Before You Buy or Sell a Business

ETA Reality Check: Jared Johnson and a Special Guest on SBA Lending, Buyer Mistakes, Deal Killers, and the Truth About Buying a Business

Jared Johnson takes a different seat in this episode as he gets interviewed and answers real questions from buyers and sellers about entrepreneurship through acquisition. The conversation cuts straight through the hype and focuses on what it actually takes to buy and run a business. Jared explains why ETA has become so popular in recent years and why much of what people see online does not match reality. He talks through what lenders are really looking for, including experience, liquidity, and consistent cash flow, and why those factors matter so much when getting a deal approved. The episode also covers the most common reasons deals fall apart. Jared walks through red flags like inconsistent financials, customer concentration, and buyers trying to operate businesses remotely. He shares where buyers go wrong, especially when they skip due diligence, rush into deals, or rely too heavily on brokers and sellers without verifying the numbers. There is also a personal story from Jared’s first acquisition that shows how expensive mistakes can be when diligence is limited. It is a clear reminder that even deals that look solid on the surface can carry real risk. This is a practical, honest look at ETA for anyone considering buying a business or currently in the process. Main Takeaways: * ETA is real, but it is much harder than it is often presented online * You cannot treat buying a business like passive income, it requires real involvement * Lenders focus heavily on buyer experience, available cash, and stable cash flow * Deals often fail early due to weak financials or lack of buyer preparation * Customer concentration and inconsistent revenue create major risk * Skipping due diligence or hiring the wrong advisors can be costly mistakes * Asking why the seller is selling can reveal important issues * The best deals match the buyer’s experience with the business they are buying * Investors can help, but not all investor relationships are good ones * Patience matters, buying the wrong business is worse than waiting Connect with Jared: If you have questions for Jared, visit: https://jaredwjohnson.comhttps://jaredwjohnson.com [https://jaredwjohnson.com] https://www.linkedin.com/in/jaredwjohnson/ [https://www.linkedin.com/in/jaredwjohnson/] DISCLAIMER: The views and opinions expressed in this program are those of the guests and host. They do not necessarily reflect the views or positions of my employer. Keywords: entrepreneurship through acquisition, ETA reality, SBA lending, buying a business, business acquisition mistakes, due diligence, quality of earnings, cash flow analysis, customer concentration risk, deal red flags, acquisition financing, small business acquisition, search fund, lender perspective, acquisition strategy

Customer Due Diligence in Action: Ivy Millman on Revenue Sustainability, Customer Stickiness, Anonymous Feedback, and Better B2B Acquisitions

Jared Johnson sits down with Ivy Millman, CEO of WHIZDOM, to explore a missing piece in many lower middle market acquisitions: customer due diligence. Ivy shares how her background in accounting, Stanford, Apple, and decades of business-customer research led her to build a firm focused on helping buyers, investors, and operators understand what financial, legal, and technical diligence often miss. The conversation breaks down how independent customer interviews can uncover risks around retention, churn, concentration, loyalty, product issues, and transition vulnerability before a deal closes. Ivy explains her process, why customers often reveal more to a neutral third party than to sellers or buyers, and how these insights can shape valuation, confidence, and post-close growth plans. Jared also shares what he is seeing in SBA acquisition lending, including higher defaults, tighter scrutiny, and the growing need for real diligence before buyers commit to multimillion-dollar deals. Main Takeaways: - Customer due diligence fills a major gap left by financial, legal, quality of earnings, and technical diligence - For B2B acquisitions, revenue sustainability depends heavily on retention, loyalty, stickiness, and switching risk - Customers are often more candid with an independent third party, especially when they want feedback kept anonymous - Seller-protected customer relationships do not have to block diligence if the process is structured correctly - Independent customer calls can uncover hidden risks that materially affect valuation and deal confidence - Customer insights can help buyers decide whether to move forward, renegotiate price, or build a stronger post-close plan - High customer concentration becomes even riskier when relationships sit primarily with the founder or seller - What buyers learn pre-close can become a practical roadmap for post-acquisition growth and retention - Sellers can use the same kind of customer work before exit to improve enterprise value, loyalty, and retention - SBA acquisition buyers should not rely on lenders, brokers, or sellers alone to validate a deal Connect with Jared: If you have questions for Jared, visit: https://jaredwjohnson.comhttps://jaredwjohnson.com [https://jaredwjohnson.com] https://www.linkedin.com/in/jaredwjohnson/ [https://www.linkedin.com/in/jaredwjohnson/] Connect with Ivy: https://www.linkedin.com/in/ivymillman/ ivy.millman@gmail.com [ivy.millman@gmail.com] DISCLAIMER: The views and opinions expressed in this program are those of the guests and host. They do not necessarily reflect the views or positions of my employer. Keywords: customer due diligence, B2B acquisitions, lower middle market, ETA, entrepreneurship through acquisition, SBA loans, quality of earnings, QofE, customer retention, customer stickiness, customer loyalty, customer churn, revenue sustainability, founder dependency, seller transition risk, customer concentration, post-acquisition growth, valuation risk, M&A diligence, independent third party diligence

