Welcome to the number one podcast for people who want to buy a business the smart way. Jonathan J is one of the world's best known experts on teaching beginners, how to buy their first business without risking their own cash. To celebrate the 25th anniversary of Jonathan's first emmiday deal, grab your free business buying toolkit packed with 16 downloadable reports, checklists, videos and cheat sheets. Plus, Jonathan's latest book at www.dealmakerspodcast.co.uk. This is the ultimate toolkit for everyone who wants to buy a business successfully. This episode is sponsored by Jonathan's personal emmiday lawyer, John Andrews, email
[email protected] lawyer at jmw.co.uk. And he can be your lawyer too. Hi, this is Jonathan J and welcome to Business Buying Strategies, the number one podcast for people interested in buying a business successfully. Before we get into this week's episode, I want to tell you that if you are interested in joining me for mastermind 2025, the information is on our website, dealmakers.co.uk. And this is for serious people who want to buy a business successfully and want me and my team to hold your hands through the entire process. Now if you're in Australia, I'm going to be there in January. You have to be there. It is a one-off event three days on the Gold Coast. Come and join me again, dealmakers.co.uk/Australia for more information. And if you are in the UK, come and meet me and other dealmakers at Dealmakers Live. It is a two-day event. We eat together. You can stay at the venue if you want to. It is an incredibly sociable networking event as well as a learning event. We're going to have 80 business buyers, mostly brand new beginners at this event. And I will be teaching you what I don't do on the podcast, what I don't do in the free content on YouTube. I will be taking it to a whole new level and you will leave with a plan to buy a business successfully. Again, information on the website, dealmakers.co.uk. So this week we meet Stephen again. Now last week we heard about the acquisitions that he did to build a 1.5 million revenue digital marketing business. This week we find out about the pains of taking over someone else's business and how he integrated culture and operations. Now buying the businesses one part of the equation, the other part is what happens afterwards and on this episode you will find out exactly what happens behind the scenes. I hope you enjoy it. So Stephen, welcome back. We have already recorded a podcast with you where we talked about the deals that you've done and how you've done those deals and negotiated those deals. On this episode I'd like to talk about what happened after you bought the first business, after you bought the second after you bought the third. Because as you may have heard me say buying the business is the easier part of the equation. The slightly harder part is what happens afterwards because there's always going to be cultural issues. There are going to be logistical issues. Sometimes just getting into the bank account is hard enough. So I'd love to explore your experiences from the deals that you've bought since joining Mastermind and how you can help our listeners overcome some of the hurdles they might encounter. Sure. Thanks, Jonathan. Good to be back. I think with four deals now we've done, there's been a couple of differences in terms of the onboarding experience if I can call it that. Again, living in France, running a UK business, the biggest issue I've had with all of that has been a non-resident director. And so the bank accounts, as you mentioned, are a tricky one because some of the businesses, for example, run with Barclays or HSPC and so on and they do not like corporate structures with a holding company anymore and they definitely don't like non-resident directors. And so, yeah, our first, we've basically developed a checklist now. So the moment we get into business, we run through a series of things. The very first one being access to the bank, things like cutting-outs, sort of non-essential expenses and just stop the outflow of money so that we can be clear on what actually needs to go out. You need to get into the bank to be able to do that. Exactly. So how do you do that? Because I know there's a couple of ways we could do it, but how do you approach that? Because getting yourself in the banking mandate can take weeks and weeks. So what's your approach? Well, first we need to identify what bank accounts they have. So the first thing we normally do is we get our accountant on our team, for example, if somebody's on Barclays, we'll get our accountant onto the bank as an accountant partner. So they've got access to things so they can see what's happening. And then we basically take away access from the owners as we do the deal. And then we can start to manage it through that process. And then usually what we'll do, because of my unique situation of being in a different country and so on, we'll typically immediately set up either wise or a revenue to account. They've been really helpful. I've got an amazing account manager at Revolute. They've been really helpful with getting this kind of stuff set up. And if need be we will transition the banking over. Now there's no small undertaking and it's difficult to manage that properly. But that's been really helpful to have a modern banking solution so that we can manage things remotely so that we can do things