How I went bankrupt after buying a landscaping company because of a personal guarantee.

Yeah, it's funny.

I've been thinking about, not that I love podcasting, but I think it's a great way to tell a story, to have an anonymous podcast and just tell the truth about my day-to-day grind in small business without talking about partners, but talk about real numbers of the business without people knowing like it's me and stuff.

So it's interesting.

And I mean, you had mentioned the personal guarantee side.

And I recall one of your conversations that you posted online there saying like, or maybe actually it might've been in your community now, that you're running.

Um, and, and we could talk more about that, but I think it was along the message of, Hey, if you're going to give a personal guarantee, if $500,000 would bankrupt you, then why not do 5 million? If you're going to lose, it doesn't matter.

Right.

So

I talk about the, uh, it's the risk.

It's the risk on your part as the buyer, right? I'm not advocating taking on more, but when you look at small business risk, um, Especially if you're going to sign a personal guarantee.

A small business, the smaller it is, the riskier it is.

A lot of times buyers think like, oh, I'm going to buy a $1 million business because that's less risky than a $5 million business.

And that could not be further from the truth.

Business quality matters.

Absolutely.

But the reason multiples expand or grow as businesses get bigger is because there's less likelihood that any one person is going to destroy that company.

If I've got a $5, $10, $15 million business, then I've probably got a lot more customers, I got a lot more cash flow, I've got more supplies, I've got a few key managers in place.

If one person gets hit by a bus tomorrow, it's less likely the whole thing ends.

But if I got $1 million business with a team of 12 and one key guy, and that key guy goes on vacation for two weeks, the business is over.

And so that's what I mean by risk.

And so a lot of times, you know, people who are, you know, really passionate about this and they're like, Hey, I'm going to go do this.

I remind them like, look, if you're signing a personal guarantee, then for you, you know, financially, the guarantee doesn't matter.

Like if you're, you know, if 500,000 to 5 million, you know, 5 million, it's the same, it's the same risk for you.

You're wiped out either way.

And if that's the case, then you should probably go bigger because the bigger company is going to be the safer bet.