I no sooner get Business #4 in the fold, when the business broker tells me he has a similar company for sale about 60 miles away. What can I say, but let’s take a look.
Sure enough, it was similar in many ways–adjacent industry,comparable sales volume, retiring owner, good profit metric. A husband and wife team were running the company. I hit it off with the wife who was taking the lead on selling their company. The fact that I just completed a similar deal with the same broker fast tracked the negotiations. The wife had so much confidence in my abilities she wanted 10 year terms instead of 5 with only 33% down. This looked like another gold nugget, so we did the deal.
I did not even make it through the 8 weeks of training when I knew I had some serious challenges. While the wife was a gem, her husband was a grenade. He put up one obstacle after another and I didn’t know if he was trying to sell his business or tank it. I knew I had moved to fast, but I did not have enough face time with the husband to make a smooth transition. In addition to this, the morale of the employees was toxic. Like me, they loved the wife, but deeply resented the husband. The brunt of this resentment soon transferred to me.
Soon the employees put on a power play to let them do things their way or else they would leave. They were disgruntled with the situation and each other. They did not communicate or work well together as a team. The result was poor customer service. On top of that, they wanted a raise and did not want the pressure of being highly billable. I had no choice but to remove the most experienced field person.
To make things worse, I caught the husband cheating on his non-compete clause. He was doing work on the side and not billing it through the company. He was also bad-mouthing our new manager and causing uncertainty among our customers. Through the strong relationship with his wife, I was able renegotiate the original deal to a much more favorable price with her promise to ride herd on her husband. This experience was tough. I am so glad this was Business #5 and not Business #2.
This business has been a thorn in my side since the day I purchased it. Luckily business #4 eased the pain by providing man power and technical expertise during critical times, such as hiring a new manager. I talked to my mentor about the poor state of the deal. He certainly understood. He has had many ventures go south. He posed the same question Jack Welsh, CEO of G.E., used to ask. Are we going to fix it? Sell it? Or close it? It is really that simple. I of course thought I could fix the business, but it really took a toll on me and the other companies.
Keys to Success
- Fools rush in
- Get the pulse of the company, employee morale can be harder to change than you think
- Do not deal with dishonest owners
- If you screw up, “fix it, sell it or close it” sooner rather than later
- Some deals will go bad, have an exit strategy