26 Oct How to Select the Right Businesses
In our previous article, we explored some of Glen Cooper’s recommendations and strategies for business brokers. Cooper is the Founder and Managing Partner of Colorado Business Brokers. Please click here to watch the webinar. With the right strategies in place, Cooper believes business brokers can dramatically improve their chances of success. In this article, we’ll overview more of Cooper’s recommendations.
Choose Your Market, But Don’t Overspecialize
At the end of the day, business brokers and M&A advisors who are proactive about the type of listings that they select will be more successful. Cooper strongly cautions against taking almost any kind of listing, regardless of its quality. Instead, you are much better served by taking a long-term and strategic approach.
It is essential that brokers and M&A advisors know what kind of markets they want to deal with. This step couldn’t be more important. But it is also important to remember that when you select the type of businesses you do want to work with, you don’t end up overspecializing.
As Cooper points out, overspecialization can lead to trouble if and when market demand changes. Inevitably, market demand will shift, and this can occur for unexpected reasons, as we have seen recently with restaurants and the pandemic.
The size and type of businesses matter, of course. Cooper notes that he doesn’t take businesses that don’t have a chance of being a big win, as he has to offset his costs. Additionally, he wants to find businesses that are “attractive, and profitable…and have good margins, recurring revenues.” He points out, “You want businesses have a strong market position in their own markets…and if possible, you want them to be in a good location.” He also noted that he looks for businesses that have working systems, proven stability, good books and records. Importantly, he stresses that you should look for a “motivated seller who will sell at a reasonable price on generous terms.”
Aligning with Your Own Interests
It is easier to sell a business if you have a personal interest in the type of business itself. Cooper sees this personal interest factor as an opportunity to, as he phrased it, “grow in my understanding of the world around me.”
Combining all of these factors will help you achieve selective prospecting. Everything is a numbers game, but that doesn’t mean that you should just take any business that comes along. Instead, you should strive to achieve a laser-like focus and really think about what businesses are right for you. You should target, adjust and retarget over a period of years, and refine your approach in the process. That stated, Cooper also believes that it is critical to know and understand your regional market and network with other business brokers.