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- Did you work on the right thing today?
- 3 Critical Rules for the day after you buy a company – to make sure you don’t miss a loan payment
- What about flipping a small business compared to real estate?
- Managing your Business in 2 Hours
- How we buy companies for under $5,000
Managing your Business in 2 Hours
3 simple secrets for managing your business in just 2 hours a week.
By KC Truby The Lonesome Cowboy
Your opportunities for buying a distressed small company cheap, fixing the obvious problems and then reselling for capital gains in one year, are everywhere. The problem is – once you own it, you have to run the little sucker or it will start sucking you dry. Over the past decade we’ve owned 3 to 5 companies at any given time using these three steps.
1. Reporting systems: When I buy a company we immediately install CRM software, paperless workflow and update the accounting program. Then I have 3 screens on my desk with each of the report pages ‘live.’ Keeping on top of the ‘numbers’ allows me to see problems early and to speak with conviction when I’m talking to my staff. 2. Operations manual: Two weeks before we buy a business we start working on the operations manual and strategic plan. The biggest reason is because we NEVER buy a company that we cannot already see a clear path to doubling cash flow from cost cutting and increasing sales by 25% through sales meetings with the top 20 to 40 customers. The strategic plan includes our “Lean Canvas” work sheet that gives the team a clear picture of what we’re going to do with this new acquisition. Shared vision means good team work. In our situation we start with a pre-written business model that we call the BIG BOOK and then modify it to fit the new business. The book not only tells us what and how we are going to do tasks, but when. The due date is posted in our CRM schedule so my team won’t forget. The operations manual is divided into 8 sections that make up the business cycle. The employees do 90% of the work as they are the ones expected to implement. It is easier to get someone to implement their own plan, then my plan.
3. Hire a manager to do the daily work: when a business problem or opportunity comes to your desk your first question should NEVER be ‘how am I going to do this?’ The first question is always “Who is going to do this?” Your people come first. Don’t skimp on lining up the best managers possible.
We find managers in three places
A) From people working for us now, who we promote and move to run the new operation. B) By promoting someone currently working at our acquisition into the manager’s position. C) From personal observation. We never stop looking for talent Now the big news, pay your manager on performance. We set a low base
pay rate of $30,000 to $50,000 and then put 33% of the net collected profits after debt service and taxes into a pool that the manager can spread around. I expect the manager to keep 50% to 75% of that profit for themselves. I’m perfectly happy if a manager is making $250,000 a year someday if I can depend on my share of the profits to be a consistent $100,000 a year for 2 hours a week of my work.
Once you start buying companies on a regular basis you may want to start an ‘apprentice’ program so you have a steady flow of managers in your pipeline. I hire college graduates who want to become entrepreneurs and train them in our main company for one year. Then we promote those people to run our acquisitions if appropriate. These three steps work over and over for us. On average we can move the value of a distressed small business up by $200,000 inside twelve to eighteen months. We then sell it, or decide with the manager to keep it long term as an income stream.
Join the M&A Club for small business. Learn how our members are using these steps to improve their current business, roll up competitors or buy distressed small companies for turn around. Click here for details.