that you talked about. You would say remember that envelope? I told you that take a look at it. I want you to see what your original expectations were because they change, right?
Elliott Holland 3:43
Yes, that’s smart. I think even more on your side maybe than mine. But again, I don’t think we’re adversarial just is interesting because by the time a seller decides they want to sell talks to their family, whatever finds you guys for instance, right? Between that day, and closing a good deal. It can be months, sometimes even over a year, depending on how picky people are in the market. And so you’re right what they want day one can get lost in all the conversations they have with their friends, that company 10 times the size, they went for a waist deep or multiple, the fact that they think their business is worth 10 million because 10 million sounds good. And then you know, on my side with the buyers, buyers can see a deal at a reasonable price. And all of a sudden convinced themselves they need to take 25% off of the price or they don’t like the fifth iteration of the working capital or the the seventh biggest online agent of sales isn’t as big as they thought and forget that there’s a great business so
Mark Daoust 4:50
yeah, absolutely. But we’ve already gone dug into some content already, which is awesome. But let’s let’s back up. I want to talk about how you got into this because you started in a field Which we know well here at Quiet Light, we’ve worked with a lot of people that would fall into this, this this sponsor, category, right the search funder type category. Can you explain to the audience just a what you did before this, how that worked, and then how you parlayed that into Guardian Due Diligence.
Elliott Holland 5:18
So when I left Harvard Business School, my first jobs after that were in private equity. So formal, institutional capital meant to go buy companies. And so my, my, my start in the business came from that. But I was working for more family office, more independent groups. And so that sort of in my blood, I then wrote out and started a independent sponsor, they call them self funded searchers. There’s a million names for fundless sponsor, investment firm with a mentor of mine called Ellsworth Partners, and we bought companies a million to $5 million in EBITda, both online and offline. And then I started my own firm Spartan Capital that was doing essentially the same kind of thing with just by myself, after my partner retired. And so around that time, 2017, I started Guardian. But if you think about what that means that I’m in sort of year 10, of evaluating, assessing, and running processes, and sort of small and medium business deals, both offline and online, from the seat of a buyer, working for others, a buyer working for myself, and now an advisor. And so I understand the owner persona, I understand the buyer persona, I understand the adviser persona. And so my background is a bit different than some other advisors in my space that come from more CPA or financial analysis core backgrounds. I’m more like an applied applied deal, guys, probably one way to say it.
Mark Daoust 6:51
Yeah, that that fits really well with the Quiet Light approach, right? Because everyone Quiet Light. We’re all entrepreneurs first. You know, we’ve all bought and sold businesses before we started in this field of of advising, right, so the same sort of background where we’ve been in the shoes of the buyer, we’ve been in the shoes of a seller, well, we’ve done you know, larger acquisitions, most of the advisors are Quiet Light. We’re actually clients before they came on board with us as advisors. So a lot of affinity there. Between between backgrounds, except for the Harvard Business School, I wanted to go, and then life got in the way.
Elliott Holland 7:25
I’m still I’m still fun to hang out with. So don’t hold it against me.
Mark Daoust 7:29
We love We love Harvard. I actually had I had some of the professors that teach the ETA course, on the podcast a long time.
Elliott Holland 7:37
Oh, yeah. Yudkoff and Ruback.
Mark Daoust 7:38
Yeah, I did. Yeah. Royce on. I’ve been working with the ETA course for a while.
Elliott Holland 7:45
So Royce actually helped me craft my messaging to get my first job in private equity.
Mark Daoust 7:50
Oh, that’s awesome. That’s awesome.
Elliott Holland 7:52
I get that. Huge amount of respect for him.
Mark Daoust 7:55
Yeah, absolutely. Absolutely. In fact, if you see my background, you can see my backgrounds behind me. I have their book that they put out the guide.
