Vets Run My Multi-Million Dollar Business (Model Revealed)

All right. Hey, what's going on? Jeff Barnes here again. So today's topic is I'm actually going to go through a deal review and talk to you guys about an acquisition that we just closed in one of our companies, Patriot Growth Capital.

Shout out to my guys over there, John, Zach, and Zach. F***ing killed it. You know, they worked their butts off and dealt with the SBA, dealt with the seller, the lenders, everything, you know, raised the capital for the down payment, all that stuff. And I'm just going to walk you through some basics.

I'm not going to go too far into the details and not disclose anything that I shouldn't be disclosing. But I want to talk to you about the whole process of going through and what we had to deal with when it came to closing this acquisition. So first and foremost, we're buying companies. I think this is a really cool thing.

It's why I'm part of this company. Again, it's Patriot Growth Capital. So big shout out to them. We buy companies that are in the defense and dual use technology space, as well as e-commerce.

Then we go out there and we find veterans, military veterans, you know, folks like me that have great resumes from the military. And if you were not in the military, you don't know what the hell a great resume from the military looks like. Sorry, but I don't care how many boxes you check saying, oh, yeah, we love veterans. We hire veterans.

If you don't have people who are veterans who are doing the hiring and involved in that process, shut the f**k up. Like to be completely frank about you, you are doing something called virtue signaling. And I hate that. It's almost as bad as stolen valor.

And if you don't know what that is, go look it up. There's a lot of great memes on that. Sorry, I was eating my, uh, my, my chocolate chip cookie here. It's amazing by the way.

And every now and then you got to have a little water. So we actually go out there and we have a nonprofit, ATL Vest, run by Zach Knight. Amazing organization. If you're looking for a philanthropic organization to get involved with, Knight is amazing.

You know, Army veteran, unfortunately, medically discharged and whatnot. Didn't want to be, but had to be. There's some things he went through and I still make fun of him. But that's because I'm allowed to.

I'm a business partner and I'm a veteran as well. uh anybody who's not a veteran making fun of him he he was in special forces so be careful um anyway the fact is that we know what a resume from the military looks like and a lot of guys that did great in the military don't talk about it because let's face it you won't understand it you will not understand i don't care if you watch every movie out there you will not understand what it was like to go through the training because most movies don't show you the training that people went through.

And if they do, they glorify it or like full metal jacket. They just want to make it look like this, you know, incredibly harsh environment where there's actually no brotherhood involved and everybody hates each other. And we're just all miserable together. That's I mean, that's part of it.

But we build this incredible bond and we do amazing things and great happens in the military. But if you weren't in, you don't know what they went through and you don't know the mindset of these people that did certain things in the military. Like if you tell me that somebody is an E-9 special forces deployed here, deployed there, went into this theater, did this kind of thing. I have a pretty good idea of what they went through, not only in those areas, but also to get to that rank in that role.

Okay. That is not easy. If I, if somebody tells me that they were a chief warrant officer, I know what that means. A limited duty officer.

I know what that means. You know, again, if you were not in, you did not serve, how could you possibly know? I'll give you an example. When I was in the Navy, I was in from 2000 to 2006, I joined as a nub non-useful body but I I ended up I did okay on my ASVAP I didn't do amazing I did better than a lot of people I guess but I joined because I want to get out of Carbondale Colorado at the time you know when you're a teenager and you know what you're gonna do with your life small towns suck right now looking back on it of course it's amazing town amazing little bedroom community of Aspen fucking beautiful there's no reason I should have ever wanted to leave except that there were no prospects for me in my career there I wanted to play baseball that was out the window, you know?

Um, and so this guy shows up and says, Hey man, you're pretty smart. You do well in math. You want to join the Navy. We can get you all these bonuses off.

Great. Sign me up. Let's do it. Um, and, uh, the pitch was literally, you're going to wear a really cool uniform and chicks are going to dig it.

All right. That's sweet. What they didn't tell me is that when you're on a submarine, no chicks even know you exist because they don't even tell anybody where you're showing up around the world. So good luck in that endeavor.

Right. Um, you know, a little thing that they put on the ashes they left out of that in the contract with me. They said, oh, you're smart. You can go to the nuclear engineering program.

Great. I did that. I went to the nuclear engineering program. And by the time I was done on a submarine, I'd done a few deployments.

I'd done dozens and dozens of underways. I'd spent, you know, hundreds of nights underwater and had been away from home more often than I was at home. I was working on nuclear power systems. I was working on high pressure steam systems.

