Analyzing the Seller’s Operations: Learning All The Facts
July 28, 2007
Most of us are brought up not to be too nosy. We develop an instinct to mind our own business and stay out of other people’s affairs. This attitude can be deadly when you’re thinking of buying a business. Everything concerning the target business’s operations is your affair, because you’ll have to live with it all should you buy the business. You should take the position that absolutely nothing about this business is going to surprise you after you buy.
You must drive yourself to learn everything you possibly can before you buy it. This means being very nosy. It means asking embarrassing questions and pressing for details if the answers don’t satisfy you. Only after you’ve convinced yourself that there’s nothing more you can learn should you even consider closing the sale.
Never Stop Learning
July 22, 2007
Daniel Goleman is the cochair of the Consortium for Research on Emotional Intelligence in Organizations based at Rutgers University’s Graduate School of Applied and Professional Psychology in Piscataway, New Jersey.
How To Find The Right Business
July 9, 2007
Let’s assume you’ve got a pretty good fix on the type of business you’re best suited for. How do you find this business? Unfortu¬nately, most people select a business in the worst way: by hearing about one available business and buying it. Just as you probably wouldn’t buy a house after looking at only one, you shouldn’t buy the first business offered to you, no matter how attractive it looks. Scrutinize the real estate section of your local newspaper. You’ll find listings for a number of businesses being offered for sale. Check out all those that look promising.
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Every Business Has Its Own Personality!
July 8, 2007
We’re getting into the realm of the analysis of a particular busi¬ness, which we’ll cover in depth in the next chapters, but this point is worth covering here: Every business has a style and per¬sonality that it has adopted from its owners and that you’ll adopt when you buy it. If your personality and the business’s personal¬ity don’t match, you may have a big problem.
Here’s an extreme example drawn from real life that proves the point. Western Distributors, Inc., is in the business of distributing coffee beans to restaurants and supermarkets. Phil, who started the business, buys coffee beans at wholesale, blends them, grinds them, and sells the blends. Lilly, who’s always been something of a gourmet with a particular interest in exotic coffees, would like to buy Western Distributors. She believes she’d get along famously with the sellers of the imported beans and with the supermarket buyers. She even thinks she could expand the business to include a line of exotic teas and coffee-based liqueurs. However, there’s one curious thing about the way Western Distributors is run. The only way Phil motivates his employees is by kicking them in the seat of their pants. What’s worse, the employees seem to like being treated this way. The only way to get anything out of the office staff (receptionist, secretary, and bookkeeper) is to scream at them louder than they scream at Phil. In fact, the whole place seems to be at the edge of a scream all the time. Lilly even saw Phil physi¬cally throw a driver into the cab of a truck in order to get him rolling. In short, this is the way the employees are treated and expect to be treated.
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The Type Of Business You Are Suited For: Personality and Lifestyle
July 6, 2007
Tom Brown had been an electrical engineer with a large instru¬ments manufacturer for more than 20 years. In the earlier years of his career, he really loved his work. He could sit for hours at his desk designing and analyzing electrical circuits. He became very good at his work and rose steadily within his company. Every Fri¬day afternoon he felt a little sad, knowing he’d have to wait until Monday to get back at those circuits. As often as possible he’d take work home with him. He submitted papers to engineering journals and even spoke at engineers’ conventions. But after a number of years a certain amount of boredom set in. What was worse, as he rose in the company he dealt less with circuits and more with office politics, since he was reporting directly to the vice president for engineering. But what really soured him on his job was that it was a job. No matter how far he rose (and there was only so far he could go, since the company was family owned), he would always be on a salary. He saw that some of his neighbors who didn’t have his abilities but who ran their own businesses made far more money than he, and they didn’t have office politics to worry about.
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Evaluating the Target (I): Why Is the Seller Selling?
July 1, 2007
Let’s assume that the following events have already occurred. After doing an adequate amount of soul-searching, you’ve decided a business engaged in some form of construction is for you. You’ve always been a pretty good amateur carpenter and can speak the language of the building business. You also feel you have the managerial skill to handle a business that has a fair num¬ber of employees and outside salespeople.
You’ve also found a business broker you have confidence in, and with that broker’s help you’ve sharpened your thoughts about what you’re looking for and what you can handle, psychologi¬cally and financially. Fortunately, your broker’s inventory con¬tains a number of businesses that appear to fit the profile. You’ve investigated these, but all save one turn out to be blind alleys. All but one either cost far too much or are too small. Some are losing money and don’t appear to be good turnaround candidates. There’s one, however, Houston Sash & Door, Inc., that seems like a distinct possibility. Houston Sash & Door manufactures win¬dows, doors, and other specialty items for general building con¬tractors. The company has been profitable, and the asking price is at least in the ballpark. You’ve visited the plant on a couple of occasions and haven’t noticed anything (at least yet) that might scare you off. Your broker informs you the company was founded 10 years ago by its present and sole owner, Everett Houston, who for the past 10 years has been the inspiration and driving force behind the business.