Elliott Holland 8:03
Mark Daoust 8:05
So cool. People are listening live as we’re finding our connections here. Love it. Sorry. So how did you parlay this into Guardian Due Diligence? When did you decide or see the need that look, this, there’s a need out there, not for the mid market 50,000,070 $5 million deal, because there’s a lot of people that want to play that space, right? It’s lucrative. But that sub $25 million enterprise value, and really, I mean, for a lot of our listeners, here, they’re looking at the the mid high six figures, figures, maybe low eight figures would be the very cap, right? opportunity.
Elliott Holland 8:37
Well, as a buyer, myself, and for six years, I was an independent buyer, I saw not only how difficult it is to get good deals done, which, you know, Mark, you can write the book on that as well, right. But also how difficult it is to find good, cost effective, efficient, smart, deal oriented advisors, and you need them, like you need oxygen during this process, right. And when you get guys that are, you know, highfalutin with a bunch of credentials, and they charge you 400 an hour and then number two guys 300 an hour. And then their analysts is 150. And you asked him for a price and they can’t give it to you. Or, hey, what’s involved in the quality of earnings? Well, they’re all different and this and that, and that and this and, oh, by the way, you got me in my busy season. So I can get to you in four weeks and your seller is going to kick you out of the process and where we I just saw how difficult it was to get deals done. That’s not to mention that I think operating a private investment firm or even you and your buddy looking at deals, operating a due diligence process plus keeping some sort of gas on the pedal around deal sourcing is like 150% of your capacity. So now add to that the complexity of finding good advisors. I just knew the whole evening system was wrought with opportunity. So I started Guardian to serve that customer needs to sort of be the solution that I wanted when I was in the buyer seat, and to be very specific about delivering the things that I knew were needed would have helped, and really helping, I think a whole set of acquisition entrepreneurs execute good transactions.
Mark Daoust 10:23
Yeah, and I love where you’re coming from with this, right? This idea that managing an acquisition is a multi faceted operation as far as the number of skill sets that you really need to have. And you can branch these down, even further due diligence, do a good due diligence, not a single discipline, right? It’s an old, multiple this type of tool.
Elliott Holland 10:47
Absolutely, you’ll even go further than that, if you back up because we do more than quality of earnings, if you think so diligence is what I called it, because people know that they sort of, they need to QE and I need a legal doc to get to deal with that. So if you’re thinking sort of brass tacks, the QE is sort of the one that kind of puts you in the game. But really our service to start from deal sourcing to evaluation, to honestly negotiating with guys like you, you know, the whole litany of things. And you got to be, you got to be a business person, entrepreneur, a finance person, valuation, a psychologist, a negotiator, a assessor of risk, a master of timing, a master of tact, and all these things take years and years and years to develop. And so it’s tough, even for people that have like deep levels of expertise in many of them, to execute all of them. And oh, by the way, when you’re putting a million dollars plus up, whether it’s your capital, or you’re getting debt, the consequences of making bad choices are severe here.
Mark Daoust 11:55
Yeah. And the stress of that puts on every single level and, you know, trying to keep a clear head with the I wouldn’t say the number one problem. But a problem that you see in deals all the time is people losing the focus, simply because of the stress of the deal, right? It’s not necessarily
Elliott Holland 12:11
Oh, you how many times I was big on myself. I mean, I have so many, like, release vows for stress now that you know, and also like, the funny as you get better at this stuff, you actually start breathing slower in the most intense negotiations. But that took years to develop.
Mark Daoust 12:30
Yeah, absolutely. It takes it takes. I remember, I’ve told the story a few times on the podcast, but one of the advisors I was selling his business before he became an advisor. I remember he was selling his business in the person buying his business was two days before close. The business was having a record day of sales in a bad way. I mean, it was just like, not, you know, not what you want to have happened a couple days before closing, I was in my car. I call them because we needed to get a few things close to being done. Right. So I call him like, Hey, you know, do you know what you’re gonna get? X, Y, and Z done? He lit me up to no end about pressuring him. This. I mean, it was, it was vicious. And I remember thinking, alright, he’s venting. He’s He’s distressing. Right? Everything worked out. We close the deal. I you know, I got fun said, Look, let’s We’ll talk later. I apologize. Let’s just talk later. We got the deal done. I talked to him about a year later. And a few months later, and I brought it up to him. Right. He didn’t remember the conversation. He didn’t remember doing that at all. And I didn’t press him on it. But I think right, I think it was just that that intense stress of the moment.
