Two years ago I wrote a series of posts on buying a business. You can find the first one here, if you want a little background. Recently, I completed my third acquisition and I thought it made sense to go back and either validate or update my information.
Finding a Business
This was the surprising part of my recent acquisition. I found this business with an internet search. Historically, I haven’t had much luck using this approach, but this time I was a little more open-minded. I was looking for a business that I could easily move back to Kansas City. By expanding my search to all states, I really opened up my options. Being willing to look at my search from a different perspective and thinking outside the box really helped me be opportunistic.
This is still one of the more important factors of buying a business. Having a team of talented partners to help you out in key areas will make the process go as smooth as possible. Depending on your acquisition target, your team could include an attorney, accountant, technical support, and operations expert. I’ve had this team in place from previous acquisitions, but this purchase was in a distant state and had existing vendors. I had to consider how to transition from the prior owner’s vendors to my local vendors without disrupting ongoing operations. While it wasn’t always as smooth as I would have liked, by openly communicating and being willing to transition over a reasonable time period, I found that most vendors were very helpful. There’s a difference in offering a reasonable workout plan and pulling the rug out from under a vendor’s feet.
I can’t emphasize the importance of due diligence enough. What was different this time versus my prior two acquisitions was doing all of it remotely. I like to meet the seller in-person to really get a understanding of how they run their business. It’s harder to do this over the phone. With this transaction I weighed making a trip just for due diligence versus doing everything via phone. I opted for the phone method, which ended up being fine, but the next time I would schedule a trip to meet the owner and complete some of the due diligence. I think this would have made the transition and ongoing operations smoother.
This was where the real learning took place. I place a huge emphasis on preparing to run your acquired business before you close on the deal. I felt we were very prepared for the transition, but the remoteness of the the business made moving the operations to Kansas City a little rougher than I liked. I underestimated the amount of time we should have spent in the seller’s city prior to transitioning the business. I also underestimated dealing with some vendor relationships that remained in the seller’s city. They were used to face-to-face conversations, not email and telephone. Some of that could not be avoided, but a little more communication while I was there, would have been beneficial.
I continue to enjoy every part of the acquisition process. Each time I find a different part of it challenging, which I enjoy. You have to pay attention to every aspect of the acquisition cycle to have the best chance of success. Even then, you need to make sure you continue to execute after you close. The closing date is just the beginning of your dream. I would love to hear about your acquisition experiences.