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Podcast – Buying into Private Businesses

Stefan Angelini is Joined by Sean Soole to discuss investing into Private Businesses. If you've seen those up and coming businesses that operate close by or that a friend runs and you've been thinking of getting involved, this is for you! We focus on investing into the person, as opposed to the business and ensure you understand that this doesn't always work out and relationships here don't always last


Stefan Angelini

Hey hey everyone Stefan Angelini here thanks again for tuning in to another episode of the

Investor Types the episode today that what we're talking about is essentially investing into private businesses or smaller businesses and when you when you buy into a business what do you try to do what do you try to look for and who do you actually invest with and we're here today we're sitting down with Sean Soole Sean thanks so much for joining me mate


Sean Soole

Great to be here Stefan


Stefan Angelini

Real looking forward to this conversation because the things that you've done both in your past starting off at 13 years old washing cars which is a which is great in itself entrepreneur from a young age um you now you know you run your own business or you run a few businesses in the past but you also invest into a lot of businesses and into private businesses now when you invest into businesses where you take it a bit different is um you more investing to the people why do you think investing into the person who runs a business is more important than investing into the numbers or the vision of the business


Sean Soole

I think what it comes down to is the fact that and coming from a background in investing now for probably nearly 18 years investing in other businesses now um is the one thing that I always look for is good people you know all great people the great people are the the diamond in the rough right there they're the thing that it's very hard to find um because there's plenty of people out there that talk the talk but they don't actually walk the walk they they're full of lip service yeah we're gonna have a hockey stick curve like this and in the first three months we're going to dominate 50 percent of the market and all this some of the

stuff I've seen in the um the pitch decks and stuff that have come across my desk over the years oh my goodness um but it really is about the people it's about what are they like do they have that that that underlying level of determination and grit and uh you know the the do they have some history to have a background of stuffing something up and what do they learn from that you know if if someone's it's their first hurry and their first go at any sort of business I'm always a bit wary I'd rather have someone who's done something and failed so she spent a lot of time talking about what they took away and how it's changed them and


Stefan Angelini

Yeah


Sean Soole

Why they think that this time it'll be successful versus last time


Stefan Angelini

You don't really learn about your true character once you get punched in the face a few times


Sean Soole

Absolutely absolutely


Stefan Angelini

Can you get back


Sean Soole

You know what is it um bright-eyed and bushy-tailed and all talking about the blue sky and using their crystal ball to tell me how good it's going to be and also stuff and and it it's it it's just it is it's just talk and and I I've literally had probably 500 deals come across my desk

you know in that period of time you know over 15 17 years whatever it's been and I've invested in I think about 14 of them right so um that's it the rest of them it was varying degrees of why not so a couple of them was a timing thing from from being able to get the capital into it in time was a couple of them


Stefan Angelini

Yeah


Sean Soole

But I'd say probably say 20 to 25 would have been worth investing in out of you know over 500 that came across my desk so you talk about half a percent of of the deals


Stefan Angelini

Um which is fair enough because these things they are quite risky in nature because a lot of businesses can fall over especially if you don't have the right person at the forefront you know every business owner they can have a vision and if you don't have a vision for your business or know where you want to take it well then what sort of what are you striving towards


Sean Soole

Absolutely and there's one business example I've got equity in a company in Sydney um and I won't go into the details in case yeah I think it probably narrows down what it is but


Stefan Angelini

Yeah


Sean Soole

It was two business partners um merging together I came in and took an equity stake to to basically sit on the advisory board the company grew quite rapidly uh uh with with the guidance and with one of the two owners being the real driver being a real you know incredible individual he was the one that I was backing he was the one that I came in and invested my time and energy in not the other partner right and then a couple years later two years later we emerged another guy in who was in the same industry to roll them together to

create dominance in that market which it did fast forward a couple years beyond that and the guy that I backed uh had to make a decision to move to Hawaii for his family right because his wife's Hawaiian and they were having a child and there was some some family stuff going on so he had to make the hard decision to actually exit not as an equity holder as but but exit managing the business day to day and we passed that leadership and that management on to one of the other two uh remaining partners and I still provided the

guidance and support and everything like that and in the last three months that's

basically turned to !@#$ um what we've found out since then is we were being told myself and my other business partner in in Hawaii were being told things that weren't true uh they were sending us uh you know cut cut my other partner off from not being able to see the bank account quite a few months ago basically they screwed that business up it was an incredibly profitable business doing really really well they listened to nothing the two of them colluded in small business thinking small business mindset stuff and so we'd have a conversation and we talk to them about it and ultimately that that business is is I would say it's struggling now particularly now being hit by the the uh the pandemic stuff the consequences


