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Why are you are buying a business?
There’s no wrong answer but understanding YOUR answer matters!
In some circles, the word ‘why’ is avoided and there are some good reasons for that. It can be off-putting and tends to put us on the defensive as we try to rationalize our position on a subject.
Businesses are bought and sold based on the perception of future value.
Business owners are often experts in fields outside of business.
We developed Business BeyonDIY to help you cross that chasm.
Show Topics:
Buying a Business
Selling Your Business
Preparing Your Business for Sale
Practical | Actionable | Sustainable
Business owners and entrepreneurs are go-getters. We start things other people don't (sometimes too many things am I right?) and we push through hard times. That means that entrepreneurship involves a lot of DIY.
Some of the most important transactions we make are buying a business; preparing a business for sale and selling a business. We'll almost always want/need help to make these successful but there is still a lot we'll need to do ourselves.
Business BeyonDIY is a Livestream/podcast where we own our DIY nature but find that sweet spot where doing it yourself doesn't mean going it alone.
In this introductory episode, I'll let you know the format of the show, what to expect, and when I'll be live.
I'm looking forward to getting to know you and your business and sharing practical tips that will make your DIY more like DI-Us!
Stephen Krausse
In some circles, the word Why is avoided. And there are actually some really good reasons for that it can be off putting and tends to put us on the defensive when we're trying to rationalize our position on a subject, right? Why did you do that? Why is that important? And so you get the idea. And it makes sense. That why you're, why are you buying a business might immediately make us uncomfortable as entrepreneurs. Answering this question, though, isn't about justifying a position or defense of a position? It isn't about defending that at all? It isn't even about answering somebody else who might pose the question to you. It's all about you. And understanding what's driving you to take the entrepreneurial leap type business owners and entrepreneurs. Welcome to Business beyond DIY, where we get from here to what comes next. I'm your host, Stephen Krausse. E, and I'm a business person by trade, education and passion. And I'm here to help you increase the value of your entrepreneurial journey. The business beyond the DIY live stream, and podcast is about understanding and developing the value of business, your business. So let's get started. So why ask why in the first place? Well, there's three things I want to talk about today, where why really matters to us as entrepreneurs from the very beginning, and you can talk about this when you're starting a business. Today, we're talking about it, when you go to buy a business and existing enterprise, whether it's a small mom and pop shop that is selling, you know, something, you know, kitchen supplies somewhere, or whether it's a larger business that's manufacturing something that's sold worldwide, it doesn't matter. Understanding why you want to participate in that is really important. And the three reasons we're going to talk about today are clarity of purpose, momentum, and boundaries. So let's talk about them. The first thing we're going to talk about is that that clarity of purpose part, and I actually like to call it fitness. We're not talking about physical fitness here, per se, but we're talking about are you fit to run that business? And that's not a judgment? It's a question. Right? It's an understanding of where are your skills and interests best suited? When it comes to becoming an entrepreneur? I'm not a dentist. I don't know the dentist, the dental industry, I don't have a dentist degree. I don't know the issues involved with being a dentist or running a dentist's office, I don't understand the supply chain. I'm not qualified to buy a dental practice. That doesn't make me less of a business person. It means I'm not qualified to run that kind of business. Okay. So and even take one step further. does is that where your interests lie? You know, is it your passion to help people with dental health care? Maybe it is, maybe it's not, it doesn't matter? If it is. And all of those other things are something you can get your head around that maybe that's a business for you. For me. That's an example of a business that I'm not qualified or prepared to brand. So are you the one that's going to be able to move that business forward? Because once we start investing in a business, we invest two things, time and money. So we need a return on our investment, the return on the money that we've invested in a business, and we need a return on our time. And you can always make more money, but you can't make more time. So that's actually a more important consideration when you're talking about getting into a business. So step on top of that, the idea of does the business align with your values and your interests? So I talked about that a little bit, you know, in the dentist example. You know, is it something you're interested in doing? You really are going to have to understand the business well enough to recognize opportunities.
