Acquisition Entrepreneur - An entrepreneur who recognises the high risk at the centre of our start-up culture and seeks to acquire a pre-existing, proven business with high cash flow return.
Aspiring acquisition entrepreneurs who have recognized the impending flood of opportunities in the acquisition of private business in Australia are soon met with an all-to-common issue: how do you find a low risk business in a market cloaked in confidentiality? In this article, we will outline the business search roadmap and provide some critical tactics to navigating it.
When searching for a business, your biggest enemy is time. The search process can be slow, expensive and can consume a full time commitment for years if not structured properly.
There are three main strategies to which a searcher should allocate their time:
- Industry direct campaigning
- The intermediated or brokered search
- Buyers advocate services
Regardless of the method, the aim should be to meet with the business owner as soon as possible. Keep in mind, the goal of this meeting is not necessarily to buy the business, but instead to learn and build industry expertise. This knowledge will increase your credibility with sellers, build confidence for future meetings and help in the perfection of the pitch. Remember, business owners are entrusting the future of their business in you, so it is important to show them you are a seasoned business operator.
A word of caution:
Be mindful of the tendency to spend too much time analysing businesses early on, especially if the seller has not yet been qualified. Deep analysis is often more fun and interesting than the search process, however an over-commitment of resources towards a few deals that go nowhere can diminish the deal flow and protract the search process substantially.
1. Industry Direct Campaign
The industry direct campaign is a process of identifying and targeting particular industries or businesses directly through mail outs, telephone or in-person approaches. The first step is to define industries of interest that also fit a set of criteria deemed necessary for success. It is difficult to be credible, thoughtful and engaged in more than three industries at once, so we would suggest refining your search to no more than three at any given time. The second step is to build a list of companies and individuals to contact within these industries.
This information gathering process can be tedious and time intensive. This is where a Buyer’s Advocate (explored later in this post) can add value and save you time.
The search process is largely a numbers game, so once your campaign has launched you will want to hit your target businesses via mail-outs, email and phone calls. Calling a business owner direct can have high success rates, however, most searchers report the most effective means is via a personalised letter. Another common and fairly successful technique is to start with a personalised email and follow up with a phone call less than a week later.
2. The Intermediated or Brokered Search
An intermediated or brokered search involves visiting respective business broking houses and looking through what businesses they are currently selling. This process can be just as time consuming as the direct industry campaign due to confidentiality constraints that mandate an in-person meeting prior to the identity of the business being revealed. Saying that, taking time to identify the key brokers specialising in your target industries can yield good results. While most searchers report that the brokered search approach seldom produces quality leads, it can be an excellent learning ground early in the search process for industry context and benchmarking.
3. Buyer’s Advocate
Given the inherent difficulties of the search process, a searcher may choose to appoint a buyer’s advocate to manage and execute the search process on their behalf. An experienced buyer’s advocate will be able to assist in identifying and targeting specific businesses or industries. They will also have systems and processes in place to maximise the conversion from prospect to qualified seller in the fastest possible time. This will substantially diminish the time wasted with sellers that are ultimately not ready or willing to part with their business. A buyer’s advocate can also undertake to canvass the brokerage agencies operating in your target area and will usually have pre-existing relationships that can be leveraged to access deals before they hit the open market.
Contact Octavian at www.octaviangroup.com.au to find out more about our specialised Buyer Advocacy Services.