Unlocking Business Success and Brokerage Insights with Jim Mayfield

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Interview Transcription

ADRIENNE: 
welcome back and thanks for listening to the Team Lally real estate show home of the guaranteed sold program or well buy it I’m Adrienne and I’m Attilio and if you have any questions just give us a call at 7999596 or check us out online at Teamlally.com. Our

ATTILIO: 
guest today is the president of Island Business and Commercial Brokerage, a distinguished business broker with an IBBA sort of certification unique in Kauai and rare statewide achieved through an extensive coursework and examinations.

ADRIENNE: 
He was key in establishing the Kauai Island utility cooperative, so carrying over 250 million for it. Holding an MBA from the University of Hawaii, a BA from Dartmouth, and being a Punahou alum, he blends expertise with a strong commitment to community and sustainability. Please welcome welcome back. Today’s guest Jim Mayfield. Hey,

ATTILIO:
Jim.

JIM: 
Aloha. Good to be back again.

ATTILIO:
Yeah, you know, and you’re just in your perfect kind local kind person because people are like, Oh, MBA from UH. Ah, BA from Dartmouth. Oh, he went to Punahou Oh, High school you went to? But

JIM: 
done in Hawaii? Yeah. diddly. Yeah.

ATTILIO: 
Where are you from here and what high school you went to? Those are the first two questions everybody asks,

JIM: 
Oh, of course. Isn’t that when they say what school you go to? Yeah, it’s not what college? What High School? Of course. So,

ADRIENNE: 
Jim, we’ve had you on before. And I mean, I know that we went over your intro. But there was one thing that we did not touch on on this intro, which is, which is his extensive knowledge of finance, and how money and the business loans work. And how did he get all this knowledge? Yes,

JIM: 
well, my career’s started. I started with First Hawaiian Bank so many, many, many years ago. And later on, I went back and got my MBA from UH. And as I was leaving, finishing, UH a very close high school friend also, who’s at Banco yelled and screamed at me twice, you know, to apply at banco, so I applied to Banco and I, and I spent, like, you know, 18 years at Bank of Hawaii serving and gradually increasing, it’s all commercial work. Yeah. And so I have many, many, many years of doing commercial lending, per Bank of Hawaii. And so, you know, so I know it from the bank standpoint, and I know it from the clients standpoint. And so what I do for clients, and I might be the only one in Hawaii, who can do this, or who has the knowledge to do it, is, you know, I handled the business, obviously. But I also, if my seller gives me written permission, I become a dual agent, and I help the buyer with the financing. I literally just, you know, waiting for your phone call, I’m, I got a, you know, $18 million deal right now. And then I just said, you know, a couple emails to some business appraisers on the mainland week, I do valuations, I don’t do, you know, I don’t do a $10 million business appraisals, but I know who they are, because I’m a member of the two national organizations and they go to this year, it’s in Louisville, and going to the National Conference, and you keep all those business cards from all those people there. Because you never know when you’re going to need their help. And certainly, you know, I need their help for this deal. So anyway, that’s, that’s my background on the business financing.

ATTILIO: 
I think people need to realize too, in residential real estate, again, we, it’s more normal, that you’re going to have the standard operating procedures, you got a representation on both sides, but with businesses, there’s not a lot of people, you know, there’s a ton of commercial real realtors, but not too many that understand, like the finance, yeah, you’re selling the building, but internally, you have a business and then you have the financing to put all that together. So it is kind of more commonplace for someone like you to put all the pieces together to make it happen.

JIM: 
Even though I am a real estate broker, I do handle commercial real estate here on Kawhi. I’ve been doing that for many, many years. You know, there’s a lot of residential realtors who really don’t have the background and you know, that’s part of our our commitment as Realtors is not to do it if we don’t have the background, but there’s a number of residential realtors, you know, looking for the commission. And it’s difficult when they’re on there representing let’s say the buyer on a business deal. Yeah.

ADRIENNE:
So so so there’s not a whole lot of agents that have this expertise in business business brokerage? Yeah. Can you explain a little bit? What, what what does that mean to be a business broker?

ATTILIO: 
Yeah, what are the like top three things that you need to be aware that that, that you have actual experiential knowledge of regarding this?

