Strategic Real Estate Planning, with Jason Bush

Email – jbush@ltpcommercial.com
Company – www.ltpxpand.com
LinkedIn – https://www.linkedin.com/in/jason-bush-value-advisor/

Jason Cutter [00:00:00]:
On today’s episode, I have Jason Bush. He is a strategic real estate advisor. Jason, welcome to the Business Broker Growth Show.

Jason Bush [00:00:08]:
Thanks, Jason. I appreciate it. You know, it’s— it’s— this might get confusing with both of us named Jason today, right? This will be fun.

Jason Cutter [00:00:14]:
We already know it’s going to be a great show because when you get two Jasons together, it’s, it’s going to be magic. It’s going to be good. I’ve thought at times of having a show where it’s just only people first name Jason, and that’s just what the, the show is about. Um, but let’s let the audience know a little bit about you. So you are a Certified Exit Planning Advisor, CEPA.

Jason Bush [00:00:34]:
That’s right.

Jason Cutter [00:00:34]:
And you have the goal of helping owners and sellers specifically when it comes to their commercial real estate, which is an interesting part of the business transaction that a lot of business brokers out there, M&A advisors, don’t have experience, don’t like dealing with, don’t know how to deal with, get confused by, don’t maximize the value. There’s a ton of stuff, uh, from that. And it’s really this underserved area of the business exit planning and exit strategy mode. And so I’m excited that you’re here because this is the first time I’ve had somebody on the show who’s, you know, has experience from the business broker side but on the exit planning, and then also the subcategory of commercial real estate.

Jason Bush [00:01:16]:
Yeah, you jumped right into a niche, didn’t you? Yeah, like, yeah. Now, luckily, these aren’t super deep waters. Like, I think I can explain it in a very coherent way, but I appreciate that intro because it is a unique thing, um, in the context of like not only the, the SEPA and the exit planning world, but also even just in the suite of resources that are commonly available to business coaches, financial advisors, business brokers. Like, there, there is connective tissue between what I do in all of those various worlds.

Jason Cutter [00:01:48]:
And, and what’s interesting, and, and I want to go into kind of how this evolved and how you got here, is, uh, that you’re basically an advisor for advisors. Uh, it’s really the focus you’ve, you’ve come to have.

Jason Bush [00:02:04]:
It’s a mixture of being a trusted resource for other advisors, right? It’d be exit planners, financial advisors, right? Where I become a resource or even a more formal part of their organization as like a dedicated resource. But really, that takes a role of direct client support and really taking advantage of their client relationships. So there’s that level of— and I’ll call that, yeah, direct client support. But then also, I have the ability to play a role as part of like an organized, dedicated exit planning team. That, that is organized by a true quarterback or value planning advisor. Uh, and I get brought into scenarios whenever that business, uh, that’s being focused on either leases or owns commercial real estate.

Jason Cutter [00:02:55]:
Got it. And so how did this evolution happen to, to this focus and this kind of really exploding, growing need that you found out there?

Jason Bush [00:03:08]:
Yeah, yeah, it— there is a bit of an origin story, so it might take me a minute. Um, go for it. But if we’ve got— I think we’ve got the time, so let’s do it. Um, so, uh, my background is very quantitative in nature. I was a professional engineer in New York. I was a civil engineer. Uh, once I realized that I didn’t see that as my career path, I went to MBA school, uh, focused on kind of entrepreneurial financial consulting type of stuff, right? But I’ve always Been a quant at heart, and over time that led me into kind of the M&A world, into being a commercial real estate investor, ultimately forging a path and becoming a part of a company that’s based in North Carolina called Linville Team Partners, which really is a combination. It’s a company that has lots of skilled, talented people and really has built a practice that has one leg in traditional commercial real estate type of brokerage activities, and then also has a separately branded company called Expand that really is a strategic business advisor that involves helping brands grow and solving for their growth.

Jason Bush [00:04:17]:
And part of that business was a buy-side M&A practice. And it was the, the development and build-out of our M&A services that we were providing, finding acquisition opportunities for other brands, That’s what led me into the, the SEPA and the exit planning world, where my background as a quant, uh, as a process type of person, I was really skilled and, uh, at talking to business owners about valuations and what the acquisition process looks like and how it’s going to feel, how we’re going to close a transaction. But I realized I was missing my ability to talk and learn about their world. And so when I learned about the Exit Planning Institute and the CEPA certification and their curriculum that really focuses on a methodology, which appealed to me as the quant and the engineer, but then also the having part of their curriculum was talking to business owners about just the simple concepts of de-risking their world and preparing themselves through the eyes of a buyer’s, a buyer’s eyes of making what they own, either their business or their real estate, more attractive, as well as ready to sell. And then there’s also another component that just focuses on their personal readiness to transact as the actual— the individual side of that. That was missing from my suite of experience. And so that’s why I went and got my SEPA. And it really was intended just to be a complement to our existing business offerings within Lumbel Team Partners.