When Acquisitions Go Wrong: Christine McDannell on a Failed Deal, Hidden Costs, Working Capital Risk, and the Reality Behind “Easy” ETA

Jared Johnson sits down with M&A advisor and serial entrepreneur Christine McDannell, founder of The Magnolia Firm, to unpack a deal that did not go as planned. Christine shares how an acquisition of a dance and fitness studio moved from seemingly profitable to cash-flow negative once she took over operations. They walk through what she missed because of speed, compressed diligence, and incomplete financial visibility, including licensing costs, seasonal revenue swings, and marketing spend that lived outside the books. Christine explains why raising pay and funding upgrades early created unintended expectations, how customer and operational pressures compounded the situation, and why working capital is the difference between surviving a rough stretch and being forced to shut the doors. The conversation challenges the idea that buying businesses is easy and highlights how even experienced operators can misstep when timelines are rushed and the full expense picture is not visible. Main Takeaways: 1. Speed compresses diligence and increases the odds of missing material risks 2. A business that looks profitable can become unprofitable quickly once all true expenses hit the buyer’s books 3. Working capital determines whether a downturn becomes temporary or fatal 4. Marketing spend and other costs can be obscured when accounts sit outside the primary P&L 5. Immediate raises and visible capital improvements can create entitlement and escalating demands 6. Seasonality can materially impact revenue and must be stress tested before closing 7. Customer service businesses carry emotional and operational volatility that buyers often underestimate 8. Not every concept is best acquired; some are better built from scratch with rent and unit economics designed correctly 9. Transparency about failures helps reset expectations and protects new buyers from unrealistic narratives Episode Highlights: 1. Christine’s background: 22 years as an entrepreneur, 10 startups, acquisitions, roll-ups, and turnarounds 2. Launching The Magnolia Firm in 2021 and advising sellers while continuing to acquire businesses personally 3. The trigger: seeing a studio opportunity and moving quickly after the seller shut it down 4. Operating under LOI: taking over operations immediately while still finalizing purchase terms 5. Reactivating customers after a sudden closure and attempting to stabilize revenue 6. Underestimating licensing, regulatory, and operating costs that surfaced post-close 7. Early missteps: raising pay immediately and funding upgrades without validating margin stability 8. Discovering hidden marketing expenses and incomplete financial visibility 9. Realizing the business was running a material monthly loss and funding the burn personally 10. The decision point: when to stop financing losses and close the business 11. The broader lesson: why speed, ego, and optimism can override discipline in acquisitions Connect with Jared: If you have questions for Jared, visit: https://jaredwjohnson.comhttps://jaredwjohnson.com [https://jaredwjohnson.com] https://www.linkedin.com/in/jaredwjohnson/ [https://www.linkedin.com/in/jaredwjohnson/] Connect with Christine: https://www.linkedin.com/in/christinemcdannell/ [https://www.linkedin.com/in/christinemcdannell/] https://themagnoliafirm.com DISCLAIMER: The views and opinions expressed in this program are those of the guests and host. They do not necessarily reflect the views or positions of my employer. Keywords: entrepreneurship through acquisition, ETA, business acquisition, due diligence, working capital, cash flow, seasonality, hidden expenses, marketing spend, financial statements, seller disclosure, post-close execution, integration risk, employee retention, compensation strategy, customer service operations, M&A advisory, boutique brokerage, deal failure, acquisition lessons, operator mindset, unit economics, rent burden, distressed operations, business risk management

Inside the Broker’s Playbook: Greg Kovsky on Valuation Integrity, Buyer Fit, and Retirement-Driven Deal Flow | Ep. 60

