Luck’s role in buying and running your business

Greek mythology is riddled with stories aplenty related to fortune, both good and bad. One of my favorite stories include Perseus’ slaying of Medusa, the powerful Gorgon through a combination of luck and divine favor. Aided by gifts from the gods, including a reflective shield from Athena, winged sandals from Hermes, a helm of invisibility from Hades and a magical sword, he was able to complete his quest! Now what in the world does Greek mythological fortune have with your next business acquisition?

Well, you certainly want to have more good luck than bad! I review dozens of business listings everyday and I kid you not, every single one of them reads like the best deal you will ever make; “will not last long”, “expect this to be off the market in days”, etc. The core question to ask as you review transactions everyday is if I am “sufficiently fortunate” to have caught this deal now, “why am I the lucky buyer"? Said a little differently, why do you think the business, under your stewardship, can achieve growth that the current owner failed to over their previous 40 years of ownership?

It starts with understanding the seller's motives for selling and identifying untapped opportunities.

As you contemplate the transaction, you want to have not just a vision for incremental growth (which, for what it’s worth is helpful) but a strategic plan capable of propelling the business to tenfold its current value. You want to understand very clearly the unique value you (and your network) can bring to the table, and to think through an innovative approach to unlocking the business's potential.

Here are a few thoughts to contemplate as you proceed

Assessing the Impact of the Owner’s Transition

The departure of the previous owner will impact the business 100 percent. The transition period requires careful planning. If the business hinges on the seller's personal expertise or relationships, devising a strategy to sustain and grow the business in their absence probably needs to happen prior to the transaction. Further, growth plans might involve securing new licenses, fostering relationships with key stakeholders, or building a brand that stands independently of its founder.

Envisioning a 10x Future: Beyond Incremental Growth

The opportunity cost of leaving a job is high - peace of mind, vacations without any disturbances, and generally limited stress about the long-term viability of he company. To justify leaving that trajectory, the business you join should have legitimate growth prospects. A useful frame of reference I like to use: what would it take to achieve a 10x increase in value. Consider radical innovations, market disruption strategies, or leveraging technology to redefine service delivery. Hypotheses will be bold, addressing not just how to enhance the business but how to revolutionize it.

The Critical First 100 Days: Setting the Stage for Transformation

Your first 100 days are pivotal in transitioning from vision to action: the tone you set on day 1 will set the tone for your ownership. This period should focus on establishing a strong foundation while starting to implement high-impact initiatives that align with your 10x growth plan. Identify the stars in your organization and start thinking about how to empower them - identify low performers. Communicate effectively. It’s about ensuring operational stability while also taking decisive steps toward long-term transformation. This plan acts as your blueprint, guiding your efforts from maintaining essential operations to initiating breakthrough projects. It should be fully fleshed out before day 0 (close day)

Speak with someone who’s done this before

Before solidifying your strategy, engage with your board of directors, mentors, and industry experts. These individuals can provide invaluable feedback on your plan, challenging assumptions and enriching your perspective. Their experience can help refine your strategy, ensuring it is robust, feasible, and aligned with market realities.

Conclusion

Having a bit of luck when buying a business is certainly helpful but in reality, strategy and planning are probably better to rely on. Acquiring a business with the aim of making it worth your while is ambitious, requiring status-quo breaking forward-thinking strategy. It requires not just identifying the right opportunity but also imagining and executing a plan that will fundamentally transform the business. The journey will usually be complex and challenging, but with the right approach, the potential rewards are substantial, offering a chance to redefine the business's future and achieve unprecedented growth.

Tweets from the Streets

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Parting Thoughts

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If you have any questions about this article or about financial metrics in general, shoot me an email at [email protected]. I will be happy to respond to all the notes that I can. Look out for a follow up post soon.

If you are looking for a thought partner with whom to think through the growth of your business, I’m also happy to chat. Again, I’m an email away.

Until next time…Keep building!