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Today, we have industry expert Richard Parker joining us to chat about Mergers and Acquisitions. With over three decades of experience, Richard has been turning business aspirations into reality, leaving a significant global impact through his renowned program, ‘How To Buy A Good Business At A Great Price.‘ This transformative program has made its mark in 80 countries, selling over 100,000 copies and empowering countless aspiring business owners.
Richard is not only a program creator but also a hands-on business acquirer. He’s been at the helm of 13 acquisitions, ranging from $50,000 to over $200 million. In addition to his hands-on experience, he has played advisory roles in transactions surpassing $2 billion. Richard’s insights and know-how have earned him recognition in top-tier publications like Forbes and The New York Times. He’s even authored more than 300 articles, showcasing his authority in the field.
Join us as we dive deep into the world of mergers and acquisitions. Get ready for invaluable insights and expert advice that could transform your business aspirations into reality!
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Key Steps and Strategies to Prepare Your Agency for Sale
Jeff Tomlin: Welcome to the Conquer Local Podcast! Our show features successful sales leaders, marketers, thought leaders, and entrepreneurs who will inspire you with their success stories. Each episode is packed with practical strategies, as our guests share their secrets to achieving their dreams. Don’t forget to check out and subscribe to our YouTube channel for the video version of each episode, where you can see our guests in action. Tune in to learn the highlights of their remarkable accomplishments and get tips to revamp, rework, and reimagine your business. Whether you’re a small business owner, marketer, or aspiring entrepreneur, the Conquer Local Podcast is your ultimate guide to dominating your local market. Tune in now to take your business to the next level!
I’m Jeff Tomlin and on this episode, we’re pleased to welcome Richard Parker. For over three decades, Richard has been turning business aspirations into reality, leaving a significant global impact through his renowned program ‘How To Buy A Good Business At A Great Price.’ This transformative program has sold over 100,000 copies in 80 countries, empowering countless new business owners.
Richard’s remarkable journey includes acquiring 13 companies spanning a broad financial spectrum from $50,000 to well over $200 million. In addition to his hands-on experience, he has played advisory roles in transactions surpassing a staggering $2 billion. His insights and expertise earned him recognition in top-tier publications, including Forbes and The New York Times with an extensive portfolio of over 300 published articles just showcasing his massive authority.
Get ready Conquerors for Richard Parker coming up next on this week’s episode of the Conquer Local Podcast
Grow your Agency through Acquisition
Jeff Tomlin: Joining us now, Richard Parker. The program is called “How to Buy a Good Business at a Great Price.” Welcome to the show, Richard.
Richard Parker: I’m doing great. Thank you for having me.
Jeff Tomlin: Hey, this is a fantastic topic, and it’s been top of the mind at our company over here. So I’m really looking forward to digging in here. And so why don’t you kick us off and tell me, why is today, you know, especially you look over the last 25 years, why is today a great time to be looking at buying a business?
Richard Parker: Well, what’s happening in the market right now is what I love to call magical uncertainty and magical upheaval. And what happens in these markets, generally, they shift between being a buyer’s market, a seller’s market. Sometimes there’s none of that at play. But right now, we have this absolutely magical upheaval, which really favours the buyer. Certain things, for example, if you talk about the overarching theme of uncertainty generally equals better buyer terms. That’s the umbrella concept to all of this. And so below that, the prongs to that umbrella, things such as inflation. So inflation causes concern to buyers. And what happens in that case is a lot of buyers fall out of the process or decide that they’re gonna wait on the sidelines until things settle out. And so that means less buyers in the mix, which is always good for the buyers that are remaining. Not so good for the sellers. But again, we’re talking from the buy side. The other thing is interest rates. As interest rates are growing, what happens is the cost of financing the deal in many cases becomes almost impossible and unjustifiable because you can’t service the debt. And so what that equals, that interest rate uncertainty, that equals more deals having to be financed by the seller because they’re typically better terms lower interest rates. And so, again, something favourable for the buyer. Then you have what we went through in the last few years of the pandemic. And businesses, you had some businesses that just went outta business, you had some businesses and consumer products that increased exponentially, you had other businesses that declined dramatically. And so you have no consistency. If you’re a buyer looking to acquire a business and you look at the past financials for the last few years, you have this, right? It’s like a rollercoaster. And so when you have that in place, well, it’s very hard to attach a valuation to the business that makes sense. Now, the seller thinks, well, I had an unbelievable year, for example, in 2001 because I was in a consumer products business. Well, in 2022, the opposite happened. And so seller says, well, you know, the business is really those numbers, but it’s not. And so when you have this rollercoaster effect, as a buyer, when you’re looking at the valuation, that allows you to put into place performance-based deals because you’re able to say, hey, I don’t know what tomorrow’s gonna bring related to the numbers because you have no consistency. It’s great to say that this will continue, but it forces the parties to understand that the valuation has to be based on certain things happening in the future. So that’s a performance-based deal. And as a buyer, you wanna buy a business based on performance if at all possible. Doesn’t always happen. But right now, that’s happening, and it’s the perfect time to do it. And then you have the concerns related to a recession. And again, that causes two things, the fears related to buyers who may stay on the sideline, businesses that may be declining. And so, again, it becomes favourable to the buyer to be able to structure deal terms that account for that and cause performance-based deals or trigger performance-based deals to say, hey, if X, Y, and Z, or as you’d say in Canada, X, Y and Zed happened, this is what I’ll pay you. Right?
