Don't Struggle for Years, Buy a Professional Practice and Jumpstart Your Growth
Don't Struggle for Years, Buy a Professional Practice and Jumpstart Your Growth
These buyers can be owners of accounting firms, engineering firms, consultants, training companies, sales companies, and many others.
Some of the immediate benefits of purchasing a practice are:
Instant good will when you buy the competitor’s name and employee contracts.
An established phone number. Make sure this is redirected to you for a substantial period of time. If you are changing the acquired firm’s name, make sure your staff is trained in handling calls from slightly confused customers. Acquisitions can be financed. Generally the seller provides the financing. Other sources are SBA loan providers and local banks.
More Benefits Include:
Often a business purchase will provide significantly lower customer acquisition costs than obtaining new clients from scratch. This is particularly true if you accurately capture all of the costs associated with traditional customer acquisition such as advertising, marketing, networking, preliminary meetings, proposals, commissions, etc.
Acquisitions provide instant cash flow.
Additional staff has immediate work instead of waiting for work though a painful and expensive ramp-up period.
Two Final Benefits are:
In some markets, it is almost impossible to obtain talented skilled employees. This is another route to achieve that goal. Often a desirable location is obtained. Rarely will you obtain all these desirable benefits from an acquisition, but you can obtain the ones most important to you.
Compatibility is No. 1
Compatibility is a very important factor in the success or failure of an acquisition-based growth strategy. Compatibility needs to work on many levels. Certainly employee and owner compatibility between the two firms is very important. Customer compatibility is also essential to receive satisfactory results. In larger firms, management control and computer technology compatibility become major factors.
There are many areas of due diligence that need to be investigated. Many of these areas can be delegated to consultants. Because compatibility runs to the core of the acquisition, it should not be delegated. This gut call will determine long-term success or failure of the transaction.
A topic directly related to compatibility is customer care. Many customers will be very accepting of the changes at “their” firm. A few will need tender loving care. Remember to treat your “new” customers with kid glove care and you should have no problem retaining them.
Price Matters
Before we conclude, we need to talk about price. Small- and mid-size acquisitions of service businesses typically range between 1.5 to 3 times yearly cash flow to the owners. (Accounting and professional practices may be in the 1 to 1.25 revenues range.) The final figure depends upon the type of practice, the profitability of the firm being acquired, and the likelihood of maintaining the purchased customer base.
Usually there are three components of the price. The first component is the base price that is paid at settlement. The second component is a salary that is paid while the old owner works for the firm to help ensure a smooth turnover of clients. The third component of the price is the final payment.
Often the final payment is partially based on the success of the completed transaction. This might be calculated based on employee retention, customer retention, dollars of revenue or other agreed measure. These provisions usually are win-win because they provide a fair splitting of the risk of customer retention vs. price.
Be Successful
There are a myriad of details in any service business acquisition. Your acquisition will be successful if you ensure compatibility, pay a fair and reasonable price, and provide excellent care to your “new” customers. If these steps are taken, acquisitions can be a great tool in your arsenal to fast track the growth of your service firm.
Dont Struggle for Years Buy a Professional Practice and Jumpstart Your Growth - To learn more about this author, visit Greg Caruso's Website.
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Successful partners in professional practices and service business owners have found it profitable to grow their businesses through the acquisition of competitors.
These buyers can be owners of accounting firms, engineering firms, consultants, training companies, sales companies, and many others.
Some of the immediate benefits of purchasing a practice are:
Instant good will when you buy the competitor’s name and employee contracts.
An established phone number. Make sure this is redirected to you for a substantial period of time. If you are changing the acquired firm’s name, make sure your staff is trained in handling calls from slightly confused customers. Acquisitions can be financed. Generally the seller provides the financing. Other sources are SBA loan providers and local banks.
More Benefits Include:
Often a business purchase will provide significantly lower customer acquisition costs than obtaining new clients from scratch. This is particularly true if you accurately capture all of the costs associated with traditional customer acquisition such as advertising, marketing, networking, preliminary meetings, proposals, commissions, etc.