Stefan Angelini

Yeah


Sean Soole

Of that um that's actually been hit by that and so it's it's gonna struggle it's really going to struggle I still have my equity holdings in it but as i went back to those remaining partners and I said to them I said I'm not i'm not investing another second of my time in this because for the last couple of years or 18 months since the other guy went to Hawaii um that that you know you just simply haven't done what you needed to do and so


Stefan Angelini

Yeap


Sean Soole

I'm not going to invest any more time in that I'm going to cut my losses from that business um if they sell it at some point I'll get my equity back out at some point if it doesn't go broke um and I'll you know I'll use it as a learning experience but the interesting thing is I don't now actually have equity for the other guy in Hawaii and his new company in Hawaii so holidays


Stefan Angelini

Yeah


Sean Soole

When we can fly again but uh yeah you never know


Stefan Angelini

He's still following the person you still believe in him and everything


Sean Soole

Absolutely absolutely what he's created in the first 12 months of him being in business over there or these other guys did in you know the last two and a half years that when he wasn't as heavily involved you know and its in the first year and and its the person it's the individual

you know that's that's the most important thing because and sometimes they might trip and fall so what may happen is that I don't get the return on that original investment but I believe so strongly in this individual that fast forward 10 years he'll probably have a business 10 times the size that other one ever was going to be doing on his own terms he doesn't have

hand brakes like the other business partners slowing him down now you know he's and he's he's out there doing it on his terms he's a very different version of himself than he was you know six seven years ago when I got involved


Stefan Angelini

So yeah


Sean Soole

Relationship a personal friendship with with uh with the people that I um that I invest in I actually want to be able to sit down and have a meal or a beer with them and not necessarily talk shop


Stefan Angelini

Yeah


Sean Soole

You know and to me it's their relationship is vitally important to then be able to be honest to have them hear you when you're talking to them and hear what you're intending to say and not having their ego come up and things like that


Stefan Angelini

So important I actually went through a similar situation to you where back in 2012 started creating a tech business um that got quite big in 2016 and then we had a full fall apart between the shareholders where one went rogue like these guys and um started issuing shares to themselves and you know things just started to go wrong after that you know it sort of it sort of forces you to re-evaluate what you want and who you want to do business

with


Sean Soole

Absolutely


Stefan Angelini

I'm still doing business with some of the partners that I was involved there with


Sean Soole

Yeah


Stefan Angelini

And we've gone great guns and we've gone flying which is good but um what I guess what you're trying to take out of it is with these businesses and with these business investments

um you don't expect to get ongoing revenue streams from these things you know you invest

these things for the long term


Sean Soole

Absolutely


Stefan Angelini

These kinds of businesses and as you said when they might sell the business you might get your equity back


Sean Soole

Yeah don't expect that in some of those businesses um some of the businesses I invested in pay dividends so they do pay dividend based on that equity holding some businesses I've gone into to be on the advisory board for exchange of of of equity uh with no you know monetary value exchange and I'll do that for a period of time before I then expect if they still want me involved and they haven't got to a certain point that there would need to be some sort of consulting fee component of that to compensate for for the additional time


Stefan Angelini

Yeah


Sean Soole

Yeah but some of them also yeah pay dividends as they get profitable a lot of them reinvest the profit back in because I am backing the person for the long play


Stefan Angelini

Yeah


Sean Soole

And backing them to to get their ultimate goal and their ultimate outcome


Stefan Angelini

Yeah and then and in those fast growing businesses it's you start looking at what's more important is it more important to pay you a dividend or is it more important to take the profits that we make reinvest them back into the business to make it bigger again


Sean Soole

Absolutely and and 90 percent of the time it'll be reinvestment uh as long as it's done strategically um because sometimes there'll be a partner that could benefit from some dividends which means that everyone obviously gets paid a dividend then that could impact the growth of the business but also when you get a certain level of maturity and certain level of profit sometimes you can't always reinvest that and if you do it's about people then putting it back in if they really really need to um but I've never had that situation happen it's always been you know that deliberate uh measured growth not too rapid so that chews through all the cash that you got in the bank and you need to keep borrowing it and then keep running out of fuel very deliberate staged growth and and solidifying the foundational pieces of that business as it gets as it builds another floor on top like a building strengthen the foundation so it doesn't start shaking you know and things like that so


Stefan Angelini

Yeah beautiful so when you invest into these kinds of businesses um how important do you say it as these businesses should have an exit strategy


Sean Soole

Well the extra strategy is is very important I mean if someone's like say someone's 25 and they came look i've i've done this I've made some mistakes but what is new business and that's growing really rapidly and what I need is they need to become a more mature leader or a better business person I need your support and i'd be like okay great so um if I'm going to get involved and whether either it doesn't matter if it's a exchange of time or value for equity investment or both it's neither here nor there's the same thing is I want to see an exit in the next five-ish years I want to know that this is a five-year ride i'm jumping on board for


