Don’t Make the Same Mistakes I Did!
Two years ago, I acquired a small business in a handshake deal. I’d known the owner of the company for 15 years and considered him a friend. So when it was time to make things official, I found a cheap, downloadable contract online and we wrapped things up quickly. I never dreamed that he’d go back on his word.
You can probably tell where this story is going. It wasn’t long before my “friend” started reaching back out to his old clients and signing them up for new projects. When I found out he’d broken our agreement, I was upset.
It was a real learning experience for me. This wasn’t my first acquisition, but looking back, I dropped the ball in a few crucial ways. Now I know better, and I want to save you from falling into the same trap. If you plan to acquire a company this year take these steps to make sure you come out on top.
Step 1: Hire a good lawyer.
No matter how well you know the person you’re dealing with, get a legal professional in the room. Yes, it costs money, but not nearly as much as you’ll have to spend if the deal goes bad.
Step 2: Craft an airtight contract.
Don’t do what I did and spend $100 for a form online. Let your lawyer take the reins and create something that’s extra airtight and covers you for years into the future. If the person you’re dealing with is going to breach their non-compete, they’ll probably do it after 18–24 months. That’s about how long it takes for an ex-CEO to get nostalgic or run out of money.
Step 3: Cut the previous owner out completely.
When I acquired the company from my “friend,” he asked if he could be the one to announce the deal to his old clients and I agreed. This turned out to be a big mistake. Some of those “announcements”apparently never went out, and it took me years to discover that many of my new clients thought he was still running the show. By cutting the seller out immediately, you can take
control of the narrative and your new accounts, cutting off any opportunities for a double-cross.
Step 4: Reach out personally to your new clients.
Once you ensure the company is entirely yours, reach out to your new clients and introduce yourself. You can do this over email, but a phone call is even better. It’s okay to be nervous. I promise your efforts will pay off. A personal introduction will clarify where you stand, show that you care, and get your new business relationship off on the right foot.
Step 5: Stay in touch and build a relationship.
It’s not enough to call a client one time. You must stay in touch with emails, phone calls, and other communications — like this newsletter you’re reading! Don’t take your new clients for granted. Acquisitions are complicated, but overall, they’re worth the effort. Even with the mistakes I made, acquiring my “friend’s” company turned out to be a smart investment. As an entrepreneur, you never know when a golden opportunity like this will come along, and I don’t regret jumping on it.
Going forward, I don’t want to miss out on another big win, but I do want to be prepared — and so should you! If you get the opportunity to make a life changing purchase this year, keep these steps in mind when you go for it.
And most importantly, remember that a great contract could very well save your longtime friendship from going bad.
-Randy Sklar