Elliott Holland 13:42
Also tell you, there’s times that the stress gets so intense that I purposefully bury it. Really? Oh, yeah. Because if I if I thought about it too long, it would taint the the sort of macro good decision that was made. Right. So to your point deal got done. If you’re talking to him a year later. He did. All right. Yeah. And, and and so now, the good deal, benefit and far supersedes whatever was going on that day. And that’s the other thing about deals is you have to you have to constantly prioritize, right? And then the priority might change 25 times in a single day. I mean, it’s just like, and you’re sort of in an entrepreneurial sense. You’re always going after the biggest problem, right? Are the one that’s going to most significantly impact your deal that day? And I mean, so you’re juggling all the time.
Mark Daoust 14:39
Yeah. And in to your point, yeah, I wouldn’t didn’t bring this up to grind an axe or anything with him. It was more of Hey, you remember that time, you know, and kind of reminiscing and he’s like, What are you talking about? I was like, Oh, God, nothing creative.
Elliott Holland 14:54
It’s not even a big deal. Yeah. Forget about it.
Mark Daoust 14:59
Alright, let’s let’s Get some, some useful tips. I’d love to hear some of your your war stories told you one of mine in due diligence and also maybe get some tips, right for somebody going into this process, if they wanted to try it on their own, which you know, I don’t necessarily, especially if it’s your first time, I don’t recommend trying it on your own. But let me hear some of your war stories and some of the things that have stood out some of the things you’ve learned over 10 years of doing this year?
Elliott Holland 15:26
Yeah, so a couple of things. I think one of the things I’ve learned is that no matter what size of the business online or offline, there are certain things that that every business has somewhere, it might not be in the spreadsheet, it may not be in the QuickBooks, it may not be in the Google Analytics, but they have it somewhere. So everybody has financials, everybody can put them into a monthly basis. So when people say they don’t have it, that’s hogwash. Everybody has a customer list. Everybody, if they have any significant assets, they have an asset list. If they have revenue from multiple streams, I’m sure they spent the profit from those things. So I’m sure they know where their money came from. And so one of the things that I would encourage people to initially settle into is that you as a buyer, represent the buy side, need to be patient enough to know that that data exists. Even if you can’t get it from the intermediary at that time, for whatever reason, that person may be protecting their client, the data is there. And so you’re gonna have to get it get it sooner rather than later. But there’s, there’s a set of data available. Um, you know, stories are the best. I mean, one of the saddest stories, I remember I was looking at a, a company that installed commercial cameras and control access doors out of just north of Dallas, Texas, and I was hired on the industry, the financials came back solid, the seller sounded reasonable. So I put in a letter of intent, the guy wanted to see me before he’s going to accept it. So he’s operating off a QuickBooks so I had pretty good data. So I get down to Texas, I drive up I meet him at a Starbucks, but he didn’t want his his people to know just yet. And as soon as he’s walking up to the Starbucks Mark, before we can even get in there, and get my my Pike Place. He’s like, ah, You’ll never believe this man. Our QuickBooks went down this morning. Like, how could that happen on daily as you come are flicking QuickBooks, it blew up, I can’t get to it, I got my I got my bookkeeping lady on it. And work, I’m sitting there. And I almost turn the car around and went back to the airport and flew back to Atlanta. But still, people who know me will get I said, You know, I need to learn this lesson on how much this guy’s willing to lie. So that sat through another day of interviews with his sales team conversations with him. So I can fully understand how many ways he was trying to pull the fleece over my eyes. But but that’s the kind of stuff that Oh, by the way, I didn’t tell the best part of the story, which is terrible. So anybody