Stefan Angelini

Yeah


Sean Soole

Done and let's get out and uh on the other side and sometimes because when they get to that point they're actually paying dividends it's like okay well I’m not going to get out there's no point selling the business because it's like a golden goose now it's laying down I'm getting some small golden eggs every month and i'm okay with that and it's it's I just leave it leave it running and make sure that we we still have our advisory board meetings and and things like that as well to make sure that everything is staying on track


Stefan Angelini

So in terms of exit strategies there's a few different ones out there so one might be trying to identify in the future what sort of bigger businesses might want to buy your company


Sean Soole

Absolutely


Stefan Angelini

What are some of the exit strategies that you've come across


Sean Soole

So one of the companies were involved in this company called Patrick's um and the my good mate Patrick and his wife Amy yeah kid they started that business they were the prime example of people that I invested in um I'd met them going through a corporate finance course you know about nine eight or nine years ago now uh and um they had a a men's uh barbershop in Bondi in Sydney and had a motorbike in the front and and they basically had uh blonde uh blonde backpacker back a 19 year old backpackers cutting your hair you get a beer 60 bucks a haircut um that's not what I invested in though what they had was they had the odd concept of of an ultra premium product it is the product I'm using in my hair um which is called Patrick's


Stefan Angelini

Yeah


Sean Soole

Yeah uh and um basically there was a gap in the market there was no ultra premium um hair products for for men basically and it's one of the fastest growing uh beauty markets as they call it um in the world and globally and what I liked about Patrick and Amy I remember

sitting down at them at the Max Brenner Cafe in Bondi there and they showed me the financials it was the crunch time of me saying whether I was going to invest or not as the seed investor and um and I looked at numbers and I and I went you know we gave them back and said those numbers are blue sky and they're just rubbish and they're a bit like oh and I put a bit of a deliberate pause in there and I said but the reason I am going to invest is

because I believe you guys can make something incredible out of this opportunity because what they've done is they'd actually done the research they'd he's he was a telly was a hustler it's one of those people that could just meet anyone and befriend them in like a minute and a half and they felt like they've known him for the last 10 years um so he's really great at relationships she she was a former lawyer who's who's the ceo of that business and


Stefan Angelini

Yeah


Sean Soole

And really structured and stuff whereas he's like the tasmanian devil all the stuff comes out she has to catch it and you know and put bottle it and all the rest of it and uh and and basically they um what they looked at was they they looked at all of the public you know records for unilever l'oreal procter and gamble and similar companies like that and had a look at what are they actually looking to buy and so they the the projection the goal that

they created was to build if they're looking for a banana or they're building a banana

so that


Stefan Angelini

Amazing


Sean Soole

Unilever or whatever these guys say we're looking to buy bananas


Stefan Angelini

Yeah


Sean Soole

There's no point making an orange and trying to sell these guys they want a banana and that's basically what they've done and I know that they knocked back a multiple you know eight figure some uh last year uh for someone to buy the business out as they came and spoke at one of my uh inner circle mastermind events that I have and and someone said well

and he said oh well we could we could you know live off you know have cash out you know multiple eight figures um and sit back and relax and someone goes well why don't you do that and he goes because i'm not finished that's why I backed him


Stefan Angelini

Yeap


Sean Soole

He's in it for the for the journey he's in it hustle he's in it for the the experience he's not in it for the money the money will be a by-product and he the goal is to get you know a nine-figure sale um and it's well and truly on the path for that you know just keeps getting stronger and stronger every year and um and that was a I guess that thing about the exit strategy was it's already very clear and some of those companies have already approached

Patrick and and spoken to them uh he and Amy about you know kind of sniffing around

the edges it looks like you guys are creating a banana you know but they're not ready to sell

yet and they're obviously not ready to buy it yet but once you take a product like that and plug it into distribution like something like L'Oreal or Unilever or Procter and Gamble that value of that company is just going to go through the roof you know so


Stefan Angelini

Yeah


Sean Soole

It's a big opportunity for everyone and that's that exit strategy thing is is is part of it I suppose other ones simpler ones are that as an investor or someone that the owners could buy me out or buy you out as an investor um or they could bring in another party who takes your place and buys you out as well so there's a or just sell it you know on the open on the open market to to you know another business or another other potential owners


Stefan Angelini

Yeah and you've had businesses in the past you've had a few businesses in the past I mean starting from washing cars at 13


Sean Soole

Uh yes yes it was four for two cars in and out my parents driveway and parking them in the park across the road council would have a field day now you know when I was 13 you know I was I I came at that idea when I was still 12 actually I started when I was 13 and I washed cars till I was about 16 I'm not going mobile on my bike with a bucket and stuff in it because it wasn't consistent enough


