The Struggle

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As we live through our new reality brought onto us by the COVID-19 virus, we are finding ourselves wearing new hats and dealing with unprecedented challenges. Many of us are now working from home in hastily created “offices” that also function as video studios for our countless video conferences. We’re also helping our children deal with being cooped up at home away from their friends and trying to figure out this home-schooling thing. Some of us own businesses with employees that are relying on us to find unique ways to maintain revenue or tap into the promised federal assistance that continues to be just outside our collective grasp. How are we juggling all of these equally important things?

Life usually will throw one or two challenges at you and then give you a chance to recover your footing while prepare for the next one. We seem to be encountering wave after wave of challenges with no real understanding of when this will be over. And for me, that is one of the most frustrating things. When will we be back to normal? Ever? I’m thinking our new way of life, after we come out of this, will be much different. If you know me, I am a planner. Some may say an over-planner, but that’s how I’m wired. Without knowing how and when this will end, my ability to plan through it has been tested. I want to share a few things that continue to help me navigate these uncharted times and keep my level of stress down (but not gone).

Ration your news

This is an ideal opportunity to get overwhelmed with news and data. There are countless news conferences, blogs, tweets, etc. that are giving up-to-the-second updates on the pandemic. Early on I realized that I was over-indulging on this. I was getting so caught up that I was losing my perspective. There’s not a lot of positive messages being spread right now. Well, except for the health care community and the essential workers that are doing the much-needed, hard work. Thank you all for that! Recently, I started limiting how much I would read or watch on the pandemic and it really helped with my mood. I purposefully stay away from news for most of the day now and it has significantly helped my level of stress. I’m not sticking my head in the sand; I just decided my day is not going to be defined by news.

Communicate

It’s important to keep communicating with others. While the multiple work videos & teleconferences that happen every day are helpful, don’t forget to have personal conversations. Whether it’s with your family or friends, verbalizing your thoughts and fears of what we are going through can be incredibly helpful. Members of my family have started a journal to describe what is going on from their perspective during the pandemic. Not only will this be an interesting perspective to look back on, it can also be cathartic to express on paper what you are thinking and feeling internally. This is also a great time to reach out to those you know may be having a hard time dealing with this situation. Just the act of reaching out to them could make a significant difference in their life right now.

Exercise

Whether you exercised before this or not, getting out for a walk in the fresh air will do amazing things for your mindset. Walking through your neighborhood while the flowers are blooming and the birds are singing helps keep things positive. The other benefit is you may have a lot more flexibility in your schedule right now that would allow you to start that exercise regimen you’ve always thought about. This could be your New Year’s resolution do-over. This pandemic is going to be transformational – you can take the opportunity to make some positive transformations yourself. My wife and I have are taking walks together and today we went on our first kid-free bike ride in 10 years.

Just breath

As I mentioned before, I’m a planner. I love having a 6-12 month initiative that I can break down into smaller segments and then complete. I’ve had to adjust that strategy quite a bit. Instead of looking to something months away, I now focus on things one day at a time. I am keeping my time horizon shorter, but still break things down into small segments. Instead of weeks, I look at hours or even minutes. It’s also important to know that we will not be perfect in our new roles. Remember that we all handle adversity and stress differently. We need to be understanding and forgiving to each other as we adjust and potentially stumble (a lot) through this new normal.

We are all trying to arrive at the same place, hopefully soon.

 

Financial Regulation – The Sword of Damocles?

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Running a successful financial institution comes with a plethora of responsibilities and pressures. Dealing with these effectively and continuing to move forward can be challenging and rewarding. When you throw an uncertain (even hostile?) regulatory environment that has been threatening to pull the rug out from under your feet for years, that’s a stress multiplier that has made some take a bunker mentality and just try to survive. While the bunker mentality is certainly a safe play, it makes it hard to be innovative or even keep pace with the competition.

Can you compare this environment to the tale of the Sword of Damocles? Damocles, a court attendant, traded places with King Dionysius after Damocles told the king how great his job was.  The king traded, but placed a sword over Damocles head that was held precariously by a horse hair to represent the constant pressure a leader faced. Damocles quickly wilted under the constant threat of the sword and gave up his position. (Wikipedia has a better summary of the tale)

This is similar to the current situation many financial institutions find themselves with the federal regulators placing a figurative sword over their heads. While the sword is figurative, the threat is very real. The big difference is the leadership of the financial institutions did not want to trade places with the regulatory body. In fact, they continue to appreciate the role of regulation in creating a healthy, consumer-focused business environment. The regulatory body just decided to place this “sword” over the financial service providers collective heads, periodically tweaking the tenuous string from which it is hanging to make sure everyone is aware of its presence. This threat has kept a large group of organizations from adapting to the changes in technology, consumer preferences, and competition. Who is benefiting from this situation? Consumers – no. Operators – no. Regulators – hmm.

