If you’re interested in entrepreneurship through business acquisition or if you’re in the middle of buying a business, this post is for you! Today’s quick win is brought to you by 10X Vets member Jeff Evenson (USMA ‘90) who bought a high-end luxury business with his spouse in 2008, months before the largest banking crisis in US history. What could go wrong there?!
Here are the top five lessons Jeff learned from buying a business:
1. Build genuine relationships with the seller and a banker.
Approach a deal with the understanding that a business owner might be selling their company for the first and only time in their life. Go into the deal with a desire to build genuine rapport and establish trust. Don’t dive into reviewing financials at your first meeting. Focus on building a relationship first. Find a reputable banker you can trust. Bankers often make great advisors because they focus on helping you get deals done.
2. Be willing to walk away from a bad deal.
Bring a mediator into the process if you and the seller are on different pages when it comes to financials. Seek to understand what the seller is trying to accomplish. Can you structure your deal to help them achieve their goal? If it’s not adding up, be willing to walk away.
3. Involve the existing team and leverage their wisdom to help the business.
Once you’ve acquired a business, invite the existing team to help you solve its problems. Leverage their wisdom, intelligence and knowledge to help the business succeed. For example, if you have a cash flow problem, share numbers with the team and give them an opportunity to brainstorm creative solutions. This builds trust and establishes positive relationships. Plus, their ideas could save you thousands of dollars!
4. Find a tribe of like-minded businesses.
Network with businesses in your industry that are accomplishing what you want to achieve and learn all you can about best practices. If you are a veteran, connect with other veteran business owners. This will help you think through strategies like how to build the business beyond a single location or expand into another market.
5. Ensure you have a robust partnership agreement.
Be cautious about forming a business partnership with a close friend, family member or spouse. If you form a partnership, ensure you have a robust partnership agreement in place. Get creative with how the agreement is structured and consider including the following clauses:
Shotgun clause - this will force you to think carefully about making an offer to buy the business from your partner and to make a fair offer if it comes to that.
Compete clause - this welcomes the other party to compete with you if the partnership ends, but comes with strings attached that make competition undesirable such as sharing a portion of their gross profit with you for a fixed period of time.
Get to know Jeff Evenson (USMA ‘90)!
Jeff Evenson has owned multiple businesses since 2008 and has successfully launched, or purchased and scaled, several multi-million-dollar companies. Along the way, he’s experienced virtually every good and bad element of business, including startup, rapid expansion, purchase, sale, and franchise, which taught him countless valuable business lessons. Today, Jeff invests in, or buys companies, with an aim to scale them up and retain them. His goal is to create $1 billion in generational wealth for military veterans and their families over the next 25 years through his new venture, the Thayer Gate Project.
Jeff was also a recent guest on the SABM podcast! Listen here.