Boosting The Value Of Your Business Through Real Estate

Stephen S. (00:03.547)
Welcome to the show where we interview the nation’s real leading real estate entrepreneurs and service providers Welcome if you’ve never been here before or if you’re joining us for the second third or hundredth time welcome back I am here today with Jon Moffitt and today we’re gonna be talking about his value framework lease to legacy seller carries creative financing He has an extensive background starting in the Italian restaurant business and construction of all things

And I am super excited to go all over and figure out what is most important and then some new things that Jon is working on here as well. just keep in mind at Investor Fuel, we help real estate investor service providers and real estate entrepreneurs, two to five extra businesses to allow them to build the businesses they’ve always wanted to allow them to live the lives they’ve always dreamed of. that, Jon, welcome to the show.

Jon P Moffitt (00:56.78)
Hey, thanks. Great to be here. Thanks for having me.

Stephen S. (00:58.795)
You are absolutely welcome. I’m super excited to get into the taste topic. But like before we get started, can you just share a little bit about yourself and how you got here?

Jon P Moffitt (01:10.176)
yeah, absolutely. You know, when I was young, my family had a business and you know,

the talk around the table was, you know, how do we improve the business? How do we, how do we get to the next level? And, know, it came from a family didn’t have the knowledge of how to do that. And so I kind of made it my life’s mission as I, as I went through life to learn as much as I could about how to create value in the business. My, my parents, we got to a point where we went to sell the business and it really wasn’t worth what we thought it was worth. And so we kind of let it go and it hit me deep. You know, it was one of those things where, you know, I know a lot of people that

go through that. They go through that time where they want to sell their business and they get there and it’s not worth anything. So I kind of made it my mission to figure out how to improve values of business. So I have this thing called the value framework, which is a very extensive course that people can take that really talks about transferable value. And some of the little things is, you in the everyday operations of the business? If you are, it’s real hard when you’re gone for the business to operate.

things that you can work on to make your business more valuable. But one of the most important things I learned was

how ownership of real estate really changes the dynamics of when people get ready to sell. You one of the things that happens is if you own the real estate, there’s a lot more credit facilities out there for you and different options for you at different interest rate costs to be able to find a buyer that can actually borrow money if you own the real estate. And I think the hardest thing for people is transferring from leasing a property into ownership. It’s such a mystery.

Jon P Moffitt (02:53.932)
do it. So I have this thing called Lease to Legacy that I’ve rolled out that walks you through if you can’t buy right away. It talks about some real basic tips on you know things you can do to make your lease so it’s not a detriment when you go to sell. And so that’s kind of where I am and who I am and what I’ve done.

Stephen S. (03:12.392)
That’s amazing. Now, so tell us a little bit more about what you’re currently working on.

Jon P Moffitt (03:19.438)
Right now I’m working on a value framework. I’m getting ready to launch here real soon You’re gonna start seeing stuff all over the social media It’s called mastering business transition and it’s called the value framework and and I’m gonna start putting out there a lot of tips and a lot of things for people to work on But they’ll be able to dive in the course and then coming up in about 45 days I’m gonna have a live session where people can come on and we’re gonna do this least of legacy and we’re gonna walk through For example, you know when you have a lease you don’t think about the cam charges, but you

want to make sure that you put a cap on those cam charges because if not you know it could be a detriment to the buyer that’s coming in. You also want to maybe put a first right of refusal in to be able to purchase the building.

You know, there’s also some things like what they call going dark period where you can actually shut the business down if you need to. and they allow you to do that because a lot of landlords don’t want those places to be empty or look empty. so those are just a few things that we cover. you know, in, in the lease to legacy, we also talk about how to structure, financing, right? So, so for example, let me walk you through a scenario.

