S2E7: Saratoga Biochar Fights Back!

In this final edition of our four-part series on buying and selling a small business, we’re looking at how to zero in on your perfect acquisition target. We’re going to detail the multifaceted approach of identifying those potential targets, ensuring a comprehensive strategy that aligns with your vision, and both your personal and financial goals.

Beginning the Search

This phase in the acquisition journey involves identifying businesses that are on the market and “off market” or not listed for sale. The process is facilitated by various platforms and strategies, each with its unique advantages and challenges.

For on-market businesses, online marketplaces such as BizBuySell.com and BusinessesForSale.com have bridged the gap between sellers and potential buyers in the business world. These digital platforms are equipped with advanced search functionalities, enabling users to meticulously sift through listings based on specific criteria like location, industry, and price range. Beyond mere listings, these websites often provide valuable resources and insights into the business buying process, including articles, tools for valuation, and tips for due diligence.

Of course, business brokers will also have listings and can be utilized to assist in the complex search process to make it a more manageable endeavor. Business brokers offer a personalized service, presenting a selection of businesses that closely match your criteria and investment goals.

Their network often extends to off market listings that are not available to the public, providing potential buyers with access to unique opportunities that might otherwise be missed. Remember: a good broker not only helps in finding the right business but also assists in navigating the negotiation and purchase process, leveraging their expertise to your advantage in what can be a competitive market landscape.

Direct approaches, such as cold calling and direct mailing, serve as targeted strategies for individuals with a precise understanding of the business sector they wish to enter. These tactics allow you to directly engage with business owners, uncovering off market sale opportunities that might not be listed on public platforms. While these methods demand more time and effort, they can also lead to direct negotiations with owners willing to sell their business, potentially reducing competition and facilitating more favorable terms.

Networking plays a crucial role in the business acquisition process, with local business associations, chambers of commerce, and industry-specific events acting as fertile grounds for building valuable connections. Engaging with business advisors, accountants, and attorneys is especially fruitful, as these professionals are often privy to early discussions about businesses considering a sale. Expanding your professional network can not only provide you with insider information, but also enhance your credibility in the business community, making you a preferred candidate for business owners looking to sell.

Subscribing to industry-specific publications is a strategic move for prospective buyers, offering updates on businesses for sale and insights into market trends. Auctions and liquidation sales, on the other hand, present unique opportunities to acquire businesses or their assets at a discount. These methods can be particularly advantageous for those looking to enter a market at a lower entry cost, provided they are prepared to put in the necessary legwork.

Initial Screening & Outreach

At this phase in the process, the groundwork for a successful acquisition is laid, involving a meticulous review of potential businesses and the start of conversations with sellers or their intermediaries. This phase is not just procedural; it is the foundation upon which the rest of the acquisition process is built.

First, buyers should take a deep dive into the available data concerning the businesses. This isn’t merely about skimming through financial statements or customer testimonials; it’s about piecing together a comprehensive picture of the business’s history, its standing among consumers, and its future trajectory.

After the initial research, but before reaching out to a seller or broker, the next step is drafting a set of pointed questions. These inquiries are designed to peel back the layers of the business, revealing the motivations behind the sale, the hurdles the business faces, its financial robustness, the tangible and intangible assets that come with the purchase, any key employees to the success of the business, and potential real estate associated with the business, among many other things. This preparatory step is not just about gathering information; it’s about setting the stage for meaningful dialogue.

The manner of the initial contact— whether direct to the seller or here that the tone for all future interactions is established. Professionalism and a respect for confidentiality are not just courtesy; they are necessities, given the often-sensitive nature of business sales. This initial outreach is the first step in building a relationship based on trust and mutual respect. Good relations between a buyer and seller are critical to a smooth transaction, and both sides should keep that in mind, particularly during the initial vetting process.

Following the preparatory work and initial outreach, the conversation deepens through meetings and calls. These interactions are valuable opportunities to delve into the finer details of the business’s operation, its challenges, and potential for growth. It’s also a moment to discuss the sale’s terms candidly, and to assess the seller’s sincerity and commitment to the transaction.

In many cases, a Non-Disclosure Agreement (NDA) becomes part of the process. This legal formality is more than just a procedural hurdle; it’s a pledge of confidentiality that ensures the information shared remains between the parties involved. Signing an NDA marks a transition into more detailed discussions about the business, safeguarding the sensitive data that comes to light.

