By Scott Bushkie

Layoff news continues, and we’re hearing from more and more formerly-employed executives who are looking to buy a business and control their own destiny. Last month, I cautioned readers like these not to rush out and buy just any job. This month, I want to talk about matching your skill sets to a company’s needs.

Every business we sell has weaknesses. I’ve yet to see a perfect operation that couldn’t be improved. Any reputable intermediary or broker will point out these weaknesses. Why? First of all it’s the ethical thing to do. But second, weaknesses are many times opportunities for growth. And buyers love opportunities to grow.

The best transitions happen when the buyer fills some kind of void in the existing operation. Everyone wins in these transactions—the buyer’s return increases, the value of the business increases, and the company gains new strengths while continuing to leverage its old ones. It’s a great thing that can happen in buying a business.

That’s exactly what we saw happen with one Wisconsin manufacturing business. The owners, believe it or not, were a father and his ex-son-in-law. They hit upon a unique product that opened a new market, and then got to work making money—more than $1 million in profit a year.

These were smart guys who built a strong business, but they only took it so far. What stopped growth? No, it wasn’t family drama. It was the exact same things that stop a lot of our sellers from taking their companies to the next level: sales, management experience, and ambition.

These business partners made themselves a comfortable living, and suddenly the drive was gone. Call it complacency, call it satisfaction—either way it’s okay.

Sellers like these come to us knowing their companies could be something more, and knowing they’re not interested in doing it. And like many sellers, not only were these guys not terribly interested in growth, they also knew they weren’t the right people to make it happen.

They had launched a terrific operation, but they didn’t know how to optimize production or expand distribution.

With sellers like these, the outcome is usually a win-win. We brought several buyers to the table, and the sellers were very happy with the price they received. But the buyer also thought he got a great deal because he knew what he could do with the company.

The buyer came out of corporate America and had plenty of operational management experience. He put a new business plan in place, introduced production efficiencies, and built a distributor network. And despite working in a depressed industry in a down economy, this business is growing.

When looking to buy, you can take two approaches: 1) find a business in which you can essentially replace the owner; or 2) find a company in need of your specific skills. One offers less risk the other greater return.

Scott Bushkie is President of Cornerstone Business Services, a low-to-middle-market M&A firm. Reach him at 888-608-9138 or [email protected]

Share on Facebook0Share on Google+0Tweet about this on TwitterShare on LinkedIn0Email this to someone
mm

A thought-leader in the industry, Scott developed the Cornerstone Process to offer investment banking M&A-level services to the lower middle market. The result is a closing ratio that’s more than double the national average.