Lois Sonstegard:

Welcome everybody to Building My Legacy Podcast. I have with me today again Chad Peterson. He is considered the number one business broker by a number of experts. He has been talked about and written about in Forbes Magazine, Inc Magazine just to mention a few. He’s published, he’s written books on buying and selling businesses. He’s also talked about going from blue collar to white collar as workers. And so in his role with M&A Activity and buying and selling businesses, today, Chad, I would like to really spend a little time talking about coming through this COVID-19, what’s going to happen; what can businesses anticipate do you think financially; where will my growth come from down the road because we’ve relied a lot on M&A for growth? What do you see happening?

Chad Peterson:

Well, I like Warren Buffett’s quote. I’ll probably botch it. But, what is it? It’s, “Be courageous when others are fearful, and be fearful when others are courageous.” Something like that. In other words, the ones who make it, and I mean anybody that… People that we all know. Names that we both know. Whether it be the Henry Fords or the Rockefellers or the Rothschilds or the Warren Buffetts or whoever, they have the ability or, like our President Donald Trump, he has the ability to see the opportunity in the destruction. And so those that are still wanting to rely on growth through acquisitions, in other words it’s very hard to grow a business one employee at a time or even five at a time. It’s grueling, it’s painful, and frankly, that’s why people sell their business for a good amount of money because people don’t want to do that.

Chad Peterson:

Somebody would rather buy a company that’s already in place because everybody knows that fighting the war to build your sales force and your operational staff one by one or five by five is a tremendous journey. So if you can see the opportunity in the downturn and if other people are suffering, let’s just take this… I’ve got a plumbing company for sale right now. Let’s just take him for example. He’s for sale because his marketing wasn’t very strong. Actually there’s three Ms is what I call them: marketing, messaging, and management. If you have a problem with marketing, messaging, or management, you’ve got problems. And usually one causes the other and causes the other. If you have those issues and you were in an incredible economy, this economy was on fire six, seven weeks ago. It was unbelievable. If you were struggling then, you’re probably really struggling now because of your management of your company, your marketing, and your message, basically your branding.

Chad Peterson:

There’s going to be people that have their marketing, their message, and their management under control and they’ve got a war chest of money. If you’re one of those people, you can go buy out the people that have equipment and have techs that still need jobs. And if you’re on the upper end of marketing and you have a foot hold in your industry, you could right now use acquisitions as a growth tool to buy up those who are not going to be able to survive the downturn. Because like I said, if you weren’t doing well six or seven weeks ago, you’re certainly not going to be doing well right now. Right now is not the time to be trying to be the top dog in your industry. It’s survival right now. So those who have the money, the resources, the marketing, the message, the branding, and they’re going to survive this like the Rockefellers did. The Rockefellers put people out of business because they had the war chest of money and resources to keep on going through the hard times, and I think you’re going to see some of that in our economy.

Lois Sonstegard:

So those are people who’ve already developed that war chest before all of this happened. They’re holding onto it, sitting on it, waiting to see where the opportunities come. So that is not a whole lot different form the model we’ve seen up until now. For those who survive but are cash poor at the end of this, ready to grow, what do you see? How are they going to grow? Where is money going to come from?

Chad Peterson:

Well, I think those that are cash poor right now and they’re still trying to remain in business, they’re going to have to wear all the hats right now. So if they had employees that were doing things, well, a lot of those employees are going to have go file unemployment. And if you’re going to survive this, and let’s just say that your monthly nut that you have to crack is say $8000 or $10,000, that owner’s going to have to work twice as hard and be twice as creative to survive this until it pans out.

Chad Peterson:

What I see above all things, and this happened in ’08, and we always talk about 2008. But let’s be honest, 2008 to 2012 was really dark. I mean, it wasn’t just one year. In fact, I think ’09 was worse than ’08. And I think 2010 was even worse than ’09. It just kept getting worse and worse, which by the way, this is interesting. 2008, the financial crisis hit. 2009 is whenever Piggy Flu happened, Swine Flu came through. So we had an economic collapse followed by Swine Flu. Well, this is opposite. This is brought on purely by a disease. We were in the most roaring economy that we could ever have, and this disease alone has wiped us out, which gives me hope that it’s really just a medical issue and it will blow by. And we’ll get back on top.

Chad Peterson:

If we had seen a downturn in the economy followed by the coronavirus, I think I wouldn’t say that. But I think a good economy is waiting for us, it’s just a matter of what it looks like once it does recover. But we’ve been here before, and we’re going to get through this. But you’re going to have to, as a business owner, you’re going to have to be out there. You’re going to have to be the tech, you’re going to have to be the marketing guy, you’re going to have to be the customer service guy. You’re going to have to be working to get through this to make the minimum money that you need to make to survive through this, however long that takes.