There was a business that was getting ready to lease a property, but the owner was also interested in possibly selling it. instead of taking all of the tenant improvement money and throwing it away, which most people do, because once you put the money into the building, it’s gone. We structured it in such a way that that was almost like the down payment money. So we signed a lease. We were able to put the improvements into the property. When you put the improvements into the property, it was a distressed property. So it needed new plumbing, new

electric, new HVAC. It increased the value of the building. So then when we went to find our first group of financing, which was private money, the loan to value was there because we had put so much money into the TIs and the value of the property had gone up. So we didn’t really have to come out with a lot more money out of pocket. And then we were on our way.

Jon P Moffitt (05:25.214)
Through that transition, I’ll take you through the whole transition about a year later the business had started operating started earning income and we were able to go look at conventional financing The issue was the value of the property wasn’t there So then what we had to do was a short-term seller carry on about 20 % of the total price And the seller carried that for two years It’s super important when they do that that the payment and the language fits what the SBA allows so that we were basically

Stephen S. (05:54.09)
Mm.

Jon P Moffitt (05:54.88)
creating a financial structure that the SBA was okay with. So two years later the SBA comes in and takes out the financing and now that person that had that distressed property, that owner had that distressed property has now been taken out in three years and now there’s a thriving business in there. That business has something of value so when they get ready to go sell they have some value in the business. So that’s kind of one scenario of how that works.

Stephen S. (06:20.818)
Yeah. And what got you passionate about with all of your different experiences within, I mean, going from the restaurant business, construction, to real estate, the finance side of everything. Like what really got you passionate about doing what you’re doing now and helping other people?

Jon P Moffitt (06:40.174)
Man it was probably I’ll tell you this you might believe or not. I was 12 years old and I was like, man I don’t know anything about Business and nobody around me could teach me. So I think the coolest thing is when I went to work for a large institution I had access to underwriting guidelines and I was like, my god I just found the holy grail of all the secrets of business and this this financial institution been around for a long time and so I was able to go in every day and read kind of what they

say a good business should look like in that industry and then back in to start studying those businesses and studying those financials and really understanding, you know, what what decisions do you make daily because

It’s interesting. The decisions you make when you open a business are completely different when you operate a business. And then when you sell the business, it’s a different mindset. You wake up and you think a little differently when you’re in those different stages of business. And, and you learn that I learned that through understanding what it took to hit the numbers that the banks like, like, you know, they have all these acronyms that nobody in the business world understands, you know, EBITDA cashflow, you know, debt service coverage, you know,

And all those things, you know personal financial statements you mean kind of know what they are But you don’t know what they mean and you don’t know the decisions that you make daily that impact those numbers And so what was important for me was trying to understand not only what those numbers mean But also the decisions that the business makers own that may they make to actually change those numbers so that when an investor or a bank or Something wants to buy a business they look at them. They go the numbers look great and by

the way they have a great you know operating procedures and decision-making that actually maintain those numbers they didn’t just kind of fall into those numbers they actually operate that way and so for me it’s been a lifelong passion since I’ve been really young

Jon P Moffitt (08:38.39)
to get in there and understand multiple different businesses, whether it’s manufacturing, healthcare, construction. I’ve kind of studied them all and found out which ones are recession proof, which ones aren’t, which ones have seasonality, which ones don’t. But I can tell you this, no matter the ups and downs in the business world, if you can own your real estate, you’re going to weather those storms better than if you don’t own your real estate. And so, you know, my advice to

to the listeners is if you’re in a lease or you own a business, find a way to own the real estate that your business is operating out of. And if you can, move towards that. And the way you have to do that is you’ve got to create it. You have to think that way. You have to start looking. I advise looking for distressed properties. There’s a bunch of inventory right now out there in the…

in the office space. There’s a bunch of retail space out there that’s available. And you know, don’t be afraid to bring in some partners. You know, don’t be afraid to, you know, if you’re, you could be in a strip center and the strip center could go up for sale and you’re like, there’s no way in hell I can ever afford that. But you know, reach out to some people, you know, you might be able to put a few people together and, and, own the business and, and own the building together. And then if you sell the business one day, you still own the real estate and they’re paying you rent. So.