effectively in that way. But yeah, the first step is just to get our accountant on board, make sure that they have access and visibility to things and that we stop any card payment. Generally we'll cancel cards. You can reissue them a day later, can't you? Yeah, but if you cancel them all those annual subscriptions that come out the day after you complete, you can stop those. Yeah, and often what happens is if an owner's been in the business for a long time, they might have a number of personal things going through there. They would call you to go to directors, low-income or something. But you forget about them, especially if they're on subscription, especially if they're on annual. So the best thing usually is just to cancel those cards, create a new one immediately. And we love using virtual cards because you can issue them instantly. And then as soon as something fails, your supply is going to contact you, find out what's going on, and you're going to set up a new payment. And you make sure you do that with just the ones you need and you stop unnecessary outflow. Because one of the things we found when the moment we get into business, the most important thing has been to manage cash flow so that you can make sure nothing goes horribly wrong. Like that's the first one. That's the most important thing. Yeah, I mean, cash flow is important for any business at any point in the business's life, but even more so right at the start. Because there is quite often some sort of attrition, isn't there? There's going to be a client who has a personal relationship with the owner, knows that the owner is selling, is already prepared to take their business elsewhere. Not because you've done anything wrong, they don't even know you, but because they were only doing business with that company because of their loyalty to the owner, or the relationship with the owner. So you're going to often see a few clients leave, which means that cash flow is going to be impacted, combined with potentially higher expenses as well. Yeah, definitely. I mean, we've seen an element of that in every deal at this point, where there's been some sort of relationship where a client, they might not have the best deal, and they might have had competing offers that are a better deal. But as you say, they loyalty the previous owners. And so if there's new owners, that loyalty doesn't necessarily need to transfer. So sometimes you'll see a drop off like that. Sometimes you'll realise you've got customers that are actually losing your money, and you need to put a stop to that. So this is going to hurt your revenue a little bit. But there's a number of things like that. It also depends on how you structure the deal, and also if you've missed anything that's through the due diligence process, or some unexpected cost comes up. There's going to be, as you say, unexpected costs. So you need to manage your cash flow really well, and especially if you've done a deal where you've used cash in the bank to pay out initial consideration and so on. You generally need to account for that in your working capital calculations, but sometimes you don't catch everything. And so you need to be prepared to have a little bit of extra available. And so you want to limit any outgones as much as possible just to make sure. Yeah, absolutely. So let's talk then about how you manage the finances. Do you consolidate all of the accounting? Do you run each business as a separate business? But you've got in the background a consolidated view. What's your approach? So we've actually just recently changed our accounting partner. So we've onboarded with a new accounting partner a couple of months ago. But that is exactly our approach. We've got individual accounts for each business. So they each run as separate entities. But we use a system that allows us to, we've made sure we standardize everyone's running on zero. So they're all in the same accounting system. We try as far as possible to set up because the businesses are fairly similar in how they operate. We just set up the same kinds of accounts. And sometimes that takes a bit of doing and tweaking along the way, because generally they've all been quite different when you take them over. And so we try to get to a fairly consolidated or consistent approach across the board. We then use a software that brings all of that together and gives us a little bit of a report. I was going to say this is really clever software that does that in zero, yes. Yeah. So we use, I think we use an app called Join. There's another great ones out there. But it really just, you need a consolidated view. Because we try and run a central management team across the businesses. And so it's really important that we've got a consistent view across the board. But then that we can draw into each company individually and make sure we look in at accounts receivable, accounts payable, making sure we measure in our profit margins and so on. And just maintaining all of that across the board. So what