Jason Bush [00:05:48]:
It’s evolved and it’s evolved significantly. As I’ve discovered that what I do and how I think about my service that I provide to business owners and financial advisors and business coaches, it’s its own unique separate thing that is really more strategic in nature than what the traditional experience most have had in commercial real estate, which is kind of a brokerage resource. Like, this is not brokerage. This is, in the parlance of exit planning and SEPA, This is working with business owners and their advisors in the, the prepare and discovery gates. I want to understand what they have so I can make it better.

Jason Cutter [00:06:28]:
Okay, so not brokerage, brokerage resource, prepare and discover for the real estate. Where— let’s, let’s talk about where does this generally go bad or is just completely missing? In the current, like, brokerage realm for, you know, people who are trying to exit their business?

Jason Bush [00:06:52]:
Yep. And so, uh, common practice in the business brokerage or even business advisory world is that most of the attention and analytical rigor and, like, value methodology is applied to the business asset. Which makes sense, right? There is a significant component of a business owner’s net worth that’s tied up into their business. But they may also own the real estate. And what I have commonly found in kind of M&A type of, or brokerage represent, seller represented transactions, that if the real estate is available to be acquired by the business acquiring entity, Often that process was treated as a bit of an afterthought. It’s the, oh, by the way, there’s this real estate thing that can come along too. And it revealed often a level of unpreparedness by the team that was representing that seller, as well as kind of just valuation and process uncertainty associated with how do we maximize the benefits associated with— is really a— should be treated as a separate transaction. I want to help that business owner that, that controls his real estate, his or her real estate, to take on the mentality of you really have two businesses.

Jason Bush [00:08:11]:
You’ve got an operating company, which is your business, and you’ve got a property company that is the ownership entity of the real estate assets. And if you manage them and apply the similar kind of analytical rigor to both of these businesses, as well as structure a proper leasing relationship between the two of them, you’re going to build net worth and you’re going to build also, uh, exit optionality should you decide to exit and sell these things. You know, you don’t have to sell them to the same person. You don’t have to sell them at the same time. You don’t even have to sell the real estate if you don’t want to. Like, there’s lots of different permutations as opposed to getting stuck in with, we’ve got a business buyer that, oh, by the way, you can get the real estate too. Like, that’s not strategic. That’s tactical at that same point.

Jason Bush [00:08:57]:
It kind of misses the mark, in my opinion.

Jason Cutter [00:09:00]:
Yeah, it’s interesting to think, like, in my non-industry mind, you know, looking at outwards, you know, thinking of the example of McDonald’s where, you know, the, the corporate side, they’re really successful because of all the real estate they own, not because of the hamburger side of the business, right? And then the franchisees, they’ve, they, they’ve got the retail version, the retail side of things, but not the real estate.

Jason Bush [00:09:25]:
Yeah, you know, I, I sometimes, as a, as I’m training other folks about what this is and kind of like the how strategic thought about real estate can be centered, I often use the McDonald’s versus Chick-fil-A example, right? Where essentially they’re— and I wasn’t going to talk about this today, but you had the perfect segue for this opportunity. You know, it’s every individual or organization has access to capital. And they have, they make choices as to how they want to allocate their capital. Right. And for business owners, right, that’s often a consideration, right? They have business capital that they use. We’re going to make the assumption that they are going to choose to deploy it within their business, right, for their marketing and operations and sales functions and all that kind of stuff. But then they also have the opportunity to deploy capital or obtain capital to control the real estate under which their business operates. Not all do, right? Some businesses just lease their space, and that’s fine, right? Really what that is, it’s just the— it’s how do we end up defining their real estate scenario, right? So McDonald’s has unlimited access to capital, and part of their real estate strategy in their scenario at the individual store level is McDonald’s owns all the real estate, and they lease that location to their operator, be it franchisee, corporate entity, right? There is a transaction that occurs between the real estate arm of McDonald’s and the operational arm of McDonald’s.