Stephen S. (10:05.458)
And so what do you see as like some common mistakes that some of these businesses are making other than maybe not owning their real estate? What are some of the common mistakes that you see? And maybe even for like people that are in the real estate sector specifically, what do you see as some of those things?

Jon P Moffitt (10:17.646)
Jon P Moffitt (10:22.738)
I think 90 % of business owners do too much themselves and they don’t trust in their team to do work they should do. And so they call them standard operating procedures. You don’t have to make it that complex.

But if you’re making every decision and everything flows through you, you don’t have a business, you have a job. And it could be a high paying job or it could be a job that you’re barely getting by. So I think the biggest pitfall people have to work on is lifting other people around them up, coaching them and building what’s called standard operating procedures. And then to really make it simple, just record that process. It could be a seven,

Checklist on a particular item and you’re assigning it to people within your organization That’s great, but take that and put it somewhere in a central location You know whether it’s dropbox or Google Drive or something like that So that you kind of create those standard operating procedures I I tell all the the guys that I work with and gals that I work with I’m like just pick one a month You know it’s not you know you’re in business for a while It’s not like you’re doing this overnight even if you decide to sell your

to five years out usually. So just every month pick something and create a standard operating procedure. When a buyer comes in and they see that they go, well, I can do that or I might change that a little bit, but there’s something on paper that helps guide them on how to run and manage your business, which I think is the one of the biggest pitfalls to businesses. They just wake up every day and who’s in my email, how much are my sales, you know, and they don’t really focus on the operations and making sure that the people around them. The other thing I

find is the succession plan, like having somebody that is in your organization that could buy it, that could take over, encouraging people to think of finding that talent that eventually could take over the whole thing and not being fearful of bringing that person in and listening to their ideas and taking some chances with them and letting them be a little entrepreneurial in your space. Those are a couple pitfalls that I see.

Jon P Moffitt (12:39.984)
See

Stephen S. (12:41.162)
Yeah, absolutely. And for anybody listening that maybe has heard of standard operating procedures, as they’re also referred to as SOPs, just for our audience sake, that may not know, I’m familiar, but someone out there might be like, maybe like, that what somebody else was talking about, about these SOP things? I thought those were SOPA PIAs. You know what I mean?

Jon P Moffitt (12:57.132)
Yeah.

Jon P Moffitt (13:01.806)
Yeah. I know I try, I try not to use acronyms too much because people are like, what’s an SOP? How do I get one of those? You

Stephen S. (13:11.134)
Right, because then you get into too many SOPs, CPMs, KPIs, and then the next thing you know, you’re SOL, right? For sure. Yeah, absolutely. Man, this is such great content. Such great content. And so with everything that you’re doing and…

Jon P Moffitt (13:18.222)
You’re like, I don’t know what the hell’s going on.

Stephen S. (13:34.767)
and referring to here for example, what are some of those like first things that when you come in, you’re coaching a business owner who maybe is like in that phase where they’re like, hey, I’m 60.

two years old, like I want to retire. I know that like my business works okay, but I know businesses maybe rise, you know, maybe I know that businesses either are only valuable based on their systems and processes that are actually in place. So that way, if I’m not here, it can replace me, you know, whatever. Like what are some of those critical things that you start doing like from day one to help them boost the value of their business?

