In this day and age, business and online seem to be synonymous judging from the vast amounts of content created about building your online business. YET, there's a whole world of services we can't live without (a business owner's dream!) that aren't as exciting as becoming an influencer BUT pay a whole lot more. This week's podcast guest, Malcolm Peace is the President of Tsetserra Growth Partners, a business that buys blue-collar businesses in Texas, United States. I'm going to break down some key takeaways from our conversation, but if you'd rather hear it from the horse's mouth so to speak click here
Identifying opportunities in your market
Entrepreneurs interested in building businesses that add tangible, measurable value through products and services should consider the blue-collar businesses in their area. We will always need plumbers, construction companies, pool maintenance etc. The list is endless. These types of businesses Malcolm says are often run by an older generation of entrepreneurs that are ready to leave business behind and focus on enjoying their golden years. Think outside the box! Do you need to start your own business, or could you add value to an existing business with a proven demand and predictable cash flow generation?
Practical Things To Consider When Buying An Existing Business
Entrepreneurs must anticipate that the grass is not always as green as they were told. After completing a rigorous due diligence process, still expect that there will be challenges that have not been disclosed. Be prepared to address potential challenges proactively.
Scaling a business involves more than just increasing revenue; it requires a holistic approach. Malcolm suggests a 3 part-framework, breaking down the top 3 line items of the Profit & Loss Statement: Revenue, Cost of Goods (which often has the highest cost being labour), and Operations. He encourages looking at these 3 areas one at a time to improve each area rather than taking a broad or general approach to improving the acquired business.
The biggest challenge in an acquisition is the culture of the organisation. Which is the general attitude or consensus on 'the way things are done' in any business. Malcolm advises studying the culture before buying a business to see if it's malleable enough for positive change, and more importantly, if you are willing as the new business owner to take up the challenge of intentionally creating a new culture that matches the values of the acquiring company.
Creating clear pathways of communication ensures a less bumpy transitioning period. The employees of the acquired business need to know that their jobs are secure. They deserve to know what the intentions of the new owner are so that they can opt-in or opt-out. Suppliers need to know if there are any changes from their prior relationship with the previous owners. Never assume anything is obvious. Nothing ever is. Communicate to all stakeholders.
If you love the startup phase of business and buying a business to scale doesn't sound interesting to you, Malcolm suggests reading the E-myth Revisited by Michael E. Gerber. This book offers valuable insights into building a scalable business by understanding the roles of the entrepreneur, manager, and technician. Additionally, he emphasizes the importance of surrounding oneself with high-quality individuals who are passionate about the business's mission, fostering a culture of excellence and innovation.
#EntrepreneurTip of the week: Keep growing your capacity as a business owner! The more capacity you have, the more the business can grow. Read, network, test, and take risks.
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Keywords:
Entrepreneurship, Startup growth, Scaling a business, Revenue generation, Cost of goods, Business operations, Building a company culture, Small business success, From zero to seven figures, Business development strategies, Startup success tips, Growing a company, Business management tactics, Leadership in entrepreneurship, Entrepreneurial journey