do you consolidate? So with four acquisitions, you've got staff on different employment contracts, different terms and conditions. Do you do any consolidation of the HR function? Yeah, so we're in the process of doing that at the moment. So that has been a challenge to manage because if the companies have different contracts, different leave terms, different annual leave, different perks and policies and benefits. So we try and consolidate all of that. We're in the process of doing that now. We've gone through the one business, we've updated all the contracts and then we've got a couple of new employees on one of the other businesses and so we've updated the new contracts. We're in a process to update the rest at the moment. It certainly helps just from a supposed mental capacity point of view. You don't have to consider all the different leave conditions or the requirements around booking your leave or annual leave. Christmas closures was a big one. Yes, so yeah, we're in the process of consolidating that. So we have a consolidated HR process basically. We apply, it's run separately per business, but it's exactly the same process across the board. So the way we manage team, the way we do performance reviews and the way we manage our employment contracts is the same and consistent. So that we've consolidated. So you're familiar with our inner circle group, which is people who have already bought businesses. And it's a different type of discussion to our masterminds, mine's for people who want to buy their first business in the circles. People have done all that and now it's taking up to the next level. And I have guest speakers. So one of the guest speakers recently is the managing director of a London based private equity firm that has some very successful buying builds. One of them, they've done over 300 acquisitions. I mean, it was such a huge business. And when it came to the Q&A, one of the questions asked by one of the inner circle members was to what level do you consolidate back office, like for example, HR finance. And his answer was, if you're just going to buy separate businesses, say that they're part of X, Y, Z group and then try and sell them to us, you're not going to get much more than what you paid for them because you haven't really done the thing apart from KM by them. However, if you have consolidated the back office, if you have consolidated the HR, if you have done some sort of overall rebrand or at least bought them together into a cohesive look and feel, then you've done work that we would do and we will pay you for that because you've saved us time. So I always think of that when people ask me to what level do we consolidate? It depends really what you're going to do at the end. But then I've got clients. In fact, one who Sam who appeared on this podcast last year, you may know him, who's bought some HVAC businesses, whose entire policy is never to consolidate because he worked for, I believe it was two, the travel company, they bought something. The consolidation was absolutely nightmare and he said, I'm never going to go through that again. So his approach is they run a separate brand, separate businesses, separate everything just to consolidate with you on the finances. And that works absolutely fine for him. So it's always where you want to be on the scale, isn't it? Yeah, so I think it, as you said, it really depends on what your ultimate objective is. I think for me, with the businesses we're acquiring, it's in sort of creative agency services. And so generally with each business, they have a specific specialisation and there's usually a sort of cap as to where they can get to in growth. And so our goal really is to run each one, each brand does its own. So we want to leverage our density in the brand that's already been built. So we want to keep that active. But what we'd like to do is consolidate how that business runs in the long term. Now initially we keep them relatively separate, separate teams. Each team has their core focus. There's no real reason to merge those. But our management team is effectively going to be a shared across the group. And part of the reason for that is depending on what size company you're looking at acquiring. So we're on maybe on the smaller end looking for businesses between depends on the situation, but between half a million in turnover, up to about one and a half, maybe two million in turnover in terms of an agency. And often when we are acquiring businesses like that, it means the management team is going to, well, like, is really the owners and they're going to leave with the business. And so we're building a shared executive team that can bring in and support that management structure. And then instead of having to replace a managing director role, we can bring in maybe an operations manager, office manager and a few more specialized roles, rather than having to get a new managing director. And so we're building this executive team that can run the group of companies and then have each individual company stand on its own without necessarily an executive team or with a functional productive team. And so there's some different consolidation there. We do have a, we have set up a brand for the creative group. We haven't pushed that too high yet. It's just really if we want to sort of approach a bigger deal, more corporate where we need to cover the fact that we have creative design, we have web development, we have all these different things. And then we can say, well, here's the group, this is our group, we have all these. But usually we'll just go to market with individual brands. Yes. I think the long-term plan would probably be to do a roll-up of those into a single bigger group. But that's probably, I'd say, three years away once we've done a few more