3 Quick Tips and 3 Telling Questions
Acquisition Aficionado Magazine
3 QUICK TIPS AND 3 TELLING QUESTIONS FOR SAVVY BUYERS
In the intricate dance of acquisitions, buyers often find themselves treading on a delicate balance between assertiveness and restraint, curiosity, and discretion. The art of acquiring a business involves not only crunching numbers and assessing market potential but also understanding the nuances of negotiation and strategic planning. As an Acquisitions Advisor working with both Buyers and Sellers, I’ve noticed some consistent rhythms to the process that show up no matter the industry, country, or background of the business or people involved in the transaction. Here are some insights to help buyers navigate this complex terrain with finesse.
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3 QUICK TIPS AND 3 TELLING QUESTIONS FOR SAVVY BUYERS
In the intricate dance of acquisitions, buyers often find themselves treading on a delicate balance between assertiveness and restraint, curiosity, and discretion. The art of acquiring a business involves not only crunching numbers and assessing market potential but also understanding the nuances of negotiation and strategic planning. As an Acquisitions Advisor working with both Buyers and Sellers, I’ve noticed some consistent rhythms to the process that show up no matter the industry, country, or background of the business or people involved in the transaction. Here are some insights to help buyers navigate this complex terrain with finesse.
Continue Reading...
3 Quick Tips for Buyers
#1 Always ask for the deal you want
In Acquisitions, assumptions can be costly. It's imperative for buyers to voice their needs and desires clearly. Surprisingly, many sellers may not realize the extent of their own flexibility until presented with a well-crafted offer from an enthusiastic buyer. So, always ask for the deal you want – you might be pleasantly surprised by the outcome.
Tip: If your offer is less than full-price, or involves creative terms, put it in a formal LOI (Letter of Intent) vs an email or verbal offer. Why? Even if the Buyer has remained constant in their demand for full-price or nothing else… It's amazing what the psychology of that written offer can do to someone. When a seller sees a formal, signed LOI, it makes it much more real, and they tend to take the offer more seriously and start dreaming of what those funds might mean to their life.
In Acquisitions, assumptions can be costly. It's imperative for buyers to voice their needs and desires clearly. Surprisingly, many sellers may not realize the extent of their own flexibility until presented with a well-crafted offer from an enthusiastic buyer. So, always ask for the deal you want – you might be pleasantly surprised by the outcome.
Tip: If your offer is less than full-price, or involves creative terms, put it in a formal LOI (Letter of Intent) vs an email or verbal offer. Why? Even if the Buyer has remained constant in their demand for full-price or nothing else… It's amazing what the psychology of that written offer can do to someone. When a seller sees a formal, signed LOI, it makes it much more real, and they tend to take the offer more seriously and start dreaming of what those funds might mean to their life.
# 2 Be ready with “Personal” information
Relationships matter, especially in business acquisitions. Sellers often require a glimpse into the buyer's background before divulging sensitive information about their business. Be ready with background information such as your LinkedIn profile, links to your current company website, and most important…a compelling personal statement outlining why you're interested in the business. A personal touch can go a long way!
Tip: Don’t get overly emotional or cry when talking about why the business is interesting to you. That can actually turn the Seller off and make them think you will be too emotional during the transition when they will need to work with you closely. Yes, I am speaking from experience here…and it has happened multiple times. Buying a business can be a very exciting and passionate experience, but try to keep your professional composure while also making it personal enough to build that relationship with the Seller.
# 3. Manage Your Enthusiasm
While it's natural to be excited about potential growth opportunities, it's wise to temper your enthusiasm during negotiations. Sharing all of your great growth ideas upfront might inadvertently weaken your bargaining position. Strike a balance between expressing excitement and keeping some growth strategies close to your chest.
In my business as an Acquisitions Advisor at Westbound Road, I’ve actually seen several instances of a potential Buyer divulging too many “low hanging fruit” opportunities to grow the business quickly, and the Seller actually pulling the business off the market to grow it themselves! Many times people are looking to sell their business because they simply have run out of ideas for scaling it and it is easier to sell than grow. Then they get all these great FREE ideas from potential buyers and realize that their business is pretty great AND they can implement those free strategies and fall in love with their business again. So, as a Buyer, keep some ideas to yourself… otherwise you just might talk the Seller into keeping the business!
Relationships matter, especially in business acquisitions. Sellers often require a glimpse into the buyer's background before divulging sensitive information about their business. Be ready with background information such as your LinkedIn profile, links to your current company website, and most important…a compelling personal statement outlining why you're interested in the business. A personal touch can go a long way!
Tip: Don’t get overly emotional or cry when talking about why the business is interesting to you. That can actually turn the Seller off and make them think you will be too emotional during the transition when they will need to work with you closely. Yes, I am speaking from experience here…and it has happened multiple times. Buying a business can be a very exciting and passionate experience, but try to keep your professional composure while also making it personal enough to build that relationship with the Seller.
# 3. Manage Your Enthusiasm
While it's natural to be excited about potential growth opportunities, it's wise to temper your enthusiasm during negotiations. Sharing all of your great growth ideas upfront might inadvertently weaken your bargaining position. Strike a balance between expressing excitement and keeping some growth strategies close to your chest.