JIM: 
So I’ll just give you my history. When I started. I had chosen to retire from Bank Hawaii and didn’t quit required, I didn’t get bought out, I just decided, you know, I had stopped learning as a banker, and I was only 40 years old. And that’s too young to stop learning. So yeah. And then I I, just by coincidence, I saw somebody valuing a business once and once I saw that I go, that’s what I should do my next life. And so, you know, I’d go back to the mainland conventions, take all the courses there to get certified. And really, anybody who wants to become a business broker really should go to the national conventions, and get that experience. And so that’s where I got my initial training, but of course, I already under, you know, as a commercial banker for Bank of Hawaii. I already knew how to underwrite real estate deals, and I knew how to underwrite business deals because I had already been doing that At the bank, the difference here was, you know, I was representing the seller, you know, as a business broker rather than being the banker. Gotcha.

ADRIENNE: 
Now, Jim, I think last time you were on the show, we talked about you do reside on Kauai, but you do help businesses all Island wide. Yeah. How does that work? I,

JIM: 
I am absolutely statewide. I, for the first six, seven years, I was raising two daughters. And so I was given all my referrals to another provider in the state of Hawaii, but that person sold his business. And so suddenly, I didn’t have anybody to refer to and, coincidentally, the largest company, United States or brokerage, reached out to me to ask me to handle they’re stuck throughout Hawaii. And so, you know, the strange thing is those young girls of mine, and grown up and left, and so I no longer needed to be just on coli. And so about 1012 years ago, no more than that. Quickly, I’m a young oldest 34 now. So that’s when I started, you know, expanding to you know, all of the all of the islands, you know, principally a wahoo some on Kauai I got two listings, and a third listing coming on Maui. And I have one listing on the Big Island. So I certainly do all of the main the principal islands, but you know, mostly, I’ll say on kawaii because this is my home. And of course on a local. Well,

ATTILIO: 
the and tell me, I don’t know if this is true. I just knew it anecdotally that a lot of the small businesses are mostly bought from people that want to move here and have a business where they land and they’re very entrepreneurial. What’s been your experience with that?

JIM: 
That’s exactly the the mainland people are entrepreneurial. Yeah. Many of the locals are not especially entrepreneurial. Yeah. But people on the mainland, you know, there, I get a number of inquiries on pretty much every single day, certainly every week. And almost no matter how many inquiries I get from all the people in the mainland, if there is no real reason why they want to buy a business in Hawaii, they end up not buying the business even though I get a zillion inquiries. Yeah, yeah, we follow up with them, of course. But they aren’t real. But what it is, is, you know, people who got married here 30 years ago, they honeymoon here 30 years ago, their children live in Hawaii. They’ve been coming here that timeshare, they’ve been coming to Hawaii for 15 years in a row. They love Hawaii. It’s all of those. It’s those of people who already have a connection. Yeah, the relationship in Hawaii. They are the real buyers. And yeah, so I’ll say 80 or 90% of all my business buyers are from the mainland.

ATTILIO:
Yeah, cuz it’s, you know, I think marketing of your businesses here in Hawaii is like that movie, the descendents movie, it was like, here is the Hawaii. Well, I

JIM: 
cried because I knew some of those families that were in the descendant, you know, and I knew him personally. Well,

ATTILIO: 
it’s, I liked the line. That was that guy’s name? The actor. I forgot his name. George Clooney. Yeah. George Clooney. He goes, there’s the Hawaii that people see on the commercials. And then there’s the real Hawaii, you know, with the homeless, and, you know, vacationing, here is one thing, running a UPS Store. 80 hours a week is a whole different kind of perspective of Hawaii. And, you know, no more going to the beach, you got to run this business. So

JIM: 
well, you know, I only sometimes do prospective buyers actually kind of my office here on kawaii but as they do, I sit them down on my sofa for about two hours. And, you know, business therapy to be successful. You know, I tell them, you know, all say all the bad things. I don’t want them to be surprised, you know, so I tell them all those things. But of course, I also repeat to them, they already know, the wonderful things. You know, the fact that we still live here after 4050 years. More than that, I’m getting old. Yeah. Obviously means that I think that, you know, it’s obviously a wonderful place

