by: Jeffrey Scott, PLANET Consultant
If you can eliminate the risks involved with buying a company, it can be good for your company. However the chances are far greater you will get a bad deal. To increase your chances of success, avoid the following twelve scenarios:
1. You buy company and then find out the owner is paying his people under the table. You need to find out ahead of time if he is doing this.
2. You buy company over winter, and too many customers jump ship; it is better to buy mid year.
3. You buy company and find the owner under estimated routes–go and estimate some of his jobs and compare to his estimates.
4. You buy company and find out too many of his clients don’t fit your business model. Either they want lower quality, or higher quality, both of which cause long term problems. How will you deal with this?
5. The new employees do not fit your culture, and this creates distraction the first year or two. Are you ready for this distraction?
6. Your rationalize that there will be “synergy” (of growth, profits) but this synergy doesn’t materialize, and you realized you overpaid.
7. You do the deal, it takes a lot of your time, and it works, but it distracts from your current strategic plans, and so your overall growth plans are not realized.
8. You base the deal on some ‘one time’ revenues that don’t repeat.
9. The owner’s estimates show a good theoretical profit, but his realize-rates are poor (due to client expectations or employees or both).
10. You buy company and find out his numbers were wrong and he was inept or he fudged. Follow Ronald Reagan’s approach of “trust but verify.”
11. The seller’s expectations are not realistic, and you end up spending a lot of time for nothing, and no deal ends up happening, and you get distracted from your core business.
12. You buy the accounts, but then an ex-employee goes after them and steals many of them.
If you can make a strategic buy, that solves a problem or fills in a gap in your strategy, then this can be win-win and really help you grow your profits. But buying for growth’s sake may be the wrong reason.
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Jeffrey Scott, MBA, grew his landscape firm into a $10 million enterprise. He now helps owners transform and profitably grow their landscape businesses by coaching them within a peer group format. Learn about his peer groups at www.GetTheLeadersEdge.com or contact him at firstname.lastname@example.org.