Jeff Tomlin: Yeah.
Richard Parker: So all these things at work of all these, you know, the overarching theme is uncertainty, which is great for a buyer because difficult times in the economy are always much shorter than good times. And so, yes, we may be going through a tough period, but it’s not gonna last. No one knows exactly when it’ll be over. But the good times that follow always last much longer.
Mistakes in Acquisitions: Underestimating Risks, Neglecting Thorough Investigation and Unrealistic Expectations
Jeff Tomlin: You know, Richard, as you might know, Vendasta has acquired four different companies over the past couple of years. And it’s not the easiest thing to do. You definitely have to build some muscle around it to learn what you’re doing. We certainly made some mistakes along the way and, you know, I think a lot of people make mistakes along the way, especially when they do their first acquisition or second acquisition. And maybe talk a little bit about, you know, some of the mistakes that you’ve seen people make when they’re making acquisitions and what they can do to get out in front of those things.
Richard Parker: Well, it’s a great point because you’re gonna make mistakes. I’ve been doing this for 30 years and I still learn something new in every deal. And so mistakes are going to happen. You just wanna make sure they’re little mistakes, not big ones, right? The big mistakes are almost always attached to not underwriting or investigating the business in a flawless way, right? And buyers get caught up in sort of delusions of what they think they’re gonna be able to do with the business, right? Versus taking an approach of here’s what I’ve got, here’s the platform of the business, and here’s realistically what can happen. And understanding what happens next related to the market, right? And what the industry looks like, what the competition looks like, what suppliers look like. All these things that come into place. Key employees, for example, people buying businesses where there’s key employees in place, really key employees, and they don’t go through the exercise of making sure they meet with those people to make sure they’re even gonna stay, or licenses or customer concentration is a huge issue that people overlook. Generally, the smaller the business, the more customer concentration you have in place where one or a few customers, you know, represent a disproportionate amount of the revenue. And so those high-level items that people overlook is because they don’t do a flawless job of investigating every component. You know, the numbers, people very often get hung up on investigating the financials. And I’m not discounting those for a second. They’re important, but they’re the financials. They’re numbers. Numbers don’t lie. People lie. And so the numbers are what the numbers are. End of story. After that, it’s all the other prongs that you need to investigate that we mentioned. You know, competitors, suppliers, employees, the marketplace, leases, contracts, all these type of things. And so you mitigate your risk by doing a flawless job or as close to flawless as you can investigating the business before you buy. But having said all that, there’s no such thing as a perfect business. Every business has warts and blemishes and there’s certain things you just have to have a very good ability to separate incidents from catastrophes and not confuse the two. Some things are just you just gotta live with them.
Jeff Tomlin: Yeah.
Richard Parker: And other things are that big and that problematic that you gotta walk from the deal.
Jeff Tomlin: Yeah. So, you know, we jumped right into this discussion. And I was just thinking as you’re going through this, maybe we should back up a little bit. You know, there’s a couple of different ways to grow. There’s organic growth, which is investing in the current business that you’re running and growing it that way, or inorganic growth, which is sort of growing through acquisitions. And so maybe we should set the table a little bit. Because growing through acquisitions is a great way to create growth in an existing business or to grow a portfolio of businesses. So maybe talk a little bit about, you know, how growing through acquisitions is a great way to think about growth.