In today’s M&A market, the difference between a clean transaction and a painful one often comes down to pricing discipline, seller integrity, and how prepared the buyer is before the first call. In this episode of Before You Buy or Sell a Business, Jared Johnson sits down with Greg Kovsky, President and CEO of International Business Associates (IBA), the Pacific Northwest’s largest and oldest business brokerage firm. Greg has spent more than 30 years in the industry and has personally facilitated over 300 transactions. He shares what he’s seeing in the last 12–18 months, why buyer demand is the strongest he’s seen, and how retirement-driven transitions will continue to fuel deal volume for years. Greg also explains IBA’s paid-on-performance model, why they only take about one out of three potential listings, and the three reasons they will refuse to represent a seller. On the buyer side, he breaks down exactly how to stand out in competitive processes, why relevant experience matters for SBA-backed acquisitions, and why full financial transparency is non-negotiable. Finally, Greg gives a practical take on where AI helps and where it can mislead, especially when valuing businesses without local and state-level context. Main Takeaways: 1. Buyer demand is the strongest Greg has seen, driven by a growing “buy and build” culture 2. Retirement-driven ownership transitions are expanding supply, but quality sellers still have options 3. Paid-on-performance brokers have built-in incentives to price honestly and only take sellable deals 4. IBA only lists about 1 out of 3 businesses: unrealistic value expectations, weak business model, or lack of seller integrity 5. Due diligence should “follow the money”: verify deposits, review bank statements, and drill into expense detail 6. Buyers stand out by being ready early: resume/bio, personal financial statement, banker pre-qual, CPA and attorney 7. Relevant experience matters, especially under SBA guidelines, because you cannot sell “management ability” 8. AI can support marketing and education, but valuation still requires local knowledge and tax context Episode Highlights: [00:00] Intro: Greg Kovsky and IBA’s transaction footprint [03:05] What’s changed in the last 12–18 months and why demand is so high [06:10] The rise of buyer demand from “buy and build” entrepreneurs [09:20] Why retirement-driven transitions will keep deal flow strong long-term [12:10] Exit cycles: why entrepreneurs often sell and move on within 7–8 years [14:35] Immigrant buyers and the Pacific Northwest tech corridor [17:15] What sellers care about: protecting employees, customers, vendors, and legacy [19:40] Paid-on-performance vs. upfront fees: incentives, pricing, and sellability [23:15] Why overpricing hurts sellers and can cost years of exit timing [25:40] IBA’s screening: the three reasons they refuse a listing [29:10] Integrity red flags: moving expenses across entities and why diligence matters [34:10] “Follow the money”: bank statements, QuickBooks detail, and full disclosure [37:30] Training brokers: why this job requires legal, tax, finance, real estate, and psychology [41:50] How buyers stand out: preparation, financial strength, and a built deal team [46:05] Fit matters: examples of niche alignment that wins deals [49:40] Veterans as strong operators and underutilized SBA programs [53:10] Bilingual support and making complex deal terms understandable [56:40] AI limits in valuation: state tax differences and local demand change pricing [01:01:20] Mentors, motivation, and why entrepreneurship keeps Greg engaged [01:04:30] How to reach IBA and where to find their educational resources More from Greg and IBA: Website: https://ibainc.comhttps://ibainc.com [https://ibainc.com] More from Jared: If you have questions for Jared, visit: https://jaredwjohnson.comhttps://jaredwjohnson.com [https://jaredwjohnson.com] https://www.linkedin.com/in/jaredwjohnson/ [https://www.linkedin.com/in/jaredwjohnson/] DISCLAIMER: The views and opinions expressed in this program are those of the guests and host. They do not necessarily reflect the views or positions of my employer. Keywords: business brokerage, business valuation, selling a business, buying a business, mergers and acquisitions, M&A intermediary, IBA business brokers, paid on performance broker, buyer demand, retirement business sale, ownership transition, entrepreneurship through acquisition, ETA, SBA acquisition financing, due diligence, quality of earnings, deal team, personal financial statement, buyer fit, seller selection, local market valuation, AI in business valuation, Pacific Northwest M&A, manufacturing business sale, distribution business sale, industrial services acquisition, confidential business sale

Inside the Marketplace: How Empire Flippers Screens Listings, Matches Buyers, and Closes Online Business Deals