I would argue that the regulatory environment many not stabilize until 2018, if then. There always seems to be something that continues to kick the “payday rules can” down the road another six months, right? Even if there is a change in leadership of the regulatory “king”, can you be assured that it will have a positive effect for your business or will it just create more uncertainty and continue the waiting game? How has the change at the executive office helped your business so far in 2017? I’m not being critical, some changes takes time and involve a lot of moving parts behind the scenes. My point is you can always find a reason to not act, but you need to take charge of your destiny and create your own environment that removes the sword from hanging over your head.

Innovation – Myths that are preventing your organization’s success

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The practice and discipline of innovation is critical to the sustained success of any organization. In 2013, PwC’s report Unleashing the power of innovation surveyed executives from around the world and 64% said that innovation and operational effectiveness were equally important to the success of any company. Yet, there are many companies that don’t initiate this practice, or even worse, discourage it from developing at all. Part of the reason for this is due to some myths on how innovation works in an organization. Here are a few of the common myths.

Innovation is only for large companies

While it is true that innovation is critical to help sustain large companies (see how the Fortune 500 has changed over the last 10 years), innovation is just as critical for the survival of smaller companies, if not more so. Small and medium sized companies are even more exposed and at risk to changes in competition, external environments, and technological disruptions. Being aware and constantly ready to change is paramount to sustained success.

Innovation requires a team of like-minded people

It’s true that your approach to innovation should have a group of people that are passionate about innovation, however, your group needs to have a nice mix of thinkers. This allows you to get different, valuable perspectives on solutions. It is especially helpful for organizations that have not been innovative to pull in outside resources to get started correctly. This provides added measures for success and brings in a fresh, unbiased perspective to provide alternative views and help move things forward.

Innovation is only good for brand new products and services

Umm, no. It is absolutely true that innovation can create a brand-new product offering, but it is not the only outcome of innovation. Many times, through the process of innovation, new processes will be created or, even better, improved processes are created. You don’t have to be a disruptor to claim innovative success. If you can get dramatic improvements in your existing processes, whether it is creating better margins or improving value to your customer, that is a great result.

Innovation takes too long

If you are hoping for a “one and done” approach to innovation, then yes, it may take too long. And yes, your innovation efforts will most-likely fail. If you take the approach that innovation is an ongoing part of your organization and it will never truly end, then the timeframe should not be an issue. The by-products of an innovation approach, if done correctly, will continue to improve the strength of your organization and add real value. It is important to understand that innovation will have its challenges. There will be times where a proposed innovative idea will not work out as expected. It is important at these times to fail fast, glean any data from the process that you can, and move to the next project. Oftentimes these “failures” provide valuable insight that provide real value.

Innovation is not a company-wide initiative

Look at companies that have started innovation initiatives that sputtered, stalled and failed. One of their common traits will be that their organization did not fully accept the innovation initiative. They also probably did not have a senior leader champion their efforts. If there is not complete buy-in from an organization with support from senior leadership, the chances of success are zero. Innovation does not happen in a vacuum.

Innovation interferes with our strategy

If your organization’s culture believes this, then it will be a problem. Innovation should be compliment of your strategy, not compete with your strategy. There is a need for organizational discipline when it comes to innovation. You can’t change directions on a whim and have the entire organization chase every new idea that comes up. There needs to be an innovation process that allows the organization to move forward and take advantage of innovation, not be distracted or mired down by innovation. This is another area where outside assistance can provide the guidance needed to create a successful innovation program.

In the same 2013 PwC survey, 57% of the executives said having the right culture to foster and support innovation is the most important ingredient for successful innovation at a company. Don’t let the common myths of innovation prevent you from taking the important first step. Innovation should be a permanent fixture in your organization to assist in your sustained success. The traits of the team that you assign this important function are critical to its success, along with the full backing of the organization. If you would like to further discuss the make-up of this team and how to start innovation in your organization, contact Incite Business.