Stefan Angelini

Holding a water pistol


Sean Soole

And I've used their homes


Stefan Angelini

Okay


Sean Soole

So I had it I had a hose around here but then everyone had a hose so I didn't need to keep doing that but I literally bought a dust buster and also stuff and so I had the same clients every two to four weeks I'd be washing their cars but at 16 and when you've washed that person's car 27 times it's literally like pulling your fingernails out


Stefan Angelini

I can't imagine


Sean Soole

And boring so I just I gave it to a friend of mine said here you can take over my my car washing and I was making 200 dollars plus when I was 13 you know that's like 32 years ago


Stefan Angelini

Yeap


Sean Soole

Um cash in the hand every most weeks on average and uh you know it was it was interesting but then we've gone through I had I used to do up old porsches and make them look like newer models back in the in the late uh late 90s when we did that um i then had a business with my dad and my brother in light aeroplanes um you know I've had then I built my nickname affectionately my 44 person adult day care center except I had to pay them to

be there um I wasn't very good at the old leadership or hiring thing it was like uh stefan you're breathing there's an empty chair you're hired sit there and look busy or something I don't know that was kind of my employment style but but in getting through that that

journey it was like it taught me a lot because we had a very broad range of businesses we had financing


Stefan Angelini

And this was in


Sean Soole

Legal


Stefan Angelini

Finance yeah yeah


Sean Soole

Started in finance


Stefan Angelini

Yeah


Sean Soole

We went into uh property as well investment properties then we bought legal practice property practice and we turned it into a state and business succession planning


Stefan Angelini

Yeah


Sean Soole

We then had financial planning practices we had insurance general insurance life insurance businesses um we have a we still do have a legal uh will kit our little legal wills and documents physical ones that have four thousand sockets around Australia we have an online legal doc site still uh so still got some of those businesses but we ultimately I decided to pull out of that and scale back from that because it was a monster that was trying to kill

me and my business partners so


Stefan Angelini

So you stop you stop essentially working on the business at all and just had to work in managing the people when you get to a certain size you you are babysitting


Sean Soole

Well well yeah I mean the thing is I didn't have the skill set to lead I was managing I was managing


Stefan Angelini

Yeah. Yeah.


Sean Soole

Like a dictator with a whip and and if anyone wanted to make a decision I had to come through me so I was


Stefan Angelini

Yeah


Sean Soole

A I was a full-on dictator and i was a control freak that's what it was


Stefan Angelini

Yeah how important is yourself awareness comes from running a business


Sean Soole

What was that


Stefan Angelini

Self-awareness so you obviously figured out that that is not the position you want to be


Sean Soole

Absolutely


Stefan Angelini

And it doesn't serve anyone any good


Sean Soole

I was doing 80 plus hours every week for about seven years like consistently like every single week just about and it nearly killed me I was 20 kilos heavier than I am now in clinical depression it was just I just was so had my head so far up the back side of the business I couldn't see the light of day and and it was the GFC was a great actual um blessing for us because it took our kneecaps out cause 80 percent of our business came from financial

planners and goes after the gfc financial planners with the devil you know so stop seeing them our client base strive out which was a blessing in disguise because it allowed us to really assess it and I came to my business partners and I'd started these businesses and I said guys one of two things is going to happen after this meeting I'm going to go in my

office I'm going to pack up my stuff I'm going to leave which is the last thing I ever thought

I'd say or we're going to break this monster up and so we did we broke up the financial

planning that went back to the camera guys who owned it we kept the the property the the legal practice the finance business and the will kits the legal document business

uh and we kept that my one business partner that I've got in that entity now for the last nine years that those businesses have been running under management so I'd probably spend

at most 20 minutes in a week at most on those businesses um I've got an incredible team that have been between uh 12 and 16 years my team members there they were obviously the ones doing all the work when I had my 44 person adult day guest center I don't know what the other I don't know I don't know what the other you know 34 people were doing probably not much um but these my team are just incredible and and incredibly blessed to have them uh and you know they they uh they manage and run those businesses for me so they don't have stakes in those businesses just as myself my business partner in those businesses um but they're just incredible people that doing a do a fantastic job you know


Stefan Angelini

You essentially built up your income stream that'll be part of your income stream


Sean Soole

Yes yeah


Stefan Angelini

Continue to pay I have clients who try to invest into franchise and get franchises start it up

have someone else run it for them and they just sort of sit back and this is almost a bit different where just the the wheels keep turning


Sean Soole

Yeap same thing when you know what you're doing you can do it much faster


Stefan Angelini

Yeap


Sean Soole

So it took me you know until nine years ago to be able to do it the first time and then very quickly with another business I did it in a 12 month period so