who knows about QuickBooks, the cloud version, what he was telling me is that QuickBooks into it went down for 24 hours. If anybody believes that I’ve got a property in Minneapolis. So I’m like, hold on, there’s no need to call into it on this, this guy’s blowing smoke. So I had that. I mean, heck, I’ve had situations where I’ve been on a customer or not a customer visit a seller meeting, flown out somewhere to go see someone, I had a guy who increased the price on 25%. At dinner, we had a whole day of meeting with the guy, he sits down with us and something made him want to increase the price 25%. I’ve seen something else that sort of look for before I kind of close this piece. And we can hop into more if you think is relevant. Oftentimes, you need to take a look at the documents that govern how a company can sell. So I might have a business partner or a bunch of silent partners. And as the person that makes most of the decisions, I might say, Oh, you only have to worry about me I make the decision. But when you actually look at the operating agreement or the bylaws, it takes unanimous consent to sell. And I’ve gone down processes very far when I was in the buyer seat that then it constantly because three of the partners and needed for unanimous consent did not like to do so I can go on and on and on. But there’s there’s war stories. And then what you have to understand is there’s diligence rules that operate on the other side of them once you’ve experienced them and that’s what the benefit or having an advisor gives you.
Mark Daoust 19:45
Yeah, those sellers had poor sales advisors. Yeah, yeah. for someone to lie about QuickBooks going to QuickBooks Online going down, it’s actually pretty rich.
Elliott Holland 19:59
Hilarious. Yeah, I
Mark Daoust 20:00
mean, it’s not not the most, it’s close to the most egregious. I’ve heard I won’t go over the most egregious situations I’ve heard. I don’t want to scare people too, needlessly? Well, I like this idea of people lying. I think this is actually a good thread to go on. Because when you’re buying a business, you know, there’s always that that question of Can I trust, and we talked about this all the time, right? offers are made based off numbers, but deals consummate based on trust at the end of the day, right, trust and verify. And if you can’t verify to the point of trusting the deal is not going to happen or shred. Right. And that’s a two way street. Right? It’s got to go both ways. What are some things that you recommend you do your clients as far as a vetting somebody? Right? And just, you know, how do you tell if somebody’s telling the truth? Obviously, if you catch them up online like that, you know, that’s pretty obvious. But then second of all, what are some things that you do to try and lay down the foundation for a good deal? Where, look, there’s mutual respect in the buyer and seller and be like, look at each other, I trust you, we’re still going to go through this process, right, but you’re an upstanding person, and I want to do a deal with you.
Elliott Holland 21:13
Right? So let me start from the second question and move to the first because the buyer side, I think you can screw it up from the beginning, particularly if you’re a new buyer. So when you first start out as a buyer, everybody lined up 100 new buyers, right? Especially like, went to college thinking so finance, whatever. The first meeting you’re gonna have with the seller, you’re gonna want to have a list of like, 15 questions that you want to ask. And I’m gonna nail on with question 37 and 17? Oh, we’re gonna get them. And you start ticking off these questions, right? And you totally forget who you’re talking to. You’re talking to an entrepreneur who started a business, but got it to the point where you were interested in buying it. And now you’re like, you know, like clipboard, questioning him like he’s in the principal’s office. And you forgot the fact that this is a free man or a free woman, that before you buy their business doesn’t have to answer to anyone, you mess up a lot of trust, in that get to know the person, understand their motives. Be a good steward, I’m a big fan of How to Win Friends and Influence People you speak in other people’s terms, not your own. That’s the first way you convey trust to yourself. I think the second way you do it is all of the touch points between the first time you meet somebody like Mark and his guys are quiet, like to the closing table, when you say you’re going to deliver something delivered at that data before. And if it’s going to be late, which happens in diligence, tell them if you can call them and tell them calling is better than emailing, but telling you’re gonna be late, but you’re each point is giving that person confidence and whether you can deliver that big check that you’re gonna have to deliver to by the company. So those missed deadlines and other capacities don’t matter as much as this one. Now, let’s