Throughout this process, vigilance is key. Any hesitation to disclose vital information, unexplained surges in financial performance, or undue haste to close the deal may be red flags identifying potential issues within the business or the sale process itself. Buyers should trust their instincts, ask questions, and verify information as they are making a life-altering decision, rife with risk under the best of circumstances.

Notably, most buyers will have help along the way from brokers, attorneys, and accountants, among others. They should work with experienced advisors and use that experience to their advantage as much as possible.

Conclusion

Finding the right business to purchase is an intricate blend of diligent research, strategic outreach, and keen intuition. By leveraging a variety of methods to identify potential opportunities, engaging in thorough initial screening, and conducting detailed outreach, prospective buyers can navigate the complex landscape of business acquisition with confidence.

The journey to business ownership, like many of life’s journeys, is paved with challenges. However, with the right approach, it can lead to rewarding opportunities and long-term success. The key to a seamless acquisition lies in understanding the market, knowing what questions to ask, and maintaining a clear vision of your entrepreneurial goals.

If you have questions about embarking on this journey yourself, our team at The Wagoner Firm, PLLC is always available to start that conversation. Learn more by visiting thewagonerfirm.com.

Business founders and owners are often outstanding visionaries.

Being a visionary, however, sometimes comes with blind spots. You may be “the bee’s knees” at casting a vision for your company, yet unknowingly neglect certain employee needs that are vital for your vision to become a reality. If this assertion surprises you, consider your immediate
response to one question about your business. Are you ready? Here it is:

“What does success look like?”

Your answer undoubtedly relates to the long-term vision for your business, whether that has to do with revenue goals, expansion plans, innovative product lines, or some other “big picture” results. Your image of success is crystal clear in your mind. You can pinpoint metrics and milestones that will mark your progress. You can’t wait to celebrate when you finally see your vision played out in the real world.

Given this clarity about how success looks, how it is measured, and how it is celebrated, you are motivated and engaged and know just what you need to do! But there is something important to remember: the people who work for you may not think in such “big picture” terms. They may understand and acknowledge the grand vision for the company, but that is not their day-to-day existence and experience. They have a job to do, such as making sales, making calls, or making widgets. That is what consumes their time and attention.

As the business owner and visionary, these daily tasks most likely never cross your mind. (And rightly so, since they aren’t your job.) Yet, these short-term actions make your long-term vision possible. For example, take the Accounts Payable team. Processing checks to pay vendors probably doesn’t get on the agenda for your leadership meetings. But if the Accounts Payable team fails to send checks in a timely manner, that can jeopardize key vendor relationships. Therefore, behind the scenes, Accounts Payable plays an important role in the success or failure of your company vision.

This is the case for every area of your company: each job, team, department, and function plays a role in how your vision succeeds or fails. Therefore, as a leader, doesn’t it make sense to ensure that your employees have clarity about how success looks, how it is measured, and how it is celebrated for their specific roles and responsibilities? Clarity motivates and engages you; in the same way, your employees will become motivated and engaged when they have clarity about the part of the vision that they own.

Here are three ways to provide clarity for your people and, in so doing, help your vision to become reality:

1. Define How Success Looks.

Talk with each department or team about how success looks for them, bearing in mind that success does not refer exclusively to results, but also to actions. For example, one measure of success for the business development team would be the number of prospects converted into customers each week. But another measure of success could be the number of calls or meetings that were held, because these actions are necessary to keep the pipeline full so that a steady stream of prospects can be converted into customers. With that in mind, there might be a week with no conversions that is nevertheless a great success because of the number of opportunities that entered the pipeline.

2. Determine How Success Is Measured.

People appreciate benchmarks, scorecards, and metrics because they offer something concrete to strive for. Having defined how success looks in each area of your company, work with your leaders to put in place practical metrics to measure progress toward and the attainment of success. For instance, call center success could be measured based on the results of post-call customer satisfaction surveys.

3. Decide How Success Is Celebrated.

Celebrating short-term wins helps keep people energized because it tells them that what they do is important and that they have done a great job. For example, as the business owner, you can ask your team leaders what successes they have seen in the past week and let them shine a spotlight on their team’s accomplishments. How will you then affirm what has been done and reinforce the part these successes play in reaching the company’s goals? Whatever you decide, enjoy that time of celebration together!

Here’s the bottom line: if you help your people define, measure, and celebrate the success they achieve in delivering on their specific part of the company’s vision, the overall long-term vision will take care of itself. Then you can have the ultimate celebration you are striving for!