Stefan Angelini

Yeah


Sean Soole

You know cause once you've got the skill set you know what you're doing you're a different version of yourself and you can actually get in there and and and help go and and you can pick if you want the right people the right team or


Stefan Angelini

Yeap


Sean Soole

People that you're gonna invest in become partners with um you get better at picking that too


Stefan Angelini

So a lot of business owners as you said are dictators like you control freaks you know you built it up to a certain point you took control of everything but outsourcing is one of the biggest values anyone can have and actually when you're not good at something go and ask someone else for help i'm a big one of asking for help


Sean Soole

Absolutely and I wasn't I wasn't I did almost so


Stefan Angelini

What about now


Sean Soole

So what changed was I realized that and and my dad had a saying that he said and he said mate you've got you're better off doing it yourself because you'll do it better and it'll be

cheaper


Stefan Angelini

Yeap


Sean Soole

And that was his that was his frame you know he was born baby boomers here in the 1940s early 1940s and so so that was what he grew up with and I knew that I know that intention was intentioned to serve me and help me on my journey but then kind of in my mid 30s I'm like this doing it yourself stuff really sucks and I really realize


Stefan Angelini

Actually as you get busier


Sean Soole

Oh absolutely and it's like there's no more than once you're working 80 hours a week or more you can't really work more right you just can't and it started to get to that point where it's cycle and even with 44 people people I was still working 80 hours a week and what I wasn't doing is I wasn't delegating responsibilities I was delegating tasks and I wasn't as to say whether it's outsourcing or delegating to a team member or you know delegating via outsourcing to someone you know affiliate in the Philippines or a contractor or you know whatever it is does it doesn't matter but what i what I ultimately realized and one of the mentors that I had and I've had mentors consistently for the last 15 years um and different ones as I've I've developed and outgrown certain certain mentors and found new ones um one thing that they sent me is said um how much of your time is spent on stuff that's worth a thousand dollars an hour and I first was like my time's not worth a thousand dollars an hour and they go you're right it's not at the moment


Stefan Angelini

Yeah


Sean Soole

Because if you spent time on the strategic stuff your business was when that in that

stage I was doing seven half million dollars a year my hourly rate was vastly more than a

thousand dollars an hour but he used it as a lower number to not scare me off


Stefan Angelini

Yeap


Sean Soole

Your business is doing if you want a business that is doing two million dollars a year in revenue for you as the owner and you as the creator that's that's a thousand dollars an hour

you know if you look at in a you know work week right that's what your value to the

business is so what I realized that me responding to those emails or you know doing those things that were 25 dollar an hour things was costing me 975 now and he said to me he said

okay if you're bookkeeping okay I'll do your bookkeeping for you how many hours would you get back a week and I said oh probably three to four you guys are I'll charge you a thousand

dollars an hour I'm like no freaking way he goes well then why are you doing it for a thousand dollars an hour oh okay I outsourced fifty dollars an hour to a high-level bookkeeper and i got four hours back right and one of the things about compounding i've got four hours a week back so one of my favorite sayings is 10 minutes a day saved is one business week a year right now most business owners that i work with are so ineffective and

inefficient that by bringing in new skill sets and new ways of approaching things and

working on what's important they can get any between one and four hours a day back that's six to 24 weeks a year that they're getting back now if someone says i can't go on a holiday out of time that's rubbish everyone has the same amount of time you're just using it

really poorly you need to stop doing the 25 to 50 an hour stuff and focus on the thousand

dollar an hour stuff because that is your value to the business as the creator you're the need

and that creator that leader of the business needs space to stop because if you've ever noticed that when you're in the shower or just about to go to sleep or going for a run or exercising or something some of your best ideas come out then right because you're actually slowing your brain down and your subconscious can actually throw forward the ideas

that are there but if you're always busy and noisy you're never going to hear that


Stefan Angelini

And as a leader and as the creator if you're running the journey on your own you're not consulting with other people like mentors then you don't know how to change your own direction because you always just put yourself in your own way so how important do you see these mentors have been on your journey and should people have mentors I know I've got some myself um in all different facets of my life but so how do you value mentors obviously

pretty highly


Sean Soole

Absolutely um I would not be doing what i'm doing which is you know living my actual purpose and passion you know it's a I find it hard to switch off from what I do because I love it so much it's helping people succeed it's building relationships it's working with people

and meeting people and seeing those light bulbs go off in their head you know and

and so for me if I didn't have and i sought out mentors fairly early um even though I might not have been able to apply it because it was some really deep-seated old stories and stuff

running there and I eventually did take on board what they'd said to me and and

and moved through that and really realizing some of those mentors were people that I learned what not to do not what to do right based on their behavior based on how

