I think that every business owner has a story about the worst decision they ever made. For me I have more than one, One of the biggest was my purchase of our vending operation that was in Burlington, Vermont. I had little experience with running my own company and didn't do enough research or even understand the process of due diligence before buying this company.

 

 

 

Transcript

You know I think every business owner has a story about the worst decision they ever made. For me, I have way more than one. One of my biggest was my purchase of our first vending operation that was in Burlington, Vermont. I had little experience with running my own company. I didn't do enough research or even understand the process of due diligence before buying this company.

None of us want to make mistakes and we certainly don't wanna make mistakes that were this big. But if we're going to make mistakes like this, we need to at least learn a few lessons along the way.

I think one of the most important lessons I learned from this experience is to do more research before you purchase a company. After I learned how bad things were after we bought the business, I felt like a total and complete real idiot. It made me doubt what I knew and I froze for several months before I realized if I didn't start doing something, taking some action, I was gonna lose the entire business.

Now, one of the lessons I learned was about the process of due diligence and why you need to take a serious and time-consuming look under the hood of a business before you buy it. I also learned that not having a purchase and sales agreement with some real teeth, will almost always come back and bite you in the rear end.

I finally learned that any advice you get from a major activity never involves your advisor taking the hit if things go sideways. It falls on you the business owner, in this case, the advisors who advise me through this process, they walked away with nothing, I walked away with a bill of several hundred thousand dollars, not a great outcome.

I could have felt sorry for myself that wouldn't have done anything useful. Instead I had to take control and slowly but surely fix all the problems that came out in the first six months of running our new acquisition. That's why whenever I talk with someone about buying a business, I'm a bear. I'm making sure you do the right things along the way. I know that if you don't, there's a good chance you'll experience a version of what I went through and I can assure you that you don't wanna do that.

If you're thinking about doing an acquisition, here's some things I think you need to think about.

  1. First, you need to learn and know how to do due diligence. Get a checklist as thorough. Make sure you get all the questions answer the checklist. The checklist should go on for pages and pages. It should be more thorough than you think is necessary and you need to go through all the steps so you actually know what you're buying or what you think you're buying. I can promise you that even after going through due diligence and going through all the checklists and all the things you do, you're still gonna have some surprises that you weren't aware of before you bought the business.

  2. Number two, if you decide to move forward on the sale, have your purchase and sales agreement have real teeth in it and real penalties for any fibs the selling company may have told you. I have to tell you, all sellers lie. They're not gonna tell you all the bad things about their business. They're not gonna volunteer the things that are wrong. If you can't find it, it is not in your purchase and sales agreement and a purchase and sales agreement is not written properly, you're the one that's gonna be footing the bill, not the seller.

  3. Number three, have a conversation with us. We've helped hundreds of business owners look at potential acquisitions in a way that should help and not hurt your ultimate cashflow. The truth is, if you buy a business and you don't get cashflow as the creative, the sale has been a failure. Now eventually you probably gonna be able to fix it and eventually you're gonna probably be glad you did it but it might take you seven, eight, nine, 10 years like it did with me. I can promise you you'll never wanna go through what I went through. You don't wanna purchase a business for $475,000 and have half of your business not be there in the first place and then the other half you have to invest another $200,000 to keep it alive. I ended up paying four times what the business was actually worth. And at the same time, I was lucky. I managed to work my way through the problems I had. It took me seven years and eventually we got out of the woods. It wasn't a fun seven years. It was a painful seven years. And more than once I thought the end was in sight. So here's what I'd like to do.

I would love to have a conversation with you about this and about buying the business you're interested in doing that. I'd be happy to walk through your thought process. I'd be happy to tell you my stories about what happened and you can see that it's really important to follow best practices along the way. So email me at jpatrick@stage2planning.com so we can set a time to talk.

In the meantime, if you're not ready to talk, download our free infographic on the stage two innovation process. It talks about how to learn from our mistakes. If we don't learn this skill, our business life can get very, very difficult.

And after you watch the video, please scroll down let me know what you think about learning the skills to successfully buy a business.

This is Josh Patrick. You're at the sustainable business. Thanks a lot for stopping by. I hope to see you back here really soon.

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