Richard Parker: Okay. Well, it certainly is because oftentimes, it could put your business on turbo. And organic growth is wonderful, but it’s not necessarily possible in every business, right? And so when you look at growing through acquisitions, you have a couple of paths to go down. The first one, which is the most obvious one, is by your competitor or competitors. And that brings with it a different set of circumstances because of confidentiality, how much you disclose, don’t disclose, whether it’ll be open with it. And so one thing, while it is oftentimes the best path to just buy out your competitor, is you wanna have a good approach. And one thing where people make a mistake is you can’t approach it like a bull in a China shop. You have a competitor. You may or may not have a relationship with the owner. Irrespective of whether you do, the first conversations have to be completely casual when you approach a competitor, right? Very casual because they’re gonna be defensive. And so you’ve gotta do that in a good way. And then as time goes on, the conversation could get deeper and more confidential information disclosed or exchanged. But having the ability to grow through acquisitions with a competitor is by far the easiest way to grow your business because you’re buying out the competition. So not only are you having access to some of their terrific people, but you’re also having access to some systems or products or processes or services that may be better and ones that you can bolt on. And oftentimes, there’s carnage in these, you know, where some people get dismissed, but you have these economies of scale where suddenly it’s like, you know, one plus one equals wow, right? And so that’s the concept with a competitor.
Expanding through Acquisitions and Offering More to Existing Customers
Jeff Tomlin: That’s exactly, by the way, what I was thinking, was you started to describe that, you know, the process of buying out a competitor. Great example of how one plus one equals, yeah, more than two.
Richard Parker: Yes. Oh, absolutely. And that should be the goal. Now there are cases where a competitor is just causing you some heartburn and friction and it’s worth it to buy them out because you’re just gonna get their business and it’ll be one plus one equals two. Those things happen more in some consumer products or retail. Those things happen. But the goal is one plus one should equal wow, right? And with the amalgamation. And the transition and integration comes with its own set of circumstances, which are difficult, but certainly possible. The second part of that is not only competition, think about ancillary businesses. You know, I’ve bought 13 companies, I’ve sold 12 of them. One of the, and I’m certainly not the brightest guy in the room, but one of the things that I found as an incredible formula for growth is just find more product to sell to my existing customers. I remember reading a stat many years ago that consumers or customers, B2B or B2C, are 60% more inclined to buy from a company they’ve already done business with.
Jeff Tomlin: Yep.
Richard Parker: And so with that philosophy in mind, whatever business you have, just find additional services that you can sell to the same customers coming through your door or that you’re soliciting. And that could be, for example, you know, using the example of Canada, right? Lawn businesses should be adding snow removal, right? Lawn businesses could be adding painting, right? And I’m just trying to pick real simple businesses. Dry cleaners can add shoe repair. Distributorships can add additional products or ancillary products, right? I was involved with one company, golf cart manufacturer and distributor, right? And they started adding some of the seeds and fertilizers that companies were using and then some additional tools that they’d use to move the holes on every green. So they were nothing related to the golf cart, but they were already going to the golf course to sell them the golf carts or service the golf carts, right? So why not sell them the other product? They’re already a customer. So it’s a beautiful way to grow your business.
Prepare a Business for Sale: Run it Like you’ll Sell it, Maintain Excellent Financials and Address Concerns
Jeff Tomlin: Yeah, that makes a lot of sense. Line extension because, you know, the cost of acquiring a dollar from an existing customer is usually at least half of what it is to acquire a brand new customer, right?
Richard Parker: Yes.
Jeff Tomlin: That makes a lot of sense to me. You know, that’s the buying side. Now, on the selling side, you know, the business for a lot of people represents their retirement. And so what are some of the steps that people can take to prepare their business for sale?
