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

How we buy companies for under $5,000

By on May 30, 2014

How we buy companies for under $5,000

By: KC Truby

Once I’m in a category like home health care or training or software, I now start looking for roll up deals. The roll up is when we buy a small dysfunctional competitor in the exact same business. We are looking for the business that is about to fail.

Now I don’t really want the business because it has a bad history and demoralized employees. So we look for ‘off balance sheet’ assets that we can re-purpose into one of our existing operations.

As an example, when we bought the home health care company in March of 2013 we took six months and nailed the operations down. Cleared off the dead wood and installed quality control systems. Now we were ready to grow. So we went on a three prong attach.

1. We went to our current clients and sold them more services if appropriate.
2. We hired a sales team and started a referral based marketing process.
3. We met with our 133 competitors to see if we could buy any of them out of business.

Step 3 is the classic roll up strategy that every Fortune 500 company uses.

Using our flow chart of questions to ask our competitors we looked for the business owner that wanted out. This is a touchy subject so we must use a lot of kind words in this meeting.

Now the $5,000 deal

What I really want is the customer list, employee roster, operations manual and any unique referral relationships the seller has.

These are intangible assets that don’t make me look like I’m buying the failed business in bulk. That’s because I don’t want some hot shot lawyer coming back and claiming under ‘bulk transfer’ laws if it appears that I took more than 50% of the company. That keeps me out of the old debt and obligations.

We are closing down the smaller company and dropping the name. We probably don’t even want the phone number as we’re going to have the old customer list and the phone bill is probably overdue.

When I negotiate these deals I carry three envelopes in my pocket. One has $2,000 in it the second $3,000 and the third has $5,000. Based on my gut instincts I pull out the envelope that I think will get the deal done. Usually at $5,000 or less. If more than $5,000 I just pull out multiple envelopes.

I just say, “if you will close down tomorrow. I will take the ‘off balance sheet’ assets, call the customers tonight and transfer the service. I’ll interview your employees and take the ones I like.” That’s it. One page agreement and I get back to the office so my team can get the clients transferred over ASAP.

Note: This only works if the owner is desperate to get out. Sometimes we hire the owner to work as a salesperson and assist us in moving the customers. We start out as a temporary contractor and pay very good commissions if he gets it done fast. A relationship after the quick burst is optional.

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 2, 2014 at 12:58 pm

    HAHA the envelop idea is brilliant!

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