Richard S. Ruback’s book “HBR Guide to Buying a Small Business” gives a nice framework in acquiring a small business. However – the rules don’t apply in Scandinavia. It is a different game here.

What to be afraid of.

I was amused, when I read the book, when it often gave the advice – to fire someone if things don’t work out. That is actually one thing you cant do here in Finland. If a company fires a person in a given position, the company is not allowed to hire anyone to that same position in half a year. The unions are strong. Some companies go around this, and hire a person to another position namely, but then the person does the work that was initially needed. So, think what will happen to the company, if you have to wait 6 months to fill a place, that was initially handled badly? Will the company ever survive? I doubt it.

What to do then? Realize, that you don’t actually own the company, even if you bought it. It is the governement, unions and employess, who out of mercy allow you to run a business. You have to be humble, and play a safe game with the employees – they are in control. Finland is close to Russia and we have almost a socialistic system here. Entrepreneurship is not popular and most people would be happy, if the state would actually take care of people from cradle to grave. It is almost so. Another thing to be carefull about, is the side expenses of any employee. It is so expensive to buy work in Scandinavia, that you can’t actually do anything here. Be carefull what kind of a company you search for. See that,what they do, is something that can’t be brought abroad.

For every hundred euros of wage there are extra expenses to the “dimmer” worth of 40 euros approximately. And this comes back to you at another place – when you evaluate the company. Be aware of owners, who raise the effektive salary as dividents! Because dividents are taken after the net gains – so any such salary will lower the real net gains! And if there are more employee owners – all the more dangerous this is. Usually the owner CEO takes a salary of 3000 € and then the rest as dividents. This will lower the company real gains by[redacted]€ per each owner employee. If there are three, it already has a real effect. Of course – if the company is big enough, this has no real effect. On the other hand – in two companies I have seen, that the CEO get’s a ridiculous salary. Then I can adjust the ebitda upwards. All the company data is public in Finland, you can see the companies profits and losses in Finder and in Asiakastieto. So this data can show that the company makes no profit at all and still it can be a good target to buy. So, it’s a handicraft – I need to visit the company and spend two days on it to figure out whether it is a reasonably good target. European salaries are also different form US salaries. It is a state run system all the way – the education is paid already in taxes as is most heathcare and daycare. So one cant compare salaries easily – one can live and easy life with low salary and it does not much help to earn more, because the state will tax it away anyway. Best is to take it easy and chill out at the summer cottage – that is what most people do here.

Going skiing now, take care and fund our Refinery7! :) Lauri