How can I move this business forward? What are the opportunities in the marketplace that either I can implement what the original owner is already doing. And I can understand why those are opportunities. Or more likely, you're going to believe that you see opportunities. And you're going to need to see opportunities that the current owner doesn't, or doesn't have the resources or skill set to implement. We also have to be able to see threats, what is going to cause a half a negative impact on this business. We have to be able to capitalize on strengths. What is this business really good at? What is that that unique value proposition to use the the lingo that makes this business special? How can I leverage that, or continue to reinforce it, or build on it in a way that will move the business forward. And then finally, we have to be able to identify and mitigate weaknesses. And I want to, I don't want to make a whole show about the SWOT analysis. But I do want to talk a little bit about weaknesses. We don't want I don't want you to think that you identify a weakness and then say, Okay, I've got to plug that hole, I've got to fix that weakness, every business is going to have something they're not good at. And it is much more important to leverage your strengths, and identify and execute on opportunities than it is to spend your time figuring out how to fix what you identify as broken. If something's really broken, maybe it does need to get fixed. That's possible. But you have to measure that energy that you're going to spend fixing that problem against the results you would get if you put that same energy towards capitalizing on what you're good at where your real value proposition is. So that's all I'm going to say about that. But I think it's important to consider. So good fit for a business aligns with your values, your interests, and your experience enough so that you can move the business forward. And that's not to say you have to be a complete expert in a specific field. In order to run a business. Let's go back to the cooking store example. Do you have to be a Michelin level chef to own and operate a kitchen appliance store, or a kitchen, a cutlery store or something like that? Of course not. But you are going to need to understand enough about what you sell to identify opportunities, threats, strengths, and weaknesses. And that's what's important. So you do have to have enough experience with a business to be able to make good decisions around that business. So you can even say I don't know anything about cooking, but I'm going to look at the numbers. And I'm going to have an expert store manager that can work. But it puts you at risk of either a store manager that doesn't actually know as much as you think they do, or doesn't execute on the same agenda that you have. And you can't identify those discrepancies very quickly because you aren't a subject matter expert. So there's a risk there. It's not impossible, but there is risk. Okay. So that's fit, we want to get a business that we know well enough to make good decisions around it. Okay, that's the bottom line. Then next thing I want to talk about is that idea that I that I mentioned earlier about momentum and this comes you know you can almost think of this as what's going to get you out of bed in the morning. And when things are going well. You know, maybe getting out of the bed in the morning isn't isn't a big deal at all. Right? Things are going well you get up you do your job. And but if you find yourself getting out of bed because you're well disciplined,
then that opportunity that entrepreneurial opportunity, I would say probably isn't right for You. And here's why I say that. It that's not meant to be a judgment, the whole idea is there are a tremendous amount of entrepreneurial opportunities. There's no shortage of businesses to start or buy. And so there's no reason to pigeonhole yourself into something that you're not comfortable with that you don't love, that you don't love doing. And so you might want to pick a different business, if discipline is what's getting you out of bed, because things are going to get tough, you cannot, you're not going to be an entrepreneur, and always have good times. And money. Generally speaking, in my experience, money's not enough. And there's no guarantee that the money part is going to happen. Anyway. As a business owner, there's, there's no promise of that. So you're going to end up in a situation where you have supply shortages, or employee issues. And sometimes you're going to have employee issues where I've had a times where employees left, because they wanted to pursue something that I couldn't offer. Because my current business and as, as larger business owners, you know, in the Fortune 500, or whatever, it's very easy to say or suggest that there's this, you know, always make room and space for employees to move into something they enjoy. And that's great, you know, if you can do it more power to you. But as a small business owner, that's not real. Okay, we do a very narrowly set group of activities as small business owners. And that's what we need. If we have an employee that starts with us, does a wonderful job, and then moves beyond what we can offer them if they are, if they grow as as a person, as an employee, as a professional, into something that we can't support, then they need to move on. If we try to keep them, we're holding them back from doing their best from becoming their best self, for themselves and their families, then for somebody who can really appreciate them as an employer, right, and those, those are people that you just you, you don't want to lose them, because generally speaking, they're very motivated, high performers. But it is really important not to hold them back. And there are other things we can do to to sort of minimize the damage from an employee like that leaving and that's but that's not the subject today. But that's