Mark Daoust 23:04
flip it, okay, for those that are listening in the car, or somewhere else not watching this on YouTube, my head’s about to fall off, because I’m nodding so much about that. But this I mean, this game is so much about managing expectations. And on the sell side, I can tell you, especially first time sellers, they don’t believe you’re going to come through with a check, like just assume that that’s the starting position. And so when you fail to deliver on expectations during the due diligence process, it doesn’t seed seeds of doubt, it confirms the seeds of doubt that are already there. So if I could just emblazoned what you just said there, if you’re going to miss deadline, cool, I get it. It’s hard work to buy a business. Right? You’re gonna miss some deadlines. You’re gonna have some more questions in your first round. Right? But communicate, communicate, communicate? Yes. Yeah. All right. Sorry. I just I couldn’t know
Elliott Holland 23:52
a perfect world. What I think people will like listening to this podcast, particularly, is I represent the buyers that negotiate against the sellers that that Mark works for, think about all the time, he’s agreed already. And I’m not being nice, just because you know, it’s Mark, I’m telling the steak shoot. So there’s a lot of commonalities here. The other thing I think, related to that is, when you there’s this is not a situation where you get perfect data. There are things that a seller will tell Mark, that that seller will never tell you that Mark will never tell you and not off of being particularly or maliciously avoided, but just there’s so specific nuance hard to communicate difficult to go past that. They’re not going to be told so for instance, when the seller says Hey Mark, I don’t think this guy can close. You might get that the second or third time the seller tells him that because at that point, Mark, sort of like you know, tighten up this thing is done, but you’re not going to hear that right. And when I would encourage people on both sides to do particularly like new acquisition entrepreneurs. I said, Don’t bring the clipboard with the 50 questions. Be involved in the communication. So you pick up some of the nuances of it so that when people are communicating things indirectly or through nonverbals, that they can’t really say directly or an email, that you’re not to do that. Or the gal that just lets it go over your head.
Mark Daoust 25:23
Yeah, no. And that’s right. I mean, and yeah, there are conversations that happen, right? And much of what we do on our site and you on your site as well, you said this already, sometimes it’s putting your client in check a little bit to say, hey, let’s pump the brakes. We’ll do that when our client is freaking out. And we look at the deal. And we see, you don’t need to be right, let’s let’s slow down a little bit here before you say Oh, it’s not going to close the deal. This is actually fairly normal. So let’s, let’s calm down a little bit. And then if they’re really insistent, I might call you and I might kind of be like, Look, you know what, let’s tighten this up a little bit. Let’s do X, Y, or Z, or just some some feedback. And I’ll sanitize it, so that it’s not, you know, sometimes people get emotional. This guy’s an idiot, like, he doesn’t know what he’s doing. I’m not gonna say that.
Elliott Holland 26:09
Right. Exactly, exactly.
Mark Daoust 26:11
I know that I’m speaking from emotion, that frustration. So you’re right on that pain. Again, it’s the communication, I wish more buyers would do this, where we just set up regular calls. And I recommend ideal set up regular calls. Even if we have nothing to talk about. It’ll be a nice quick call. But let’s at least do it.
