Being prepared to acquire a business needs a change of mindset. Jonathan Jay outlines what’s required.
Buying or selling a business is outside the normal skill set of even the most competent business people because it’s not something that they do on a daily basis. So says Jonathan Jay of The Dealmaker’s Academy, a businessman who sold his first business at 27, and has bought and sold multiple businesses since. The Academy runs courses providing advice on how to achieve higher levels of business success.
“Most people only sell at the point in the business where they want to retire. You get the odd person who sells their business in their twenties, but they are the exception,” he says.
This is the worst time to sell as the gas may have gone out of the business, but it can be the best time to buy. “The strongest negotiating position is when you get an unsolicited offer at a time when you were not considering selling. Unfortunately, that doesn’t happen very often.”
However, acquiring a business is something that growing companies should always be alert too, he says. “It is the fastest way to grow a business. You can grow overnight to an extent that might otherwise take you five years to achieve. That’s why acquisition is so attractive, because it speeds everything up and we’re all time poor.”
There is no perfect time to buy or sell, says Jay, who advises company bosses to develop a mindset to always be on the lookout for an opportunity that may present itself. His courses teach businesses how to structure a deal and de-risk the process.
Jay says that even a flagging business can be an attractive acquisition opportunity if you have a strategy to turn it around. “It’s a bit like relationship advice. We’re all better at giving it to others than recognising problems closer to home. Sometimes it’s easy to spot that a better functioning sales team, or a more competitive online offering is all it takes to boost a business that was on a downwards trajectory.”
Every business has equal access to these sorts of opportunities but not everyone knows how to take advantage of them when they present themselves. “Business people need to learn that the best use of their time is not dealing with the day-to-day aspects of the business, but figuring out how to get the business from where it is to multiple times its revenue, quickly, and then figuring out how to sell it. You need to stop thinking like an operator and start thinking like an investor.”
When it comes to selling a business, Jay says that companies have to realise that its value to a potential buyer is not the same as its value to them. “A buyer isn’t interested in the 20 years of work you’ve put into it. It’s like buying a house – you don’t care about the wallpaper because you’re going to change it. Sellers can concentrate on the wrong things. They can be delusional and have unrealistic expectations.”