I sold one of my companies recently and have been spending some time looking at various potential acquisitions.
I have also been quite busy with the consulting and brokerage work I do with both prospective business buyers and owners who want to sell their companies.
With the second group, much of my work is focused upon helping them get their businesses ready for sale.
Still, after twenty plus years doing this work, I am utterly amazed the shape in which some businesses operate.
Last week I called a partner of mine and told him that after seeing so many businesses over the past twenty years, I cannot believe that neither he nor I are billionaires. Don’t get me wrong, I have made what most people would consider to be quite a bit of money, but I am very long way from the “B Word”.
The reason I feel this way is because of how successful many business owners are and often times it is despite themselves.
I see countless businesses where there is a ton of profit falling through the cracks, operationally they are paralyzed, employee morale is in the toilet, their books and records are in complete disarray, and day after day the owners do the same thing without any zeal to grow their companies. Still, many remain profitable.
Can you imagine how these businesses can surge if the right person would be at the helm? Certainly not all businesses fall into these categories and for a prospective business buyer, it can be a double-edged sword. On the one hand, they see a business operating on cruise control and think “with a bit of dedication, I can really grow this thing.” At the same time, the seller is giving them the big sales pitch: “with new blood, there is no end to the upside.” It all sounds great doesn’t it?
Easier said than done my friend and this where many buyers fall into a trap.
Sure the business may have some upside and yes, with dedication, hard work, new blood and creative initiatives, there may be some splendid growth potential. Unfortunately, all of this “blue sky” is entirely dependent on one main metric: The new owner has to be the RIGHT owner!
That is why, no matter what business you look at, no matter how excited you become by these alleged untapped opportunities, and no matter how deeply you convince yourself the current owner’s performance can be improved, the ONLY way it will happen if your best skills are EXACTLY what the business needs to not only sustain current levels but also grow in the future.
Do not fool yourself or hallucinate about all of the wonderful things you can do as the new owner. Instead, give yourself a reality check of your strengths and weaknesses and make sure you possess the acumen to operate and build the business.