Elliott Holland 26:29
I totally agree. weekly calls are great. I encourage them to your point. I know I’m talking to the guy this week. So if I don’t like him, I can yell at him and get over it. If I love him, I can tell him. If he’s delivering everything we can say this push the date up a week. And if we need if he needs to tell me something that I don’t want to hear, at least he told me, I totally agree with that. I’m like, on my side on the buyer side, you know, how do you get a sense on the sellers? The sellers trust factor? How well can you trust the seller? Right? So there’s two or three things you must do in this instance, right? First off, you must understand why the seller selling. When I first got into the business, I thought that was some nebulous quantification type question. Oh, I mean, he told me that, you know, he’s going from Colorado, and he’s moving to Maryland, so we had to sell the business or he got tired. And, you know, it’s been any 10 years. And he’s, and he’s, he wants to do something else, or he’s tired of it. And what I would say is that most, most times, the thing that a seller can do to give me trust initially, is have a real compelling story. And why selling because people don’t sell assets that are throwing off good cash that’s going better for the buyer than the seller. Very often. Now it happens. But things like retirement, things like health issues, things like you already have a house in the Bahamas, and your wife’s about to leave you if you don’t go to that house. Those are things that lead to a visceral level, I can understand the ones that don’t feel all that compelling because of the pain that people go through during the diligence. I question. So the first thing is just why is the guy selling. The second thing is it’s almost a complete opposite of what I said about the buyer conveying trust. So when the seller look in all of these businesses, online offline, this is not physics, like engineering, like I was when I was an undergrad, like the numbers are not going to be exactly the same folks. So I understand there’s going to be naturally some changes. But when the revenue matches the matches the sales matches, what you see on the balance sheet, when all those things match consistently. And if something’s going to be sort of grossly off if the seller, or the sellers broker tells you, hey, there’s a big difference between taxes and financials. Let me tell you how private company tax preparation works and how nobody likes overpaying Uncle Sam, if they convey the old shit moments to you ahead of time. That’s confidence. And then keep in mind the third way and these like three ways you got to sort of check for trust. something negative is going to happen during your diligence process. I mean, I hope I’m wrong. But almost every time something happens, right, like that moment you talked about, like every deal has that I’m in that moment. Does the person tell you when it happens when they knew it was gonna happen? The last minute or not at all? And depending on how they bring that information to bear is a huge indication of how trustworthy you are. So for instance, one guy might say, Hey, I got three salespeople, or I’ve got two marketers. And I’m here and one might go away, and it would be a pain but we can figure something out to replace him. I’m already Putting a requisition out, I just want you to know in case that happens, that’s on like, the very proactive thing, right? The other first thing, you look at interim financials halfway through your diligence process, and you see the marketing spend cut in half. Right? So there’s very different trust factors and those two, to wait, and there’s others. But I think those three are very clear ways to check the trucks.
Mark Daoust 30:23
Those are awesome. And as far as you know, how sellers handle themselves for those that are potentially on the sell side, you know, this is a point that we drive home quickly, internally, at Quiet Light here. He coined a phrase, and I’ve been using it lately. We just call it get ugly fast, right? We want to bring up the ugly stuff right away. My experience has been that buyers can handle the ugly they can’t handle surprises, right? It’s when someone’s surprised that they’re like, wait, what else? Didn’t you tell me now? Like, you know, that’s, that’s bad. I can I can digest that. But I can’t I just the fact that you thought you couldn’t tell me that.
Elliott Holland 30:58
And a call with a client this morning. He’s like, early, and I have no issue with anything that happens to diligence. But if I get the sense that the person is not telling truth about one thing, I’m gonna think Everything I have is crap. Yeah, absolutely. So the conversation we had earlier about the seller may be telling Mark, I don’t think this guy can close. But my clients often telling me is I think this guy’s full of it. Yeah, and I had those same calm down conversations, if I think the financials are right.
Mark Daoust 31:24
So I am going to disagree with you, I this will be the first time that we’ve disagreed on this call. And that would be with the first point as to why somebody is selling. And what I would disagree on might be just a nuance more than anything else. My experience, even as an entrepreneur myself, is that I don’t think most sellers know why they’re even selling fully. Or there’s this big mix of reasons that go together that don’t make it really neatly into a single answer. Right, it could be a mix of right now we’re 2021, right? And just went through 2021 of the most tumultuous years to do business in the online world has been whiplash, right? A lot of our sellers, especially in the e commerce space, that we’re sourcing products from China went through a period where they couldn’t order product, because we shut down, then they could order product, but Amazon is prioritizing products that weren’t theirs. And so they couldn’t stock their product. Meanwhile, demand was going through the roof for their product. And so it was this weird thing. And so that was stressful. And now they’re having all these record sales, and they’ve always sort of thought about an exit. And now maybe they want you know, they’re interested in another project, cuz they’re an entrepreneur. And so when I asked them, Why are you selling, I get kind of this wishy washy answer that feels a lot more like, I don’t know, I just know it’s the right time.
