Hey there! I'm building a network of world class dealmakers sharing best practices with eachother. I'm glad you've came across this video, I see so many silly pieces of advice online and would love an opportunity to share my experience so like minded people don't have to do as much trial and error as I did!. Grab a pen, paper and maybe a snack and Enjoy!
It's easy to spend all our time thinking about making a million, but I wanted to start this series by talking about risk management, which should come before anything else. Best practice is to put your deals into separate corporate silos so that there's no risk to other ventures or your personal assets if things don't work out. Take care of the downside, and the upside will take care of itself.
I see so many people wildly going for a deal without having a game plan going forward. This comes in two parts; having a plan to boost cash flow and having an exit plan after you've grown the company
With every guru always talking about no money down deals, it's important to stress the need for a cash buffer. This isn't necessarily all going into the purchase, but there are many ancillary costs (legals, accountants etc) and post acquisition costs that you should be prepared for, remember, many businesses go bust profitably because they don't have immediate cash for a black swan event
Another million dollar question is how much industry experience do you need to start doing deals? I don't mean to burst any bubbles, but I have to say having at least some prior experience in running a company in that niche dramatically increases likelihood of success, especially when it comes to distressed bolts-ons and seller financing
A quick word about the mental fortitude needed for success in dealmaking. Great deals can often take significant time and you need a great poker face to show you're not desperate for a deal and can handle delays and pressure.
Probably the number one due diligence mistake I see when people purchase a small business, especially when they expect passive income, is that there's an overreliance on the founder who's the main rainmaker and the lynchpin to the whole organisation. This means when you close the deal you're essentially paying for the main asset to leave the company. If you know you can run the company better One-man-band syndrome can actually be a positive, but regardless it should be one of the first things you look for in due diligence.
It's all well and good getting the numbers right and having a growth strategy, but after you get past these milestones you need to look at the wider business environment and if there are any major companies that could undercut you in the future. Ask yourself what's the moat in this business?
In a similar vein to tip 6, you would do a rigorous analysis of the source of customer's brand loyalty, making sure it's not from the founder assuming they're leaving on acquisition (which isn't a certainty by the way).
No matter how badly you want a deal you must always be willing to walk away. Don't worry, there's other fish in the sea. all your contracts should include a clause about mutual separation where either the assets and liabilities revert back to the original owner or you can shut things down with no liability to you
A personal anecdote about some of the funny things I've found doing due diligence. These sorts of things aren't necessarily dealbreakers, and usually a quick chat with the sellers clears the air, but you should take care to leave no stone unturned
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Give customers a reason to do business with you.
Give customers a reason to do business with you.
Give customers a reason to do business with you.
Give customers a reason to do business with you.
Give customers a reason to do business with you.
Say something interesting about your business here.
What's something exciting your business offers? Say it here.
Give customers a reason to do business with you.
Give customers a reason to do business with you.
Give customers a reason to do business with you.
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