Chad Peterson:

Like I said, I think our business world is going to be bruised for a year. But I think we’re dead in the water for the next 45 days or so, maybe 60 days. But I think we’ll be bruised for closer to a year.

Lois Sonstegard:

So my experience with getting bruised, especially if it’s a bad bruise, is it’s real hard… If it’s a leg, it’s hard to step on it. If it’s an arm, it’s hard to use the wrist or whatever. You go through this period where you are adjusting and you give it preferential treatment until it recovers. So I see that happening with business as well. And while that’s happening, how will business to business relationships change? Will we see changes there in terms of how people work together, will people work together, will people pool resources and leverage one another to build each other? That’s not typically an American model, but we’ve seen it sometimes in the past. What do you think will happen in that way?

Chad Peterson:

Well, I think it can happen. I think the bleeding heart, and I don’t want to get political here, but I just got to be authentic. The bleeding heart liberals who believe that everybody loves each other and everybody takes care of each other and everything’s going to be great… When you have a nationwide shortage of toilet paper because people are leaving with SUVs full of it, you got to ask yourself, are you relying on these very same people to care about you because as soon as disaster strikes, those who are not mindful and conscious beings, people that are awake, people that make wise, rational choices in the time of turbulence, those are the dangerous people that swallow up all the supplies. They take before you can get it. And I think that this whole toilet paper crisis only goes to show that we can act nice as a human race, we can act like we’re going to take care of one another, but I don’t think that that’s reality.

Chad Peterson:

So I brought politics up anyways. So here I go with religion. Might as well, right?

Lois Sonstegard:

Double whammy. Yeah. Go ahead.

Chad Peterson:

If Jesus had 12 disciples and one of them sold him out for a box of silver and the other one denied his existence once they arrested him, well, Jesus, the guy who changed the clock and changed the world, he had only 12 people that he thought that he really knew and loved and would back him and support him and never deny him and not sell him out and betray him. So if Jesus had 12 but really you get to thinking about it, maybe he was down to 10, maybe even eight once we start looking at it. I don’t think that you can rely on the 500,000 that surround your city to be mindful of you and your business and your needs at home and your food supply and everything else. I think that it’s a dark part of humanity. But it’s why lie to ourselves. It is what it is.

Lois Sonstegard:

So Chad, I grew up in Japan, so there’s a part of me that has seen business function a little bit differently in terms of how you relate, how you look at things collectively for example. And certainly they have the competitive models, certainly there’s that aspect. So there’s a difference in terms of how we in the US I think respond. So a long with what you just said, I can’t help but wonder if a competitive model is going to push some people away from one another because they’re not safe. They never will think about anybody else except what they need. They will take care of their own supplies first, right?

Chad Peterson:

Yeah.

Lois Sonstegard:

Then there’s another group that maybe open, but we don’t have the skillset of that yet in our… I don’t think actually anybody in the world really has that skillset developed. That it’s going to be a new kind of relationship, and I don’t know what that’s going to look like. Do you have any idea what that might look like?

Chad Peterson:

Are you asking me the skillset, what skillset do you mean?

Lois Sonstegard:

Okay. So I’m thinking if we’re going to have companies that are going to work together, build partnerships or alliances that are loose, maybe you’re trying to solve this problem here. I need to enter this market, work with this market. You’re an expert there. I can help you here if you’ll help me here. So it’s not a one-way street, it’s a two-way street. And it maybe really far outside what you normally work in. So it’s a larger ecosystem in a sense that you’re going to be working in. Do you see that happening, and if so, how? How does it happen?

Chad Peterson:

Yeah, I think equally, like I mentioned earlier, the political thing and the religious thing that I mentioned, I think there’s also just as equally in the human mind exists a need for alliances. And if you’ve ever watched the show Survivor, which I’m not a big TV guy but I know enough about the show. Survivor I thought was really who can survive meaning living off the land, resources and things like that. Well, the whole thing ends up taking a totally different shape and form because it ends up being alliances in the end. And it’s who’s going to betray this person and who’s going to align with this person.

