If you’re operating your own business successfully, looking to acquire an additional venture can be an extremely profitable decision as well as a heady experience. It also requires taking a huge risk and being all-in.
One of the very first steps you will need to take is to assemble a dream team. This team should be made up of legal counsel, a financial advisor, entrepreneurial mentors, and anyone else you can think of to help you make the smartest possible decisions for your existing and future business.
There are many things I’ve learned from acquiring a business, so here is my advice for a first-time buyer.
1. Vet your potential business
All businesses have skeletons in their closets, and it’s your job to figure out what those skeletons are up front and then decide if they are worth the trouble of dealing with post-acquisition.
There’s no perfect company, and there is a lot you can and will uncover in the aftermath of acquisition, so being as prepared as possible is key. It’s best to know the ins and outs of not only the business you are looking to acquire but also its competitors and the big picture of the industry (if you’re not already in that industry). The bigger picture is just as important as the smaller details.
For example, when I bought a digital marketing business, the intent was to combine the two different entities into the more powerful brand and do it sooner rather than later. The other business owner (who stayed following the merger) had different expectations. He wanted to maintain the two different brands, websites, and some of the business ideologies under silos for more than a year.
In retrospect, I should have spelled out my intention to have the company fly the new flag under one brand and one message before the contract ink was dry. While every merger or acquisition has a transition period, the best practice is to quickly and as seamlessly as possible, present a united face and message to past, present, and future clients and stakeholders.
This is just one of many business policies you will need to negotiate and place in a contract prior to signing. Many of these policies will be specific to your type of business or situation, so make sure to do your research and consult with the dream team you’ve hopefully assembled by this point in the process.
2. Strong leadership skills matter
Merging two teams together under one new company is no task for the weary. It requires exceptional leadership, patience, and drive among many other skills. Often, when acquiring a business, leaders have a pre-conceived notion of how well their two teams will get along and see eye-to-eye, and that’s rarely the case. For a successful start following the merger, everyone must agree on a common vision and mission and be willing to make compromises.
While you’ll likely be working out the kinks many months later, setting a solid foundation for your team and being a great leader is a necessity for long-term success. Set up team building exercises and quarterly retreats if possible, especially if all or part of your team is remote. These community-fostering junkets and practices are a good way to start on the right foot with employees and will help build and maintain the new company culture.
Also, either before or after the merger, implement personality testing as well as a survey regarding the company, its mission and overall company objectives and policies. While some may be suspicious at first of the personality testing, ensure it is distributed with the intent to build an environment where people know how to communicate with each other’s different personality profiles.
3. Focus on the financials
During the exciting acquisition phase, many people will be tempted to dream of counting stacks of money based on the numbers outlined in the pitchbook of the company or business broker. But beware, just as mentioned earlier, the discovery process doesn’t always pull back the curtain on everything.
Securing a financial or accounting expert early on is a linchpin for your success. Even if you are a genius at numbers and spreadsheets, having a professional in this area allows you to focus on the highly important task of merging the two companies while he or she keeps your financial records organized, healthy, and pointed toward future earnings.
4. Prioritize and monitor the details
If you’re running a successful business, you’re probably at a point where you don’t have to pay attention to the small details day in and day out. When you merge two businesses together, however, this is an extremely important part of the acquisition—at least for a year or more, depending on the scope of your operation.
You should get up close and personal with all aspects of your business, your managers, and employees. That way you can guide and refine the business model as your business grows and becomes even more profitable.
A CRM (customer relationship management) software where everyone (or those that it pertains to) can track and monitor jobs or tasks is a foundational tool where all can be involved in the company’s productivity and success. Even if you use Google Docs or a tool you inherited from the other company in the beginning, plan to combine all information into the next best platform that can scale as you mature, such as Salesforce or Insightly.
Persistence and process
Persistence, diligence, and process are mantras I suggest you focus on—in the beginning, and on an ongoing basis. It can be hard to stay motivated before you start seeing the fruits of your labor.
Keep engaging with your mentors and professionals in the year-long or more onboarding time period and remember that proper processes are not optional, they are imperative for success.
Your days will be long and grueling to start, but eventually, you’ll get to a place where you can step back and reap the benefits of your time, your financial output, and sweat equity.