Deal Makers And Breakers
Matt Remuzzi is the founder of CapForge, Inc, a bookkeeping and accounting firm with over a thousand clients. Matt has always been business savvy, even as a kid. After a career as an agent in a consulting firm, putting small business owners together with venture capital, he bought a catering business, grew it for four years, and ended up selling for double on his investment. He has been involved in 100s of business deals, worked with buyers and sellers, and bought and sold businesses on his own.
What Is The Best Type Of Deal?
According to Matt, the best kind of deal is the one that involves walking into a room full of friends–not necessarily people you know but people you share the same business understanding with. In this type of deal, you are comfortable, know the layout, and speak the language. There may be some new information, but it’s mostly relaxing. Before getting into a deal, you need to understand what it’s all about. It’s easy and helpful to close a deal if it’s something you understand and are passionate about. You don’t want to jump on a deal you know nothing about. It’s a scary situation when your deal feels like walking into a room full of strangers.
Prospective Buyers In Deal-Making
In deals, there are generally two kinds of buyers. According to Matt, this includes high-level corporate guys or people who have done well in other businesses and are looking to take on something else. They may plan to grow or build a management team but mostly deal with personal or borrowed funds.
The other is the small strategic buyers who may have a business 2-3-5 times bigger than the target. These strategic buyers acquire businesses they feel are beneficial to them. They jump on deals because it is a good fit, a complementary brand or a geographical location they are interested in. After that, they try to bring their people in to run the new site. Those tend to be the two kinds of buyers in the smaller spaces.
When you get up into the bigger deals - more strategic acquisitions, there might even be private equity interest. These bigger deals involve different kinds of buyers with different kinds of deals. It’s all about different analyses.
Lessons Learnt From Smaller Deals
Experience is the best teacher. As we close more deals, we learn along the way. Matt shares some helpful lessons he’s learned in his career:
- Some deals may fail for reasons you have no control over. You just have to understand it is what it is. For example, you could work on a deal for months, then you get a call the night before the deal closes, and the caller says, “Hey man, I hate to tell you, but the deal is off. It turns out my wife wants a divorce, and now we have to split everything. I can’t sell the business.” What can you do in a situation like this? It’s nothing you did wrong; it’s nothing the seller did wrong. It’s just life.
In a larger deal with multiple parties, and there’s no single point of failure, it’s unlikely that something like that - a sudden turnaround in a person’s life, would affect the deal. It’s all about the numbers in the larger deals.
- Another thing in the small business acquisition is emotions getting involved - not wanting to let a particular thing go. It could be a sign that the buyer doesn’t want to buy and the seller won’t sell without. Things like this don’t happen in larger spaces. Matt gave a helpful tip for this scenario - you just have to stop and look around. Read the room, and consider the implications of the things you can’t agree on.
As a business owner that’s thinking of selling, there are things you need to look into, including:
- The first thing you do in any deal is to evaluate. It would help if you looked through the financial statement over twelve months and went back a few years. Clean it up so that the buyer can easily estimate how much your business is worth.
- Turning in an unrealistic number could crash the deal.
- You need to provide quality bookkeeping with good customer service.
- The last thing you ever want in a deal is a surprise. Whether the buyer comes and says, “Hey, I found this. How do you explain it?” And you go, “I didn’t know about that.” You don’t want to be in that situation. An appropriate response would be, “Of course. We’ve seen that. Here is the explanation, this is why it’s like that… any other question?” That gives you more confidence and leverage to negotiate a good deal for your business. Buyers always want to pick out faults to get a discount.
- Run the business like you will sell it tomorrow, even if you don’t want to sell. Run it like you could sell TOMORROW.
Corey Kupfer is an expert strategist, negotiator, and dealmaker. He has more than 35 years of professional deal-making and negotiating experience. Corey is a successful entrepreneur, attorney, consultant, author, and professional speaker. He is deeply passionate about deal-driven growth. He is also the creator and host of the DealQuest Podcast.
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