Ellen Rohr is the President and Franchise Operations Manager of ZOOM DRAIN and a home services business makeover expert. Howard Partridge is an internationally recognized business coach, bestselling author, and experienced business owner. Together, they discuss the timing, terms, and negotiating tactics that make up successful acquisition deals. 

Business Acquisition 

Ellen shares the reminder from Michael Gerber that you want to build your business so you can sell it. The people who are buying companies are looking for valuable businesses. What makes a valuable business? Profits that are:

• Predictable
• Consistent
• Turnkey

At the same time, if a business presents the potential to reach profits that check these boxes, it is worth considering. Howard echoes Ellen’s advice, adding that considering a business’s current client base and potential client base is also a good indicator of whether they might bring in a strong, predictable income. 

When Is the Right Time?

“The idea of acquiring companies is really so that you don’t have to spend marketing elsewhere. So when is the time right? Always… our recommendation is that you get a list together, you make up that list, you get it from a list service, or you go through and search your market area for your competitors, and you assemble a list, and then you’re going to reach out and try to make a friend.” - Ellen

Once you create your list, Ellen recommends beginning to fish and connect. You are reaching out to see how you could be of service to their company. You will face rejection, but eventually, you might find someone who will say, “Why don’t you just buy my company?”

Howard points out that even if you don’t get the acquisition of a company right away, you might acquire a great employee through that relationship or plant a seed that will blossom down the road. 

Unfortunately, due to COVID-19, some home services businesses are struggling right now. If you are looking to acquire, Howard recommends looking at three areas of that business:

1. Quality of their service experience.
2. How they are currently marketing or using referral strategies. 
3. Potential to increase revenue and profits. 

Ellen emphasizes that no matter where you are as a buyer in your financial place, you can offer creative arrangements for compensation, like an owner finance arrangement to take an income stream instead of a lump sum.

To Merge or Not to Merge?

Howard shares that his first acquisition was one of his suppliers. When he acquired his second business, he quickly was able to take his business from $360,000 to over 4 million, and today they are a turnkey business. These first mergers helped him build his staff internally and scale. 

“If you want to grow, this is like one of the best ways you can do it. It’s instantaneous. You just got to make the right financial deal and so you need to understand the numbers and you need to understand the marketing and sales. Like, you’ll look at some companies, and the reason I know this is not because I’ve acquired a bunch of companies but because I coach small businesses in-home services every single day. And what I know is that some businesses, some service companies, they have this humongo account, if they lose that one account, they’re sunk. So, you want to look for predictable revenue that comes in day in and day out. And because they aren’t doing some of the things they need to be doing, they’re not going as deep into that well as they could be.” - Howard

Ellen also highlights the benefits of bringing your acquisitions under one brand. However, she emphasizes that it’s important to be sensitive to the fact that this may mean a business is retiring a family name that means a lot to them. Be prepared for emotional conversations. 

Approaching the Negotiating Table 

Whether you’re buying or selling, Howard and Ellen underline that it’s important to ask: what is it that is needed and what is it that is wanted?

• When it comes to money, it’s important that buyers respect what the seller says they want, even if you can’t meet it. Put what you can on the table with respect for the hard work they put into their business, and see what happens. 
• At the same time,  if you’re selling, don’t settle for something that doesn’t meet your expectations. 
• Take the ego off the table.
• Remember that the agreement should benefit both parties. 
• Clearly define your goals and your whys for selling and buying.