ATTILIO: 
to live. Yeah, I would say you know what, the question you should ask them, Where are you gonna put your ashes? And if they say, whatever, this beach or that beach, then you know, they’re serious about being here because that’s interesting. We get everybody has this pipe dream of working for a team Lally and Hawaii. So we get a lot of calls from agents in the mainland. I’m like, okay, that’s your fancy dream. We take the interviewer to a certain point and then we stop and we say we only continue the interview with you when you’re on island. Because we’ve learned, but you know, they’re like, oh, nevermind, you If

JIM: 
you can’t afford to spend that much time with people who don’t have a relationship, you know, if they’re just looking to buy a business at the right price at the right size, there’s going to be far more businesses somewhere on the mainland for them. And, you know, no matter how well a business is priced here in Hawaii, there’s going to be bigger, cheaper businesses somewhere on the mainland. So

ATTILIO: 
I would only be interested in a Chick fil A. So

ADRIENNE: 
Jim, let’s, let’s move on to like the actual business owners. And, you know, maybe they’re trying to plan their exits. They’re thinking about selling Yeah, like, well, or just maybe, you know, they’re like, Okay, five years down the road, I want to exit this business. Do you do any kind of consulting or helping them to, you know, just make sure their business is set up properly for the sale?

ATTILIO: 
pretend they’re listening to the show right now? What would you tell them? What advice would you give them?

JIM: 
Make the phone call? I say that because I get almost no inquiries years in advance in advance. So ideally, what we were trying to tell people is, we should they should approach us three years. Before Wow, time to sell. But I received almost no, no heads up that far. Yeah. Right now I there’s, you know, one of the deals over on Maui should be coming in probably next month or two. But the only reason why it’s delayed because they repeat again today that they do want to list as they were waiting to get their 2023 tax returns completed. So make the phone call, you know, whenever as soon as possible. But I won’t be surprised if I’ll give you a story. And then some unfortunate or fortunate. About three months ago, I got a phone call from a gentleman. He said, Mr. Mayfield, I’m driving back from my doctor’s office to my business, now, I need you to sell my business as fast as possible. The doctor just told me that I want to die within the next three months. Oh, and we want that as a backup. We are motivated as brokers of course, yeah. So when you hear that kind of a story from somebody, it was all hands on deck, we did everything we could and we found a very appropriate buyer. Very quickly, the buyer worked well with the seller, because you know, he knew the situation in terms of the help. And we and we actually about a week after closing, the seller called us up and just told us how thankful he was that we were able to help him and to give his wife the comfort that she needed. And then a week after that he passed. So it was nice, that we were able to do what we needed to do to help both him and his wife,

ATTILIO: 
you know, talk about turnkey businesses versus

ADRIENNE: 
like owner operator, you know, like you’re buying a job well,

ATTILIO: 
the owner operators, like they’re trying to sell the business, and there are key parts of the business working in it. And then there’s the ones who have a business where they got all like, all the key positions are covered by employees. And they’re just kind of like coming in once a while to check the books speak to that on, on on values, and, and the expectations that people should have when they’re selling something that’s turnkey, versus you got to come in here and be the manager or something,

JIM: 
I’ll say 80% of all sales are with the expectation that the buyer is going to become the owner operator. Gotcha. That’s just how it is in Hawaii, you know, for deals, certainly up to let’s say, three quarters of a million. I just got an inquiry from somebody yesterday. And they’re looking to do a deal in the 500 to $600,000 range. And they’re looking to, you know, per business that already has a manager in place and, and I told him that might be rather difficult, because that’s a relatively modest business still, that has an existing full time employee manager for this business. Now, once you get to the 1,000,001 and a half million dollar deals, then you know, I won’t say frequently but on many occasions there he has a manager in place and that we can’t we can do those deals. Yeah. But most deals are with the buyer becoming the operator.

ATTILIO: 
Yeah. You know, Adrienne and I own multiple businesses and one of the things we look at is, is the owner operator actually taking a salary? Because if they’re not you What’s your opinion on how books look, because the numbers are off? If they’re not, if they’re taking some 40 grand a year and their position needs to be filled by somebody should be paying 80? How does that play into the negotiations of the sale of that business?