I was writing quality assurance packages for our boat. We had implemented brand new water technologies that had not existed anywhere else in the entire fleet that we had to install. And we had to test and we had to vet. We had to verify it was going to work.

We went out. I was standing in an escape hatch at one point going down to test depth. If you think about this bottle down here below here is the submarine above. Here's the ocean up here is a hatch.

All right. That's the escape hatch. And under here is the hatch that goes down to the rest of the crew. I was standing inside this thing while we went down to test depth to make sure that the top wasn't leaking.

I was the only one really at risk, right? If that leaked, I'm dead, right? To me, it wasn't a big thing when I was doing it. To so many other people that I've talked to, like, oh my God, I can't even imagine being on a submarine, you know, claustrophobia and scary and all that sort of Yeah, I get it, I guess, but that was our lives.

I was in charge of, I was an engineering watch supervisor. I was an E6 by the time I got out I was in charge of the quality assurance program boat That why I was doing that other job And I was a Navy diver You know how much training I had to go through to get to that level I had a division of about 25 guys underneath me at one point I was in charge of the machinery division. I was in charge of a lot of s**t, a lot of responsibility. You know what job I got when I got out of the Navy?

Because I wasn't going to go work in nuclear power. I wasn't going to work in a cubicle and I was not going to do shift work. All right. Those are my three.

I'm not going to do this s**t. which if you don't have the things that you're not going to do in life, you need to make that thing right now because that's how you at least stay somewhat sane. If you just take any fucking job you can get or do any business you can get just because you want to make money, you're going to hate yourself, right? Figure out what you don't want to do, all right?

That's my suggestion. But those are the things I didn't want to do. And I got a job. They're like, hey, guess what you can do?

You can become a boiler inspector. I'm like, what the fuck is a boiler inspector? You know, like I worked on a nuclear power plant with steam generators. Like, oh, it's basically the same thing.

But instead of using nuclear power and superheated steam and hot water, we're using fire and gas and things like that. Okay, cool. So I go do these bullet inspections. I guess the vast majority of the time, you know what I was looking at?

Air tanks and hot water heaters. The same thing that you have in your own garage, it's at an auto shop that you have in your own house, your own hot water tank. That's what I was looking at. That was the level of responsibility that the civilian world felt I was capable of, all right?

You know how insulting it is when you get out and you do all these amazing things and then they put you in this f***ing role because they don't know what the hell you did. They don't know how to justify or quantify your capabilities in the civilian world. Now, luckily, I'm an ambitious guy. I made it through that.

I, you know, over the course of a dozen years, did some amazing things with that company. But the fact is, going back to this, if you were never in the military, what, I'm sorry, but you don't have any f***ing business talking to people and just, and figuring out what skill sets they really have. Now, yes, they need to have soft skills, right? They need to know to talk to people and interact in a civilian workforce.

I get that. Right. So you do need some of that. But, you know, you can't judge these these people that have spent years and in some cases, 20 years or more of their life doing something amazing that you could never understand.

And so we actually have ATL Vets stands for Advancing the Line for Veterans that runs these people through the ringer. And we teach them how to become a civilian worker and ultimately an executive and then eventually a business owner. and we walked them through the entire process. What's that going to look like?

And in that process, we find people that we think are suited to run these companies that we then go and acquire, okay? That's the business model in a nutshell. Our private investors are making nice returns because they're owning a piece of this business that the veteran then becomes an operator of eventually. And they get qualified small business stock instead of a section 1202 exemption in the IRS, which says, hey, if you hold this stock for five years or more, you get 100% tax-free gains, things like that.

There's a lot of caveats to that, but that's the high level thing. So we find this business, all right? Now, first off, anybody that tells you, oh yeah, you can go out and find businesses all day long. There's all these brokerage sites, there's all these different things.

You can go buy a business. You know what, how many hundreds of businesses we looked at to finally get one, not just under contract, but all the way across the finish line to close it. Like it was literally hundreds of businesses we're looking at. We submit LOIs on the field.

That means a letter of intent. So you submit the letter of intent. This is what I think your business is worth and what I'm willing to pay for and how I'm gonna structure this deal. If the seller agrees, which generally they don't agree with your terms right out of the gate unless you're an idiot and just offer them everything they want.

