As a buyer, how do you stop yourself from getting overwhelmed by the marketplace? What discriminating criteria can you rely on to make your business acquisition easier?
To discuss best practices and strategies that work when buying a business, we interviewed entrepreneur Tim Lahey. Tim recently purchased Homerun Technology sealing the deal in February 2021.
Here are his top five pieces of advice for anyone thinking of acquiring a business in the current climate.
Business Acquisition Tip #1 Reach out to other entrepreneurs who’ve acquired businesses before
If you’re a rookie to business acquisition, wisdom dictates that you don’t go at things alone. Before you buy a business, you have to prepare for the acqusition. So, contact a few entrepreneurs who have purchased a business before and hear their stories.
You’ll learn first hand about their highs and lows, common pitfalls, how they navigated transitions and what it’s like to run an acquired business as opposed to one you’ve built from the ground up.
From these sit-downs you’ll also have an opportunity to broaden your own network by asking for referrals to seasoned M&A specialists such as brokers, CPAs and attorneys to guide you on your own business acquisition journey.
Takeaway: “I talked to a lot of people. I knew that if I put my feelers out as much as I could and learn from as many people as I could, the better off I’d be.”
Business Acquisition Tip #2 Cast the net wide over the marketplace
The marketplace can be a jungle. So many different industries and sectors. At the onset because you’re trying to find your niche, don’t limit yourself. See what’s out there and what piques your interest.
Once you have an idea of an industry, break it down. Consider the various sub-sectors within and start researching businesses in that portion of the market.
The industry that fit my mold was technology and the sub-category I went with was home technology. With this out of the way the search for a home technology business began in earnest.
Takeaway: “I cast a wide net. You’re trying to look for something dusty, not rusty. You have to ask yourself when you wake up in the morning, ‘Are you going to be excited to go to work?’”
Business Acquisition Tip #3 Outsource due diligence to a competent accounting firm
Regardless of how good you are personally with numbers, you need someone else to handle due diligence.
You should bring on board a specialist whose only job is to look at the target business’ financials and give you the down low on what’s what.
This takes a considerable amount of pressure off of you giving you freedom to focus your attention on more important issues.
Takeaway: “When we hired the accounting firm to do due diligence, it allowed me to focus on the bigger picture and not get super into the numbers.”
Business Acquisition Tip #4 Approach businesses that aren’t for sale
Most people start and end their search for companies to acquire by checking out businesses for sell webpages.
While this is definitely a great place to start it was by no means our only recourse.
In fact, we took a little bit of an unorthodox approach in that we went directly to businesses that weren’t for sale and engaged them on the possibility of selling. Not everyone was open to selling of course but to those that took an interest, we made good headway and received enormous support during the searching phase.
So don’t be afraid to seek out businesses that aren’t on the market yet.
Takeaway: “My search process involved proactively talking to companies. I wasn’t looking at companies necessarily already for sale. This approach meant I didn’t experience a rush or an urgency. It allowed me to go through the searching methodically and not feel that we were losing opportunities because I was taking my time, frankly.”
Business Acquisition Tip #5 Ease your way into the transition
If you’re buying a company that’s been established for a few decades it’s okay for transition to feel and be awkward. You’re the new guy. While things shouldn’t be hostile, you shouldn’t expect everything to be all smooth from day 1. Just remember to keep communicating with the team.
With this in mind, it becomes very important to have a plan for the next 100 days. And this isn’t a plan dictating to people what they should and shouldn’t do. It’s more often than not a plan about what you as the new owner should go around learning from the existing employees.
Takeaway: “I was careful not to say, “You do this. You do that. You do this the first day.” What was important for me is to show the team a sign of good faith like, “We’re going to invest. We’re going to invest to grow and we’re going to invest in the things that make your job better and our work better.”
Get the help you need
If you would like to discuss business acquisition, our team of advisors is only one phone call away.
Sun Acquisitions boasts an experienced M&A team that can assist you to navigate mergers and acquisitions regardless of whether you’re a buyer or seller. Don’t hesitate to contact us.