Richard Parker: One of the most important things when you get into business, whether you’ve bought a business, started a business, or what have you, you brought up a good point. Every business will eventually get sold. I mean, the average, and certainly in America, is every five years, it gets sold. So the one thing you want to have top of mind is you wanna run your business like you have to sell it. And so never taking your eye off the ball about how a buyer looks at a business, right? And it’s incredible to me because I do a lot of buy-side work, tons of sell-side work, and the disorganization, disorganization in so many businesses is rampant. So the first thing is, think about this concept of run your business like you have to sell it. Below that is, number one criteria, is you have to have spectacular books and records. Your financials have to be pristine. You know, as your business grows, you can’t keep using the bookkeeper down the street where you bring a shoebox full of receipts at the end of the year and have him or her compile your books. You need flawless books and records. And as you grow, get more sophisticated accountants to do your books and records so that when a buyer comes in and looks, they immediately recognize that the financials are in great shape. And anything they look at is exploratory, not investigative, right? So flawless books and records are critical. The next thing is, what is a concern to you, whatever keeps you up at night as a business owner is surely gonna keep up a buyer and probably to the factor of 10. So if you have some issues like processes or procedures that are not articulated or are really not up par or technology that hasn’t been implemented or customer concentration issues, those are gonna be red flags and probably deal breakers to a lot of buyers. And so whatever keeps you up at night in your business is certainly gonna keep a buyer away from acquiring a business. And the one thing that business owners need to understand, and a lot of people are in like busyness, right? They’re not in business, they’re in busyness. They’re working every day, they’re putting out fires and they’re like firefighters, not even business owners. And so getting these things into shape immediately. It’s great to say, well, you know, it’s gonna add value down the road, but it’s gonna make your business better today. So when you put these things into place, your business will be better today and hold more value tomorrow.
Jeff Tomlin: That’s a great way to think about it.
Richard Parker: Yeah. And so thinking about it, you know, if you had a buyer’s eyes looking at your business, what would concern you? Whatever you identify is going to be a problem to every buyer magnified.
Exploring Business Ownership, Overcoming Comfort Zone, and Reaping Benefits
Jeff Tomlin: 100%. You know, regular operation around here, I can see when we do things like prepare for a board meeting and we have to, you know, get, you know, our story straight and we put our decks together and we organize all of our, you know, the results from the previous quarter, it creates a lot of clarity, making you think through your business. And I think it’s a, you know, a similar process of, you know, just doing the simple work of cleaning up your financials and making sure they’re tight and you get a great lens on the business. It creates clarity, doesn’t it?
Richard Parker: When you do it in true fashion, in other words, when you’re open-minded to not putting your ego ahead and saying just because we do things a certain way means it’s the right thing, like being open-minded to change and taking a real good critical look as you say about each aspect and forcing yourself to articulate your position and where you are and how you’re handling certain process procedures or whatever the case may be, it does provide an enormous amount of clarity.
Jeff Tomlin: You know, you said at the beginning, you know, thinking about M&A can really turbocharge your business. For a lot of people, it probably might be something outside of their comfort zone. You know, there’s people that step outta their comfort zone just to create a business. And typically, it’s something that they know and they have a passion for and they start doing. But getting into and thinking about M&A activity might not be in their comfort zone and that might hold them back. So what are, you know, some of the obstacles maybe you’ve seen people, you know, come up against to get thinking about this type of growth strategy and maybe how can people overcome that?
Richard Parker: Okay. It’s a major issue and a great point that you raised. The solution is pretty simple. And this is a common issue. The way I like to address this is from a couple of approaches. The first thing is if we’re talking about individuals that may have a, you know, that are working, have a good job, or it’s somewhat in the back of their mind, like I’ve always wanted to do that or what have you, the one thing I’ll say is that anybody can do this. Not everybody will, but anybody can do this, right? It’s just whether or not they’re gonna go through with it. The only time you have job security is if you own the business. The only way you know what’s really going on is when you own the business. Now, don’t get me wrong, it’s not all, you know, it’s not all pixie dust and unicorns. There’s tough times, what have you, but it’s certainly, it’s doable. It’s the only time that gives you job security. When you look at this, I look at this very philosophically, which is if you’re, first of all, if it even resides somewhere in your brain that you’d like to own your own business, you owe it to yourself to explore it because there’s no risk, right? And so at least go through the process of understanding what’s involved and whether or not you can deal with it or want to deal with. I mean, you really owe it to yourself. If not, you spend your whole life, and at the end of your life, you never gave yourself that opportunity. And I’m not trying to stand up here and preach like motivational talk. But the reality is, if you have any inclination that you’d like to be in your own business, for goodness sakes, at least explore it, right? Like, you owe that to yourself. And the other part, which is people should understand they’re buying benefits. When you acquire a business, and that’s why I’m such a huge believer in buying an existing business that has everything in place, that you can get the keys on Monday and take a paycheck on Friday because that’s the way to do it. I don’t believe in buying garbage businesses or distressed businesses. Those are nothing but heartburn. But in a good existing business, you take it over and you hit the ground running, everything is in place. Sure, there’s a little bit of problems, but you deal with that. But think of the benefits that you get. You immediately have what I believe is job security because you know exactly what’s going on versus waking up one day working for a publicly traded company. They wanna improve their numbers. They lay off 10,000 people, even though they’re profitable. When you own your own business, you can improve the lives of other people. You can have a terrific team around you and you gain great gratification knowing that you’re bringing up a lot of people with you. You have an opportunity to grow and build something. You have the opportunity to build something so that down the road, this is your retirement, that you can sell it for a multiple of the profits that you’re generating. Every bit of your hard work should result for the most part in increasing the business. And during this whole path, you’re getting paid. Like, the benefits involved with it, it’s like a no-brainer, right?