Acquisitions provide instant cash flow.
Additional staff has immediate work instead of waiting for work though a painful and expensive ramp-up period.
Two Final Benefits are:
In some markets, it is almost impossible to obtain talented skilled employees. This is another route to achieve that goal. Often a desirable location is obtained. Rarely will you obtain all these desirable benefits from an acquisition, but you can obtain the ones most important to you.
Compatibility is No. 1
Compatibility is a very important factor in the success or failure of an acquisition-based growth strategy. Compatibility needs to work on many levels. Certainly employee and owner compatibility between the two firms is very important. Customer compatibility is also essential to receive satisfactory results. In larger firms, management control and computer technology compatibility become major factors.
There are many areas of due diligence that need to be investigated. Many of these areas can be delegated to consultants. Because compatibility runs to the core of the acquisition, it should not be delegated. This gut call will determine long-term success or failure of the transaction.
A topic directly related to compatibility is customer care. Many customers will be very accepting of the changes at “their” firm. A few will need tender loving care. Remember to treat your “new” customers with kid glove care and you should have no problem retaining them.
Price Matters
Before we conclude, we need to talk about price. Small- and mid-size acquisitions of service businesses typically range between 1.5 to 3 times yearly cash flow to the owners. (Accounting and professional practices may be in the 1 to 1.25 revenues range.) The final figure depends upon the type of practice, the profitability of the firm being acquired, and the likelihood of maintaining the purchased customer base.
Usually there are three components of the price. The first component is the base price that is paid at settlement. The second component is a salary that is paid while the old owner works for the firm to help ensure a smooth turnover of clients. The third component of the price is the final payment.
Often the final payment is partially based on the success of the completed transaction. This might be calculated based on employee retention, customer retention, dollars of revenue or other agreed measure. These provisions usually are win-win because they provide a fair splitting of the risk of customer retention vs. price.
Be Successful
There are a myriad of details in any service business acquisition. Your acquisition will be successful if you ensure compatibility, pay a fair and reasonable price, and provide excellent care to your “new” customers. If these steps are taken, acquisitions can be a great tool in your arsenal to fast track the growth of your service firm.
Dont Struggle for Years Buy a Professional Practice and Jumpstart Your Growth - To learn more about this author, visit Greg Caruso's Website.
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Anne BarrAnne Barr has over 26 years experience in sales and marketing, six years as a franchisee. She has assisted over 367 business owners and purchasers to achieve their goals in career change, transition and exit strategy. She holds the designation of Certified Franchise Executive from the International Franchise Association, Certified Business Intermediary from the International Business Brokers Association and Board Certified Broker from the Texas Association of Business Brokers. Anne is active in professional organizations, networking groups and volunteers for non-profit entities. As owner/operator of four successful businesses, Anne has proven people skills and enjoys helping clients find the right "fit" in business ownership. Visit www.FranchiseOpportunitySpecialist.com for more information about me and my company. - Visit Anne Barr's Website |
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Jeff FosterWebBizIdeas.com is a Minneapolis website design company founded to help people start an internet business by providing them with website, business, and internet resources that help foster the growth of successful online businesses and develop innovative Internet business ideas. We specialize in internet consulting & internet marketing. - Visit Jeff Foster's Website |
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Jay Kubassek(Jay's Full Bio: EvanCarmichael.com/jaykubassek) In five years, Canadian-born entrepreneur Jay Kubassek went from selling mufflers at a Midas franchise to revolutionizing Internet marketing with the 2004 launch of CarbonCopyPRO, a online marketing education company, now worth over $20 million with customers in over 160 countries.
As an independent film producer, his upstart film fund Aliquot Films is currently producing a films with Spike Lee and Abel Fererra (starring Ethan Hawke and Dennis Hopper.)