Contact Incite Business

Want better customer service? Be a better customer.

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A few weeks ago I received a disconnect notice from my internet service provider for my business. We had an issue with a payment being applied to the wrong account (my fault) a few months before and, for some reason, they could not get it resolved. Because of this, my account goes into a delinquent status and I get this notice every month. I’m not sure about you, but I prefer not spending my time trying to resolve ongoing issues that should have been fixed. Having a little bit of a type A personality probably does not help this situation and being wired as a problem-solver really does not help. As I was dialing their customer service number I started getting into battle mode. What I was really doing was ensuring that this upcoming experience had very little chance of succeeding.

As I mentioned before, I tend to be a problem-solver. In this situation, I realized that if I started the conversation in a negative and defensive manner, it would force their customer service representative to react in a certain way. They would be trying to defuse my behavior as much as trying to defuse my problem. However, if I started out in a positive, problem-solving manner, it would allow us both to focus 100% on fixing the problem. If both sides are focused 100% on fixing a problem, the chances of success are much higher.

For most of my career, I have been deeply involved in service-oriented industries where excellent customer service is the standard. From firsthand experience I know agents will take the extra step or give a little more effort to customers that are positive and willing to work with them. I wish I could say that I take this positive results-oriented approach every time, but occasionally I let my emotions lead the way. I will say that the times when I create a positive mindset prior to engaging a customer service agent, my outcomes almost always are positive – for both sides. For me to expect excellent customer service, it’s only reasonable that I am an excellent customer.

 

Don’t Let the Unknown Stop Your Strategy

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Over the past few months I’ve had the opportunity to talk with a wide variety of participants in the financial services industry. Most of the time the conversations would touch on the impending publication of a regulatory agency’s proposed rules for the small dollar credit industry. We would talk about what the rules might look like, when the rules would be published and when they would become effective. Frequently we would speculate on the impact the rules would have on consumers and the providers in the industry. As you can see, the common theme in these discussions was speculation. We would gather snippets from presentations at conferences or information from published interviews, but there has been very little clarification provided by the government agency to help the industry prepare. Whether this exact situation applies to you or you are being stalled by some other type of pending outcome with multiple scenarios, the following process can help.

Why is this important?

The lack of information is important because it is stopping some from creating and acting on a strategy for their organization. There are many owners and executives delaying creating or modifying their existing strategy because of this huge regulatory unknown. Whether it is because they don’t want to waste time creating a strategy that turns out to be wrong or they don’t have the available resources to effectively work on a strategy because their best people are now focused on compliance instead of growth, a majority are not working on an effective strategy. This is concerning because there are other significant disruptors, beyond regulatory, in the market that need to be addressed. Changing customer demographics, quickly evolving technologies, and the influx of capital to new competition is creating a challenging environment that requires action to stay competitive.

How do you create a strategy for the unknown?

The first thing you should do is identify where your organization is right now. What are your current strengths and weaknesses? What areas of the organization need help? How is competition affecting you? I highly recommend that you get very granular on this with the review of your people, departments, financial status, products, competition, etc.

If there are areas of your organization that are going to be affected by the proposed rules, I would suggest looking at 2 or 3 scenarios for your strategy. At a minimum, I would look at a best-case and worst-case scenario. You would need to decide, but I can see where you might consider the rules not becoming effective at all as the best-case scenario and the rules coming out as previously defined as the worst-case. If you wanted to add a third scenario, you could create a middle-of-the-road scenario that falls somewhere between the best and worst. Once you have your scenarios, you would follow a decision tree type logic to determine your strategy options.

How does this help?

Granted, creating a strategy that is dependent on different possible outcomes is not ideal, but it will potentially give you important clarity in a few areas that will allow you to act now. For instance, if you determine that you want to add a new loan product in your branches to help diversify revenue, you could start the licensing and product definition process. The earlier you get your application in the licensing queue the better in some states. The other example would be if you wanted to introduce data analytics to your lending decisions, this would be beneficial to your existing way of doing business and if/when the new rules are applied. Getting this discipline effectively integrated into your organization takes time and effort. If you determine that you want to offer your customers an omnichannel approach to strengthen relationships, there is some lead time to create that solution. The bottom line is that this approach allows you to act.

How do I start?