You know, you shouldn't do that. Then you end up in a situation where now you get to go do due diligence. Okay. Due diligence means you're viewing and reviewing and vetting every little thing about that business you can possibly do.

This included site visits. It included meeting with the sellers. It included meeting with the team. It included reviewing all their financial documents and statements.

It included getting lawyers to go and verify that all of their corporate governance is in place. it's a lot of f***ing work. And why do you do that? Well, because you don't want to buy a s***y business that's not going to spend off profits and it's not going to work for you or that you don't know how to operate long-term.

So we went through that whole process and my boy, Zach, it's, you know, he's going out there and he's the one getting the loan because when you get an SBA loan, you have to personally guarantee the loan. So he has to personally guarantee the loan. In another episode, I talked about how onerous that SBA process is. The underwriting guidelines are intense and that's for a good reason.

I just don't like it, all right? Just to be completely clear, I hate dealing with that kind of piddly bullshit. I'm really glad that Zach had the mentality to stick with that because that's what got us through. So you end up getting a you get a five million dollar loan for this kind of business.

Go through all this process, go through all the underwriting, back and forth with the bank, back and forth with the buyer. Oh, it's taken us three months now. So now we need updated financial statements. We need new quarterly balance sheets and profit and loss statements.

Everything needs to be, you know, reconciled properly. Right. we need to do a review on this. Oh, you need to make sure you have key man insurance and you need to have this kind of insurance because if you die and you sign the loan, well, how are we gonna pay off the loan?

Like all these little things that you have to check off on these boxes. Meanwhile, you wanna make sure the seller is not taking their foot off the f***ing gas because you might find out by the time you finally close on a deal that it's worse off than when you initially brokered it or negotiated it, right? And again, if that happens and you've spent six months in some cases dealing with the banks to get to that point. And then the banks say, okay, one final review before we send the money over, before we close this deal, we need to review the financials again.

And we need to make sure that you're still making money and that you're still gonna pay off this loan. If the seller took their foot off the gas and all of a sudden the profits are going down, the bank says, sorry, we're done. All right, that's happened. I've seen that happen several times, actually.

Again, another one of the reasons that I'm not a big fan of working with banks. I'd rather work with private individuals. Now, on the other hand, if you have a guy or gal who is selling you the business and takes their foot off the gas, it means they didn't really have a business in the first place because if it contingent upon them constantly pushing and pressuring everybody to do their jobs it not a real business right You self with a few employees That great But you need to have a business that runs without you which means the team knows how to do that So we're reviewing all their operating procedures.

You know, what are the job descriptions? Who are the employees? What are they doing on a daily basis? We're learning all this stuff.

Zach and John and Knight, they all went through this whole process consistently. And then in the meantime, we're trying to figure out, OK, well, how much are we going to get from the bank? Dog, you stink. That's rude.

Sorry, my dog's in the office here. And, you know, she tries to remind me every now and then that she's a little bit too comfortable. Sorry, disgusting. Too much information.

Sorry. Anyway, so the fact is that when you're going through this process, you are handholding a lot of people. Okay. To buy a business, a successful business, business was doing million and a half in profits and continuing to grow year over year.

Just great, great contracts. you have to handhold the seller because the seller seems to think that because you signed a contract an LOI that okay cool everything is good you're going to be able to fund this and close in 30 days I'm going to get my millions of dollars I'm going to be off and I'm going to go hang out on the beach and drink Mai Tai's no all right there is a transition period after you buy a business so you have to negotiate with the seller to stick around for a while if they are something that's important to the business and you need that knowledge transfer like that's really important to get a knowledge transfer from the seller going through this process as well as after the fact.

And sellers, they don't understand taxes most of the time. They don't understand capital gains at all. They don't realize that, oh, you don't know half the shit I know because I have tribal knowledge, meaning stuff that I've accumulated over the years in my brain just from running this business that they have to then transfer to somebody else. They don't understand all that stuff.

And so they get really flustered and say, this is taking too long. Maybe I should just keep doing it. or we've had this happen. I can't tell you how many times this happened to us and other people that I've worked with.

You start asking all these questions about do you have this standard operating procedure? Okay, what's this person doing? And along the way, instead of just asking questions, you make suggestions. And because you're making suggestions, these are the things that maybe the seller hadn't thought about before.

And now they're saying, oh, well, I actually need to do that. Like we actually had a contract, a company under contract earlier this year. It was doing roughly 5 million in profits. Okay.