they they would lead with an iron fist and they're like huh I'm not sure if I actually want to do

that that doesn't feel right


Stefan Angelini

Yeap


Sean Soole

For me I I you know my definition of leadership is humble authentic and vulnerable that's how I lead whereas some of my previous mentors probably would have laughed at that because they were like you know thor with a big hammer and smash people with it just to get him into submission and so you've got to look at and say well at different points all I've as for 15 years straight there was I think 12 months say there where I kind of stepped back from it

and I went backwards i didn't just stop actually went backwards I reverted to some of my old patterns and i realized that when !@#$ i need to I need to find somebody else again and then I said I did I found other people and at the moment I still have mentors their peers in my industry that I that I've formed relationships with and i work with very closely that actually give me a sounding board uh that give me guidance that that when I'm feeling a bit flat or a

bit stressed out about what's going on here they i can actually have a a a trusted um shoulder to lean on you know and sort of go well like i'm really concerned about this and blah blah blah and get a different perspective because you don't know what you don't know right but someone looking in can go hey do you realize there's a log there that you keep tripping over oh I've never seen that before how about we move it so you don't trip over it

again you know and that log could be a story or a belief or something you're doing uh day-to-day that's actually blocking you from success because if success was how to all we'd

need to do is google it we'll jump on youtube and wikipedia all the answers are there they're all free


Stefan Angelini

I can get it yeah


Sean Soole

And we'd all be worth a billion dollars each we don't because this stuff is what's

stopping us right our baggage that we're carrying around and what a mentor should do is a

mentor shouldn't be teaching there's different mentor and a coach okay and and I don't call myself a coach for a reason a coach is somebody who who I see that has generally learnt

it through um through through academic methods so they've learned something and now they're teaching it whereas a mentor is somebody who's gone in those trenches fought off

crocodiles has slashed their way through the jungle


Stefan Angelini

Done themselves


Sean Soole

Yeah they've taken you through right they're taking you with with them to say hey watch out the piranhas here this is how you deal with them and


Stefan Angelini

Yeah


Sean Soole

And giving you some tips now you still might stuff up and get bitten a few times but

at least it's not going to chew all the meat off your bones you know and like it would

like i did with me in the early days because I didn't actually ask for any support

so mentor-ship incredibly important


Stefan Angelini

I agree a 100 percent you're only really learning life as well when you do it yourself


Sean Soole

Yeap


Stefan Angelini

Or when someone's gone through it through on their own and then you go oh !@#$ all right I can learn from that as well but let's if we relate that back to buying businesses or buying into

businesses um in your view when you buy into a business and buy into a culture and tell me about your experiences um is it better to take over a business slowly and gradually or do you see people coming in and snapping up an entire business and running it through their machine


Sean Soole

Both absolutely both it'll


Stefan Angelini

Both work in place both yeah


Sean Soole

It'll depend on the on the people


Stefan Angelini

Yeah


Sean Soole

An example is is my accountant my accountants Gary and Jenny they ended up becoming so we're now mutual clients of each other's they end up joining my inner circle uh mastermind group as well because the reason I chose them as accountants even though they're only in their um late 20s um is because they're the biggest accounting nerds that I've ever met right i'm like I want you or my team because you're excited about finding

this deduction or this


Stefan Angelini

Yeah


Sean Soole

You know and just really hungry for accounting whereas my last accountant was in his late 60s and we had him for like 12 years um and so it got a bit stale you know in that

sense so I mean he had a health challenge so we needed to move accountants anyway

but when I found Gary and Jenny uh primarily Gary is who I deal with um he they joined my group just over a year ago and his goal was like I want to want to grow our business from this to this and blah blah and I said we're going through the procedure I said why don't you just buy another accounting practice I said there's plenty of older accountants looking to

retire it's like really we could do that i'm like yeah and and use their money


Stefan Angelini

Yeap


Sean Soole

It's like what do you mean so get them to vendor finance it because they're not going to do that anyway so in in where are we now in September no it was in um February this year was

February this year I was trying think when he settled it's around February this year they actually set on that business and um they they only put 30 percent deposit down of their own money and 70 percent was vendor financed so so so part of it was 20 percent was um funded from a lender and 50 was vendor financed and that vendor finance is based on

the business hitting certain milestones otherwise they have to pay less for the business right


