SMB for Beginners Part 12 of 12 - Top "Don'ts" for your search

With the final post of my monthlong #smb #acquisitions for #newcomers, I want to summarize our learnings into the top 10 pitfalls we've seen at Private Market Labs since we launched in September.

Keeping these 10 "don'ts" in mind as you search can help maximize your outcomes:

1) Don't build search criteria that are too loose or too broad – if your thesis is too broad, you’ll be unable to communicate why you’re the right fit to take over the business. If your search criteria are too narrow, you might miss out on an adjacent opportunity.

2) Don't wing it when talking to brokers - in addition to establishing your acquisition target, you need to have a baseline level of knowledge about the acquisition process before communicating with brokers in order to be considered a serious buyer.

3) Don't pigeonhole your search - explore both on-and-off-market avenues to maximize your chances of finding the right acquisition target. People who shut themselves off from one side or another are constraining themselves unnecessarily.

4) Don't wait to have conversations with lenders and investors – it’s essential to engage lenders and investors early in the process to ensure a smooth closing. If you’re scrambling to find money for the first time when you’re under LOI, you may lose your deal.

5) Don't put all of your financial hopes on a single lender or investor – diversify your funding sources to add redundancy into your process and reduce the risk that a single lender or investor could upend your deal by pulling out of the process.

6) Don't be overly aggressive with the broker early in the process – being overly pushy with brokers before receiving a CIM can derail a deal. For example, read the NDA carefully, and if the terms are standard, don't nitpick. Graciously share reasonable financial information.

7) Don't write a vague LOI - taking shortcuts when constructing an LOI can lead to pain down the road. Clearly outline expectations, key terms, and conditions for the deal to close at the proposed price. Make sure to discuss working capital and seller transition support.

8) Don't underinvest on due diligence - this can lead to unforeseen issues and liabilities. Make sure to hire the right experts and do a thorough examination for red flags. This is your opportunity to truly understand the risks involved in your specific acquisition target.

9) Don't ignore the seller - acquisitions involve more than just the finances. Building a personal relationship with the seller can help facilitate a smoother acquisition. Sellers want to know who you are as a person and operator.

10) Don't fail to plan ahead - unless you’re hiring an operator on day 1, you’ll have to run a business after the deal closes. If you don’t build your strategies ahead of time, you may set yourself up for a rough transition.

And that's it! Thank you for spending #January with me on this crash social media course on buying a small business.