April 1, 2025

Buying and Scaling a Business | LoL #4

Shane Pierson, Stephanie Dunn & Brian Congelliere

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Buying and Scaling a Business: How to Evaluate Human Capital Before and After the Deal | Episode 4

When you buy a business with an SBA loan, you are not just acquiring a brand, a customer list, or a piece of equipment. You are inheriting people — and those people will either become your biggest asset or your biggest liability. In Episode 4 of Lords of Lending, Stephanie Dunn, Shane Pearson, and Brian Congelliere break down the workforce evaluation process that most business buyers skip entirely, and explain why getting your human capital right is the single fastest way to scale after closing.

In this episode: Steph opens with a framework for assessing inherited employees — who your star performers are, who is dead weight, and how to provide the right tools to the people driving revenue. Shane shares hard-won lessons about self-evaluation as a leader and the emotional traps that catch new business owners off guard. Brian brings the communication playbook: monthly lunches over sterile one-on-ones, transparent dialogue over HR checkbox meetings, and clear goal-setting over vague expectations. Together, the three hosts cover everything from managing family members on payroll to why throwing bodies at growth is almost always the wrong first move.

Key Takeaways

1. When You Buy a Business, Assess the Workforce Before You Touch Anything Else

The most common mistake Steph sees in business acquisitions is buyers who focus exclusively on the bottom line and assume everyone on payroll is critical. The reality is different. Some of those inherited employees may be the reason the business was for sale in the first place.

Shane puts it bluntly: the people you inherit can accelerate your growth or drag you under, and the evaluation has to start immediately.

"When you buy a business, you're not just getting a brand, customers, or any type of equipment. You're really inheriting people, and that can either be your biggest asset or your biggest liability. The biggest mistake that I see is that buyers don't assess the workforce fast enough." — Shane Pearson

Steph backs this up with a stat that should make every buyer pause: in a profitable, well-run company, 65 percent of managers have a negative net value. The square root of your total employees is roughly the number doing half the work. If you have a hundred employees, ten of them are carrying the load.

"65% of managers have a negative net value. The square root of your employees do half the work. So if you have a hundred employees, 10 managers are actually valuable. The others are dead weight." — Stephanie Dunn

This is not theory. Steph points directly at the Elon Musk Twitter acquisition as a case study: he bought the company and fired 50 percent of the people. The business kept running. That math should inform every acquisition conversation.

2. Scale by Duplicating Star Performers, Not by Throwing Bodies at Growth

One of the most expensive traps in business scaling is the impulse to just hire more people. Shane has watched it happen across hundreds of SBA deals — a business owner walks in asking for $500,000 to hire 10 to 15 employees, but has never once said, "I want to get 10 to 15 times the revenue out of the existing employees I already have."

The math Shane runs on his own production tells the story. Working solo, he can produce $25 to $30 million in loan volume. Add one analyst who thinks like him, and he is at $60 to $75 million. Add a second, and the team pushes toward $100 million — all through one main revenue generator with two support staff.

"I've never once heard them say, 'I wanna try to get 10 to 15 times the amount of revenue outta the existing employees that I have.' My plan for scaling is throwing bodies at it. That's always the common way that everybody has tried to address that." — Shane Pearson

Brian ties this to legal practice, where the same principle applies. The key is quantifying what each new person can do — how many extra loans, how many extra widgets, how much additional revenue — before hiring. Business owners who come in and say "I just need to hire 10 more people" without knowing why those people are needed are the ones who bloat payroll and shrink margins.

Steph's formula is clean: payroll should run 20 to 30 percent of gross revenue. If it is way higher, you are overpaying or carrying dead weight. If it is way lower, you may be underinvesting in your people. And before adding anyone new, run the sequence: process first, then technology, then people.

"It's process first, then technology, then people. The reality is, guys, no one wants to admit this, but we all know it. The reality is we need less bodies now because there are other solutions." — Stephanie Dunn

3. Communication Is Leadership — And Most Business Buyers Get It Backwards

Brian shares a story about a business owner friend who initially took his project managers to lunch every month. During that period, communication flowed freely — feedback loops worked, problems surfaced early, and the team performed well. Then things got busy, the lunches stopped, and performance started slipping. The barrier to honest conversation went back up.

The lesson is direct: effective communication does not mean a five-bullet-point remote one-on-one that checks an HR box. It means giving people your time and letting them set the agenda for what makes that time productive.

"Instead of having formal performance reviews, he took his project managers out to lunch every month and sat there and talked with him. When he was doing that, he was much more successful in getting that feedback loop so that he could understand where they were at." — Brian Congelliere

Steph takes this further. Her philosophy is that job satisfaction comes from feeling like you matter, and that feeling comes from time. If your boss does not talk to you for days or weeks, you feel invisible. That is exactly how quiet quitting starts — not with a dramatic exit, but with a slow disengagement born from being ignored.