Jason Bush [00:10:51]:
That’s great. And their strategy is to use that hedge against downturn. There’s all a revenue stream associated with that rent, and it’s a nice hedge against their business. Any given time, like at McDonald’s, they average like $3 to $4 million in sales. Um, which is fine, it’s great, wonderful business. But you compare that to Chick-fil-A, they generally don’t own a majority of their real estate. They commonly lease their locations from a real estate investor, and they are comfortable paying that investor as a landlord a lease. Great.

Jason Bush [00:11:30]:
It’s really no different from an operational model. Both entities are leasing the location, but Chick-fil-A doesn’t play the role of landlord commonly. They have elected to allocate— they also have unlimited access to capital, but they have chosen to allocate a majority of their capital into operations versus into real estate. They’ve just made an allocation choice. And you really can’t argue with that choice that Chick-fil-A has made. I mean, they’re open 6 days a week and their average store does $9 million in sales. It’s more than 2 times what an average McDonald’s does. The key is understanding what is What is a business owner’s real estate scenario? I’m going to segue from the McDonald’s example, right? It’s— every business owner has a unique real estate scenario, and there’s really like an infinite number of permutations as to what that is.

Jason Bush [00:12:18]:
And it really depends on, you know, what type of business do they have, what type of asset do they occupy, who’s their landlord, are they— do they own the real estate, does somebody else own it, what type of lease do they have, what types of terms and conditions the type of market that they’re in. Like, it doesn’t take as long to end up with, you know, a 10-factorial type of matrix of all the different ways you can define their real estate scenario. And the key for me is working with that financial advisor, that business owner, to understand what is their real estate scenario and kind of where does it live on the spectrum. All business owners, their real estate scenarios kind of live on a spectrum somewhere between totally buttoned up and hot mess. I hate using that term hot mess, but some of them are really messy. Um, and in the parlance of, of SEPA and exit planning, like, I’m trying to discover where, where, where do they lie on that spectrum, and then what can we do to get them more buttoned up.

Jason Cutter [00:13:17]:
So as you’re talking, I’m thinking of one of the scenarios that come to mind, and maybe this is a little divergent from, from what you were sharing, is that in the states, in most of the states that require a business broker to be licensed in that state, it falls under real estate. So essentially they have to get their real estate broker license. And then where do you see that causing issues in these transactions? Because now you have a business broker who thinks they know real estate because that’s what their license is under, uh, and then they’re trying to get involved.

Jason Bush [00:13:46]:
It’s the— it’s very weird, if I’m just going to be totally transparent. Um, so there’s 17 states in the country that require a business broker to have a real estate license. And I’m going to use North Carolina as an example. So my real estate license in North Carolina is no different than— it’s the exact same license that a residential broker has. And so, you know, 98% of all licensed real estate brokers in North Carolina are residential brokers. And so your, um, a business broker that has a license a real estate license has received training in how to be a residential broker. So as a result, like, that correlation— like, I can understand why it exists, right? They want— the, the state licensing regulatory board for business brokerage wants to have some barrier to entry. But honestly, a real estate license is kind of— it’s better than none, but it’s kind of silly.

Jason Bush [00:14:52]:
Yeah, yeah, because they’re not trained in thinking the way a commercial broker, a real estate broker would. Uh, and as a result, that kind of somewhat explains why oftentimes that the real estate asset gets treated as an afterthought, because it’s, it’s a thing in which they— and unless they have, uh, professionally sought excellence in that space, generally they’re going to miss the mark if they’re only relying upon their, their their residential real estate training.

Jason Cutter [00:15:19]:
Yeah, and, and I know some brokerage offices where there’s maybe 1 or 2 people in the office that have enough experience with the commercial real estate side, uh, to be able to handle those transactions and know how that works. And then essentially they’re the go-to in the office for everyone else who’s confused, scared, shy away from, you know, just.

Jason Bush [00:15:42]:
Lost in that part of the transaction. There’s the old comparison, you know, it’s apples and oranges. People try to say it’s versus residential versus commercial. It’s not. It’s apples and elephants. It’s, it’s, it’s totally different things.

Jason Cutter [00:15:57]:
Yeah, yeah.

Jason Bush [00:15:57]:
But we all have the same license.

Jason Cutter [00:15:59]:
It’s weird. And then there’s the additional layer, which is there’s residential versus commercial real estate, then there’s commercial real estate versus business asset sale that the business broker is generally focused on.

Jason Bush [00:16:12]:
That’s right.

Jason Cutter [00:16:15]:
Yeah.

Jason Bush [00:16:16]:
Yeah. Um, okay, so you’re, you’re exposing flaws in the system.