acquisitions and start to build on that. And again, this is a subject that we debate a lot, is do you re-brand or do you keep it the same? And part of what you bought is the brand, is that name recognition? And to rip the sign off the door, the day that you buy it, you're losing part of the value of what you bought. But you can have that hybrid of powered by or part of. And again, actually, when that private equity managing director came in to speak to everyone, this was one of the questions asked. Now, he had a very different policy. His was, you need to rebranding stuff and you need to rip the bandaid off as quickly as possible. And they want to do it immediately. Now, I suppose they are typically buying far larger businesses, which are typically more stable because they're far larger businesses. And that rebrand may be, I suppose, in corporate history, there's been lots of rebrands that have been very unsuccessful. But it just goes to show there's a horses for courses approach. But definitely, I think when buying smaller businesses, stick with the identity that you bought. Because that's what the customers relate to. And you don't want to lose customers. That's the last thing you want to do. You want to build the number of customers. Yeah, I think this has been an interesting one. As you say, like you mentioned earlier, if we once you take on a business, there's a good chance that some customers might leave just because of relationships. So if you go and change anything additional to that, you add to that risk. Some customers just, they don't, like, the change comes across as risk. And so most people are risk averse. And so they will rather have the, yeah, that's a great explanation. Yeah, that's exactly what it is. I mean, we've been in negotiation with a couple of deals with potential new clients along the way. And they've seen the change of names and, you know, done a quick company's house search and seen change of owners. And it raises some red flags for them. Now, we're able to quite openly and transparently explain all of that. But when you're pitching for work against another company who doesn't have any of those, you know, it's just a less risky decision for the client. It looks unstable, because of the change. Now, which brings us into a very good point, which is no one likes anything changing. So you can actually change things. You can put a new new fridge in the staff room. And you think you're doing something really good. But what you didn't realize is that Jeff can't fit his lunch box in the new fridge. And suddenly that's an issue. So how do you deal with change? That is probably the hardest part about everything, right? Because as far as possible, we go in then we'll like when we start with an onboarding of a team. So we've just close the deal depends on what the owners have discussed with the staff beforehand. But generally, we'll go in and we'll introduce ourselves, introduce our management team. And ideally, as far as possible, we'll be clear, like we're trying not to change anything. Like there aren't going to be, you know, inevitably you can't change nothing. Usually there's some stuff that needs fixing or needs changing, you know, sometimes you're losing money on clients and you have to make some adjustments. But well, as far as possible, go in and run the sort of first 30 days without changing anything, just observing. And then you take the next sort of 30 days, you know, so from 30 to 60 days, you go in and you look at all the things you've observed, what would you change? And you kind of test your theories. You go and speak to people, understand if I were to change this, what would that do before you do anything? And maybe you implement a couple of quick wins. And then from 90 days onwards, you know, you can start to implement a bit more change. The thing is you need to get everybody on board with that. So a really interesting way to do that is if you're going to chat to the staff and say, "Alright, cool. If you were CEO tomorrow, what would you change in why?" And then separately, you ask them, "What do you love about the business?" And so you can identify some of the things that the team actually want changed. And if you can implement and follow through on that, that also builds a lot of trust. Absolutely. Yeah. But the challenge is what we've found, you know, we've had some businesses, the one deal we took over in January, the business was running everything very manually, manual job cards, manual time sheets, an administration sort of night, me like and the previous MD was doing a great job at it, but it was very manual. And so we needed to implement systems to bring that up to speed and align it with the rest of the group and just automate a lot of the bullying. And that there's been a challenge in one because it's a big systems overall. And so you need to make sure you provide in training and support and given the team time to adapt and just cover in all those bases, which it's a challenge in a thing to do. And it's going to have some difficulties, but you kind of need to commit to it, get everyone on board, keep the enthusiasm high and then sort of follow through on it because if you stall, then you kind of left in the middle of nowhere. Yes. And if you lose the trust of the staff, you know, the staff can be the biggest asset and the biggest liability because they can work against you. Maybe not consciously.