Jon P Moffitt (14:11.03)
Yeah. So, you know, the first thing I do with everybody is you, you do an evaluation. It’s just like an athlete that goes on a field, right? Or somebody that a music person, you sit them down and you see what they can do. You see who they are. And you see that, you know, you see these websites, you see these sheets, but there’s a very specific way to engage on what I call a gap analysis about a business. And the first thing I say is, know, in this, I think everybody’s kind of heard this if they’ve been in business, but you need your three years financial

your P &Ls and your balance sheets. You need your team. So who is the core players on your team and what’s their bios look like and how do they cover what you do. You need your marketing plan. You know, what social media platforms are you on? How are you gaining your business? You need to evaluate your client base. You know, you need to see how much of my stuff is reoccurring, how much of my business is one time, how much of my stuff is concentrated on one client. And you need to start evaluating

Evaluating your client and production base. You need to look at your products. You know, you need to see what products are Profitable what products are and can you bundle you know do some bundling? So there’s there’s you know, like I said, there’s five or six main areas and what we do is we really just gather the information first and then we just start having discussions we and the discussions more about mindset than it is about the business it’s it’s because You know the business owner you

created the business you created from scratch you woke up one morning with this idea that I’m gonna create a manufacturing company and you just did it you know I’m gonna start a lawn company and you just did it you know you you came over the cool logo you did your website and you had a certain mindset and then you get into the fact that you now it’s operating how do I grow it and so you have that mindset well very rarely are people thinking about transferable value and transferable value is different than just

operating a business. something that you can create that anybody can come in and run with what you’ve created. So there’s some things you want to do. Like, for example, in your financials, almost everybody I know has what I call fluff in there of expenses that shouldn’t be in their financials. So as you’re getting ready to sell, you want to start cleaning up some of those expenses. You know, you want to you want to drop the stuff that shouldn’t be in there and clean up your books. Clean financials are really key.

Jon P Moffitt (16:40.56)
to when a buyer comes in. Another one is your staffing. Who is in your staffing that’s gonna be a key employee that’s gonna stay on and move through? And have you had the conversation with them? And they’re not caught off guard. And so it’s just a different mindset, so to speak, as far as how you’re preparing your business to sell versus how you’re preparing your business to launch. And so we focus pretty much on the same things, but in a different way.

Stephen S. (17:08.424)
Yeah, that totally makes sense, absolutely. Now, so let me ask you this as, you know, we’re kind of coming up on time here. I want to give you enough time to answer this question because you have a wealth of knowledge across multiple industries. If you had to go back to the beginning of everything and you were able to take this.

hundred years of experience that you’ve accumulated within, know, let’s say, you know, three decades of time, to be fair, right. But you had to take all of this knowledge, all this experience, all the wins, all of the losses, everything. And you had to.

Jon P Moffitt (17:35.831)
Yeah.

Yeah.

Right, right, yeah.

Stephen S. (17:51.258)
Start over. What would you do different and what would you do the same with all of that?

Jon P Moffitt (17:57.998)
I think the one thing I would do different is surround myself with like-minded people I think finding your tribe of like-minded people and whatever journey you’re going down Make sure that they are on the same page with you and your journey. I think that that’s probably the biggest lesson I learned in life Don’t try to help everybody but stay focused on those around you that are like-minded number two I think

Stephen S. (18:04.754)
Mmm.

Jon P Moffitt (18:28.212)
everything I do I think about owning some type of real estate and when I say real estate I don’t necessarily mean dirt, bricks and mortar you know there’s also real estate online there’s also real estate and technology

there’s real estate and branding. so understanding the value of those different assets, I learned a lot on how important it is to have those types of pieces of assets no matter what you do.

And then, and then the only thing I think, outside of that is, I would have, I would keep the exit in mind day one. I’d be thinking about, you know, what do I want to do when I build this and sell it? What’s, what’s my next thing? You know, and, just have that kind of in the back of the realm of everything you’re building and, and think about building it to hand it to somebody else to run with it, you know, opposed to die in it.

Or hand it off to your kid or because they don’t want it, you know by the time you get down there most of kids don’t want it unless they’ve started working in it with day one and then they want you out a lot sooner than you want to go, you know, they want to get you out of the way and say, you okay, you don’t have the ideas anymore. Let me run with this. And and so there’s this there’s this rub there too, you know, like passing it on to your siblings.