Seller was a young guy, great dude, you know, have this incredible business. They had their marketing dialed in. They were selling products left and right. They were scaling up.

They were doing on track and they're doing over $3 million a month. OK, great business, very profitable, a lot of work. But he was just kind of running off of tribal knowledge and the fact that his team worked really well together, but nothing was documented. Nothing was working properly.

I shouldn't say it wasn't working. Everything was working properly, but nothing was documented, which meant if somebody else left, got to think about this. If one of the key people leaves upon closing this business and buying it or even shortly thereafter, because they don't like you, they like the seller, they like the person they work for, they don't like you, you're going to put some changes in place. They don't like that they leave.

Well, how are you going to replace that person? Right? You got to figure that out. So you have to have standard operating procedures in place.

You have to have a training system in place. And so we started talking to this guy about that throughout the process, which it took six months to get through this. He goes, you know what? My business is worth double what I'm selling it to you guys for because my profits have increased.

I'm not even going into the office anymore. This is amazing. My business literally runs on autopilot. He should have been thanking us for consulting with him.

And it was dumb ass moves on our part by asking questions that pointed him in the right direction of what to do. But because he did that, he no longer needed to even go into the office to run the business. And he's just getting profits every single month. That's an amazing business to have.

Why would you sell it, right? So you have to handhold people like that without tipping your hat too much and telling them what to do to fix their business in the due diligence process, okay? The other thing here, the other person you're handholding is the banker or in this case, the broker or the underwriter, okay? The underwriter is the person that writes up all the documentation to say, yes, this is a good loan to make and here's why.

We've checked all the boxes, we've done all this stuff and they're asking for everything. They're asking for, of course, basics, name, rank, serial number, social security number, all that crap. But they're also asking for your financials. And then they're asking for personal financial statements and financial statements on the business that have to be updated on a regular basis.

And they want to see the insurance policies. They want to see the contracts that you might have if there are suppliers and vendors and customers, and they want to see what those look like, right? You have to go through all of those things because any one of these could be a failure point, at which point somebody says, nope, we're not funding the deal anymore. Nope, we're out.

whatever the case might be. And just in the last 12 months alone, I've had this happen at least a dozen times where somebody who is planning on funding the deal, likes the deal, likes everything you've told them about the deal, gets to the finish line and says, you know what? Actually, this little thing over here, we don't like. Well, you never asked about that in the first place, right?

You never even told us this was an issue. And all of a sudden, that's the reason you're pulling out? It happens, right? So you have to handle these people.

So good, going back to Patriot Growth Capital, Zach is over there and he's literally handling every single person, which means he's on phone calls every single day, putting out fires. The attorneys that you get to help with the due diligence to make sure you're not buying a bad company are asking questions. So you, as the person who is buying a company, you are dealing with all that stuff and you're quarterbacking everything. You're learning a lot in the process.

Of course, you're learning all the requirements for underwriting. You're learning about what the legal team is looking at. You're learning about what the CFO and the financial people are looking at. You're learning what the seller is doing and how the business is operating.

You have to go You got to go make side visits. You got to see that this thing's for real. Can tell you how many times we heard about people trying to buy a business that doesn really exist but they fabricated all this stuff for whatever reason And they thought they were going to be able to make a quick buck Right There all these different things you have to think about On top of that you know when we first got involved in this Trump had just gotten into office and we talking about tariffs and what's that going to mean for this business.

And then all of a sudden the tariffs come out. There's 100% tariff on the country that is supplying this business that we're buying all these products from that we're selling. Well, that changes the financial metrics completely. Did anybody account for that?

Anybody think about that? Well, no, it's kind of hard to, right? But again, government risk is a thing. And you have to be thinking about these things.

You have to be paying attention to what's happening in the broader economy, not just what's happening at the microcosm level inside this business. Because when you are buying on net 30 terms, net 60 terms, things like that, well, one, you lock in the payments from the suppliers, you buy the product, and that's the set price. But if something happens to them and all of a sudden there's no grandfather clause into the tariff thing and they have to charge you extra, well, that changes your margins on the product and you have to be aware of that, which means you have to have somebody that understands financials and logistics and all of these things, right?

Anybody that tells you you can go buy a business, no money down, no problem. It's super, super simple. They're selling you a product. Of course, I know some of these people don't get me wrong.

They're great people. They know what the they're doing. And when they say no money down there, they really mean no money out of your pocket. You can go get private investors to put the money up, which is what we did.

