Lessons from the OG's of M&A - Deeper: The Psychological Aspects of M&A: Seller's Remorse, Buyer's Anxiety, and More
This Week On How2Exit, Chatting With two experts with over 60 years experience between them- DEEPER - Psychological Aspects of M&A
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This week on How2Exit:
About The Guest(s):
Richard Parker is the CEO of richardparker.com and Roy Street Advisors. With over 30 years of experience in the mergers and acquisitions industry, Richard has worked with numerous clients and has made 13 acquisitions himself. He is known for his expertise in helping buyers and sellers navigate the complex process of buying and selling businesses.
Richard Parker shares his journey in the mergers and acquisitions industry and provides valuable insights for aspiring entrepreneurs looking to buy a business. He emphasizes the importance of acquiring knowledge and preparing oneself before diving into the process of buying a business. Richard also highlights the need to identify the right type of business that aligns with one's skills and interests, rather than searching for the perfect business. He advises buyers to conduct thorough due diligence and validate the financials provided by sellers. Richard also discusses the role of brokers and the importance of maintaining a good relationship with sellers throughout the buying process.
In the interview, Richard Parker discusses the importance of making a business easy to sell, rather than just focusing on finding the perfect business. He suggests that buyers ask sellers important questions such as what happens if the seller is unable to continue running the business, what keeps the seller up at night, and how much vacation the seller takes. These questions provide valuable insights into the business's operations and potential for growth. Richard also emphasizes the need for buyers to pay attention to the presence of policies and procedures in a business, as well as the seller's ability to have uninterrupted meetings with employees.
Furthermore, Richard highlights the importance of surrounding oneself with the right people and empowering employees to do their jobs well. He shares his own experience of hiring individuals who were smarter and more capable than himself, which ultimately led to the success of his business. Richard encourages buyers to identify the areas in which they can improve a business and have absolute certainty about their ability to make those improvements.
Overall, Richard Parker's insights provide aspiring entrepreneurs with a comprehensive understanding of the key factors to consider when buying a business, including the importance of knowledge acquisition, due diligence, and building strong relationships with sellers.
Acquire knowledge and prepare yourself before buying a business.
Identify the type of business that aligns with your skills and interests.
Don't expect the perfect business; it doesn't exist.
Validate everything the broker and seller tell you; it's up to you to diligence it.
Maintain a good relationship with sellers and use brokers as a resource.
Make the business easy to sell by having processes and procedures in place.
Ask sellers important questions about the future of the business and their level of involvement.
Pay attention to the presence of policies and procedures in a business.
Surround yourself with the right people and empower employees to do their jobs well.
Identify areas for improvement in a business and have absolute certainty about your ability to make those improvements.
"The first thing you gotta do is acquire the knowledge."
"You have to figure out what type of business is right for you, and then it's easy to find and buy it."
"Don't expect the perfect business; it doesn't exist."
"Validate everything the broker and seller tell you; it's up to you to diligence it."
"Run your business like you have to sell it."
"Make the business easy to sell by having processes and procedures in place."
"What happens if you get hit by a Pepsi truck tomorrow?"
"What keeps you up at night about the business?"
"How much vacation do you take a year?"
"Surround yourself with the right people and empower employees to do their jobs well."
"Identify the areas in which you can improve a business and have absolute certainty about your ability to make those improvements."
Richard Parker: The Art of Buying and Selling Businesses
In this thought leadership article, we delve into the insights and experiences of Richard Parker, CEO of RichardParker.com and Roy Street Advisors. With over 30 years of experience in the mergers and acquisitions (M&A) industry, Parker shares his expertise and provides valuable advice for aspiring entrepreneurs looking to buy and sell businesses.
Throughout the article, we will explore the main themes discussed in a podcast interview with Parker. These themes include the importance of acquiring knowledge, identifying the right business, understanding the complexities of the buying process, and the role of brokers and off-market deals. By using verbatim quotes from the interview, we gain a deeper understanding of Parker's perspective and can analyze the implications and potential impact of his insights.
Acquiring Knowledge: The Foundation for Success
Parker emphasizes the importance of acquiring knowledge as the first step in the buying process. He highlights the need for aspiring entrepreneurs to educate themselves about the M&A industry and the specific steps involved in acquiring a business. Parker suggests seeking out mentors or resources that provide guidance from experienced professionals who have successfully navigated the buying process.
