Lancer Insurance
Monday, March 04, 2024


ask andi Dilemma: A colleague asked if I was interested in buying her company. My curiosity is piqued, but I’m not sure. She says she wants to keep working to help ensure a successful transition, and to have income for the next few years. While I’d be open to doing an acquisition, I’m also worried: If she came to work for us, what opportunity is there for her to make a living? My gut says she’s considering selling because she can’t make enough money on her own. I don’t want to solve her need for income and leave my company on the short end of the stick.

Thoughts of the Day: Make sure you know what this business does for your company. Negotiate until you’re both clear in regard to the role (or roles) that the seller will play in your company post-acquisition. Think about how easy or difficult it would be to take on the business. Can you make money by doing the deal?

What would your company gain by adding this operation to its portfolio? More clients? A new business line? Technical skills? Personnel? Will this purchase add new vehicles to your fleet, a new market to your service area, or new affiliates to your partner roster? Consider how the industry is doing overall—and if this is a move you absolutely must make in order to grow the way you’ve been wanting to.

Because it’s not all about the revenue. You’ll have to consider whether you even want her clients, as they need to be as or more profitable than your current clients. They need to be both easy and loyal enough to manage so that you’re not spending all your profits, energy, and time on concessions and support just to keep them coming back to you, especially if the previous owner is no longer involved.

In a low-unemployment economy, picking up personnel and technical skills can have a great deal of value. How skilled are the seller’s employees? Do you want all of them, or just a few standout performers? Reflect on your company’s culture and how any new personnel would fit in, whether there are areas where you need the redundancy, and if the two companies’ core values and pricing structures are similar. Think about the personnel gaps in your company, and nose around to see if her employees could shore things up.

How likely is it that her employees will even want to stick around? Once competitors find out the company is in play, employees will be getting calls. If you’re moving or merging locations, the commute could impact who stays or goes. What will pay be like at your company—more than, less than, or comparable to what her employees are currently making? Any increases to get to parity, whether it’s her employees or yours, will impact your bottom line.

Figure out the role you want the seller to play in your company, and whether she’s doing that now in her own company. Will she want to take a backseat role? You will have to consider that if she can’t make enough to live on by running her own shop, how will she make enough once she’s part of yours? Conversely, it may be to everyone’s benefit if the seller does stay, as she knows her clients best and, ideally, will help ease their worries through the transition period.

Her best opportunity to make money will probably be in client-facing jobs: sales, account management, technical advisor. Functions such as accounting, production, and even marketing need to be handled by less expensive personnel, and can be blended in with roles already present within your company.

Do your homework. Find out everything you can about the seller’s business, its place in the industry, and the owner. Check out her work. Make a sales call to some of her better-known customers. Take a look at reputation and positioning on the internet. If the company has its hands in vertical markets, go to trade shows for those industries to get information not only on overall trends but also about her company and its success in delivering what related markets need. That way, you can see for yourself the kind of inherent value this company possesses.

Decide how you can turn this opportunity into a moneymaker before you make an offer. Consider paying out over time, as a percentage of profit, if she’s open to it—probably her best shot at making money from the sale. Just don’t be afraid to walk away if her requests are deal breakers for you and your current company. [CD0817]

Andi Gray is the Founder of the business consulting firm Strategy Leaders. She can be reached at