but they can work against you if they don't trust you. They start looking for other jobs. And before you know it, the business that you bought just sort of disintegrates around you, which is the exact opposite of what we want to achieve here. Yeah, exactly. I mean, we did find that in the one business that we acquired was a distress company and a distress donor as well. And we ran into that. And I think that the staff had been kind of in a, the business had been in decline for a number of years. And it was very sort of scarcity mindset, everything like our clients didn't have money, like our clients or, you know, the businesses falling apart. And then it had been going on for a number of years. And so when we went in there, it was very difficult to kind of change the mindset of the staff. And so, and but the business needed change and it needed change quickly because it was in a difficult situation. And that was very difficult to do. We managed to kind of stabilize that business and we ultimately ended up getting it kind of to zero and then selling it. But yeah, that was a really difficult one because we didn't have, there was no clear cultural alignment with the team. And there was a big gap in terms of, you know, getting on board with change, following through on the new systems that were desperately needed to manage profitability and things like that. So yeah, it can definitely work against you if you're not, if you're not careful. And that used the word culture there. Mixing cultures is very difficult, isn't it? So you've got one company that you buy where it's a work hard play hard, another company where it's, you know, you clock in a one minute tonight and you leave a one minute to five because you arrived a one minute tonight and you're not going to work a minute longer. So how do you deal with that? Because that's got to be one of the hardest parts of merging businesses. Absolutely. I think, yeah, if not the hardest part about merging a business as the culture. And so we've tried to be very careful with that to manage it like we've got relatively small teams at the moment. So it's been okay. But yeah, definitely we can see very distinct differences in culture. The other thing is that, you know, some of my background in personal development and understanding values and what's important to each person as an individual having core company values, having a clear vision and strategy for your business. The businesses we've acquired so far, they generally have none of that. And so that's an interesting case where you got to go in and ask like a guess of what are the core values of the business. You know, what is this particular team value because it's going to be different to the others. And for me, company values is not what you'd like them to be. I mean, you can have one or two sort of aspirational ones on there. But it's like, what is it actually? What does the team actually value as important? And if you can understand that goes a long way to understand whether you can't merge teams, whether you should keep them apart. Because sometimes you just need to keep them apart and they can work great on their own. But if you try and merge them, they're going to create conflict. Because if you expect everyone to work in the same way and value the same things and they don't, it's going to cause some issues. So yeah, I'd say when you're merging companies, probably, as I said, the number one thing I reckon is you've got to look out for that culture. You've got to try and understand at first before you attempt to merge if possible. Sometimes you don't have the opportunity to do that and you kind of just got to wing it and see how it goes. But you've got to be very attentive to that. And you've got to try and stamp out any issues as soon as you see them pop up, address them, head on and don't just let it happen. Because otherwise it's going to cause major hassles down the road. So what's your personal involvement in the businesses now then? And what was it from the moment you bought the business, each business? And as it diminished, as it increased, what's what's it, what's your day look like? It's kind of been, for each acquisition we've done, it's been very hands-on initially. Because again, being smaller businesses, as we've acquired them, the owners have stepped out and so it leaves a gap in the sort of effectively managing director role. And so usually I've taken on that role in the interim to kind of oversee, really get a sense for the business and how it operates, be in the day to day and see the challenges. One of my core skills is really understanding what's in place and doing some critical pathfinding to understand what is the quickest solution here? How do we solve problems quickly and sort of plug some gaps in the workflow? So I get into the business, so I know what's going on and where the quick wins are. And then I'm bringing in, I'm building up my sort of executive team. I've got a fantastic operations manager now who's kind of taking a lot more of the day to day off of my plate. So the ultimate to get to is for me not to be involved in the day to day at all. And we're making good progress towards that. At the moment, I would say I'm more involved, hands on our latest acquisition, so doing onboarding, setting up contracts, introductions with clients and so on. That's more my day to day at the moment. And there's a fairly big sort of sales role that I'm playing in the businesses because again, an interesting one when you look at agencies, especially on the sort of low end, even up to about one and a half million, generally there's no clear sales process. And usually the businesses work towards referrals from the, you know, to the business owners. And so when the business owners leave, you've got a gap in sales. And so that's an area I'm focusing quite a lot of my time on is building some sales and some sales processes that we can bring in a sales team. That's our kind of next step in our operations, sort of shared services, if you will, is to have a sales and marketing team, you know, that covers the group. Okay. But yeah, so my day to day at the moment is kind of on the latest acquisitions to make sure that I know what's happening. And then I can bring in my ops team to kind of