According to Parker, many buyers make the mistake of jumping into the search for businesses without proper preparation. They spend countless hours browsing business-for-sale listings without a clear understanding of what they are looking for or how to evaluate potential opportunities. This lack of knowledge often leads to frustration and a high failure rate in completing transactions.
To overcome this challenge, Parker advises buyers to first determine what type of business is right for them based on their skills, interests, and strengths. He recommends exploring different industries and contacting sellers or industry experts to gain insights and learn more about specific businesses. By engaging in conversations and asking the right questions, buyers can gather valuable information that will help them make informed decisions.
Parker states, "You've got to get knowledgeable before you jump into it. Align yourself with the right people. Get good information before you start looking at businesses. Really educate yourself."
The Quest for the Perfect Business: A Mythical Pursuit
Another key theme discussed by Parker is the misconception that there is a perfect business to buy. He emphasizes that perfection does not exist and that buyers should not waste time searching for an ideal opportunity. Instead, they should focus on finding a business that aligns with their skills and strengths, even if it has its flaws.
Parker encourages buyers to understand that every business has its challenges and warts. The key is to identify the problems that can be mitigated and determine which ones are acceptable to live with. By managing expectations and being realistic about the imperfections of a business, buyers can set themselves up for success.
Parker states, "You want to educate yourself and meet with a bunch of different businesses until you can figure out exactly whatever skillset that you have marries perfectly to that type of business."
The Role of Brokers and Off-Market Deals
When it comes to finding businesses for sale, Parker suggests leveraging both brokers and off-market deals. He acknowledges that there are good and bad brokers in the industry but emphasizes that their role is to provide access to listings, act as a buffer between buyers and sellers, and handle the necessary documentation. While brokers can be helpful, buyers should not solely rely on them and must conduct their own due diligence.
Parker also highlights the importance of off-market deals, which are businesses that are not listed for sale. These opportunities can be found through networking, industry associations, or direct outreach to business owners. While off-market deals may require more effort to uncover, they can often lead to unique and lucrative opportunities.
Parker states, "You can go off market and there's good ways to do it. And don't get discouraged. A lot of deals fall apart. You're gonna meet all kinds of people, but you meet mostly nice people and the onus is on you. And everything, this is very doable."
Conclusion: The Path to Success
In conclusion, Richard Parker's insights provide valuable guidance for aspiring entrepreneurs in the M&A industry. By acquiring knowledge, identifying the right business, understanding the complexities of the buying process, and leveraging brokers and off-market deals, buyers can increase their chances of success.
Parker emphasizes the need for buyers to educate themselves and seek guidance from experienced professionals. He encourages buyers to explore different industries, engage in conversations with industry experts, and ask the right questions. By doing so, buyers can gain valuable insights and make informed decisions.
Furthermore, Parker dispels the myth of the perfect business and highlights the importance of managing expectations. He advises buyers to focus on finding a business that aligns with their skills and strengths, even if it has its flaws. By understanding that every business has its challenges, buyers can set realistic expectations and make the most of their opportunities.
Overall, Richard Parker's expertise and insights provide a roadmap for success in the world of buying and selling businesses. By following his advice and adopting a strategic and informed approach, aspiring entrepreneurs can navigate the complexities of the M&A industry and achieve their goals. As Parker states, "This is the ultimate marathon and not a sprint. Don't spend this ridiculous amount of time just searching endless business for sale listings. Top of the list, you want to educate yourself."
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We are Back to doing two shows per week: Here is our other show of this week:
E138: Seasoned M&A Professional Jay Rodgers Shares Insights on Buying and Selling Businesses: (49:23)
About The Guest(s):
Jay Rogers is an entrepreneur, author, and seasoned mergers and acquisitions professional. He has started and sold about 20 companies and is dedicated to helping other entrepreneurs grow their businesses.
Jay Rogers is an entrepreneur and author who has started and sold about 20 companies. In this episode, he shares his insights and experiences in the world of mergers and acquisitions. He emphasizes the importance of entrepreneurs in driving employment growth and strengthening the economy. Jay also discusses the rule of 40, which states that the percentage of annual growth plus or minus the percentage of profit should equal 40 or more for a company to be in great shape. He highlights the value of clean books and the benefits of getting a quality of earnings report before selling a company. Jay also shares the lessons he has learned from his successes and failures as an entrepreneur.
Entrepreneurs are born, not trained or taught.
The rule of 40 states that the percentage of annual growth plus or minus the percentage of profit should equal 40 or more for a company to be in great shape.
Clean books add value to a company and make it more attractive to buyers.