Jason Cutter [00:16:20]:
Yes. Yeah. And it’s, it’s wild that the, the industry of business brokerage M&A advisory has been around for as long as it has, and this is the current state. Uh, I’m sure there’s very, very smart industrial people trying to work on, on.

Jason Bush [00:16:34]:
On that, but the scarier proposition is the converse, right? There’s 43— or excuse me, 33 states that require no licensing whatsoever. So in those states, there is nothing that prohibits you going from whatever your business you’re in today to tomorrow opening, you know, throwing out your shingle, uh, and calling yourself an expert business broker.

Jason Cutter [00:16:58]:
Yeah, which is dangerous and scary to everyone involved just thinking about that. Um, yes. So, so your focus with— from the SEPA side, from the exit planning side, is is really those other exit planning type of professionals out there. Like you said, the financial advisors, wealth advisors, CPAs, the people that fall under that where they’re working with that current business owner. The goal for you would be to bring you in at some point as that additional advisor on the team to be a part of that, like you said, for the discovery and the, prep and then the discovery portion of it to see what’s going on with the real estate. What— when we talk about those professionals that you’re working with and getting those introductions, what is it that they should be looking for? I know that we had talked about this, and there’s some specific questions that are, are really good for them to use to identify when it might be smart to bring you in.

Jason Bush [00:18:01]:
Yeah, that’s great.

Jason Cutter [00:18:02]:
Yeah.

Jason Bush [00:18:02]:
So that was a challenge as this practice was evolving, which is into this, it’s really kind of a new space to have somebody act as not a transactional broker, but a true strategic advisor. And these financial advisors, they’re amazing people, right? They, and a ton of them have CEPA certifications, right? So we’re very like-minded in that we want to bring value to their clients. But those financial advisors, they have a very strong relationship with their clients. And in order to feel comfortable bringing me into their universe, into that relationship, first I had to solve for and build a level of trust with that financial advisor. And so, in order to do that, of course, we have conversations like this, but then also what I created for that financial advisor is 10— I call it the top 10 questions that they should ask their clients about commercial real estate. And these are questions that apply to really any business owner that either occupies or owns the commercial real estate. And the purpose behind the questions really are twofold. The primary goal of the question is honestly to strengthen the existing relationship that financial advisor has with their clients.

Jason Bush [00:19:22]:
These questions are going to make that advisor look smart because these are questions that likely no one has ever asked this business owner before. So even if nothing happens as a result of those questions being asked from an actionable thing, that client is going to look at that advisor as a more valued resource because they challenged them by asking them some unique questions they’ve never been asked before. And that in and of itself is a value-add. But what commonly happens is that that advisor is going to ask these questions, and the nature of these questions are almost— they’re going to prompt follow-up, or they’re going to prompt further exploration, because they’re not yes and no questions. They’re not X or Y. They’re not numerical type of questions. They’re often thought-provoking questions that are going to require the owner to either admit that they don’t know how to answer that, or they’re going to admit that they’ve never thought about that question before. And if the smart advisor is asking the questions with the intent to add more value to the client, that response is automatically going to generate a follow-up opportunity where the advisor is going to recognize, hey, Mr.

Jason Bush [00:20:29]:
or Mrs. Business Owner, there’s something that we should probably explore a little deeper here, uh, or there’s, you know, it feels like we need some expertise in this space. Given, you know, the way you responded to that question. And that’s when they get to say, hey, oh, by the way, I got a guy, uh, his name’s Jason Bush. He is a fellow SEPA. This is all he does, and I’d love to introduce you. And that becomes a very low-risk introduction to, you know, another resource that’s part of that financial advisor with spoke model. Or encourage that where the financial advisor is the hub, and then here that advisor can bring in resources depending upon their client’s needs.

Jason Bush [00:21:12]:
And so I’m just one of those many potential.

Jason Cutter [00:21:16]:
Spokes. I love it. I think that’s great. And so in those questions, what are, what are some of the questions that, you know, somebody could be using to identify those opportunities?