Jay's entrepreneurial spirit is irrepressible. He’s the owner of five companies, a professional speaker and trainer, international real estate developer/investor, extreme sport enthusiast and emerging philanthropist. Jay resides in NYC with his wife Jamie, son Milo and dog Cooper. Visit Jay's official website: www.JayKubassek.com - Visit Jay Kubassek's Website |
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David BarrDavid Barr is the President of Venture Opportunities, Inc. David has been a professional business broker/intermediary since 1980 focusing on General Business Brokerage and Mergers and Acquisitions representing client transaction value from $400,000 to $20,000,000. Mr. Barr has handled the sale of over four hundred and fifty companies. David earned a university degree from the State University of New York majoring in economics and business. David holds the Mergers and Acquisition Master Intermediary and the Certified Business Intermediary designations from the International Business Brokers Association. He is also a Senior Business Analyst and a Texas licensed Real Estate Agent. For more information about David and Venture Opportunities, visit www.bizdealmaker.com. - Visit David Barr's Website |
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John BrennanJohn Brennan Ed.D. Dr. Brennan is President of Interpersonal Development, LLC, a training and development firm. Interpersonal Development has provided sales training and coaching to more than 3,000 sales reps from over 100 companies. A native of Australia, Dr. Brennan received his doctorate from the University of Rochester. His dissertation researched the effectiveness of Behavioral Modeling Technology in training people in interpersonal skills. While he has spent most of his career designing or delivering training, he was also a Vice-President of Sales of a training and development franchise with operations in 25 markets. Dr. Brennan has designed and delivered sales training in North America, Asia, Europe, Australia and the Middle East. He has been a guest speaker at numerous national and regional professional conferences. When Microsoft wanted Best Practices articles on sales for their web site, they called Dr. Brennan. The results are at http://office.microsoft.com/en-us/FX011387391033.aspx His firm’s clients have included Volvo, The Prudential, Merrill Lynch, Eastman Kodak, Gannett, Equifax Europe, the Economist Group and countless small businesses. - Visit John Brennan's Website |
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Stephanie RobeyStephanie Robey is President and CoFounder of Pivot Positive, LLC - an Internet marketing business focused on helping people start work at home ventures. Previously, she was employed at The Search Agency with over 20 years experience in graphic design and 10 years experience in online marketing. She was responsible for launching the Conversion Path Optimization (CPO) unit where she and her team have conducted hundreds of optimization tests for online companies across multiple verticals. She is a successful entrepreneur having started and sold 2 companies and remains on the board of directors of the third, PhotoSpin.com Stephanie began her career in the direct marketing realm creating and producing direct mail for many of the major cable television companies and directly attributes her understanding of Internet marketing to those early offline experiences. Stephanie is a graduate of San Diego State University with a BFA in Graphic Arts and also holds an Executive MBA from the Graziadio School of Business and Management at Pepperdine University. Read Steph's Blog Meet Steph and Dave Sign up for our Free 7-Day BootCamp: Self Employed & Rich - Visit Stephanie Robey's Website |
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Casey GollanCasey Gollan, Business Coaching & Mentoring Programs. Add $1 Million to $10 Million in the next 1 to 3 years. Since 1996 Casey has to added hundreds of millions of dollars to businesses. Watch a free video see client results Business Coaching website. - Visit Casey Gollan's Website |
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Joe DagerJoe Dager is President of Business901, a progressive coaching company providing no-nonsense direction in areas such as Lean Six Sigma Marketing and organized referral marketing. What others say: In the past 20 years, Joe and I have collaborated on many difficult issues. Joe’s ability to combine his expertise with “out of the box” thinking is unsurpassed. He has always delivered quickly, cost effectively and with ingenuity. A brilliant mind that is always a pleasure to work with.” - James R. If you want to learn more about Business901, start a conversation with us. We can be found @ Web/Blog: Business901.com Web/Blog: FundingYourNonprofit.com LinkedIn Profile Follow me on Twitter - Visit Joe Dager's Website |
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