In my business as an Acquisitions Advisor at Westbound Road, I’ve actually seen several instances of a potential Buyer divulging too many “low hanging fruit” opportunities to grow the business quickly, and the Seller actually pulling the business off the market to grow it themselves! Many times people are looking to sell their business because they simply have run out of ideas for scaling it and it is easier to sell than grow. Then they get all these great FREE ideas from potential buyers and realize that their business is pretty great AND they can implement those free strategies and fall in love with their business again. So, as a Buyer, keep some ideas to yourself… otherwise you just might talk the Seller into keeping the business!
3 Telling Questions to Ask Yourself When Evaluating a Potential Acquisition Target
While these examples of standard questions are crucial:
#1 How much time will this business require from ME?
Assessing the time required to manage the acquired business is paramount. Evaluate whether there's a manager in place or if the current owner plays a hands-on role in operations. Identify key functions that would need replacement if the owner exits. If time constraints are a concern, budgeting for hiring suitable replacements becomes imperative.
# 2 What specific skills or expertise do I have that can contribute to the growth and enhancement of this business, elevating it beyond its current state?
Consider how your unique skills and expertise can propel the acquired business to new heights. Many businesses lack effective marketing strategies, presenting an opportunity for savvy buyers to make immediate improvements. Identify areas where your strengths align with the business's needs. Offering tangible avenues for growth and enhancement can ensure an easy win once you take ownership of the business and start implementing your skills.
#3 Does the business excite me… or is it just a good investment?
Beyond financial viability, assess whether the business aligns with your personal interests and passions. While seeking a good investment is valid, acquiring a business that excites you can fuel sustained commitment and dedication. Conversely, if you're seeking a passive investment, ensure the business can thrive without demanding excessive time and attention.
In acquisitions, success hinges not only on financial acumen but also on astute negotiation skills and strategic foresight. By sticking to these principles and asking the right questions, buyers can navigate the complex landscape of business acquisition with confidence and competence.
One Last Tip: It seems to be both a Buyers and a Sellers market right now. If you find a business that you are interested in, you need to jump on it because the really good ones are not lasting long. Looking at the past 5 acquisitions that my M&A Advisory Firm has been involved in, all 5 had multiple offers on them. This means that for a Buyer, the competition is fierce out there and you better be ready to put in an offer quickly. This intense competition demands buyers act decisively; hesitation inevitably leads to missed opportunities. Working with an Advisor can make that process smoother and less daunting.
While these examples of standard questions are crucial:
- What is the Current Financial Health of the Business?
- What is the Market Position and Industry Outlook?
- Are There Any Outstanding Legal or Operational Issues?
- What is the Historical and Projected Financial Performance?
#1 How much time will this business require from ME?
Assessing the time required to manage the acquired business is paramount. Evaluate whether there's a manager in place or if the current owner plays a hands-on role in operations. Identify key functions that would need replacement if the owner exits. If time constraints are a concern, budgeting for hiring suitable replacements becomes imperative.
# 2 What specific skills or expertise do I have that can contribute to the growth and enhancement of this business, elevating it beyond its current state?
Consider how your unique skills and expertise can propel the acquired business to new heights. Many businesses lack effective marketing strategies, presenting an opportunity for savvy buyers to make immediate improvements. Identify areas where your strengths align with the business's needs. Offering tangible avenues for growth and enhancement can ensure an easy win once you take ownership of the business and start implementing your skills.
#3 Does the business excite me… or is it just a good investment?
Beyond financial viability, assess whether the business aligns with your personal interests and passions. While seeking a good investment is valid, acquiring a business that excites you can fuel sustained commitment and dedication. Conversely, if you're seeking a passive investment, ensure the business can thrive without demanding excessive time and attention.
In acquisitions, success hinges not only on financial acumen but also on astute negotiation skills and strategic foresight. By sticking to these principles and asking the right questions, buyers can navigate the complex landscape of business acquisition with confidence and competence.
One Last Tip: It seems to be both a Buyers and a Sellers market right now. If you find a business that you are interested in, you need to jump on it because the really good ones are not lasting long. Looking at the past 5 acquisitions that my M&A Advisory Firm has been involved in, all 5 had multiple offers on them. This means that for a Buyer, the competition is fierce out there and you better be ready to put in an offer quickly. This intense competition demands buyers act decisively; hesitation inevitably leads to missed opportunities. Working with an Advisor can make that process smoother and less daunting.
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About the Author:
With a wealth of experience as a Partner and M&A Advisor at Westbound Road, Becky Smith brings a dynamic blend of expertise and insight to the world of mergers and acquisitions. Specializing in facilitating successful business transactions, Becky is dedicated to guiding clients through every step of the buying journey with precision and care. Drawing from her extensive interactions with thousands of potential buyers, Becky has distilled invaluable lessons and strategies from real-world case studies. Her unwavering commitment to client success and her deep understanding of the intricacies of M&A make her a trusted advisor in the field. |
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The above article was adapted from a live training Becky conducted for members of our Acquisition Alliance Private Mastermind group. Acquisition Alliance is a weekly “Ask Me Anything” group coaching and Mastermind hosted by the experts at Westbound Road LLC, acquisition advisors with over 50 years of collective experience in Acquisitions, with dozens of Mergers and Acquisitions transactions totaling nearly $500 million. If you are looking to acquire a business in the next 6 to 12 months, you owe it to yourself to check out this incredible resource to help you with your acquisition journey!
For more great tips and weekly business-buying content, check out our Private Mastermind, Acquisitions Alliance
For more great tips and weekly business-buying content, check out our Private Mastermind, Acquisitions Alliance