Jared Johnson sits down with Andy Allaway, CEO of Empire Flippers, one of the largest marketplaces for buying and selling online businesses. Andy shares how the company built a global platform that lists only 5 percent of submitted businesses, vets every seller, verifies every buyer, and has facilitated thousands of acquisitions ranging from high five figure deals to eight figure exits. Andy explains why the online business market has matured significantly in the last decade, how valuation expectations shifted after the zero interest rate era, and why today’s buyers are far more sophisticated in due diligence. He breaks down Empire Flippers' internal valuation methodology, their strict criteria for accepting a listing, and how their engineering and sales teams use technology and human oversight to efficiently match buyers to opportunities. Jared and Andy walk through what is actually happening behind the scenes of a digital marketplace. They discuss creative deal structures, the rise of SBA financing for online businesses, the normalization of quality of earnings reports, buyer behavior trends, the impact of AI on different business models, and why co brokering high quality listings is becoming a meaningful expansion channel for Empire Flippers. Andy also shares why he believes e commerce remains one of the most resilient acquisition categories in a world increasingly shaped by AI and why productized, transferable businesses like faceless YouTube channels are becoming a fast growing asset class among buyers. Main Takeaways: - A highly selective vetting process means only about 5 percent of businesses submitted to Empire Flippers are accepted - Strong financials, clean books, realistic valuations, and stable trends are critical to a seller’s eligibility - Many sellers remain psychologically anchored to inflated valuations from the 2020 to 2022 period - Buyers today are more sophisticated and expect clean financials, organized records, and clarity on trends - Due diligence has matured and exclusive due diligence periods, quality of earnings reports, and buyer side advisors are now common - Empire Flippers verifies buyer identity and liquidity before granting access to listings in their price range - AI enhances buyer matching by analyzing thousands of historic CRM notes to surface relevant opportunities - Co brokering is expanding the marketplace by bringing in high quality listings from a select group of trusted brokers - E commerce continues to perform strongly because AI enhances rather than replaces the business model - SaaS valuations remain high but are more vulnerable to disruption from rapid AI advancements - Sellers should have accurate books, a true understanding of profitability, and realistic valuation expectations before going to market - Buyers benefit when marketplaces maintain strong vetting so they are not wasting time on stale or overpriced listings - Market cycles influence both valuation expectations and the creativity of deal structures - Remote first companies can build strong global teams and attract diverse buyer and seller pools - Leadership, culture, and flexibility are powerful motivators for teams in digital first organizations Episode Highlights: [00:00:40] Empire Flippers overview and how the online business marketplace has evolved [00:01:36] What types of online businesses qualify for the platform [00:03:22] Why only 5 percent of submitted businesses pass the vetting process [00:04:14] Common reasons listings are rejected and how sellers can better prepare [00:05:22] How Empire Flippers validates financials, builds P and Ls, and packages listings for buyers [00:08:07] Seller psychology and the lingering impact of inflated 2020 to 2022 valuations [00:10:00] How valuation ranges are established and why realistic pricing matters for sellability [00:11:49] What buyers expect today and why due diligence has become far more rigorous [00:14:23] Buyer verification, liquidity checks, and the role of human led sales outreach [00:17:00] AI driven buyer matching using thousands of historic CRM notes in HubSpot [00:20:32] Why the market shifted in 2023 and how buyer and seller expectations reset [00:22:20] Creative deal structures, earn outs, and the rise of financing on larger deals [00:25:37] Empire Flippers' changing view of SBA lending for online businesses [00:26:54] The normalization of quality of earnings reports and their effect on timelines [00:28:10] Co brokering as a new strategic growth path and the first 6.5 million dollar agency success story [00:31:31] What types of brokers and deals are ideal for co broker partnerships [00:34:25] Trends in e commerce acquisitions and why diversified channels beyond Amazon are attractive [00:38:44] The rapid rise of faceless YouTube channels as turnkey, productized acquisition targets [00:40:31] AI’s impact on SaaS valuations and why e commerce remains resilient as an asset class [00:41:05] The realities of seller expectations, market cycles, and valuation resets [00:41:56] Remote culture, leadership, and Andy’s personal motivation to build a flexible global team Connect with Empire Flippers: Website: https://www.empireflippers.com [https://www.empireflippers.com] LinkedIn (Andy Allaway): https://www.linkedin.com/in/andyallaway Connect with Jared: If you have questions for Jared, visit: https://jaredwjohnson.com [https://jaredwjohnson.com] LinkedIn: https://www.linkedin.com/in/jaredwjohnson/ [https://www.linkedin.com/in/jaredwjohnson/] DISCLAIMER: The views and opinions expressed in this program are those of the guests and host. They do not necessarily reflect the views or positions of my employer. Keywords: online business acquisition, digital business marketplace, SBA loan, e commerce acquisition, SaaS valuation, due diligence, quality of earnings, buyer vetting, seller vetting, business valuation, marketplace M and A, remote business, co brokering, AI in acquisitions, deal sourcing, financial verification, buyer matching, main street acquisitions, online business trends, acquisition strategy