The Rapid Route To Business Growth – Buying A Second Business
This blog is for YOU if you aren’t yet reaching the level of sales and profits that you want from your existing business. Most business owners have a fairly clear idea of what they wanted to achieve when they started their business but after several years, very often find that the pace of growth slows down.
So – is this you?
Are you – committed to your business, working hard but not yet hitting the levels you want OR
Your business is actually doing ok but you really do want to kick onto a higher level BUT you know that organic growth is tough OR
You are in a good place with your business but that one more deal bolted onto what you have would give you that last pillar of wealth that means the difference in the legacy you give to your family.
If any of these is YOU then I’m talking to YOU today!
Get Crystal Clarity on your Why
It almost goes without saying that if you understand – in detail – why you are doing what you do and you have a clear Purpose then what you do is always more effective. I know from experience, working closely with many business owners, that they actually don’t always have that clarity. But when you get it, your energy is increased and you become much more effective.
How you get that clarity is up to you. Annually, quarterly or maybe every 6 months you should assess and review, whatever works for you is great just COMMIT to creating and reviewing your burning “Why”, your Purpose and your plan.
Understand the System for Acquiring Businesses
Like most things we do effectively, where we use a tried and tested system – we will get predictable results.
Just like any other area of business – there is a precise process to follow when acquiring a business. Make sure you understand the steps before you start – it’s very easy to get carried away when you come across a business that looks perfect. You absolutely must be willing to follow the process, avoid letting emotion take over, and ensure you buy a business that will work for you long term.
So if you know what markets you want to target and you know how to find suitable targets then you have steps 2 and 3 in the system.
Once you’ve found the likely target businesses, the No 1 thing that will help you to achieve a successful acquisition that is great for you AND great for the vendor is building rapport.
Once again, this is about applying a system – one that I’ve learned over time – that helps you find out what really matters to the vendors of a business and that allows you to craft a truly win win result. After that the next steps are also about following the system:
- Use spreadsheets to analyse the last 3-5 years accounts to see what the relationship is between sales, gross and net profit and what the trends are.
- Use a multiple of between 2-5 based on the net percentage of profit, low to high (remember very few businesses generate over 20% net profit). That becomes the basis of your valuation and offer.
- Identify the assets that can be used to release the value tied up in the business for the current owners (things like cash, excess tied up debtors, unused assets etc). Excess cash is especially important given the tax reliefs available in a sale.
- Obtain a funding decision in principle, rather than a time consuming full credit approval, when that will almost certainly change.
- Present an Indicative Offer rather than straight into Heads of Terms, to give the vendors the chance to understand your offer and to suggest changes that make you both comfortable.
- Have a clear and simple process to go through Due Diligence and produce the legal contracts at a fixed price with the lawyers.
Have all of this is a project management system so that you can make swift and easily understood decisions, because deals can and do fail and you need to be able to process several at any one time – it’s a numbers game!
Be Extremely Professional
I’m not suggesting you are not in any way professional in the way you go about your current business anyway. But it, in my opinion, very important that you set yourself up properly to engage with prospective vendors of businesses. These are the steps I recommend:
- Establish a website devoted to your business of acquisitions, saying who you are and what kinds of business you want.
- Create an information pack in a PDF that can be emailed to vendors and their advisers, with FAQs on your process. This is professional and reassuring that you know what you’re doing.
- Create a presentation that can go to prospective funders, again explaining what you need and how you plan to use the funding mix that you might use.
- Set up a dedicated CRM to keep in touch with prospects and record the relationship progress. Sometimes deals come back to the table and you need to be ready.
- Have a targeting process – introductory letters, sent in a sequence, designed to build credibility and rapport as well as obtain response.
Make a Plan and Commit to Take Action
The Key to success lies not just in the planning but in the execution too. I love rugby and the coaches talk about getting points in the “red zone” of the 22 area of the oppositions half. If you’ve done all the hard work to get down to their try line you have to come away with points.
So if you’ve done really well so far in your business but you know you haven’t yet built that unassailable lead to win the game, then this is a process that WILL get you there.
Now it’s YOUR turn.
Commit to understanding your “Burning Why”, set up your system TODAY but also get out there with vendors who are desperate to sell and escape from their businesses. They need your help!
Want to learn how to use the precise techniques I talk about here?
Join our revamped online course Business Buying Blueprint now comes with additional support from Guy and the team. Click here for details http://bbc.thebusinessbuyersclub.co.uk/business-buying-blueprint