Jason Bush [00:21:27]:
One of the ones that I love to ask because it almost always guarantees the response that myself and the advisor are looking for, is I like to ask, are you, as the business owner, are you receiving the maximum amount of support and benefits that you— that your business could or should receive from the real estate at which your business occupies? It’s hard to answer, right? Because You don’t, you don’t have a baseline for that, for answering that question, but it will allow the, the business owner to explain that they don’t like their lease, or they can never talk to their landlord, or the landlord’s not holding up their end of the bargain, or, you know, I’m in a strip center and I’m rumored, you know, there’s a rumor that the, the, the anchor tenant, the grocery store that’s anchoring our strip center, might be leaving soon. Like, what do I do? Right there. Again, it’s not like I’m trying to expose like a wound, but what I’m trying to do is demonstrate that there’s more things to consider here than just what is the amount of rent you pay and when is it due. Like, we need to master this, all the functions of like what I call the blocking and tackling within commercial real estate. I want that business owner to master their leasing relationship. If they own the property, I want them to master their ownership structuring and take and maximize the value of the real estate that they own. I want them to master the structure of the lease that they set up between their opco and their propco. Like, this is really all about creating wealth, but also creating transactional flexibility for that business owner should they either want to grow or exit.

Jason Bush [00:23:15]:
And if we actually go down an exit path, now we’ve created a whole bunch of options for them because they’ve got different things that they can sell. It’s separate transactions. You’ve got a business, you’ve got real estate, you’ve got all the various permutations of what disposing of those two different assets might look like from a timing, from a buyer perspective. Like, there’s lots of places to go with this.

Jason Cutter [00:23:37]:
Yeah. And, and I, and I feel like when you ask that question about, you know, maximizing the value from the real estate side, is the answer’s pretty much always going to be no, or thinking they are, but then as they talk through it, they realize they’re not. And in the event that someone says, yes, I am, because I’ve done this, this, and this and this, then that’s also okay, ’cause it just means that it’s not a good fit for someone like you.

Jason Bush [00:24:00]:
Yeah, I mean, there’s a rare outcome, right? Where an advisor asks all those questions and they crush the answers of them. And we determine like, yeah, as we look at that spectrum of their real estate scenario, Holy cow, they’re buttoned up, right? Okay, great. You’ve still added a ton of value by confirming for them you’re buttoned up. You really don’t have too much to worry about right now, but let’s revisit this, you know, at the appropriate time, you know, a year from now or changes, right? You’ve still established that baseline. There is a strategic commercial for you if and when you need it. So there’s really no downside for asking the questions. No.

Jason Cutter [00:24:45]:
Uh, what else on that list of questions? Any other ones that stand out that you like?

Jason Bush [00:24:49]:
Like, here’s another one of my favorite ones, but this will be the last one that I’m going to give away for free. If anybody else wants to send questions, we’ll have to do a call for action or something at the end.

Jason Cutter [00:24:58]:
All right, sounds good.

Jason Bush [00:25:00]:
Yeah. Um, yeah, gotta have a tease, right? Um, so for the business owner who also owns their real estate The question I love to ask them is, do you know the fair market value of your real estate asset today? And that’s always an interesting question that doesn’t really matter how they answer it, also because it creates follow-up opportunity. But I’ve asked that question a lot, and I generally get 3 types of answers. Um, and, and I share this just so the advisors that are listening out there can, can tune their ear to this type of response. So oddly enough, a decent percentage of business owners will answer that question by telling me what they paid for their real estate, which is interesting trivia, but it’s really irrelevant, right? But unfortunately, it shows that that’s the data point, the only data point that the business owner has regarding the valuation. But really, it’s a response. It’s kind of like, Jason, if I ask you, you know, What’s your Apple stock worth today? And you tell me what you paid for it 5 years ago. Yeah, right.

Jason Bush [00:26:06]:
There’s no— it doesn’t matter, right? That’s not what it’s worth today. It has no correlation. So that’s the answer style number 1. And that’s actually the better answer than the one I’m about to share with you. So the other answer that I commonly see, I call it the country club valuation, where the— you know where I’m going with this. The business owner has a friend that sold a thing, meaning a commercial asset, and the, the thing that got sold isn’t exactly like his or her thing that they own. But I know that he sold it, or the business owner sold their, their piece of real estate. I don’t really know the terms or the conditions or the motivations by which that person sold that piece of real estate.

Jason Bush [00:26:52]:
And I also don’t really know— well, and it may have been 2 or 3 years ago, right? It’s never like a relevant timeline comp. Um, but I know when he sold it that he received X amount of dollars for it, and so mine should be worth X plus. It’s never X minus, it’s always X plus, right? And really what it exposes is that they don’t know what their real estate is worth, but they’re giving you a longer-winded explanation of telling you that, right? Um, and because it’s always X plus they end up often with an artificially inflated sense of value of the real estate asset that they have. And often, commonly, that valuation will get incorporated, like, into their financial planning exercises to where you have got an inflated, uh, component of your net worth. It’s higher than what it should be, um, yeah, because it’s never X minus, really. So that’s a— I call it the country club valuation. It’s a process, really, that’s— it’s a value process that’s really based off the ego and vibes. More so than anything quantitative.