one, but it is a serious impact on your business, when you have a great employee that moves on to do something great somewhere else. And our job as employers is to be happy for them to support them. And then in the background, go oh crap, what am I going to do about this now, because I need to figure out how to fill that gap. All right. Sometimes employees leave because you need them to, either you don't have money to pay them, and you have to lay them off, or they're not a good fit for the business. And you have to get rid of them. You have to fire them, that happens. Okay. So, you know, you may have employee issues, you're gonna have market pressure, competitive pressure, alternatives to your offering. One of the misconceptions about business, excuse me, I think, is that the competition for a bicycle store is another bicycle store. Yes, that's one form of competition. But the kayak store down the way is also competition. The mountain climbing store down the way is also competition because it competes with the same dollars in the family budget, the same general interest area for a consumer. You know, we can go bicycle riding, or we can go kayaking. And I reckon, excuse me, I recognize that these are different sports, but there are alternatives to each other. So they compete. And so when things get tough when you have to start answering those questions or dealing with those situations, and there are many more that I didn't list,
you know, that's when your business needs you the most. And are you prepared to show up then? So that's number two. Is that momentum? How do we keep things going? When things aren't going great. The last thing I want to touch on is this concept of negotiation. Understanding why you want to buy a business gives you the power of putting together boundaries, and setting those up for yourself. So that you know when you can say no. And you know what you can say yes, to as well. And what makes boundaries important. When you get to a sticking point in a in a negotiation, and you say, Well, I don't feel comfortable with x. If your counterpart doesn't understand immediately and assign the same value to that topic, it's very likely that they're going to try and pick apart your argument. And if they're good at it, and you don't have a really clear understanding of why that isn't okay with you, you can find yourself in the position where you're like, Well, maybe that wasn't really very important. And that is a very weak negotiating position to be in. And I'm not talking about getting everything or or pushing for that last dollar, I'm talking about understanding and being able to articulate what matters to you. And being able to stick to that in the face of discomfort, which is a good part of negotiation is getting to the points of discomfort and saying, Okay, I'm going to sit here in this discomfort, because that's the line that I've drawn. And that's okay. So when my wife and I, we bought a company a few years ago, and we made an agreement that we wouldn't go into debt, to buy this company. And you know, we had to push that we had to say, Okay, well, we are, we were really willing to walk away from this deal, in order to prevent us from violating that piece of our agreement. And we were and we, we, the deal went through, and that was all fine. But that was a place we were not willing to go. And we understood that because we understood the value of the opportunity to us. So part of our why was, why are we going to buy this business, we're going to be willing to put how much into it. And then at that point, if it's if the value of the business is more than that, then our y isn't good enough to buy it. And that's okay, someone else's y can be good enough to buy it, that's fine. You know, we can move on to another opportunity. In that case, we were able to close the deal, but add another opportunity. A few years before that, and quite a number of years before that, where I was going to buy a local store. And the owner wanted to continue to work in the business. And I said no. And I understood why that wasn't going to help me move that business forward. And we can have a whole discussion about why that mattered and why it was important. But the point was, that was on my list of non negotiable items. And I understood that because I wanted because I understood why I was going to buy that business. And that deal did not go through and that was one of the major sticking points that we could not cross we we just couldn't fix that and so and that's I think it's really important to understand that that's okay. Understanding your why gives you the power to walk away
and that's huge in negotiation and I'm not talking about the the made up drama of walking off and and and having your counterpart chase after you I'm not into that. That's not what I'm talking about. I'm talking about being okay in here, saying You know what? I'm okay with this not working out. Because there are other things that I can do with my time. Other things that I value, and if the deal isn't the right one for me, because it doesn't meet my why. Then I need to find something else. I don't need to force a square peg into a round hole. Because my why matters. It matters To me. So there's three things I always talk about when I when it comes to business. And that's practicality, actionability and sustainability. And I want to talk about, you know, how does all this why become practical, actionable and sustainable. And the first thing is understanding why you want to business may appear to be a 30,000 foot view issue. And I think that actually, it couldn't be further from the truth. It doesn't get more practical than understanding why you want to do something every single day. What drives a good business fit means that we're going to be able to find a match, that we can best leverage, that's when we can leverage a business in a in a positive way. We increase the business's ability to impact the the