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How to Buy a Business (The Stupid Way)

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Hey there entrepreneurs,

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Welcome to the Better Business Brief, where I share takeaways from:

• running businesses I’m building to sell for millions
• My advisory with other business owners building to sell for millions
• tips and tricks you can use to do the same

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We interviewed David C. Barnett, who has tens of thousands of followers online and coaches business buyers of all types because of his 17 years of experience buying and selling businesses.

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Here’s the punch-in-the-mouth truth he dropped in our interview:

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​“People think cash flow of the business is money they get to put in their pocket.

It’s not.

It has to pay YOU, your debt, your taxes, AND still leave cash in the business.

Treat it like pure profit and you’ll go broke fast.”

So today, in less than 5 minutes, I’ll give you: ​ 💥 The most common trap first-time buyers fall into 🧭 How to avoid confusing cash flow with free money 🛠️ A simple filter to make sure a deal actually pays

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David’s big idea was this -

Most buyers fail before they even close because they don’t understand what Seller’s Discretionary Earnings (SDE), AKA cash flow really is.

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They see a business showing $250k SDE and think: “Nice, I’ll make $250k a year!”

Wrong.

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Out of that same SDE you still have to:

• Pay yourself a fair market wage
• Cover the bank loan payments
• Pay taxes
• Replace equipment and fund growth

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By the time you’re done, what’s left is usually a fraction of the headline number.

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If you ignore this, you don’t just buy a business…

you buy yourself a job with debt attached.

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MISTAKE #1 — Treating SDE Like a Salary Bonus

Too many people run the math like this: SDE = new lifestyle income.

David’s Reality check: if you’re working full-time in the business (which you likely will need to to make it work the same), your “salary” comes out of that SDE before debt service.

Miss this, and the deal looks great on paper but starves in real life.

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MISTAKE #2 — Overestimating Your Cushion

One hiccup in customers, a tax bill, or a broken piece of equipment can wipe you out if you didn’t budget SDE properly.

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Barnett calls this “customer risk traded for finance risk”…

instead of wondering if customers will buy, now you’re wondering if the bank will get paid.

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MISTAKE #3 — Believing Broker Math

Business brokers love to pitch SDE like free cash flow.

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But unless they’ve subtracted a real operator’s wage, the deal is inflated.

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If you step into the business full-time, you’re the operator.. your labor costs money (or at least it SHOULD if you want to make any).

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THE GOLDILOCKS FILTER (use this before you write an LOI): ✅ Does SDE cover: salary for you + debt service + taxes + reinvestment? ✅ Is there enough margin to survive a bad quarter? ✅ Are you being paid fairly for your time, or just buying yourself a stressful job?

Barnett’s hardest-hitting point: if you confuse SDE with profit, you’ll nuke your savings, ruin your credit, and still have to find a job after.

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Don’t buy dreams.

Buy numbers that pay in reality.

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If you’ve acquired a business recently and are struggling to figure out your priorities, we help business owners create action roadmaps all the time.

​Schedule a call with me here so we can plan yours.

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If you like these ideas or found this informative, stick around and subscribe. I do this newsletter every week.

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They can even sign up here :)
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Happy value-building to you!

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See you next time for Better Business Brief,

-Brody