Buy Better

Of course everyone wants a bargain even the super rich, in fact probably particularly the super rich. How do you think they got rich in the first place!!

In our current economic climate, it’s almost certainly a buyers market – though in order to buy well you clearly need a willing seller. Therefore in order to get a good deal, unless you are really ruthless, a fair deal is what you should be aiming for and don’t forget a fair deal can still be a bargain.

To buy right you need to do your homework not just on your target but on you – ask yourself:-

1) Why am I buying

2) What is it exactly I want to achieve

3) What’s my maximum price

4) What are the things I will not compromise on – no matter what

Armed with this information, whether you are buying a house or a business, you will at least have set some critical parameters.

The process of acquisition is a long and painful one. Most deals take twice as long and cost twice as much as you may first have anticipated. Deal fever takes over ad buyers (as well as vendors) make compromises that in the halcyon days of the transaction no one would have even remotely considered and if its not deal fever, deal fatigue sets in, when frankly the parties involved are so sick and tired of the deal they will virtually do anything to compete the blooming thing!

It’s not a bad idea to have a contingency fund for just these purposes as 2 out of 3 deals as a minimum will need it.

The time needed to successfully complete a deal cannot be underestimated and up to 12 months is not all that unusual. If you have taken yourself out of your business to do this, don’t forget how important it will be to leave someone in charge of your own territory throughout this period.

Over optimistic projections of future business performance of an acquisition is common place. What we call “hockey stick” projections are endemic – watch carefully you don’t step into this arena and be advised that your funders will always discount any budgets you provide by up to 25%.

To make a deal work it’s essential that your staff are on board with you, both supportive and able.

An acquisition which brings about change, often phenomenal amounts, will sort the men from the boys, if only on a sheer scare factor. An acquisition can send lesser mortals off the Richter scale.

Information and lots of it, provided in a timely and understandable format, keeps everyone sane, but make sure the medium covers both written and verbal format allowing a facility to allow those involved to answer questions and provide support.

It’s sometimes quite humbling what concerns people have, including in my experience, seemingly irrational worries about brand changes, uniform allowance and working hours. One of the best ways I have seen this dealt with is by using FAQ summaries issued in advance to allay fears (helping especially those people who dare not even vocalize their concerns).

Many buyers concentrate so much on the end completion (not unsurprisingly) that post integration if often over-looked, which is proven by the fact that 3 out of 5 acquisitions fail to add value. This is probably due to the issues listed above and the failing to plan for a proper integration. Your 100-day plan post deal with the deadlines will undoubtedly help.

Having a realistic sense of proportion is also helpful, even when everything looks great. Post deal, s**d’s law says somebody or something will be waiting around the corner to trip you up unexpectedly, so complaining is not a comfort zone you should seek out; be pro-active and anticipate problems.

Jo Haigh
Head of Corporate Finance for MGR

www.mgr.co.uk
www.jo-haigh.com

About the Author

Jo Haigh

Jo Haigh is a Partner and Head of Corporate Finance for MGR, a company based in London and Yorkshire and a partner in the FDS Group, a specialist training and development business.

An experienced dealmaker, Jo specialises in putting together the right deal at the right time and in the right format for growing businesses throughout the country. She has bought and sold over 300 companies in the last 20 years specialising in owner managed companies.   More >>

 

Don’t Start a Business in the Recession… Not!

If position, position and position is vital in identifying and enhancing the value of an asset in the property market then cash, cash and cash remains paramount in any business but never more so than in a new venture in these cash strapped times.

Starting a business in a recession may not be your first choice as an entrepreneur but if in fact, whether through desire or as a result of unforeseen circumstances, you find yourself in such a position an enterprise started in a downturn may not be any less successful than one started in a boom provided, whatever the temperature of economy is, the key principles of business management are adhered to.

Management books abound that include such essential ingredients to success as; a business plan, a budget, a marketing strategy and of course a people management and development process, all of which of course are very worthy, maybe even for some particularly institutional investors a prerequisite, but in my 25 years of experience of buying and selling over 300 businesses they are ingredients that, without the recipe cannot be blended into a meaningful dish.

Anyone can be taught to cook, as indeed Jamie Oliver has proved, but only a few will make truly great chefs. In every recipe one or two special ingredients are what actually help turn the dish from a simple supper to a magnificent dinner.

In business this is cash. You simply wont survive if you;

a) Can’t make it
b) Free it up
c) Access it from alternative sources if your own particular well has dried up.

This ingredient has always been particularly special but now it is particularly scarce.

