Have you dreamed about buying a company or perhaps you’re thinking about making an acquisition to strengthen your existing business? Mackenzie and Company, a corporate strategy and finance consulting firm, believes that to buy a business you should be able to execute one or more of five strategies.
Find out what they are and what a seasoned pro does to buy a business on this episode of What Works for Biz.
WHAT YOU’LL LEARN FROM CHIP NIELSEN, PRESIDENT/CEO OF DOSCHER’S CANDIES?
WHAT ARE SOME PRINCIPLES THAT GUIDE Y0U IN LOOKING AT A BUSINESS OPPORTUNITY? (2:01 in)
In Chip’s words – A strategic reason and an opportunistic opportunity. Increase your size or volume, geographic expansion, lessen competition, acquire key new people. It might be fun, interesting or challenging.
Tip – Consider whether your staff is ready to take on more responsibilities or new challenges.
WHAT KIND OF RESEARCH DO YOU DO TO EVALUATE PROSPECTS? (4:02 in)
In Chip’s words – Once I’ve picked an industry or business, the research in my case goes to friends, relatives, acquaintances, who might I know and who might connect me to someone in that industry. Read trade journals in that field. Get the word out I’m looking.
Tip – The type of research you do depends a lot on what you’re looking to buy, what your capabilities are, where’s your passion, and how large or small in scope the company footprint is.
IS IT IMPORTANT TO HAVE A THOROUGH UNDERSTANDING OF THE BUSINESS YOU’RE LOOKING TO ACQUIRE? (8:10 in)
In Chip’s words – You’re naturally going to succeed at it faster. Those in an acquisition mode should play to your strengths. Look at the things they are passionate about. Overlay businesses they might be interested in, involved in and be able to learn fairly rapidly.
Tip – Pursuing businesses that don’t complement your skill set and background is too big a risk.
HOW IMPORTANT IS PAST PERFORMANCE VERSUS FUTURE PROPECTS OF A BUSINESS? (11:44 in)
In Chip’s words – (Past) It’s the best predictor of the future.
Tip – Judging the future is very important if you are already in the business and the acquisition is an add on or you’re looking to close down the business and just buy a customer list.
HOW DO YOU LOOK AT YOUR ROLE IN THAT ACQUISITION? (14:21 in)
In Chip’s words – You should be doing it with the purpose of building the business. I’m definitely more of the builder than the operator.
Tip – Develop a clear strategy that can be communicated effectively to those you’re relying on to execute it.
WHAT ATTRACTED YOU TO DOSCHER’S CANDIES? (15:20 in)
In Chip’s words – I grew up in a family business environment. We worked that list of contacts in town. There happened to be a couple of small business brokers. It was a family business sold to Greg Clark. In meeting him we fell in love with this quaint candy business.
Tip – Consider giving a previous owner equity in the new business if the person is going to stay on and help you run the business.
SHOULD A BUSINESS BUYER HAVE AN EXIT STRATEGY IN MIND WHEN PURCHASING? (19:49 in)
In Chip’s words – In my estimation it’s going to be a lot more situational.
Tip – If you buy a business that you’re just getting started in, formulating an exit strategy upfront is likely not as important as it is to the business owner that seeks to turn it over in three years.