Do you need help defining, measuring, and celebrating success across your organization? Contact me today!

I have a question I ask all my clients: “What is the engine that drives your lifestyle?”

Most of them eventually land on income. Of course health, family, faith, and many other things are important to our existence, but the income we earn, in my estimate, is the thing that is the lynchpin for our lifestyle. Whether you are 2, 20, 65, or 90 years old, it is about income. Working or retired, it is about
income. You may say, well there is that one person. Perhaps you have taken a vow of poverty and it is about someone else’s income. Or perhaps you are a YouTube sensation, forging hatchets from iron ore, completely self-sufficient, living off the land. Either way, for most of us, income is paramount to the lives we live.

THE ILLUSION OF ASSETS OVER INCOME

An interesting thing I have observed is that society tends to be more enchanted by assets. To allow you to think for yourself about what is most important.

Imagine this… Imagine that you won the lottery, and I told you your ticket was worth 100-million dollars! What feelings would you have? How would your life change in the blink of an eye? How would you physically change before our eyes? And then, just as quickly as I said you won $100-million dollars, I followed up with the fine print of your massive win: “You, my friend will receive your $100-million in the form of $1,000 annual payments for the next 100,000 years, and upon your death, whatever you have not enjoyed, you will leave for the next lucky winner!”

I am not saying any of us would turn down an extra $1,000 a year, but hopefully I am proving to you that it is not about assets, but rather the income that can be generated from those assets. We have a tremendous amount of clients in the Capital Region who have, or will have, NYS Pensions. For years now, I have smiled at how little these clients have appreciated the money that is required behind these pensions to guarantee payments for a lifetime. Ironically, I have also smiled at how much our clients overestimate the amount of income that their 401(k)s can generate based on the lump sum they have.

UNDERSTANDING COMPOUNDING INTEREST & MORTALITY CREDITS

Two simple but profound distinctions every human should understand are the idea of compounding interest, and the law of large numbers; or in the context of income, mortality credits.

Investopedia defines compound interest as the interest on savings calculated on both the initial principal, and the accumulated interest from previous periods. As I often say, over many, many years of diligent saving, you have the opportunity to take a little bit of money and create a lot of money. In the context of compounding interest, the years you have and the interest you earn each year will determine the success of this strategy. The law of large numbers, and in this case mortality credits, can have a significant impact on income.

Simply put, across a very large group of people, actuarially, you can determine an average age of death. Some people will live beyond this average age, and some people unfortunately will die before this average age. Mortality credit is the idea that when you pool a percentage of your money together with thousands of other people, the ones who pass earlier than expected can benefit the ones who live longer than expected. This can increase the amount of income available for each individual while they are living. Pensions, such as the ones provided to employees of NY State and other municipalities, leverage this actuarial science and mortality credit in providing these employees with a guaranteed income for life.

TOOLS AND CONTEXT IN FINANCIAL PLANNING

In my opinion, the financial industry is divided into two camps. Of course, there are firms like Thoroughbred Advisors who enjoy and see the value of each camp. The financial tools available in our industry primarily fall under two major umbrellas: investments and insurance. Those in the investment camp leverage the distinction of compounding interest, and work to solve the income challenge through building greater assets. The insurance camp often leverages the law of large numbers and mortality credits when solving the income challenge. In my opinion both are valuable, they are simply different tools.

We believe that tools are neither good nor bad, until you put context around them. To give a simple example, in the context of a nail, hammers are amazing tools. In the context of a screw, hammers are not so amazing. With that said, I can definitely get a screw in with a hammer! At the end, however, what does the screw look like and what does the material surrounding it look like?

THE CONTINUOUS IMPORTANCE OF INCOME

The context of our lives. The resources we have. These and other factors will impact the tools you will need to implement. And as a reminder, your lives are driven by income today, and so it will be for the years to come.

If you do not have a clear view of how you will maximize income now, and in the future, we would welcome a conversation.

The information provided herein is for general informational purposes only and should not be considered investment advice. Any strategies described may not be suitable for everyone. Readers are encouraged to evaluate all information in light of their own situation and seek the advice of an appropriate professional advisor.

Thoroughbred Advisors is a leading financial firm dedicated to providing tailored, transparent, and authentic financial solutions for their clients. Established in 2014, the firm focuses on empowering individuals, families, and businesses in the Capital Region to achieve lasting financial success. Visit our office at 421 Troy Schenectady Rd, Latham NY 12110, or our website at www.thoroughbredadvisors.com