And we have to explain to them, here's the risk. Here's the challenge. You have to put a pitch text together. You might need to put a PPM together, a note offering, a term sheet, a subscription agreement, all that other stuff.

These are the things you have to do to be successful with that. There's a lot of things that go into buying a business and doing the due diligence, right? That's why when people join our club and they become a member, what they really like is the fact that we already know all this and we do a lot of that for them. So yeah, they should still do their own due diligence.

By the way, I'm not giving you financial advice here. I'm not your financial advisor. Always consult your legal and financial professionals whenever you're doing any of this. Now we've got that out of the way so that I don't get in trouble.

Realize that there is a process for reviewing deals. And in this day and age where it's so easy to fake f***ing anything, AI can fake it. The news can fake stuff all day long. They can take all these things out of context.

They can choose not to show you certain things. And because they didn't show you, it's a lie through omission. These are the things you have to deal with. So when people join our club, they realize that we know what the hell we're doing.

And so we vetted a lot of stuff. Does that mean that we're perfect? No, of course not. Does that mean that we're going to catch everything?

No, of course not. The fact is that there's only so much you can do and there's still a leap of faith that you need to take. And that leap of faith that you're taking is completely based on your expertise, your experience, your skill sets, and your team. You need to have a team around you that you trust, all right?

And that's the beautiful thing that we had going on at Patriot Growth Capital. We had an amazing team that filled different seats on the bus, and because of that, the deal was able to get done. Now, it took six months, seven months, something like that, to finally go from LOI to closing the deal. Should they all take that long?

No. But when you're buying a profitable business that's doing over a million, $2 million in profits, it's gonna take a little bit longer, right? Because you're buying at a multiple of that, right? You can be buying at a three multiple, six multiple, which means, okay, let's just say it's doing a million dollars of profits and you buy at a 3X multiple, that means you're buying the business for 3 million.

If you're buying it at a 6X multiple, you're buying it for 6 million. And you need to figure out what it's actually worth based off all those numbers. And, oh, by the way, there's this one little thing in there. We'll talk about this at different podcast, ad backs, right?

Most small businesses, when they're being run by the founder, they are not using GAAP compliant financials and reporting, which means that they are using the business for their own personal piggy bank. Now, here's the simplest, easiest way I can explain GAAP financials done the right way. You, as a business owner, should be getting a salary, okay? if there are expenses that you feel the business should be paying for, then you should be creating an entry and having the business reimburse you for those expenses.

Right. But more often than not, what happens is they just use the company credit card. The company goes and buys it. And it's like, oh, cool.

Well, that looks like it's a business expense. But then when the seller is going to sell it, they're like, no, no, no, no, that was a personal expense. So if I add that back in, hence ad backs, if I add that back in, so instead of it being an expense, it's actually just crossed off the expense line item, it makes your profits look higher. Well, if your profits look higher, you can sell the business for more money, right?

This is the kind of stuff that you're going through. And this is what we've been going through for months with these guys, as well as getting the investors to understand all this, pitching them, helping them understand where they're gonna wire their money, what they're gonna do with it, what they're gonna get in return for it, how much equity are they gonna get? What's the cap table look like? All of these different things, that's what happens.

So again, when people join our club, which is really easy to get into the Mastermind Investment Club, it's only $5,000 a year, if that's too much for you, then you're in the wrong, it's the wrong club for you. If it's too little, just realize we just want to get you in the club so you can see deals. We can do deals together because we make our money doing deals, right? The kind of thing I'm talking about right here.

That's how we make our money. That's why we want people to join. So yeah, I'm going to pitch this. I'm going to plug it from time to time because I really do believe that if you want to learn how to do this the right way and you want to be in the deals, not I want to learn how to raise money.

I'm not bringing people like that into our club. If you want to actually do deals with people that know what the f*** they're doing, That's why you joined the Mastermind Investment Club, okay? So that's exactly what we do. We go through this whole process with everybody.

The job of our team is to vet the deal so that you don't have to spend as much time vetting it. But of course, you need to look into it yourself, all right? So anyway, this is not a sales pitch. I'm here to tell you what it takes to go through and buy a profitable company.

Don't buy problems, by the way. There's too many good companies out there that you can buy the right way. And it's a lot easier to do than a lot of people think, even that I made it sound. It's a lot of work, but it's way better than buying a problem that you have to then go fix.

Okay. So anyway, put your money to work, put your mind to work, get out there and crush it. See ya.