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How to think about Acquisitions as a Business Owner.

Apr 11, 2022

 

 

 

When it comes to being a business, your job description is really quite simple. As an entrepreneur, your job is to set your vision and find the most efficient way to get to that vision. 

 

Business acquisitions, when done right, are hands down the single most powerful tool for strategically putting the pieces in place to achieve rapid growth and profit. 

 

Key phrase, "when done right."

 

To get it "right" you need to know some things. Still, more importantly, you need to have an open mind when in the discovery process of really understanding the potential of acquisitions as a business growth strategy. 

 

A key example, we recently worked with a client who acquired 16 companies with combined revenues of $200M within just 6 months... 

 

Try doing that any other way... I'll wait. 

 

So, let's jump into how you need to think about Acquisitions as a Business Owner. 

 

#1. Why are you buying? 

 

Firstly you need to ask yourself why you are buying a business in the first place. 

  • What are your goals? 
  • What is a good outcome, a bad outcome?
  • Are you buying out a competitor to increase market share?
  • Is it a strategic acquisition where you are buying superior systems, people, or brand? 
  • Are you acquiring additional channels to give you a strategic advantage? 
  • Are you buying additional products to use as a value add for your current customers? 
  • Ultimately, you need to get clear on how 1+1 can equal 3. 
  • How are you going to create more value than the price you pay? 
  • What is your strategy to leverage what you buy so that your current business and customers receive more benefits?

 

These questions and more will lay the foundation of your strategic approach. 

#2. What data do you need to make the best possible decisions? 

 

To make sound decisions, you need to know what information to look at and consider in your decision-making process. 

 

Nowhere is this more true than in the business acquisition process. Data is the new gold. 

 

Obviously, the first and arguably the most significant are the financials. 

 

Data goes deeper than just financials, though. Can you look at it to discover things like leveraging their products to incorporate into your current go-to-market strategy? 

 

You also want to look at the data objectively and ask, can I build this myself? Does it even make sense to pay what they are asking? How long will that take? 

 

A perfect example is Facebook. They tried buying Snapchat, couldn't, and essentially copied the product. Do you think it would have been better to buy Snap if they could? 

 

I'll give you a hint, go look up the stock price now vs their IPO... 

 

Conversely, they did buy Instagram and WhatsApp. Again, what do you think? Worth it, is no? 

 

Finally, where and how will you find your ideal acquisition target? 

 

I can't tell you what is right here because it ties back to your specific strategy.

 

However, I can say that it is always better to have leads coming to you; you don't really want to be going out and just asking random business owners if they want to sell. 

 

We cover exactly how to set this up in Acquisitions University. 

 

Often the best place to start is your existing network. 

 

Are your distribution partners looking to sell and move on? 

 

Are all your customers crazy about a hot new product offered by a similar or complementary business? 

 

Is there a long-standing competitor who you know is about to retire? 

 

These scenarios come with literally infinite possibilities and variables. 

 

Once you find it, though, the first question you will be faced with is whether the CEO will stay or go.. Who's going to run this thing? 

 

Again, it depends on your own strategy to decide what answer is better for you, but being aware of this will help you be prepared. 

 

This is just the start. If you are interested in hearing each of these points and many more in detail, I just recorded a brand new video you can view at the top of this post.