Creating a strategic plan takes effort and commitment from key personnel in the organization, especially senior leadership. You have to balance the work everyone is doing for the present and your investment in the future. An important part of strategic planning is getting an unbiased perspective on the organization’s current situation and its ability to achieve future goals. For this reason, organizations benefit from bringing in an outside expert to help facilitate the process. This person will not have the organization’s historical biases to cloud their judgement or the desire to protect their turf. In fact, the right person can ask tough, clarifying questions that will benefit the process and organization. The other benefit of using an outside party is that it will tie up less of your critical resources – allowing your key personnel to continue working on critical projects. Whether you go through this process with internal or external resources, the most important thing is to start!

If you would like to discuss how to create a strategic plan in further detail or would like some assistance taking that first step, please don’t hesitate to contact me.  I am here to help you!

Contact Mike

 

 

Half Empty or Half Full? Who Cares!

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I constantly see the sayings “Is your cup half empty” or “Is your cup half full”. There are many variations to these, all with the purpose of determining whether you are optimistic or pessimistic. While I think that, as a leader, it is important to know how you naturally perceive things, it is just as important to take the next step and ask the question “Why isn’t the cup full and what are we going to do to fill it back up?”

Why perception is important?

As a leader, you need to understand how you and each of your team members perceive things. If you are naturally pessimistic and you surround yourself with like-minded individuals, you are probably going to see your environment in a less-than-positive manner. The same if you are naturally optimistic. I want to stress that I firmly believe you should embrace who you are. If you are naturally pessimistic or optimistic, understand that and work with it. Create a team that balances your natural perception.

You’ve observed, now act!

How many times does your organization encounter a difficult situation and then nothing happens? I see situations like this frequently and too many times there is a lack of action because the team is too focused on why they are in the situation. They spend a lot of time working through the cup half empty / cup half full debate. While it is important to understand the situation, once you have defined it you need to create your strategy. Then act!

It’s overflowing!

The next time you encounter a difficult situation, I encourage you to not spend too much time defining the situation and spend more time on planning how to move forward and fill the glass back up. Rally your team around creating a strategy to not only fill up your cup, but make it overflow – then you will need a bigger cup! Then you can have a heated debate with your team on whether your new cup is half empty or half full!

Getting stuck in these situations is a very common problem for businesses of all sizes. Sometimes, a new perspective helps get things started. Please contact me if you would like a confidential, no obligation conversation about your cup.

Contact Mike

 

 

Leadership – Is Magic Your Strategy?

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I saw this cartoon and chuckled to myself. I instantly thought of multiple situations where this brand of leadership occurred. A group of leaders sitting around their conference table trying to fix a difficult situation or turn the company around without any solid solutions on how to fix it. I often wondered if anyone actually thought or wished that something would just magically happen to fix their problem. Is hoping for magic to happen the same as hoping that time will allow a difficult situation to resolve itself? Is that what the ostrich is thinking as it sticks its head deeper and deeper into the dirt? I guess if things happen to create a difficult situation, is it so unreasonable to sit back and let things “unhappen”? Yes, it is unreasonable.

Employees Count On You

No matter how big or small your company is, if you have one or more employees, you have a duty to do what is best for the future of the company. Employees generally take a leap of faith when they join your team. More than likely, they are looking for something beyond just a paycheck – especially the newer generations. They are looking to be part of something growing or moving in a positive direction. If their leadership team is sitting around the table hoping for something magical to happen, how committed do you think employees are to that team? On top of that, employees have expectations that their leadership team will have the capacity to work out solutions for these difficult situations or connect with outside experts that do have the expertise. Here’s a little insight – employees don’t mind if solutions don’t work every time. They mind when there are no solutions.

Customers Count On You

Your customers use your services and/or products because they provide value. They want to keep a relationship with you as long as you are providing positive value. As a customer, it is much easier to keep going to the same company than finding a new company. If customers gets a sense that your company is not capable of solving problems or adapting to difficult changes, they will quickly translate that to thinking your company is not innovative and will not keep up with the trends. They may not jump ship immediately, but be assured they are looking to do so.

Competition Loves This

How do you think a competitor reacts when they hear a leadership team in their industry is hoping for magic? Some may celebrate; knowing that they soon may get more customers coming their way. Others may focus on how they can be opportunistic and take advantage of this situation. How many competitors, do you think, will reach out to the struggling company and offer some free assistance?

Unfortunately, unless you are a professional magician, magic is not going to solve your problems. If you are in a leadership role at an organization, there are times when you are going to need to make some extremely difficult decisions to handle extremely difficult situations. Hoping things work out all by themselves is actually a decision – usually a bad one.

