If you’ve been reading along in this 30 Days to ETA series, you know that in the Day #17 post I discussed how as Acquisition Entrepreneurs we need to have focus on the end with The ETA Exit Plan. While you need to buy your business via Mergers & Acquisitions at the right strike-price, it’s equally important as a part of due diligence to sell the business right as well as a part of your Entrepreneurship Through Acquisition journey (You can read the previous post by CLICKING HERE). But what if you get into this as an entrepreneur and you find out you really enjoy owning a business? I mean, what’s better than owning a single business? Two or more businesses! So, in today’s 30 Days to ETA post, we’re going to explore how you can expand/create an empire by owning multiple companies — The ETA Conglomerate… Enjoy!
The ETA Conglomerate
As Managing Director at Tip of the Spear Ventures, one of the most amazing things I see during an entrepreneur’s journey in Entrepreneurship Through Acquisition is owners walking away from a buyer’s dream offer. If we’ve spent all of these years building a business to sell it, why wouldn’t we want not to explore taking it? What makes some business owners take the money and run, so to speak? And what causes others to turn down millions of dollars to keep working their fingers to the bone?
Ultimately, I find that some business owners are scared of their lives after leaving. All they’ve known is business, and they don’t know what else to do. That makes their future-after-business-ownership extremely precarious. But it also gives them an advantage: They shouldn’t just own one business… Enter the ETA Conglomerate!
3 Decisions Owners Make as the ETA Conglomerate
Essentially, Acquisition Entrepreneurs will do one of three things in order to excel as The ETA Conglomerate. Two decisions we make can lead to life and prosperity after the business sale. However, one decision could lead down a path of self-destruction before the business acquisition or in life after the business sale.
Here are three decisions we owners typically make when it comes time for The ETA Conglomerate:
- Take the money and run! We want more challenges, we need more challenges, but we take the money and run rather than investing those Benjamins in additional businesses where they can make more!
- Make an offer but make a calculated decision not to buy at that time. This decision has the potential to be rewarding. Maybe we invest the time and energy into exploring other business for sale, and it becomes so highly efficient that we don’t have to be in the office every day. With a highly functioning business, we find time to relax AND run the company. Or maybe we want more time to save for our ideal retirement goals. Sometimes, we want to spend more time building the business’s value to get a better offer later. Either way we go, we can still get to a sale’s table at another point in our business’s life and take more time to prepare ourselves to leave the business.
- Walk away from the Letter of Intent (LOI) prior to Purchase Agreement. This is a dangerous decision we ETAs often make. We perceive value in a company and make the offer we want via LOI. But when it is time to sign on the dotted line, we change our minds. It seems unlikely, but so many of us make this mistake that the Exit Planning Institute has done studies with the results that 80% of companies making below $50 Million in revenue never sell.
Questions That Determine The ETA Conglomerate Path
So you have an ETA Conglomerate Plan that’s been in the works for months, years, or decades? What makes you hesitate just long enough to back out? In my business at Tip of the Spear Ventures, I typically find that the deals that we’ve walk away from a business mergers or acquisitions scenario haven’t been the ones that we’re mentally prepared for. In other words, we get too attached to the company.
Ultimately, though, our answers to two questions tend to determine whether we can achieve The ETA Conglomerate dream:
How Much Money Will I Get?
Money can fix a lot of problems, but it can’t fix everything. I’ve witnessed Acquisition Entrepreneurs with lots of money self-destruct before they ever get to the sale of the business — Just as quickly as businesses with little/no cash flow. When it comes time to acquire businesses (multiple) though, money will be a deciding factor or the deciding factor.
Almost without exception, we Acquisition Entrepreneurs know how much we want for our business and how much we actually need to earn from the sale of our company in the future. If we’ve planned our business sale for years and worked with professionals to come up with a realistic company valuation, we’ll balk if a buyer offers us significantly less. For instance, we’ll walk away if we’ve valued our company at $5 Million, but an outsider only offers us $1 Million. Alternatively, if we think our company is worth $1 Million and someone offers us $5 Million, we’d likely take that money and run before they change their mind. This scenario is with one business, and diversification or exponential growth/sales figures can be achieved with multiple businesses. So how much money you receive from selling The ETA Conglomerate is a crucial metric/KPI to consider!
What’s the WHY?
As an Entrepreneur Through Acquisition, and you know this all too well by Day #18 in the 30 Days to ETA series, you will face many ups and downs on your journey. Money, while a considerable factor to consider may not be enough to drive every decision you make. I’m going to ask you to dig deep… Deeper than you probably feel comfortable with and ask yourself why you are doing this whole ETA journey for in the first place. Is it to live the lifestyle that you’ve always dreamed of? Is it to provide generational wealth for you/your family? Is it to better your community/state/country?
If you strip away the exterior and are stuck with the interior decisions that you are attempting this ETA climb, you’ll find your WHY.
SUMMARY
So what will we business owners do when we get to the future moment of selling your organization? Will you take the money and run, or will you stay put? In this ETA Conglomerate post we’ve looked at why some Acquisition Entrepreneurs decide to do just that. My answer: Build an empire! If you can take one business and scale it, several businesses will allow you to better diversify and get to your endpoints of money or WHY.
Sam Palazzolo