Stefan Angelini

Yeah


Sean Soole

It doesn't hit the milestones and they came in and they within the first two months moved them all across from still sending physical paper tax returns out to all of their hundred thousand couple thousand clients and all sort of stuff to using a digital you know document

signing system and within two months switch that business around and the business is much

more effective much more efficient to actually be able to remove one team member


Stefan Angelini

Yeah


Sean Soole

Which means that it's more profitable now haven't lost any clients yet they've still got the owners involved on a lesser level for the first 12 months to do handover of relationship but what it's allowed them to do is the culture is not perfectly matched to their culture

but the individuals in the business nine out of ten of the or 90 percent of the the people in that team would be a cultural fit and so that's what they saw about the team and all these guys have got potential so they've brought the team across but they already know they've got robust systems even if they lost a few of the team they've got enough ability to to pick it

up so that's effectively that's dub more than double their revenue as a business and um once the those you know that's the buying the business is paid off it's almost tripled their profit

because their economies have scaled they've been able to move into one location not two or move you know one of these other people and stuff so having that ability to take over a business maintain the owners there for a time so that you can get out of their head

you know particularly if they're old school get it out of their head how do we get it out of your head you know and capture it so that when they walk off you've got to still get a strong

business after that so that's that's one of the ways to do it um the other way is

as you'll see larger businesses do this they'll take a small stake in something that they're looking to buy into you know I know that um uh what's it called um just trying to

remember that then the NAB owned company they ended up buying three of the

mortgage broking that bought plan fast and uh choice that three mortgage-broking aggregators um i just can't remember that the name of this case is not the point but they bought one of them out right but then they the other two they bought a 15 percent stake first to see how those businesses were tracking but then they had an option to then

increase that equity holding which they ultimately then increased to a hundred percent

so they staged it so in small business we can do the same play the same game as

big business there's no restriction on that um and or you may just literally buy the business the owner walks off which is called the walk-in walk-out you walk in they walk out and you just keep going and particularly for businesses that are running very poorly but you can see very quickly how to improve the profitability and if it's if it's a competing business with yours you could potentially just buy it like i did with um 10 mortgage trail books we rolled up 10

other mortgage trail books into our business


Stefan Angelini

Yeap


Sean Soole

I needed to do in total was add four hours to one of my team's time to manage those

books and that was it you know


Stefan Angelini

You had the wheels everything was there


Sean Soole

Yeah and because that's a recurring revenue stream there's no you don't have equipment we didn't have team other than the one managing it we had all that automated systems and stuff and phone just they do a phone call twice a year and it was a great great to buy that and we didn't want anything to do with the owner after that was just like we bought them and you know we had


Stefan Angelini

Yeah


Sean Soole

Obviously certain milestones that had to maintain


Stefan Angelini

Yeah


Sean Soole

Gain we've vendor finance part or all of it so that we minimized our risk that we bought with dad you know as well so


Stefan Angelini

Yeah the stage the stage approach is interesting as well because you know to understand if you actually fit the culture


Sean Soole

Yeap


Stefan Angelini

Of what you're buying into um you get to slowly implement yourself sit down with everyone see how it actually runs and consider do I want to own this entire thing or a majority of

this thing right here and


Sean Soole

That's we're talking about you know acquiring ultimately whether it's a bit or all of it if you're just investing and it depends on your skill set you know if you're coming along are you just manage to that business owner or are you smart money you're actually someone who's coming along with skill sets with knowledge with experience that you can now mentor them and they now become a vastly better business person and therefore the return on your investment is going to be substantially higher as well because you're actually helping to

mentor that's what i do I I combine my desire to mentor great people with my investments because then I've got some control over it that if I just invested in the share market or you know invested


Stefan Angelini

Yeah


Sean Soole

In something over here and then let it sit there I've got zero control


Stefan Angelini

Yeah


Sean Soole

I have a lot more control if I invested in a small business


Stefan Angelini

Yeah


Sean Soole

Where I'm working with someone who's a great individual I can help them mature and grow as well


Stefan Angelini

Hands-on ability to grow your own money to grow your own wealth


Sean Soole

Yeap


Stefan Angelini

I love it so let's let's say other people out there that are listening to this they want to buy into small businesses they want to be able to use their expertise to help grow another small business what traits do you think they should possess or what is their investor type


Sean Soole

Well it's a I think it's a fairly specific one I mean you've got to be someone who wants to get your hands dirty a bit you know I'm not talking about getting there and do the operational stuff or laying bricks or painting a house i mean the you know you want to get involved on a on a kind of that leadership level to start with them and I guess it's it's you've got to be willing to put a bit of yourself in there if you're going to invest in a small business and it' literally just the money I think you're at a very very high risk


Stefan Angelini

Yeah


Sean Soole

That's going to be much much higher than if you're actually investing the money and putting some time in to be part of the advisory board and actually meet regularly and consistently and follow the numbers and


