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Acquisitions Small to Large

One of the easiest and most painful ways to grow your business is through acquisition.

I’ve personally been through everything from “hire me and take my clients” to “buy my clients and my property so I can retire”.

If you are on the selling side, it’s important to be realistic in your pricing and requirements. I’ve made some acquisitions that I shouldn’t have based on the math but it worked out strategically because of cross selling and other opportunities. I’ve also made acquisitions that ended up being a steal between property and seller financing.

I deal entirely on recurring revenue. That’s why I sold internet service for a decade and lease property now. Many people are better at sales than me so I want to sell something once and my client and I can enjoy it for years.

If you are looking for general guidelines, I’m happy to provide them with no guarantees. Don’t buy a business for more than 3x-5x EBITDA of the recurring revenue. If you want to invest and be an absentee owner, look very close at the net owner benefit the broker will show you. That needs to cover the salary of the manager you don’t want to be. Non recurring revenue is worth very little unless you already have the same business nearby and can leverage it. The fifth propane store is worth more to you than the first propane store to someone else.

Growth through acquisition is easily my favorite as long as you go in eyes wide open and know your risks. The combination of cross selling and shared efficiency can be the icing on the cake for a purchase but don’t buy icing, buy the cake that exists. You’re making the icing yourself, don’t pay for it.

 

 

 

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