Acquiring and selling businesses is one way to live a rich and happy life, but how do you convince someone to sell you their company?
In today’s episode, Roland Frasier walks us through some important questions to ask when buying a business. This is Part 2 in a series (be sure to check out Part 1!) where he’ll be sharing some of his extensive knowledge and acquisition experience as well as tactical strategies you can go out and implement right away. Acquiring businesses is Roland’s specialty. He’s actually written an entire book on it.
Listen in as he talks about the two questions he asks the target company’s owner as he’s starting the conversion about acquiring the company.
Question #1 to Ask the Owner
Roland says a lot of people create more friction than is necessary at the beginning. They jump in and say, “Hey, do you want to sell your company?” When you’re ready to talk to the owner of the company you want to acquire, hopefully you’ve determined your acquisition criteria and the profitability level you want. But “Hey, do you want to sell your company?” is a walls-up question.
If you’re going in cold, you might get this common angry response: “Who told you our company was for sale?”
The question Roland likes to ask instead is more investment-related. “Hey, I’m an investor. I’m looking for a company in [specific area] that sells [specific industry] and makes [x level of sales]. Would you be interested in having a conversation about the possibility of investment or working together?”
Coming in as an investor is very non-threatening, because almost all businesses need investors and capital. You want to be coming from a place of authenticity, so get clear on what an investment means to you. An investment doesn’t have to mean you have a pool of cash available. You can have other resources and assets to bring to the table.
If they say yes, another mistake people make is asking for a financial statement or tax returns. Don’t ask for that upfront. You don’t want them talking to their accountant or attorney and getting their walls up again, before you even know if you want to buy the company.
Instead, just say, “That’s fantastic. I have a few questions to see if we’d work well together. I’d love to know some basic numbers. Could we meet now, or do you need a few days to gather that information?”
Question #2 to Ask the Owner
This brings us to the next question: “Can you tell me the story of the company?” This one helps build rapport. You’ll get the long-form narrative response about the history of the company and how it has evolved. Take notes here, because they’re giving you priceless information. And it’s so much less threatening to them.
While they’re telling you this history, find places you can build rapport with them because you have commonalities of experience. Find common touchpoints that will build trust. Bring them up when they’re done talking.
Then say: “That’s great. So interesting. I love learning more about the company. I’d also love to know more about you and your entrepreneurial journey.” People love to talk about themselves. Find more commonalities. Ask more questions. Build more trust. And you’ll be well on your way to acquiring this company.
Stay tuned for Part 3!