If your group is having a hard time finding a workable solution you have three options: change the makeup of the group, expand the group, or bring in some outside expertise to help facilitate the group. All three of these are better options than hoping for magic.

Contact Magic Mike

 

Buying A Business – Part Three

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In my prior posts about buying a business I went over the major steps leading up to closing a deal. There is a lot of hard work and many moving parts to manage in the buying process. You may encounter unexpected hurdles, last-minute surprises, and possibly a couple of sleepless nights while you approach the official closing date. This is absolutely normal. There are too many pieces to this complicated puzzle for it not to cause you to scratch your head a few times or ask “Did I forget to do this?” My best advice is to go into this expecting there are going to be some rough spots, but remember that your ultimate goal is to buy a business that is going to make you incredibly happy. Let’s assume the big day has arrived, you’ve signed all the paperwork, and you now have the keys to your new kingdom. What’s next?

Bust A Move!

You just accomplished something that only a small percentage of the population has done. All the hard work during your search and closing has culminated in this amazing opportunity that you created for yourself. This is a huge deal and you should celebrate! During your lifetime you will have a handful of milestones that you will remember. I guarantee that this will be one of them. Celebrate with your loved ones, friends, and anyone else you want. Toast your hard work and your future successes. If you have a personal happy dance, this is a great time to do it! It’s probably a good time to thank all your trusted partners who helped you get to this point. Relish in this moment and remember it. You will have opportunities in the future to look back and use this memory to help you out. Now it’s time to get to work!

Make A Plan

This is probably a little misleading when I state at this point to make a plan. Actually, prior to your closing date, you should have sat down a created a plan on how you are going to approach this business as a new owner. You should definitely have a detailed plan on what you are going to accomplish your first day, week, and month. These will definitely be fluid plans, but they need to be in place to ensure you start off on the right foot and keep your positive momentum. Some of the key things you could consider doing the first day or week are:

  • spend quality time with each employee – learn what they do, get to know them, and let them get to know you
  • begin learning all aspects of the business – roll your sleeves up and get to it
  • communicate your short-term plans to the organization – this will reduce anxiety surrounding a new owner
  • reach out to all your key customers and vendors to introduce yourself – let them know it’s business as usual or what is going to be different
  • work on your cash flow and expenses – making that first payroll cycle can be a little stressful

Having a plan before you walk in the door the first day will help alleviate all of your stress and convey to your team that you are on top of things. Of course, there will be many issues that come up during the first days or weeks that you did not consider. Take them on one at a time and know that you will get through them in short order and a routine will emerge.

Why Did I Do This?

When things get a little hectic, you may let a little negative thinking sneak in. A little buyer’s remorse is perfectly normal and probably expected. What you just spent, both in time and money, was very significant. When those doubts creep in I want you to think about how you felt during your celebration. Maybe picture your happy dance, especially if it looked ridiculous. Owning a business is an incredible experience and it is also a lot of responsibility. Unlike being an employee for someone else, at the end of the day you are still the person in charge and accountable. The fulfillment you will receive when your business succeeds is incredible and worth all the hard work and sacrifice.

Finding, buying and owning a business can be one of the most incredible experiences you may encounter, but it can also be a little overwhelming. If you are thinking of taking the plunge, but are unsure of how to start or if it is the right move for you, I would be happy to share my experiences with you. I’m here to help you.

Contact Mike

 

Buying A Business – Part Two

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In Buying A Business – Part One, I gave an overview on identifying the type of business you want to buy, searching for available businesses, and then a not-so-subtle tip that it will take time and hard work to actually close on the business you are pursuing. There are a few more areas in the process that I’ll cover in this post. As a reminder, these posts are not meant to be an all-inclusive primer on buying a business, but a high-level overview on some of my learnings as I’ve gone through the process multiple times.

Circle The Wagons

As soon as you start the process of buying a business, you should begin to identify your trusted advisers and vendors. Here is a short list of some of the most important connections for you to make. Each transaction is different, so you will want to evaluate your situation and identify any others you may need.

Accountant   An accountant is a great person to review your opportunities. They have seen many successful and unsuccessful business over the years and are well-equipped to give you advice on the financial health of the business. Also, you should decide if you are you going to do your own bookkeeping? If not, you will need to identify who is going to do it. If you are, it’s still a great idea to have a trusted financial adviser in your corner to help review your efforts and possibly prepare your necessary tax submissions. This is a critical area for the long-term success of your venture and is not an area to take shortcuts or try to save a few dollars.