“How to Buy a Good Business at a Great Price” Program Offers Comprehensive Guidance for Buying Businesses
Jeff Tomlin: Yeah, 100%. I can see that. Program is called “How to Buy a Good Business at a Great Price.” You’ve got a lot of great takeaways in the program. At the, you know, end of our chat, we usually try to leave one or two key points with our audience. Are there a couple key insights from the program that you want to leave people with?
Richard Parker: There’s a couple things. First of all, the hardest thing that we have, and I’ve been in this business for 30 years. Our guide, we sold over 100,000 copies. We have clients in 80 countries. We’re sincere people. I went into this business, I never had any thoughts that this was gonna turn into a business. It’s still a shock to me every day. Our only goal is to help people. I would really love to be able to help people accomplish what I’ve been able to achieve. We make our product incredibly affordable, under $200. It’s a 500-page manual with all of the workbooks and all of the ancillary resources that takes people through the entire process, teaches people what they need to know, what to do, and exactly how to do it. And the other thing was, you know, it’s very important to me that people understand, you know, if people buy information products all the time and when you get the information, it’s nowhere near what it was represented to be. So, of course, if anybody’s never happy, we always give them their money back, which is very, very rare. But I make myself available. Anybody who has a question, you’re going through the process, you can email me anytime. I answer hundreds of emails a day. I jump on the phone with people who bought the product. My only agenda is to help. You know, that’s the only mission that I’ve had from the beginning. I never thought this was even gonna turn into a business.
Connect with Richard Parker through his Website, richardparker.com
Jeff Tomlin: Richard Parker, it’s been a fantastic few minutes sitting down and chatting with you, getting to know you a bit and hearing some of the insights that you have about M and A. If people wanna continue the conversation and get ahold of you, how do they reach out?
Richard Parker: The easiest way is just through our website, which is richardparker.com.
Jeff Tomlin: Fantastic. Richard Parker, it’s been an absolute pleasure. Thanks for joining us on the Conquer Local Podcast and we hope to see you back sometime.
Richard Parker: Thank you. I appreciate you having me. It’s been great.
Jeff Tomlin: What an interesting conversation! A key lesson that Richard highlights here is that uncertainty favours the Buyer in Mergers and Acquisitions. He emphasizes that uncertainty in the M&A process can be advantageous for buyers. Factors like inflation, interest rates, and economic fluctuations can create favourable conditions for buyers, potentially leading to much better deals.
Another key lesson is that effective Due Diligence and Business Preparation Are Critical. Parker underscores the critical importance of thorough due diligence before engaging in M&A activity. This includes investigating various aspects of the target business, such as competitors, suppliers, leases, employees, and contracts. Proper due diligence helps mitigate risks and ensures smooth transitions to the acquisitions and sales process. In other words, he advocates for a proactive approach to M&A, emphasizing preparation and the need to run a business as if it’s always ready to be sold.
If you’ve enjoyed Richard Parker’s episode discussing Mergers and Acquisitions keep the conversation going and revisit some of our older episodes from the archives: Check out Episode 635: Streamlining Business Operations with Virtual Personnel, with Barry Coziahr or Episode 618: Mastering Partnerships and Go-To-Market Success with Barrett King
Until next time, I’m Jeff Tomlin. Get out there and be awesome!