Stephen S. (19:51.028)
sure.

Yeah. Now, so one of the things you touched on there is surrounding yourself with like-minded people. You know, the big thing that business owners, real estate investors, really anybody doing anybody doing anything that that doesn’t naturally have a community for itself, like working in a job with other people that were hired that you’re all somewhat similar to somehow because one dude interviewed all 20 of you and made decisions based on whether they liked you or not.

Jon P Moffitt (20:16.792)
Yeah, yeah, yeah.

Yeah.

Stephen S. (20:22.346)
You know, like, and all of the natural groups that come, you know, I think the big thing that most people find is that they’re alone, like they’re alone in the process. So what are some ways that you suggest people surround themselves with like-minded people? How are some things, what are some things they can do to do that?

Jon P Moffitt (20:40.418)
First of all, that’s why I created My Next Age. That’s a group of like-minded people that are on the purpose of building value in their business, selling their business, and transitioning to mentorship and investment into the industries that they love. And it keeps them alive because once you sell your business, you don’t have problems to solve anymore. You don’t have board meetings to go to. You don’t have emails to answer. You become kind of distant from everything that made you who you were for years. So that’s the, that’s one thing I’ve done. The other thing I recommend is every single industry

I don’t care who it has has an association and in that association just get involved and just Introduce yourself to everybody that comes in there. You’ll find at least one or two people that

have some of the same passions as you do and build from there, but get involved with your, whatever your local group is. If, if you’re in the contractor role, get involved with the contractors and, and get to know your competitors because they’re just like you, know, and you don’t have to, competitors can get along, you know, and you can, and have a strong relationship, especially if you’re competing and your products aren’t quite the same and your brand is not quite the same. don’t be afraid to call up a guy and say, Hey man, I love what you do. I’d love to

to pick your brain and get to know them. You who knows? You can put both the companies together and sell them both and both make a crap load of money. I mean, I’ve done rollups before. put 54 different self-storage units before together, all different brands and put them into one brand and sold them. And these are all different people, but they all had one thing in common. They wanted to sell, right? And so that’s like mindedness in a way. So that’s what I’d recommend. Get involved, get involved with whatever your local associations are. Don’t be afraid to talk to your competitors. And if you want

you can join our next age group. It’s on an application only process. You have to be accepted into it because we’re there to get some things done and to move the dial.

Jon P Moffitt (22:37.57)
We want mentors and investors and people in that stage of life where, know, they really want to, help those business owners. Like you’re saying that are lost and don’t have friends. want to give them a companion. You know, a guy just sold a construction company for, you know, $20 million. He’s bored and he’s like, what do I do? I’m like, well, just go tell a construction company. It just started. That’s doing 2 million a year and help them build that. And he goes, that sounds like fun. Let’s go do that. You know, and it’s really cool because then, you know, if they need help buying some real estate or whatever, he goes, Hey man, I got some extra cash for myself.

Stephen S. (23:01.46)
Yeah.

Jon P Moffitt (23:07.504)
I’ll be your bank, you know? And so it just becomes a really great community of people lifting each other up, rising the tide. I believe in rising the tide with everybody around us.

Stephen S. (23:17.93)
For sure. Well, Jon, thanks so much for being on the show today. So I know you kind of plugged it a little bit there. But if anyone wants to learn more about you specifically or what you’re working on, where’s the best place they should go for that?

Jon P Moffitt (23:20.822)
Yeah!

Jon P Moffitt (23:29.496)
Jon p Moffitt.com.

Stephen S. (23:31.983)
Awesome sounds great. Well everyone. I hope you enjoyed today’s show. We’ll see you in the next episode But thanks for thanks for joining us and make sure to subscribe and learn more about investor fuel at ww.investorfuel.com We’ll see you in the next episode. Thanks so much for being here again,

Jon P Moffitt (23:45.932)
Awesome, thank you guys. Yeah, thank you.