Elliott Holland 32:47
But hey, Mark, I mean, in reality, I think you bring up a good point. The the reasoning and rationale for selling changes over time, like 2020 is gonna put a lot of people on the selling black, if you will, for sure, yes. If you are in the last couple of years of your preference for owning a business, and a year, like 2020 hits, I’m sure your phones blowing up, right? Yeah, you’re right. Some of these folks won’t have a reason, necessarily, but I, I honestly would say like, as an entrepreneur, having been around entrepreneur for a long time, I think you sort of get what a reasonable one is and and not reasonable. And here’s the other thing. One of the things we have to do on the diligence side is have some sense on how credible and full of integrity, the the Mark in the room is the Southside representative, right? Are they pitching deals that they’re okay with the guy not actually selling? Because they already took a fee? And they’re, they’re cool. Do they? Do they bring a lot of businesses to market that don’t close? And And so again, like from certain representatives, like seller representatives that I know, I know, like the background of the deal by the time I get it, and so I don’t have as much worry if it’s a new person, or I don’t get the same warm fuzzy, right, integrity is different. So I think that’s a fair rebuttal.
Mark Daoust 34:15
Yeah. No, it’s a useful question that to, to ask. And what I would say is, for those that have been in tune with the marketplace, you can read into the answers pretty pretty quickly. Right? And sometimes you have to read between the lines, and there’s there’s some explanations which look, yeah, they make sense. I’m retiring. That’s what I’m doing. Yeah, that’s easy. I get that one. You know, some of them make sense. Some of them, some of them, you kind of look at it. Like, there’s something else here.
Elliott Holland 34:44
You know, and I think the best thing to do in that instance is ask I mean, I think a valid question is talk to the seller about what he’s going to do after he finishes. Yeah, absolutely. I have a story Does he ever plan you know, even if it’s I’m working on a business, this guy Better margins than this, or I’m more interested in like, Well tell me about this new thing that you’re gonna do. I like your old thing. But yeah, yeah, I think our conversation
Mark Daoust 35:09
is all about conversations I think relating right. And and I heard a due diligence tip, which was just ask a lot of questions. Just be curious, like, you know, and that’s, that’s not a formal due diligence of course that’s like basic stuff but
Elliott Holland 35:25
but I think to an extent it is. So here’s what I think one of Guardians best value add really is. So there’s, there’s an infinite number of questions you can ask as a buyer. You know why as you’re saying yellow and not red, I mean, we can get to the level of in your buying the business. So it’s unreasonable for a seller to not give you an answer. But But what you really want to do on a process because you have a time constraint and extending the time pushes on the trust you’re conveying to the seller, you actually want to ask not just a lot of questions, but the best questions, the most efficient questions, right? If it’s an online business, me talking about your fixed asset registry, and depreciation is a question that you can ask. But that’s not going to be where the juices right. And also like an RSI, what we’ll do is we’ll take a look at a business and within the first week, we’ll sort of spread the financial spread the metrics, take a look at different years different views, and say, Here are the top three to five issues we need to concern ourselves about, and then sort of almost put together workstreams? Or how do we determine the the sort of sanctity and sustainability of challenge one challenge to challenge three? So we help people streamline the question, asking process to get to the answers quicker, so they can get to comfort quicker, because to make the investment, you’re going to need the comfort. And getting there in an efficient way, is more helpful, because what happens and you set it, you’ll start with five issues you need to answer and then you’ll hear something about that business. They divested two years ago. And it doesn’t quite make sense. And you start asking this question, and all of a sudden, you’re two weeks into diligence, seeing something that was the rest of two years ago, and you forgot about your five points. So we we keep people in the guard rails around answering the questions that matter?
