It can be daunting to know where to start your journey to grow your business by making an acquisition. As founder of the second-largest printing, promotional products and packaging distributor in the country, I’ve spent the past 40 years growing Proforma into a $500 million business. A lot of that has to do with strategically acquiring the right businesses — B2B businesses under $5 million — at the right time.
Identify acquisition prospects
While you can work with a business broker to source an acquisition, the best route to ensure you are qualifying the right prospects is to simply reach out to business owners, introduce yourself and your business, communicate your intentions and ask to meet. Although you may come in contact with business owners who do not want to meet, those who accept a meeting are more likely to be interested in learning more about selling their business, even if they stated otherwise.
Schedule introductory appointments
First impressions matter, and it’s imperative to conduct a great first appointment with prospects interested in meeting with you. Most business owners looking to sell their company want to be assured of the continued success of what they’ve built. An in-person meeting is your time to present your value proposition and your intentions of acquiring the business and your plan for continued success.
Build a relationship, then follow up
During introductory appointments, get to know your prospect both professionally and personally. Learn how they started their business, their goals for their future, as well as what they are looking for in an exit strategy. Focus on creating a lasting relationship while building trust. If at your first appointment, you don’t feel as though the prospect is ready to sell, it’s still important to maintain a dialogue in case things change.
Identify the right acquisition
Once you find a prospect who is interested in selling, I recommend obtaining the seller’s financial statements for the last two or three years, including a summary of sales by customers and a list of key employees by job function and compensation. This information will allow you to determine what sales you think you can retain, whether you can help increase the gross profit and what expenses you can eliminate after the acquisition.
Make the acquisition
Once you have agreed in principle with a seller, you will need to put your agreement in the form of a letter of intent outlining the key details of your deal. In due diligence, you will have the opportunity to conduct a deep dive into the seller’s business and assure yourself that the basic assumptions on which you based your offer are, in fact, valid. From here, the next step is to finalize the contract.
Always remember that the key to a successful acquisition is a well-planned, successful transition by working with key customers, employees and suppliers to assure that sales and operations continue smoothly.
Greg Muzzillo is founder of Proforma.