Jason Bush [00:27:59]:
Um, and every now and again you’ll get a third answer to that question where the business owner will be like, yeah, I have no idea, we should, we should probably get that done. Yeah, so that, that’s one of my favorite questions too.

Jason Cutter [00:28:11]:
Yeah, I think that one’s great. And I think the country club valuation, I think, is the detriment of so many different things out there, even for the business brokerage side when somebody’s, you know, looking to— absolutely— a business and sell it. And, you know, with their— the business owner has an idea of valuation because somebody they know, let’s say using your example at the country club, uh, sold a business for X, um, and so they should get, like you said, X plus. It’s never X minus. It’s never like, well, you know, I’ve got half the employees and half the real estate, so mine’s, you know, half. It’s— no, it’s that— that sounds good, I should get that too.

Jason Bush [00:28:47]:
That’s right, that’s right. Yeah, it really just explodes— exposes a lack of preparation, right? Again, going back to that discovery gate, like before you enter in that extra, like let’s discover what are, what these things are worth, right? And if, and let’s be truthful and honest and understand that as you are preparing to move forward, you know, if those valuations don’t help you achieve your goals, well then we have work to do to increase the valuations of these things.

Jason Cutter [00:29:16]:
Yeah. Now I, the instant answer for the question I’m about to ask is as early as possible. But when should someone look to bring you in, you know, from the SEPA side with that business owner to talk about the real estate? Like, is it same thing from the exit planning, which, you know, is 2 to 3 years before someone might exit? Like, what’s, what’s, what’s the best window or the, the most effective window?

Jason Bush [00:29:43]:
On your end? Yeah, so you nailed it, right? Of course, it’s earlier is always going to be better, but there’s also other considerations to take in, uh, to take in. You know, when I talk to that business owner and I’m trying to understand their scenario, what I’m really trying to assess beyond the scenario is also what other factors affect like the real estate work in their world, right? So The first thing is, you know, where on the spectrum do they live? You know, from buttoned up to hot mess, right? So that’s kind of a— it’s an impromptu gap analysis. Like, you’re here, we can get you to there, right? So there’s a scope of work that you can define given that gap analysis. The second thing is, what’s our timeline, right? Sometimes I’m not brought in early enough, and so therefore, you know, if If we’re dealing with a 3 to 6 month window, there’s only so many tools and tricks and techniques that we can apply given that, you know, the engine’s already in gear and it’s moving towards a transaction most likely in that scenario. The other thing that I’m looking for is what is the priority of the real estate related work compared to some other more elevated concern within the business, right? It’s not necessarily a dumpster fire, but there might be something else that’s way more important that needs to be solved first before we can pay some attention towards solving the real estate scenario. You know, they just lost their— the head of their sales division and, you know, they’ve got intense customer concentration that’s going to follow that sales lead. Like, that’s a problem that needs to be addressed first, right? Or I can just completely work in the background regarding the real estate scenario. And yeah, so it’s a prioritization, it’s a timeline, and it’s a gap analysis.

Jason Cutter [00:31:33]:
Got it.

Jason Bush [00:31:34]:
I think it sounds like, it sounds like an engineer, uh, right?

Jason Cutter [00:31:39]:
It sounds like an engineer. It sounds like a quant talking who.

Jason Bush [00:31:41]:
Loves— yeah, I can’t, I can’t help it. I can’t help.

Jason Cutter [00:31:46]:
It. That’s all right. That’s, that’s what’s great about this part because, you know, the, the nice thing too with the real estate side is that it is tangible and it’s something that’s, you know, more of calculatable item, right? And then fits into a system and process, you know, a little bit better than the business asset side, right? There’s still a lot, you know, there’s very hard to do exact comparisons, but I love the fact that you’re bringing the system process side to, to this exit planning piece of the physical asset.

Jason Bush [00:32:20]:
Yeah, and the key is really understanding that this is not brokerage. Right? It’s, it’s preparing you for an event should you need one, right? And maximizing the value of the business as a result of that real estate relationship that you have with the space your business occupies. And then it’s also maximizing the value of the real estate as well.