economy, if it's if it's a retail business that sells kitchenware, and we do well, we add to the economic value in that area, we add to the tax revenue, we add to the employee count, whatever it is, we bring more to the table in that area, we bring more to ourselves if we can leverage it, because we're able to generate personal wealth from that operation as well. And so it's, it's being able to find a business that you really is a good fit allows you to leverage that, and and get the most out of it. It also is a point of what's going to give us the most motivation, and allow us to bring our best selves to work on the worst days. Now, let me say that, again, when you have trouble, you want to be able to bring your best self to work on your worst days. And understanding why you did it in the first place is a key component of that. And then finally, why puts us in a strong and authentic negotiating position, when it comes to what we can with it, how we say yes and no, or what we can say yes or no to with confidence and comfort. So I think it really is one of the most practical things that we can do as a business owner or as a, a would be business owner is engaged this concept of why and and get clear on it. Before we move into that eat while we're looking for a business and then when we enter into the negotiation stage. So what action can you take is there is there something we can actually do to, to dig into this? Well, you know, identify what you value in a business and whether this can take whatever form works for you. And that's one of the things that I stress all the time with people is the tools that we use. The ones that are going to work for you are the ones that you should be using. Don't watch a video, don't watch my videos and say, Oh, Steve does this. So I should do that to forget that. I use a whiteboard for my twitch show. You don't need to use a whiteboard. To do your job. You can use a notebook paper you can or a notebook, you can use a napkin if that works for you. So but the idea is for single use, like if you're going to let's say you're going down the road of buying that kitchen appliance store, okay.
And we're, you know, we're kind of in this place where we're going to, we're going to put down our why around that so that we can we can negotiate with the owner and make the purchase. Get it on a whiteboard, write down your values, what what's your goal? What's your no go? What are you willing to do? What are you unwilling to do? You can type it up in a document. It doesn't matter as long as it's accessible to you in the moments that matter the most. And I guess I should touch on that. That brings to mind a little bit of a story. When I was buying the company that I was referring to earlier. One of the things I did was we we did most of the negotiations completely remotely whether it was on a web conference system or by phone, and what I did was for each discussion that we were going to have, I wrote down what mattered to me in terms of the outcome of that discussion. And in terms of boundaries that I needed to have around that discussion. And then I wrote them down whether it was on, you know, most of the time I wrote it on a whiteboard, so that I didn't have to be looking down at my notes to see, okay, that's where I need to be. And it helps to have those reminders in front of you, when you're actually negotiating with someone. Now, if you're negotiating in person that can, that can change a little bit, because you can't have a whiteboard that says, you can put some pretty private stuff on the whiteboard. And that becomes inappropriate or not helpful for your own side. But you know, use the tool that works for you in the situation that you have. And you can certainly note, in a notebook that you keep in front of you, even in an in person meeting, where you can have phrases, that means something to you that are meaningless to the counterpart. And that's a good way to keep that keep those things in in the top of your mind while you're in those discussions. So again, we go back to what is the tool that's going to work for you in the situation that you're going to find yourself in, doesn't matter what it is, if it works for you, it works. Longer term, I think it's important to recognize that we change as people, we, we grow, and we learn, and we find different things matter to us. You know, certainly things, different things mattered to me before I had kids, then after I had kids, and that's not an indictment of people without children. It's not an indictment of people with children. It's just a change in perspective, that affects what you value. Okay. And so I think, you know, you can keep a notebook, if you want to about the things that matter to you journal. You know, it's, it's a perspective that you need to keep updating yourself on. So that, as things become issues for you and your business, you can say, Okay, does, you know how, what are my feelings about that. And I just think it's important to keep that in your mind. It's not something that I'm I'm going to, you know, I don't keep a whiteboard of all my values in case that comes up every day. But it is something that if you need to, if you're thinking longer term, I think the most important thing is to understand that your values during the negotiations of one business may not be the same when you do your next business. Because you may grow and change. And the experience of buying and running a business may change your perspective on what you want to deal with. As you buy your next business. I think that's important to recognize as well. All right. And then so we talk about sustainability. And I think going back to this whole concept of your Y can change. You know, sustainability, when it comes to your Y is about maintaining your core principles, understanding what's valuable to you as a person. And yes, to some degree that can shift. But identifying and understanding those things can help you.