Stefan Angelini

Yeah


Sean Soole

Maybe you stage your investment so as to minimize the risk you could stage it you know over six months or over 12 months or over two years that you gradually invest you know more capital into that business as you see how they apply it in the first place um so you're not just putting it all in there and it gets flushed down the toilet because you know obviously Warren Buffett's said you know saying is the the two rules rule number one always preserve capital rule number two always refer to rule number one so if you lose if you lose that you say put 200 grand into a business and that business goes down you're not going to make you want to then go and make that 200 grand from somewhere else again to be able to recover it and that's the thing you you want to know that it's being looked after


Stefan Angelini

After yeap so you need to be able to dedicate time you need to have be a value add and I

know that we just we just um acquired 30 percent of a business that we can strategically add some value to in terms of revenue streams so we believe but we're working on that

at least catching up once a month as well as you know more internal catch-ups we've got the finance department as well as the way to grow the revenue um so what we've got time good expertise as well don't expect to earn an income from this asap maybe one day you might earn an income from it


Sean Soole

Yeah if you do need an income be careful making that decision


Stefan Angelini

Yeah


Sean Soole

Cause it'll turn to pain right this type of thing being an investor is just that it's an investor you might sit on an advisory board to manage your investment but it shouldn't require too much more of your time if it does it's going to take you away from whatever your primary income producing activity years is so whatever your career is or whatever business you've got

and so that small opportunity is actually really a distraction you know


Stefan Angelini

Yeah


Sean Soole

I think the opportunity is a swear word unless proven otherwise that it's probably just a shiny object because you're a bit bored with what you're doing so


Stefan Angelini

Yeah


Sean Soole

You start putting all this time in here and maybe generate ten thousand dollars a year in value but it's actually cost you a hundred thousand dollars in value in your primary business that you would be better off spending the time in any way so be careful it doesn't start to

detract from your primary business or your primary activity


Stefan Angelini

But do you feel a person that buys into private businesses they've got to be a good delicator

delegator and they've got to be willing to let go of the reigns and let someone else run with the business


Sean Soole

Absolutely


Stefan Angelini

Like you've done with all your investments people are people are um running the business themselves you're sitting on the back providing an advisory having an advisory seat the Hawaiian company or the guy who moved to Hawaii that business while you

provided the advisory seat it's gone bust


Sean Soole

Yeap


Stefan Angelini

But these are still a risky kind of investment


Sean Soole

Yes yeah I mean it hadn't been up until 12 months ago for the first six years

that have been growing the profit is increasing you know I've been getting a slightly larger dividend each year um because it had gone longer taken longer i was also on a contracting

arrangement so I was being paid for my my input as well cause it had taken longer to grow but we've gone a different pathway to get there um and uh yeah it really you've got to

be able willing to adapt but also be willing to jump out and to get out and take your losses

don't spend any more time than you have to which is what I've just done with this other business I've gone you know what I'm not spending any more time on this because it's costing me too much in where i can where I can put my time into people who do want to learn and grow and listen there's nothing worse being a mentor or a consultant or whatever

and you keep saying things to people and they're like yeah yep yep and then they just go away and don't do it you know and it's just so frustrating I don't have time to work with people like that anymore


Stefan Angelini

Yeah


Sean Soole

It's not worth it I'd rather work with people who go yep yep and they go and apply it and they go wow I did that thing and this happened it was amazing you know that's satisfying for me that's where I get my soul food you know it fills my cup


Stefan Angelini

Yeah beautiful so Sean it's been an amazing conversation mate we should leave it there um before we keep going we could talk all day let's say people want to reach out to you what's the best way for someone to get in contact with you


Sean Soole

Uh well uh any anything you see my you know my little on this side whichever side it is this side the camera is the other way around this side cause i've got i've got a camera


Stefan Angelini

Where the outside is


Sean Soole

One way and the other one's the other way so you can see just Sean Soole uh just facebook

uh you know instagram you can email me it's seansoole@seansoole.com however you like

um you can find me just google me there's any other one one other Sean Soole in Australia so I think you'll you'll find me pretty quickly um and uh so feel free to reach out if you

need some support uh you know follow my follow my social I put out content about business about you know growing as a leader and also stuff so if you're in business or looking for tips around that then that I put that content out all the time to provide more value and help more people succeed cause that really is my purpose and what I do so and I hope today's discussion helps people get a bit of clarity around you know investing in small businesses

what can happen you know the pitfalls the benefits the you know ups and downs and all that sort of stuff that comes with it


Stefan Angelini

That's it so guys I hope you hope you've all learned something and I know I know you would have so if you're investing into small businesses be willing to dedicate your time your energy your expertise and focus on the long term try and build an exit strategy Sean thank you so much for this if you're out there and you've got any questions about what we're doing feel

free to leave a comment on here feel free to contact me Stefan Angelini at Angel Advisory or stefan@ angeladvisory.com.au look forward to seeing you in the next episode thanks again


Sean Soole

Thanks Stefan


Stefan Angelini

Bye


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