Jason Cutter [00:32:42]:
Yeah, I think that’s, I think that’s great. And, and at the end, we’re going to talk about how people can reach out to you and, and get those questions, get in touch chat with you, especially any CPAs who are listening to this, uh, to find out how they can work with you for their clients. So we’ll mention at the end. So this, this next segment is generally the deal that got away. So most of the time I have business brokers, M&A advisors on the show. We talk about their strategies, we talk about the deal that got away. You’re in, you’re in a different realm because again, you’re not on the brokerage side, so you’re not acting as a broker and doing that part. Um, but I know that you have enough experiences seeing deals or watching ones that, uh, fail or are going to fail.

Jason Cutter [00:33:28]:
And so I still want to open it up to you because I’d love to hear your perspective, especially from, let’s say, the real estate side, where, you know, the something got away or is.

Jason Bush [00:33:38]:
Potentially going to fail. Scenario 1 is I’m working with a business broker who is working with the industry— doesn’t really matter, it’s a, it’s an individual that owns a business, he wants to sell it. They’ve engaged with a business broker, uh, and it’s got a valuable business, like it’s attractive. And they’ve gone through the valuation exercise, they’ve put together a SIM, they’ve actually taken it to market, and buyers are— or interested buyers are responding. And that individual has received an acceptable letter of intent from a buyer. And during the due diligence process, the buyer discovered that that business is on a month-to-month lease. Essentially, they have no control over the tenancy of their space whatsoever. And this is a type of business that is, it’s a very specialized type of space that they need.

Jason Bush [00:34:30]:
And so you can’t just go lease some office space and keep plowing forward. This is a unique asset class. And so that’s an example of all the attention, like the classic case of the real estate was treated as an afterthought or that real estate relationship was treated as an afterthought. And it potentially exposes flaws in the business brokerage side where there was a valuation exercise that occurred. And when a business operates on a month-to-month lease, the theoretical value of that business might be zero, right? Because if that tenant elects, or if that landlord elects to sever your ability to enter the building, right, which in some states can happen as quickly as 3 months from now, right, that business is not an ongoing entity. And so unfortunately, I was brought into the situation like after buyers had submitted LOIs. And so there is a path to reaching the solution. Pending your landlord wants to play ball.

Jason Bush [00:35:35]:
This landlord does not want to play ball. So that’s a real pickle. Like, that may turn into a deal that has gotten away. And it’s unfortunate, right, because it was fixable 2 years ago, um, or it was something that could have been addressed early enough to help the business owner realize, like, your plan or your strategy for selling your business in 12 months from now is 100% dependent upon you solving your tenancy and your location challenge. Yeah, right. So that’s, that’s an unfortunate situation. I’ll give you the converse of one that it’s a deal that I’m worried that might get away, but it’s, it’s an awesome example if we can make this deal happen. So, um, this particular business owner, uh, also leases a location, uh, but they have an incredible tenant favorable lease.

Jason Bush [00:36:29]:
And lots of mistakes were made on the landlord side where that landlord for some reason provided the tenant an option to purchase the building with— and there’s no termination on the— or there’s no duration with that associated with that option. Like it’s kind of a perpetual purchase option. And that landlord, that real estate owner actually wrote a price an exec— a transaction number into the lease. Um, so this tenant has got a standing, unending option to purchase that building at a known price, which is an incredibly powerful option for a tenant to have. And it’s an option that a landlord should never give, but that’s where we are, right? Um, yeah, and the building is likely worth 2 times what that transaction price is that’s written into, uh, into that lease. So I’m working with this business owner diligently to help, uh, them understand, like, you need to buy this real estate now. You’re going to add about $1 million to your net worth just because, like, just let’s get some capital organized and let’s buy this thing, right? So that’s a win. That’s a huge win, provided that they to, you know, choose to allocate their capital in the right way.

Jason Bush [00:37:48]:
Yeah, it’s kind of, you know, I don’t know why it hasn’t happened yet, but I’ll make it happen.

Jason Cutter [00:37:55]:
Yeah. And, and what I love about those two stories, starting with the second one, is that if I think about it, if it just went forward and let’s say the business broker wasn’t looking at it or thinking about it strategically, or it’s at the moment where the business needs to be sold, and so you know, it’s not in advance, it’s not the exit planning mode, it’s the, uh, I need to sell this now or let’s list this now kind of timeline. Then, then what happens is you’re putting it out the market, or the broker doesn’t notice the value of that in, in, in the lease, and then the broker’s putting that out there in the open market and then hoping that someone sees that value and is willing to pay for that potential value instead of the actual like real estate value.

Jason Bush [00:38:39]:
Um, yeah, in this scenario, that may.

Jason Cutter [00:38:40]:
Or may not work.