You know, certainly when we talk about the negotiation process, having what matters to you written down is the sustainability you need it. You just needed in place long enough to get the deal complete. And then you know, whether or not it's written down, you know, no, well, I won't say nobody, but people aren't going to open a an online document in the morning before they get out of bed and go, Okay, how come I'm going to work today because yesterday sucked. That's not going to happen. We need that needs to be intrinsic. But when you're getting through a specific issue, like an acquisition, having that available to you, that you can reference on a regular basis so that you do stay on track. That's important. So when it comes to sustainability, you know, keeping it handy when it's current when it's something you're dealing with. I think that's important. And if you understand future Do this exercise and you understand why you want to buy a business, that's not going to change in the short term. You know, your your motivations may change in the long term, but in the time it takes to acquire a business, even if it takes a year, generally speaking, you're going to be, you're going to have the same values, you know, in a year that you did at the beginning. Alright, so I think as as we go through this, there's, there's really three things that we talked about. One is you want to find the best fit. And we want that because we can best leverage a good fit. And the best leverage is good for us as entrepreneurs, it's good for our employees, as business owners, we can do better for our employees if our business is doing well. And we can do better for the local economy, because our business is doing well. And we can also improve the impact that we're having with our business, most of the entrepreneurs that I know are not in it to, to become rich. Making money is great. It's important, but it's the impact, the positive impact on our customers. That brings us to work every day. And so we can do that better if we're best matched to our business. And then we go back to you know, that whole idea of motivation, what, what is going to get us out of our out of bed, what's going to help us bring our best self to the business on our worst days. That's important, that momentum that I talked about. And then finally, what's going to provide us with the boundaries that we need when we're negotiating, so that we can negotiate with confidence, either yes, or no, we can confidently agree to something or confidently say, I'm going to have to decline. I want to make something else really clear. Before I wrap up today, you don't owe a rationalization of your Y to anyone. Okay, your Y is yours. And so you don't owe them an explanation. You know, your counterpart across the negotiating table, if they say Why does that matter to you, you don't owe them that. You can try to explain to them what makes that important. But I think it's really critical to remember that you don't owe them an explanation of your why you can walk away from saying something and just say, I'm not willing to do that. Now, if you can't discuss it any further, you may put a hard stop on negotiation. And that's okay. Now, if that's not okay with you, then you need to back away from that conversation long enough to articulate what needs to be said, This is not a podcast or a live stream about negotiation. But and that's a big deal. Negotiation is a whole you know, that's a whole field unto itself.
But you can redirect the conversation around the facts that matter to your counterpart without having to defend yourself. And I think that the importance is to stay out of the defensive mode. When somebody starts to push up against your why, and saying, you know, you need to defend that well no, you really don't you know, if you want the deal to go through you may have to articulate something that affects the the your counterpart, you may have to discuss an issue related to the buy. But your why is yours. You don't owe anybody a defense over it. Alright. Your business is important. For more for me about building business value. You can connect with me on social on the social platform that you use in the links below either in the description for the video, or in the podcast description notes. Thanks for being here. Thanks for the hard work that you do. I'm looking forward to our entrepreneurial journey together. Remember that doing it yourself, doesn't mean going it alone.
Transcribed by https://otter.ai