Jared Johnson sits down with Ivy Millman, CEO of WHIZDOM, to explore a missing piece in many lower middle market acquisitions: customer due diligence. Ivy shares how her background in accounting, Stanford, Apple, and decades of business-customer research led her to build a firm focused on helping buyers, investors, and operators understand what financial, legal, and technical diligence often miss. The conversation breaks down how independent customer interviews can uncover risks around retention, churn, concentration, loyalty, product issues, and transition vulnerability before a deal closes. Ivy explains her process, why customers often reveal more to a neutral third party than to sellers or buyers, and how these insights can shape valuation, confidence, and post-close growth plans. Jared also shares what he is seeing in SBA acquisition lending, including higher defaults, tighter scrutiny, and the growing need for real diligence before buyers commit to multimillion-dollar deals.

Main Takeaways:

- Customer due diligence fills a major gap left by financial, legal, quality of earnings, and technical diligence

- For B2B acquisitions, revenue sustainability depends heavily on retention, loyalty, stickiness, and switching risk

- Customers are often more candid with an independent third party, especially when they want feedback kept anonymous

- Seller-protected customer relationships do not have to block diligence if the process is structured correctly

- Independent customer calls can uncover hidden risks that materially affect valuation and deal confidence

- Customer insights can help buyers decide whether to move forward, renegotiate price, or build a stronger post-close plan

- High customer concentration becomes even riskier when relationships sit primarily with the founder or seller

- What buyers learn pre-close can become a practical roadmap for post-acquisition growth and retention

- Sellers can use the same kind of customer work before exit to improve enterprise value, loyalty, and retention

- SBA acquisition buyers should not rely on lenders, brokers, or sellers alone to validate a deal

Connect with Jared:

If you have questions for Jared, visit: https://jaredwjohnson.com

https://www.linkedin.com/in/jaredwjohnson/

Connect with Ivy:

https://www.linkedin.com/in/ivymillman/

DISCLAIMER:

The views and opinions expressed in this program are those of the guests and host. They do not necessarily reflect the views or positions of my employer.

Keywords:

customer due diligence, B2B acquisitions, lower middle market, ETA, entrepreneurship through acquisition, SBA loans, quality of earnings, QofE, customer retention, customer stickiness, customer loyalty, customer churn, revenue sustainability, founder dependency, seller transition risk, customer concentration, post-acquisition growth, valuation risk, M&A diligence, independent third party diligence

Jared Johnson sits down with M&A advisor and serial entrepreneur Christine McDannell, founder of The Magnolia Firm, to unpack a deal that did not go as planned. Christine shares how an acquisition of a dance and fitness studio moved from seemingly profitable to cash-flow negative once she took over operations. They walk through what she missed because of speed, compressed diligence, and incomplete financial visibility, including licensing costs, seasonal revenue swings, and marketing spend that lived outside the books. Christine explains why raising pay and funding upgrades early created unintended expectations, how customer and operational pressures compounded the situation, and why working capital is the difference between surviving a rough stretch and being forced to shut the doors. The conversation challenges the idea that buying businesses is easy and highlights how even experienced operators can misstep when timelines are rushed and the full expense picture is not visible.

Main Takeaways:

1. Speed compresses diligence and increases the odds of missing material risks
2. A business that looks profitable can become unprofitable quickly once all true expenses hit the buyer’s books
3. Working capital determines whether a downturn becomes temporary or fatal
4. Marketing spend and other costs can be obscured when accounts sit outside the primary P&L
5. Immediate raises and visible capital improvements can create entitlement and escalating demands
6. Seasonality can materially impact revenue and must be stress tested before closing
7. Customer service businesses carry emotional and operational volatility that buyers often underestimate
8. Not every concept is best acquired; some are better built from scratch with rent and unit economics designed correctly
9. Transparency about failures helps reset expectations and protects new buyers from unrealistic narratives

Episode Highlights:

1. Christine’s background: 22 years as an entrepreneur, 10 startups, acquisitions, roll-ups, and turnarounds
2. Launching The Magnolia Firm in 2021 and advising sellers while continuing to acquire businesses personally
3. The trigger: seeing a studio opportunity and moving quickly after the seller shut it down
4. Operating under LOI: taking over operations immediately while still finalizing purchase terms
5. Reactivating customers after a sudden closure and attempting to stabilize revenue
6. Underestimating licensing, regulatory, and operating costs that surfaced post-close
7. Early missteps: raising pay immediately and funding upgrades without validating margin stability
8. Discovering hidden marketing expenses and incomplete

In today’s M&A market, the difference between a clean transaction and a painful one often comes down to pricing discipline, seller integrity, and how prepared the buyer is before the first call.

In this episode of Before You Buy or Sell a Business, Jared Johnson sits down with Greg Kovsky, President and CEO of International Business Associates (IBA), the Pacific Northwest’s largest and oldest business brokerage firm. Greg has spent more than 30 years in the industry and has personally facilitated over 300 transactions. He shares what he’s seeing in the last 12–18 months, why buyer demand is the strongest he’s seen, and how retirement-driven transitions will continue to fuel deal volume for years.

Greg also explains IBA’s paid-on-performance model, why they only take about one out of three potential listings, and the three reasons they will refuse to represent a seller. On the buyer side, he breaks down exactly how to stand out in competitive processes, why relevant experience matters for SBA-backed acquisitions, and why full financial transparency is non-negotiable. Finally, Greg gives a practical take on where AI helps and where it can mislead, especially when valuing businesses without local and state-level context.

Main Takeaways:

1. Buyer demand is the strongest Greg has seen, driven by a growing “buy and build” culture
2. Retirement-driven ownership transitions are expanding supply, but quality sellers still have options
3. Paid-on-performance brokers have built-in incentives to price honestly and only take sellable deals
4. IBA only lists about 1 out of 3 businesses: unrealistic value expectations, weak business model, or lack of seller integrity
5. Due diligence should “follow the money”: verify deposits, review bank statements, and drill into expense detail
6. Buyers stand out by being ready early: resume/bio, personal financial statement, banker pre-qual, CPA and attorney
7. Relevant experience matters, especially under SBA guidelines, because you cannot sell “management ability”
8. AI can support marketing and education, but valuation still requires local knowledge and tax context

Episode Highlights:

[00:00] Intro: Greg Kovsky and IBA’s transaction footprint

[03:05] What’s changed in the last 12–18 months and why demand is so high

[06:10] The rise of buyer demand from “buy and build” entrepreneurs

[09:20] Why retirement-driven transitions will keep deal flow strong long-term

[12:10] Exit cycles: why entrepreneurs often sell and move on within 7–8 years

[14:35] Immigrant buyers and the Pacific Northwest tech corridor

[17:15] What sellers care about: protecting employees, customers, vendors, and legacy

[19:40] Paid-on-performance vs. upfront fees: incentives, pricing, and sellability

[23:15] Why overpricing hurts sellers and can cost years of exit timing

[25:40] IBA’s screening: the three reasons they refuse a listing

[29:10] Integrity red flags: moving expenses across entities and why diligence matters

[34:10] “Follow the money”: bank statements, QuickBooks detail, and full disclosure

[37:30] Training brokers: why this job requires legal, tax, finance, real estate, and psychology

[41:50] How buyers stand out: preparation, financial strength, and a built deal team

[46:05] Fit...