Here is my recipe for cash management;

Jo Haigh's Business Recipe

So you now have a recipe and the all important secret ingredients – so it can’t fail… or can it?

Life’s virtues include faith, hope and charity and behaving with such moral fortitude must surly bring its rewards.

Business virtues are in fact not too different, replace faith with belief and enthusiasm in you products and services; it’s seen many a despondent entrepreneur through dark times, and instead of hope how about intuition for the truly talented, this will rarely let you down. And finally charity, a new business is very greedy and not just for cash but of your time and energy.

Like an athlete training for a marathon, it will sap your strength and bleed you dry. So practice patience, a skill many entrepreneurs sadly lack but which if harnessed can deliver more than any other business virtue.

Some make millions by putting all their resources on a single play of red or black, but the shrewd wait, judging the market and then seizing the opportunity, watching as the avaricious and foolhardy stand bereft.

Being patient doesn’t mean doing nothing, far from it. It means optimising the moment in a downturn. There will be lots of these around for the shrewd and savvy entrepreneur so your choice should be someone who

- Makes things happen
- Watches things happen

Or someone who rather sadly says
‘what just happened then?’

Seen in the right way the recession brings not just problems and disasters, which it certainly does, but also opportunities to be grasped.

The question is are you up for the challenge and the ride of a lifetime?

Jo Haigh
Head of Corporate Finance for MGR

www.mgr.co.uk
www.jo-haigh.com

About the Author

Jo Haigh

Jo Haigh is a Partner and Head of Corporate Finance for MGR, a company based in London and Yorkshire and a partner in the FDS Group, a specialist training and development business.

An experienced dealmaker, Jo specialises in putting together the right deal at the right time and in the right format for growing businesses throughout the country. She has bought and sold over 300 companies in the last 20 years specialising in owner managed companies.  More >>

 

Would You Buy This Company? – an understanding of company finance

The North East Academy for Chief Executives, Future Leaders Forum speaker in May was Peter Sutcliffe, an accountant who facilitated a workshop including practical examples and case studies from his own ‘coal face’ experiences within finance, IBM, GEC and in recent years as a company doctor. The Academy members were taken on an experiential learning journey from the principles of accountancy/setting up a company through to the selling of a business and how it would be valued. The workshop used action and experiential learning techniques culminating in delegates valuing a company based on what they had learnt.

The key experiential learning points included the:-

• importance of business planning, forecasting & budgeting,
• principles of finance and its role in a successful business process cycle,
• clarification of accountancy jargon,
• ability to identifying trends,
• key ratios and performance indicators to monitor,
• understanding of statutory accounts -Profit & Loss and Balance Sheet,
• key elements that can positively affect the bottom line,
• benefits of knowing breakeven at all levels of the business,
• best way to analyse strengths/ weaknesses in financial performance,
• benefits of team motivation by displaying meaningful performance data,
• techniques for adding value to our services to charge customers more/ increase sales revenue,
• various fundamentals that affect the value of a company when buying or selling.

Peter Sutcliffe,
Joint Chairman with Karen Humble,
North East,
Academy Group 23 and Leaders Forum 11

The Academy for Chief Executives, a leading provider of experiential business learning® facilitates peer groups of CEOs and Managing Directors who meet together every month to network and take full advantage of experiential learning. To hear great speakers like this every month and engage in The Board You Could Never Afford®, to find out more about the North East Group, or to find a local group near you, visit www.chiefexecutive.com.

 

Understanding the Balance Sheet

Members from experiential business learning group Leaders Forum 42 enjoyed a session full of great content and insight from Simon Kelly, (pictured, right). Simon waved his financial magic wand over a Balance Sheet – like magic, the scales fell away from our eyes as he blew away the myths and the mystic terminology that had previously fogged our vision.

At this critical time in the world’s economy, everyone is telling us “Cash is King” – Simon explained exactly why.

• He helped us to get behind the numbers and find out what our Balance Sheets are really telling us.
• He explained 8 key ratios behind the balance sheet which we should be aware of that will help us understand the true strength, or otherwise, of any business.
• He showed us how to improve our cash flow, which in turn will help us work with our bank as we will know more about their questions and what is behind them.
• Above all he helped us to improve the management and utilisation of our business assets.

Joanna Jesson,
Chairman Leaders Forum 42

The Academy for Chief Executives, a leading provider of experiential business learning® facilitates peer groups of CEOs and Managing Directors who meet together every month to network and take full advantage of experiential learning. To hear great speakers like this every month and engage in The Board You Could Never Afford®, or to find a local group near you, visit www.chiefexecutive.com.