How to buy and turn around a
distressed business or 'roll-up' competitors

On this site you’ll read real life stories of how 23 entrepreneurs find, fix and then sell small companies on the edge of failure. Sometimes we buy our weak competitors in a roll-up and get new clients cheaper by acquisition then organic growth. If you like these concepts, come to the next workshop. Learn how we...

✓  Find distressed companies that are worth saving for capital gains
✓  "Roll-up" your competitors for rapid growth with little cash or risk  
✓  Why buying a distressed business is the BEST way to do a start up

From KC Truby Lonesome Cowboy Publishing Inc. 301 Thelma Drive #426, Casper WY 82609 (760) 207-6385

3 Critical Rules for the day after you buy a company – to make sure you don’t miss a loan payment

By on June 9, 2014

3 Critical Rules for the day after you buy a company – to make sure you don’t miss a loan payment

By: KC Truby

On the day after you buy a business, everyone in the office is going to be nervous and all your customers will be looking sideways at you wondering what is going to happen next. Here are the steps we take:

ONE: Meet with the employees in a group. Don’t make any promises or grand vision statements. Assure them that we are going to have a steady hand at the wheel and methodical process for going forward. Give each one of them a form asking for 3 suggestions to make the company a better run operation or increase sales. Your task with the employees is to find out what and how they do things now, so you don’t run off a cliff with your axe cutting people, products or processes that you may regret losing in a few months.

TWO: Go see the top 20 to 40 customers immediately, in person and ask them three questions…

  1. What are we doing that you like, would you like us to do more of that for you?
  2. What are we doing that you do not care about, would you be OK if we dropped that?
  3. Who else do you do business with before us, during our relationship and after you buy from us?

These questions are designed to give calm to your current customers while looking for opportunities to sell more services to the customers you already have. You’ll also be able to reduce cost in a few weeks if you find most of your customers don’t really appreciate or use one of your product features. But best of all you will find opportunities to do line extensions as you learn who else your customers are doing business with.

THREE: Plan your cash flow and watch your numbers daily. I personally like to have my bookkeeper working remotely to review all the expenses and collections. The remote access allows her to drill down into the books without making anyone in the office nervous. Generally we have already gone over the books in detail over the two weeks prior to closing, so we know where we can cut cost, fast.

But wait, do not make any changes for 2 to 4 weeks unless it is an emergency like bleeding cash.

Sometime in the near future after I have talked to the customers and read the 3 things report from the team members I can make the changes needed to drive up net cash flow.

Most important of all. Do not buy a company where you cannot see how to easily make your obligations from CURRENT cash flow.   Here is how I plan out my distribution…

If you have purchased a going concern you will have payments. I try to keep those payments at 33% of the profit levels prior to my buying the company. So if the company is making $10,000 a month it is my goal to keep the payments around $3,300. In rare occasions I will go to 50% of the profit prior to my coming on board, but I really have to want the company to go to that level.

Then I allocate 33% of the net profits to the manager I will have to hire to run the operation. We also put those managers on performance bonuses that are realistic and quick so they work harder. The remaining 33% will go back into the company for taxes and marketing.

I personally do not take any money out of my acquisitions until we have doubled the profit (generally 90 to 120 days) then my manager will be getting paid more, and I will get a small check.

This 3 step process puts me on a solid foundation to grow the company. I plan to own the business for at least one year and maybe longer so it is OK to invest some time and energy into building the new asset.


 

About KC Truby

From their ranch in Wyoming, KC and his wife Linnea have bought or started 21 companies as a side line to their accounting business leading them into M&A as a full time business in 2012. These companies are located all over the Western Rocky Mountains, London and India. Since 1969 through their accounting and training companies, KC has taught 18,000 business owners how to improve cash flow and find more customers by installing standardized systems in their small business. Since 1989 KC has presented over 1,000 seminars and training classes to the small business owner.

One Comment

  1. Robert

    June 22, 2014 at 12:37 pm

    Going out and talking to the top customers and employees is really something all current business owners should do too, so simple.

Leave a Reply

Your email address will not be published. Required fields are marked *