JIM: 
Sure, well, then that’s why you go to the mainland for the training well in advance before you become the operator, because for the we call the Main Street deals, those are the deals that in our up to a million million and a half at the most, where the buyer typically becomes the manager. And in those situations do do not build in a salary for the owner, or the manager, you assume that the profit is going to go to the bottom line, and then the buyer, they’re going to do whatever they choose to do. When you get to them mergers and acquisition size, which is, you know, a million half 2 million and up. That’s where you typically have a manager, and we ask upfront, you know, what is the manager being paid right now? Or if there is no manager, we asked the seller, what would be an appropriate validate for a manager to run the business? And so we build. So the larger deals we build in the manager salary and appropriate manager salary? For the smaller deals? You do not do that. Gotcha.

ADRIENNE: 
So So Jim, with it looks like we pulled up your website, when you see that you’ve got about 20 businesses for sale? What’s your most interesting or unique business opportunity that you have available?

JIM: 
Ah, unique. Well, that one’s that one. Is

ATTILIO: 
there any professional olive stuffing factories?

ADRIENNE: 
Or you could name a couple who’s just you know, I’m always curious. Well,

JIM: 
I’ll tell you a couple. Some of them I do not do typically, I do not do the professional when I do the CPAs gonna do the doctors, I don’t do the dentist. I can get to training in that. Because I belong to the, you know, again, the national organizations which have training for that. But I haven’t done it in the past. Yeah. And so but there are specialized Business Brokers on the mainland, and that’s all they do. They specialize in one or two professions. And those are the ones I would refer those kinds of those kinds of people. Yeah, I handle, you know, all those other businesses, you know, that that come around? Right now. There’s a bunch of restaurants in the market, there’s always restaurants in the market. But yeah, the situation with employees is so difficult on all of the neighbor islands, that, you know, the owners are just tired, you know. And so there’s a lot of restaurants that’s not unique in any way. But I needed the story about, you know, the employees situation, I needed people to know about that in advance.

ATTILIO: 
I think that’s a common theme because we when we look at businesses, that’s what the owners say, I’m tired. Yeah. No, why are you selling? I’m tired.

JIM:
Callie, oh, I have I have a large one, you know, you know, it’s been in the business now and all that, but that’s just a it’s a standard business. It’s just larger. It’s hard for me to do that. Some part of the problem is, sometimes I’m allowed to give out information about the business, but frequently the owners don’t want me to sign on. I’m sorry. That’s okay.

ADRIENNE: 
No, one that you sold in the past

JIM:
about relatively small one. It’s on the market now. It’s a food product, which is not I never seen that for sale in Hawaii. It’s a Japanese product. But you know, Japanese food items sell well in Hawaii. We have a unique Japanese product that’s on the market right now. Yeah, but it said when I say Japanese it’s a it’s a Japanese kind of product that in any halili any Chinese any Filipino they would all enjoy yes doing and also

ATTILIO:
Yeah, the you know, that reminds me Do you know why the sharks like to eat the Japanese tourists? Because get get omae in the middle get me in the middle of the Japanese. pickled plum that’s all frankly Lima joke. So I’ll give credit to Frank dilemma. But it you know what kind of advice you give the because a lot of time you saying you’re like you’re on both sides, but so you sit down. You sit down with the seller, or business owner, the business owner And then you also sit down with the buyers and say, Okay, this is how we got to make sure we’re in a land of reality of what we’re looking like as far as owning a business in Hawaii.

JIM: 
Well, one of the things with the seller upfront is, we frequently get it, I’ll say, 90 95% of all sellers, obviously don’t know how to value their business. That’s why they’re approaching us. But their internal valuation for their business is typically way out of line with what the market is. And so even a write up prompt in the first 30 minutes of my initial discussion, I tell the sellers, it’s highly likely that the valuation you have in mind for your business is way above the market. Yeah. Tell them that up front. Another thing I tell the, the seller upfront, is, there’s oftentimes a request for some seller financing by the buyer. And I tell the seller upfront, do not tell me if you’re willing to provide that do not tell me what your bottom line selling price is? I don’t want to know because I need to be able to tell the possible buyers that I don’t know if there’s seller financing. I don’t know, you know, other than the listing price, what you know, possible selling is Gotcha. In that way, I can honestly tell the buyers that I don’t know that. But here’s what I do. The seller financing, and I tell this to sellers up front is as long as there’s not a huge number of add backs, which is what we do. The one I use. If you were to look at my telephone, my cell phone bill, you’d see three lines to call one line to get my daughter called the second line, my wife oh, by the way, because the third telephone, you would get me and yes, I charged it off to my business. Yeah. And that’s rather typical in this whole business. And so if there’s not a substantial number of add backs, typically if the buyer is putting down 20% financing, we can normally get pretty close to the 80% financing. We might be a little short, but we’re going to be pretty close to that. But what happens sometimes is when there’s a ton of backed, I sold a deal four months ago. The the the earnings that’s called the earnings, the adjusted earnings were about 460,000 but tax returns reflected about 175. So huge amount to tell, you know, the seller right up front is going to take a unique buyer it’s going to take someone who has a significant amount of cash to do this deal because the banks aren’t going

ATTILIO: 
to provide more than about a value Yeah.