Attorney   A strong deal lawyer is worth their weight in gold, especially if you can find one that will protect your interests without flooding your deal in paperwork. One of your decisions could be whether you want to go with a big or small firm. The benefits of a large firm are they can throw a lot of resources at a deal and make things happen quickly, which you will pay for. The benefits of a small firm is possibly a lower bill and personalized service. There are pros and cons to both options and I’ve seen success using both. The best advice I can give you is to get referrals from trusted advisers and go with the lawyer you connect with and understands what you are trying to achieve.

Financing   How are you financing your deal? Are you considering an SBA loan, a conventional loan, or other alternatives for your deal? There are many options for deal financing. Some will make more sense than others, depending on your financial situation, deal size, and type of business you are acquiring. Like other areas, the more homework you do ahead of time, the better. The worst time to start looking for financing is after you have made an offer. I highly encourage you to do a lot of homework in this area as soon as you start looking for a business. Until you know what financing you have available you will not know what price range to look at or what to offer. The other thing to keep in mind is that financing should not be a cookie cutter approach – financing a deal can be an art and use a lot of imagination and creativity.

These are just a few of the important connections you should make when you start your search. Depending on the type of business you buy you may need other resources like Information Technology, Marketing, Banking, etc. These will be valuable resources even after you close on your business.

Bow To Your Partner

You’ve found the business that meets all the parameters you previously established and you want to move forward. Now comes what I call “The Dance”. Depending on your personality, this could be the part of the process that really gets your adrenaline pumping or elevates your stress level. Usually you will be given the opportunity to meet with the Seller and ask them questions about the business. This is a great opportunity to learn about that specific business, but an even better opportunity to learn more about the Seller. Why are they selling? What type of deal structure do they prefer? What does their ideal Buyer look like? If there are multiple offers, what will they base their decision on? Don’t be afraid to ask specific questions about a deal. If it’s a question they don’t want to answer, they or their Broker will say so. If you are polite and genuinely interested, a lot of times they will give you some critical information. The key objective of this meeting is to give you enough information to decide whether you want to continue to pursue the opportunity or not. The secondary objective is to give you key information that will help you draft an offer that gives you a higher chance of acceptance, if you want to go down that road. Like other aspects of buying an acquisition, there is a little bit of an art to these meetings. If you do your homework and prepare quality questions for the meeting, you will do great.

Once you have decided to pursue the opportunity, you will need to submit a formal offer to the Seller. You will need to determine what price you want to offer and the broad terms of the deal. Depending on the Seller, the size of the deal, and a few other factors, you will probably present the Seller with a Letter of Intent or something similar. Each opportunity is different and your approach may need to be different for each one. If you are responding to a business that has been listed by an Aggregator or Broker, you will probably be competing with a few qualified buyers. You may go back and forth a few times or you may, but hopefully you will come to an initial agreement that allows you to move forward towards the actual purchase.

The Homestretch

The Seller accepted your offer. Now it’s just a matter of picking a closing date and getting the keys, right? No. You’ve still got a lot of work ahead of you. There are major things to do beyond just picking a closing date. Here are a few of the major things you will need to do to get to the closing date.

Due Diligence   You will need to perform some due diligence on the Seller’s business prior to closing. Depending on your financing, they may require some proof of this. At a minimum, you will want to do this for your own benefit. You will want to verify the validity or existence of key items that the Seller represented to you. This could include reviewing the Seller’s prior years’ tax returns to verify revenue and expenses. It could also include reviewing existing customer contracts to verify that they can be transferred or assigned to your new entity. A thorough due diligence process is vital to closing the deal and assuring you the business you are buying is worth the amount you are paying.

Finalize Financing   Your financing partner should be working closely with you at this point to make sure you are gathering the right information they need to approve your funds and make sure everything is proceeding in a timely fashion. I highly recommend communicating often with your financing partner to make sure everyone is on the same page during this whole process. You don’t want any last-minute surprises or delays that could derail your deal. Generally, these partners have a lot of these transactions under the belt and will be a huge asset to you completing the deal.