Taking vacations and stepping away from the business can increase its value and show that it can run without the owner's constant presence.
The best deals are made with smart people who can add value to the business.
"Entrepreneurs aren't trained or taught. They're born." - Jay Rogers
"Clean books add so much value in the buyer's eyes." - Jay Rogers
"The more vacations you take, the more your company will bring." - Jay Rogers
How to Exit: A Comprehensive Guide to Selling Your Business
Welcome to the How to Exit podcast, where we delve into the world of small to medium business acquisitions and mergers. In this episode, we have the pleasure of speaking with Jay Rogers, an entrepreneur's mentor, author of "The Bet," and a seasoned mergers and acquisitions professional. With his vast experience in starting and selling multiple companies, Jay shares valuable insights and lessons learned that can help business owners navigate the process of buying or selling a business.
The Importance of Entrepreneurship
Jay emphasizes the critical role that entrepreneurs play in driving economic growth and job creation. He highlights the decline in the number of startups in recent years and the need to support and encourage small and medium-sized businesses. Jay believes that entrepreneurs are born, not made, and recommends Gino Wickman's book, "Entrepreneurial Leap," as a self-assessment tool for aspiring entrepreneurs.
The Journey of an Entrepreneur
Jay shares his personal journey as an entrepreneur, starting and selling multiple companies. He emphasizes the importance of knowing when to step aside and let professional management take over the reins of a growing company. Jay also discusses the concept of timing the sale of a business, highlighting the importance of selling before reaching the peak of growth.
The Rule of 40
In the world of mergers and acquisitions, the rule of 40 is a crucial metric to consider. Jay explains that the rule of 40 states that if the percentage of annual growth plus or minus the percentage of profit equals 40 or more, the company is in great shape. This metric helps potential buyers assess the company's growth potential and profitability.
The Value of Clean Books
Jay emphasizes the importance of maintaining clean and accurate financial records when preparing to sell a business. He advises against hiding personal expenses within the company and overpaying oneself, as it can negatively impact the company's value and make it harder to justify a recast. Jay also recommends obtaining a quality of earnings report to replace three years of audited financials, which can add value and attract potential buyers.
Lessons Learned from Failures
Jay believes that failures can be valuable learning experiences for entrepreneurs. He shares stories of his own failures and highlights the importance of learning from mistakes. Jay encourages entrepreneurs to focus on the lessons learned and to always strive for continuous improvement.
The Bet: A Guide to Entrepreneurial Success
Jay's book, "The Bet," offers valuable insights and lessons for entrepreneurs. Each page provides practical advice and real-life stories that entrepreneurs can apply to their own businesses. The book covers a wide range of topics, including the importance of working with smart people, the value of vacations before selling a business, and the significance of serving an underserved or unserved market.
Conclusion and Future Outlook
In conclusion, Jay Rogers' extensive experience as an entrepreneur and mergers and acquisitions professional provides valuable insights for business owners looking to buy or sell a business. His emphasis on the importance of entrepreneurship, clean books, and learning from failures resonates with aspiring and seasoned entrepreneurs alike. With his book, "The Bet," Jay offers a comprehensive guide to entrepreneurial success, providing practical advice and real-life examples to help entrepreneurs navigate the challenges of building and selling a business.
As the business landscape continues to evolve, it is crucial for entrepreneurs to stay informed and adapt to changing market conditions. By leveraging the knowledge and experiences shared by industry leaders like Jay Rogers, entrepreneurs can position themselves for success and make informed decisions when buying or selling a business. The future of entrepreneurship is bright, and with the right guidance and support, entrepreneurs can continue to drive economic growth and create opportunities for themselves and their communities. Watch Here: (49:23)
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This week’s “DEEPER” Dive: The Psychological Aspects of M&A: Seller's Remorse, Buyer's Anxiety, and More
This article delves into the often-overlooked emotional and psychological dimensions of Mergers and Acquisitions (M&A), particularly in the small business sector. It explores the emotional rollercoaster that both buyers and sellers experience, shedding light on phenomena like Seller's Remorse and Buyer's Anxiety. The article also examines the role of ego and the importance of emotional intelligence in successfully navigating M&A transactions. It concludes by emphasizing that understanding and managing these emotional complexities is not just an optional skill but a central component for the success of any M&A deal.
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FROM THE Editor:
Disclaimer: This newsletter is provided for informational & educational purposes only, and should not be relied upon as legal, business, investment, or tax advice. We are not attorneys, tax, or financial advisors and not qualified to give any such advice.
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