JIM: 
They’re not going to period

ATTILIO: 
well might have to be like Leona Helmsley, you know, she was writing off the pool at our house. But a hotel chain she owned but she she she she went to the Federal holiday inn with the three square meals a day for that process. But let me

JIM: 
let me tell mama, you you guys are directing but I need to talk about this. I you know, I I started with First Hawaii, I ended up with Bank Hawaii I’ve lived in Hawaii and now 57 years or whatever it is long time. I have huge Kokua for those two banks. They are excellent banks. One of my former associates at Bank Hawaii is a loan officer at CPB Am a Former have a family member kind of extended family member just retired from ASB just literally a month and a half ago. So I have lots of Kokua and experience working with white banks. However, for business financing, the Hawaii banks don’t want to utilize the full assistance provided by the SBA. They like to keep the loan amortization down to five years, when the SBA can go out to 10 years I have a deal. Right now I’m working on him I’m on a loan they tried, they got denied by one of the local banks here. And you know, the he would have buyer would have had to put another 25% cash into the deal to get qualified by the local bank, because they’re using the five year amortization as opposed to using the full SBA authorization of the 10 years. Yeah. And the mainland SBA lenders, most of them the good ones, that they’ll do all of that, but I also want your clients to understand there’s some shady guys out there on the mainland also. So So you got to be careful. Yeah, it’s best to use, I’ll say myself or people who are very familiar with the, you know, the SBA lenders, the mainland, SBA lenders, because they’re very, very good. And they aren’t shysters.

ATTILIO: 
Well, to the local banks are very conservative. And the main reason behind that is the local economist Frank De Lima says that at least 15% of the people that work there is named Glenn, Mia, Shiro. And they all get their Aloha shirts from Kahala. That’s why they’re so conservative.

ADRIENNE:
But I think the moral of the story is you want to work with a professional like, yeah, like, who knows all the parts together, who knows where to, you know, connect to you to make sure that you’re not having to put an extra 25% down, and he knows the difference between the ones that are awesome. And then the ones that maybe you know, kind of fly by night, you don’t want to get involved with them.

ATTILIO:
So our one takeaway from today’s show, call coach Jim, and call him early, don’t call him the day before

ADRIENNE: 
three years early selling, and then even if you’re not buying, just take the time upfront, and get educated and make sure it’s a good fit. Yeah, so get

JIM: 
educated that, you know, we, you know, like most of the professionals my first meeting is free I you know, I got 14 trophies from the SBA in the state of Hawaii and my office here because I’ve been providing that kind of, you know, I’m a traditional banker and you provide that kind of assistance to your prospective business buyers and I’m glad to do that now. I want to give recognition to my associate who’s been with me for more than five years now. And typically she handles all of the initial increase command and she and I can hear every word of every conversation that either one of us have so by chance if any of your clients you know call and they Elizabeth picks up the phone, which is quite normal. They should feel very comfortable talking with her because she’s been doing it for many years.

ADRIENNE: 
So you guys are interchangeable and you work as a team.

JIM: 
When it’s when it’s a three $3 million deal or team as this current one is that’s a little different. But you know, certainly anything up to half 1,000,003 quarters of a million I’m comfortable with her handling it I have to sign off on anything that goes out the door. Yeah, I almost always trust what she’s done.

ATTILIO: 
Okay and and Hawaii always best way to sit down with Jim and given the the award. He likes the best. One dozen Manapua from Shawn cam on Oahu. Visit him bring them on?

JIM: 
We’re gonna say the one down there. Nimeth you know?

ADRIENNE: 
Well, we better wrap things up. But

ATTILIO:
thank you so much, Jim.

JIM: 
Thank you all very much. I appreciate it.

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