Jason Bush [00:38:42]:
Yeah, luckily I’m not going through a business broker or a financial advisor. Like, this is a direct client relationship that I have. Um, and so I’m confident we’re gonna fix it. Um, yeah, but yeah, that one, I’m hoping we don’t have a conversation a year from now and say, yeah, that’s the deal that got away. Like, we’re gonna— we’re gonna keep that from happening.

Jason Cutter [00:39:02]:
Yeah, well, and I think, like, again, like The good thing is that you’re involved. I’m just thinking of the other parallel universe scenario, which is someone like you wasn’t involved and it just went forward, and then the, you know, it’s now listed as a business for sale with this real estate, and who knows what would happen. Would they, you know, maximize the value?

Jason Bush [00:39:22]:
Yeah, the most typical error that we see is, you know, when a, when a business owner owns their real estate, they don’t lease it to themselves at market rates. And, you know, as a result, they don’t build the value of the real estate via an income valuation potential, uh, in a way that they should. Like, they, they be— they’re, they’re inherently too cash flow focused on the business asset and aren’t transferring enough wealth into the real estate entity. And so that’s a whole nother conversation. Maybe that’s a, a second podcast episode where we can really dig in, like, into the like, I might turn away some of your audience because we could really dig into the minutia as to how that works. But, um, that mastering that leasing relationship is, is the key.

Jason Cutter [00:40:10]:
Yeah. And, and this, the short version of that is if you’re underpaying the rent based on the market value, then it’s essentially undervaluing the real estate, or you’re.

Jason Bush [00:40:22]:
Potentially even eliminating the ability to value the real estate on an income-based.

Jason Cutter [00:40:28]:
Valuation.

Jason Bush [00:40:29]:
Got it.

Jason Cutter [00:40:29]:
It makes sense. Yeah, I love it. Yes, that might have to be a part 2 conversation for us for sure. So as we wrap this up, I would love— you know, I have some of the links for you. Links will be in the show notes. But because I know this is a growing thing and you’re focusing on it, other than LinkedIn, which the link will be in there, people can find you, Jason Bush. It’s actually Jason Bush Value Advisor if they find you on LinkedIn. Um, how else should people get a hold of you, people who are interested in, in chatting with you, getting that list of the 10 questions that, you know, exit planners should ask?

Jason Bush [00:41:09]:
Yeah, um, right now LinkedIn is the best mechanism, uh, because that is kind of like the hub for all my various ventures between strategic advisory, my role within Linville Team Partners, uh, as well as like kind of my direct client relationships. That’s the best place to start. In my LinkedIn, there’ll be a link to my Calendly, which will give you direct access to my world. Like, so anytime that you wanna schedule a meeting and have this initial conversation about, you know, what, how can I help you as the advisor first, and then how can we help the client, just book time. You know, I have, my calendar’s available to all. And we’ll take it from there. That’s, that’s the easiest, most efficient place to start.

Jason Cutter [00:41:52]:
Got it. And, and I love it. And I, and I love from the, the, the first time we spoke to today in recording and how much the business from your side and your focus has evolved and is, is, is gaining a lot of momentum. And I’m excited because obviously, like you said, it’s a very underserved portion of the exit planning, uh, realm or umbrella, which is the commercial real estate side. And, and and not many people focused on that or know what to do with it. So I’m, I’m excited for you. I think this is great. I’m so glad you came on, Jason.

Jason Cutter [00:42:24]:
Thanks for, for sharing all of this, um, with the both the brokers who are listening, and maybe they’re trying to forecast further ahead for their clients or the ones that they’re talking to that aren’t ready to exit, the, the other exit planners, the certified people out there. So I appreciate you being here and sharing all this.

Jason Bush [00:42:41]:
Yeah, same, Jason. I appreciate the invite. Happy to do it again, you know, anytime that you want to delve into deeper waters in this topic. I’m happy to do it.

Jason Cutter [00:42:50]:
Yeah, I love it. And for everyone tuning in, hopefully you got some value. Make sure to check out the show notes. We’ll have Jason’s, uh, LinkedIn, easy for you to find, uh, on LinkedIn. Just look him up. But otherwise, the link will be in there. The stuff that he talked about, uh, if you missed those 2 freebie questions that he, uh, threw out there, uh, those will be in the show notes as well. Otherwise, reach out to him and get the rest.

Jason Cutter [00:43:11]:
Uh, and then from our side, if you want the authority that we talk about as a business helping helping others, uh, business brokers out there be successful and become trusted authorities. You know, that’s what we do here at Business Broker Growth. Make sure to contact us today. And until next time, stop hoping for deals and start growing your pipeline.