Closing Documents   While you are doing due diligence and working on your financing, you should also be working on all of the closing legal documents. In addition the the sales agreement, you may also need consulting, non-compete, and lease agreements. Whether the Seller’s attorney or your attorney is drafting these documents, you will want to thoroughly review them to make sure they encompass everything you want and need to transition the business.  If the Seller’s attorney is preparing them, you will want your own attorney to give them a thorough review. Don’t be afraid to ask for changes if you need them. This is another area that may cost some money, but you should not try to cut corners.

The process of buying a business takes a lot of flexibility, patience, and endurance.  You will be juggling a lot of different balls at the same time, but it can be one of the most gratifying and exhilarating things you go through. In my next post I will cover the important things that should happen after you take possession of your new business. That’s right – there is more work to do! In the meantime, if you have any questions or want more details about my experiences buying businesses, don’t hesitate to contact me.

Contact Mike

 

Buying A Business – Part One

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Over the last few years I have had the pleasure of going through two different searches to find and purchase a business. I’m not sure which was more exciting to me – the hunt or closing on the deal. I learned a lot from both searches and wanted to share my experiences, in case you are considering something similar.

What Do You Want To Be When You Grow Up?

For me, one of the hardest things about buying a business was trying to identify which type of business I wanted. Since I grew up in service-oriented companies, I naturally gravitated towards them. Beyond that, I wasn’t sure what I wanted. I went through the SIC directory to see if any specific type caught my eye, but it really didn’t help much, except to identify some industries that I wanted to stay away from. After a lot of time and headaches, I decided that not knowing exactly what I wanted was not a bad thing. Actually, for me, being open-minded helped me buy two of my businesses.

Release The Hounds

Finding the right business to buy is a combination of skill, persistence, and sometimes luck. Once you have narrowed down what you are (or are not) looking for, the really hard work begins. The first thing you should understand about “the search” is that you will probably have a lot of competition. Depending on the market you are searching, many times there are more buyers and sellers. It’s important for you to understand this dynamic in your market. If there are a lot of pursuers for a business, many times you will have to pay a premium for the business or be creative with your offer. If you know people who have recently bought a business in your market, ask them how the process went and what the competition was like. The more informed you are about your market, the better your chances. Here are a few options on how to find available businesses.

List Aggregators

An example of a list aggregator is BizBuySell. They provide lists of companies available for sale that you can filter by location, type, etc. If you register, you can also get updates emailed to you. I would sign up for these lists whether you are seriously looking or just thinking about starting a search. You should definitely understand that this is a volume game and that you and a gazillion others will be looking at the same information. However, there is a plethora of great information on these websites. Once you find an industry you are interested in, you can look at different locations outside your market and see how they are priced. This is helpful insight for you when you are contemplating offers.

Brokers

If you are serious about buying a business, you should absolutely reach out to the brokers in your market. Before you send your first email or make your first call, reach out to your network and find out who the best brokers are in town. You might also find out who you should shy away from. Once you have your short list, reach out to each of them and take the time to introduce yourself and begin developing a relationship. I highly recommend you meet them in person. I’ve always believed that you can build a relationship stronger and faster if you meet in person. Each brokerage will have a slightly different approach to working with clients. Some may offer to help you perform your search – for a fee. While I have not gone with this approach, I know others who have had great success with it. This is a decision you will need to make based on what you are looking for, how fast you want to find your business, and your budget.

Networking

If you are in a position to share the news that you are searching for a business, by all means do so. Leverage the network you have built over the years to help you find the business of your dreams. You may be surprised and find the business of your dreams through your network. I would leverage your connections and even look at groups on LinkedIn to identify opportunities. Think of searching for a business like fishing. The bigger the net, the more fish you will catch, and hopefully find one that is a keeper.

Law Of Large Numbers

I hate to be the one to tell you this, but it may take longer than a few days to find the business of your dreams. I’m also sorry to tell you that you may bid on the business of your dreams and lose – multiple times. I will tell you that if you are persistent, you will find more than one of these golden opportunities. I don’t know how many dream businesses I lost or even walked away from (actually, I do), but I picked myself up and kept working hard. Eventually, it paid off.

In my next post I will discuss what happens once your offer is accepted. The fun of due diligence and contract negotiations begins. You also will need to start developing key relationships with your trusted advisers. These are the critical people that will help you finalize your transaction and get you started on the right foot.

If you are thinking about starting the exciting adventure of buying a business, or in the middle of a search and would like to get some valuable feedback on the process, don’t hesitate to contact me. I would be happy to share my successes and failures with you.

Contact Mike