Chad Peterson:

So yeah, that’s definitely in our human mind. You’re going to see alliances formed in business, and that’s going to look like little mini-partnerships. For instance, I have one. I have a mini-partnership already out of this, and I called two of my people that I consider on my team. And I said, “Yeah, we were team, but now we got to be like family if we’re going to survive this.” And they both agreed, and that’s why marketing guys, my video guys, my search engine optimization guys. And I told them, “Whatever it takes, I will make sure you guys are okay. I will not let you fail,” which means if I have to get in my pocket and give them money, then I will do that. If they need me for anything, if they need me for consulting, they need me to come in and make marketing calls for them or help them do things, any of my skillsets that I can offer, free of charge of course because I’m not… We’re in this thing together. But if I can offer my value to them just to keep them alive in business and keep them well because I need them. What if they go out of business and then I’ve got to cultivate a new relationship after this storm passes, I don’t want to do that.

Chad Peterson:

So yeah, I think alliances and a deeper connection and commitment to making sure that one of us, both of us are safe, it’s biblical. There’s safety in the multitude of council, and what does that mean? That means hey, stay closer to your council when things are rough and remember that ’01 happened. And remember that ’08 happened. And now everybody’s going to remember that 2019, 2020 has happened. So what, about every eight or nine years disaster has struck us in some way since 2001?

Chad Peterson:

So have good alliances before it happens and get closer to your alliances during those times. I think we’re going to be seeing a lot of that.

Lois Sonstegard:

So what does a good alliance look like?

Chad Peterson:

Well, it has to be synergistic. It also has to be a necessity. For instance, I can’t do my podcast and I can’t do my video without the people that are doing it for me. And I don’t know enough about search engine optimization and Google rankings and all that stuff to be doing that full time. And even if I did, if I’m spending my time on that and not doing what I’m good at, then I’m wasting my time. So I need them to do that, and they need me to perform. That’s the alliance I have. So I cut a deal with them, and I said, “13% of everything that I come up,” which that’s a weird number, isn’t it? But we came up with 13% that if I do something by way of their marketing, I’m going to give them 13% of my revenue. So I’m going to give them a paycheck of… Oh, I don’t know. Somewhere around $9800 maybe here in the next 30 days and that’s because of what they did for me.

Chad Peterson:

So as soon as I go make some money, I’m going to literally slice off some of mine to give it to them, and that’s because they’re in an industry that got hit so hard that people aren’t coming in their store. They’re not coming in there to do that. And so I’m in an industry that I can still function. And so I don’t want to be greedy. I want to make sure I’m taken care of. So I’m going to make sure their paid so they keep their doors open. And then in reverse, what are they going to do? If I need my video done and I need my podcast edited, and I need SCO done and all that, they’re going to pay it back to me in the way of services. So the way I look at it is I’m just prepaying for services in the future whenever this blows over. That’s just an example of my situation.

Lois Sonstegard:

Interesting. I think as I’m listening to you talk, I’m thinking one of the things we may need down the road is a little bit of a different directory but a directory of sorts of people who have allianced well. By that is who are the trustable, reliable, authentic companies that you would look to to create an alliance with and who do you want to stay away from because I think there are places you probably do want to stay away from when you’re thinking that way anyway.

Chad Peterson:

Sure. So I think a good parable or analogy or whatever about what you just said is talk to a Vietnam veteran and talk to him about his Vietnam vet buddies, talk to somebody who was in the Iraq War, talk to people who were in New York in 9/11, talk to people that were in the hottest spot of the economy in ’08. It’s like a war. This is like a trauma. And those that you stick with, whether it’s war in Vietnam or a war in Iraq or Desert Storm, whatever, those bonds are forged forever.

Lois Sonstegard:

That’s true.

Chad Peterson:

Talk to a Navy Seal, talk to an Airborne Ranger, the people that they went through bootcamp and training with, skydiving and all the frogmen stuff, it’s forever. They have reunions every five years. They don’t let go of one another. Those who are going to survive this war as an analogy will have even a more fortified relationship for the years to come, and my team and I are going to get nothing but closer throughout this thing. And if there’s safety in the multitude of council, then we should all be safe. We will all look back and remember it similar to a war veteran talking about what they went through because that’s really what this is. This is total chaos, right?

Lois Sonstegard:

It surely is, and our president has declared it as such invisible enemy that we’re fighting.

Chad Peterson:

Yeah.

Lois Sonstegard:

On that note, thank you so much. It’s a positive note to end on in terms of really working together and creating those bonds and those loyalties and looking to how it can strengthen them because that will be the future that will be a great deal on.

Chad Peterson:

Yes, it will.

Lois Sonstegard:

Chad, thank you so much for your wisdom, for all of what you’ve brought from your experience with working with businesses, buying and selling, and your own experiences with various businesses. So-

Chad Peterson:

Thank you very much for having me. Yeah.