Shane adds a practical twist: let the employee define what makes the check-in valuable. Some want to vent frustrations. Some want five minutes of direction and then to get back to work. The worst thing a manager can do is run a scripted meeting that nobody cares about.

"Effective leadership and job satisfaction comes from feeling like you matter. My interpretation of 'I matter to you' is when you give me time. If someone cares enough to talk to me or spend time with me, I matter." — Stephanie Dunn

This applies directly to acquisitions. When you walk into a business full of employees who just lost the owner they knew, you need to get in front of them fast. Introduce yourself, tell them they are important, and find out what they need. Some will step up. That is your first real talent evaluation.

Shane also raises a point that most acquisition guides skip entirely: self-evaluation. Before you assess anyone else, you need to assess yourself. What is your emotional intelligence like? How do you handle confrontation? Are you the kind of leader who sends an angry email at 10 PM and regrets it by morning? Shane admits to being that guy — "Fat Fingers," as the team calls him — and he is honest that walking into a new business with that kind of reactivity will destroy trust with employees who are already on edge about the transition.

"Anybody going into buying a small business needs to do their own evaluation of themselves. Try to educate themselves on emotional intelligence, try to understand people, be more empathetic. Find out where your weaknesses are and the gaps that you need filled." — Shane Pearson

The move is to identify your own gaps before closing, then either bring in someone to fill them — a board advisor, an operations manager, a trusted second — or be transparent with the team about where you need help and see who steps up.

What This Means for Business Buyers

If you are buying a business with an SBA loan, your lender is going to ask how you plan to manage the operation. Shane says the borrowers who can rattle off a precise plan — who stays, who goes, what each role produces, and how the business scales — are the ones who get funded fast and on better terms. The borrower who says "I'll just open the doors and figure it out" is the one who makes credit officers nervous.

The family member problem is real and worth confronting early. Steph warns that small businesses historically hire people they know and trust, which often means the seller's relatives are on your payroll. Shifting their loyalty to your vision requires clear expectations, performance frameworks, and ideally having them report to someone who is not you — so you are not holding the ax when hard decisions have to be made.

Brian's closing advice: every decision you make about people should tie back to revenue. Not emotions, not loyalty to the previous owner's structure, not fear of confrontation. Revenue. If you can quantify what each person produces and what it costs to replace them versus investing in them, the scaling decisions make themselves.

Steph closes the episode with a line borrowed from her high school coach: "May the wind always be at your back." And her addition: "May you always be dialed in." The business owners who show up with that level of preparation — who know their numbers, know their people, and know their plan — are the ones the Lords fight hardest to get funded.

"Every time I get a new business owner who is that dialed in, it is so easy to get them a loan. They're not only motivated to get us all the paperwork, but they also have an explanation for literally every single thing." — Brian Congelliere

SBA Business Acquisition: What Lenders Really Expect — The inside track on how lenders evaluate your acquisition plan
The Complete Guide to SBA 7(a) Loans — Everything you need to know about the most popular SBA loan product
SBA Deal Structuring Guide — How to structure your deal for the best terms and fastest approval

Frequently Asked Questions

What is the first thing I should do after buying a business?

Assess your workforce immediately. Do not wait weeks or months to figure out who is performing and who is not. Talk to every employee, understand their role, measure their output against revenue, and identify your star performers. The people you inherited are either accelerating your growth or silently draining your investment.

How do I know when to hire more people versus getting more from my current team?

Follow Steph's sequence: process first, then technology, then people. Before adding headcount, analyze whether your existing employees are working at capacity and whether better systems or tools could multiply their output. Shane's example is powerful — two support hires under a top performer can triple revenue output, while four new hires at the same cost might produce less total volume.

What percentage of revenue should I spend on payroll?

Steph's rule of thumb is 20 to 30 percent of gross revenue. If your payroll expense is significantly above that range, you are likely carrying dead weight or overpaying relative to output. If it is well below, you may be underinvesting in the talent that drives your growth.

How do I handle inherited family members on the payroll?

Set clear performance expectations from day one. If possible, have family members report to someone other than you so the performance evaluation stays objective. Create a framework that shows the success path of their performance so the conversation stays about output, not relationships. If they step up, they become your most loyal team members. If they do not, you have the data to make the hard call.

How does my workforce plan affect my SBA loan approval?

Lenders want to see that you know exactly how each person on your payroll contributes to revenue. A borrower who can quantify the return on each hire and explain their scaling strategy gets credit approval far faster than one who just says they plan to add bodies. Come to the table with metrics, not maybes.

Ready to Learn Deal Structuring from the Inside?

The Lords of Lending Training Platform teaches you how to evaluate businesses, structure SBA deals, and build the operational plans that get loans approved. Whether you are buying your first business or scaling your tenth, the frameworks in this training will change how you approach every deal.

Explore training options at learn.lordsoflending.com/pricing

This content is for educational purposes only and does not constitute legal, financial, or investment advice. Consult with a qualified attorney, CPA, and financial advisor before making business or financing decisions. Loan terms, rates, and programs are subject to change and vary by lender.