take over the day to day. And where do you see that evolving there and over the next couple of years? Ideally, I don't want to be on the org chart at all. A great place not to be, yes. I think so I also, you know, on the side, I do some fractional CEO consulting or business strategy consulting. And I love that space. So I'm happy to jump into like a quarterly meeting, a straight planning session to understand where do we want the business to go. But the way I see it happen in is that I'll do that as a consultant almost to to the team running the business. So I don't want to be involved in the day today. And I'm probably not going to be the sort of visionary leader of the business from an acquisition side short, but not from the individual businesses and their running. I'll come in and operate and work with my management team on what do they want the business to look like for them? What are their personal goals aligned to? How do we want to run each business and kind of be a strategic consultant to that? So that's really where I'm going to get to in the next while. Hopefully we can do that. My target is to try and do that within the next sort of six months. That might be a little ambitious. Fantastic. Realistically, it's probably going to be nine to 12 months from now. Yeah. Okay. But yeah, that's the plan. So people watching listening to this are often on the fence about buying a business. And yeah, they've been listening to the effort that is required once you bought these businesses and merging them and everything. But is it all worth it? That's the question. I don't think anyone minds putting effort in if there is an opportunity in the future. If there's profit to be made while you are in the business, if the business can be sold in the future. So would you mind sharing with us what your vision of the future is what does this look like to you? I mean, it's interesting to bring that up because there have been a few moments where I've wondered this has been worth the effort. I won't lie about that. Yeah, I mean, it is a lot of effort. It does take a lot of work. I've never been scared of hard work. You know, I've built my own companies in the past and like it takes a lot to build a company. I think it's a lot easier to buy a company if you know what you're doing. It's a lot easier to buy a company and to build a group that's, you know, through acquisitions. Certainly easier than starting from scratch, but it does depend on what kind of business you buy. Again, if you buy in smaller businesses that don't have a sales team or stuff like that, it's going to take effort to do that. Now, I think the advice I would give is like, okay, make sure you've got the right people around you and build a really good team so that you don't have to get as involved. But for me, be clear again, like coming back to being clear on your goals, like why are you doing it? Now, for me, the upside is my long, longer term vision is to buy. I think I'd work tonight when I started this. It was probably about 12 acquisitions and then kind of build a group that's worth. My aim was somewhere around the 10 million pound valuation. You know, for me, it's a big, ambitious goal and I think it's quite achievable, but it's going to take some effort. But I think that's what you're doing. Unless you're going to win the lottery, doing anything that's worth 10 million pounds is going to require some effort. Of course, yeah, of course. But I mean, even, you know, like, it's an old adage of you sort of shoot for the aim for the stars and the moon kind of thing. I think, you know, like, I love business. I love what I do. I love sort of being involved in the strategy of business, building the sort of organizational structures around it. I love the consulting side and part of my sort of reasoning behind this, was I was going to go into just to business consulting. But then I thought, well, if I could do consulting for businesses that I own, you know, the upside is twice, you know, or probably 10 times what I would do just for just on a consulting role. So like, why not do what I love for businesses that are own already? And then the potential upside is I could sell those businesses down the line. Yes. So I'm holding on to that version around, you know, it's a longer term plan. It's going to take a lot of effort in the meantime. And sure, in the short term, it should make good profits because the business should be profitable at growing. So I should earn some good margin. I'm not talking about type of business. Yeah, exactly. So yeah, so I mean, that's the sort of version. I could say I started out with a plan of probably about 12 acquisitions we've done for. They're probably not the same size as what I'd planned on initially. But they're bigger. Yeah, exactly. Because the confidence grows and you've also got an infrastructure now. Yeah, exactly. You've started. Yeah, I mean, that's probably the biggest thing is like, you know, when you start in art and you're having these conversations with potential sellers and you know, you're having a discussion around buying their business and they look at your track record is like, well, what do you have? Like, well, I've registered my holding company and it's a month old. It doesn't really lead much to credibility. Yeah, certainly lean on your credibility of your experience and your industry sector and teams. But for me, a lot of it has been then, okay, well, now we have the platform. We've done a couple of acquisitions. We've got a track record. We've also got a
a couple of businesses effectively on standby. So if we were to acquire another asset purchase, we could slot that in immediately and run with it. - Yes. So yeah, that infrastructure really helps. - Stephen, really interesting talking to you. Congratulations on your success so far. And maybe you can come back this time next year and update us on what you've been doing. - Thanks, Jonathan. It's been great. Yeah, definitely keen to fill you in once we get there. (soft music) Thanks for listening to this week's podcast. Have you got your free business buying toolkit? It's a huge free resource that Jonathan's put together to help you get your deal done. Go to www.dealmakerspodcast.co.uk and claim your free toolkit now.
PodcastTranscript AI