Mark Daoust 37:23
Yeah, that’s a great segue, because we unfortunately do have to wrap up, I’m just going to clock in, we’re running a little long for our typical episode length. But it’s partly because I’m having a lot of fun talking about this stuff. So it’s a good segue, I would love to just I gave a very brief scope of services that the Guardian offers, and I want to do this guys not as a sales pitch for Guardian, necessarily, I do want to, you know, thank you for your time and give you a chance to do this. But because I know, the listeners of this podcast do skew towards buyers. And I know that there’s a lot of I get questions all the time, hey, do you have somebody that can look at a deal for me? Can Can you have someone they can help me with something or walk through this with me? Or even the due diligence question, what are the scope of services that you guys offer at this point?
Elliott Holland 38:08
Sure. So I will start from the sort of beginning of phase no deals and then push to sort of the later stage and do so initially, what we offer at the front end are two things. One is diligence as a service, which is a monthly service, where we will help with almost any piece of the deal process you need, whether it’s sourcing more deals, because you’re not looking at enough, whether it’s evaluating 10 deals you have in your pipe, and you don’t know what’s one or two of the best ones to look at whether it’s crafting indications of interest, letters of intent, and on and on and on. So we’ll do all of that for a very reasonable monthly fee. The other thing we’ll do, we’ll review Sims, and financial. So you get a book from Mark or somebody else. And you’re like, stuff looks like Chinese to me, we’ll sit with you for two hours go through it help you understand it, so you kind of know what you’re looking at. So those are at the beginning stages of looking for strokes that are still trying to find that deal they really like then when you get to the deal you like we offer quality of learning. So that’s a complete financial assessment of the business, financial statements, taxes, banks, they statements, revenue, balance sheet, the whole thing, and help you actually get the financing from the bank, if you’re doing any of that or even to talk to your investor base about it. We also have a quality of deal, which is our same quality of earnings service that also has a projection on the next three years of cash flow, debt paid on schedule, so you know how close you are to be able to pay off the debt, but you don’t want to default on that. So that’s another service we have. And then the final one that sort of a major service is let’s say your two or three weeks away from closing, you’ve done all this data analysis, you feel like you know what you’re doing when you’re a little hesitant to really pull the trigger. We have what we call a red zone review. So we’ll take a look or whatever analysis we’ve done to that point. Use our sort of 10 years of expert analysis to sort of point out places you may have missed or, or say hey, I think you got most of it here and give you more confidence poking ideal. So those are the scope of services from guarding. Yeah,
Mark Daoust 40:12
you know when again well we’ll look in this because we started out this way when you’re looking to drop 6, 7, 8 figures on a deal spending four or five on somebody to have a second set of eyes that’s been doing this for 10 years. completely worth it. I mean, that’s that’s a no brainer in this in this field. What’s the best way Elliott for people to reach you if they want to just ask questions or talk to you or get another war story?
Elliott Holland 40:37
Sure. So you can find me a guardianduediligence.com, that’s a D for due I know it’s long, but that’s what we do. You can also find me on LinkedIn, Elliott Holland, Elliott. And then when you go to the website, my phone number and email are there. I’m also very active on searchfunder.com for those that are on there. So any of those ways I’m very responsive and I love talking about deals so we can we can have a chat whenever you like.
Mark Daoust 41:07
Awesome. Well, it’s been an absolute pleasure to have you on have you on again in the future. We can talk more deals.
Elliott Holland 41:12
Yeah, Mark. Thanks for having me. I really enjoyed it. I have a great one.
Today’s podcast was produced by Rise25 and the Quiet Light content team. If you have a suggestion for a future podcast subject or guest, email us at [email protected] Be sure to follow us on YouTube, Facebook, LinkedIn, Twitter and Instagram, and subscribe to the show wherever you get your podcasts. Thanks for listening. We’ll see you next week.