Where to Start with Your First Business Acquisition

A Journey Starts with a Step.
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Based on the makeup of who gets our newsletter I've noticed a trend: Many of you haven't bagged your first home service business yet. Is there something holding you back? Maybe it's just a lack of knowing how, or when, or why to start. if that feels like I'm describing you then have no fear. Let's look at the first acquisition journey and where to even begin.

Picking the First Acquisition Target

Ready to snag that dream service company? Here's the lowdown on making those savvy acquisitions.

First things first—know your gig! There are a ton of different options for potential acquisitions our there and each brings its own nuance:

  1. Do you want to deal with more businesses and less homeowners? 
  2. What do you want your cashflow cycle to look like? 
  3. Do you have an expertise in driving cold calling on commercial clients or google advertising? 

All these questions will determine which industry or segment you go into.  Plumbing, HVAC, pest control—choose your expertise. Start small; post-2020, it's akin to a Gold Rush out there. Focus on residential, service-based opportunities for the real chances to shine.

The home service trades have rapidly consolidated. As you ascend the market ladder, larger businesses bring fiercer competition when eyeing acquisitions. This hike drives prices skyward and steepens competition.

That’s why it's smarter to consider initiating or acquiring something a bit smaller than your ideal size.

In the quest for acquisition targets, prioritize certain factors. Are they residential or commercial? Residential properties consistently boast the highest value.

Among businesses, the goldmine lies in service-oriented ventures, leaving new construction businesses with little to no value at all. Residential, service-driven enterprises are the prime targets.

So where do you even start? If you're eyeing your first venture in the home service industry, start by creating a focused profile of your ideal acquisition—Jot down specifics on your dream buy. Opt for a smaller, residential, service-oriented business within your chosen niche.

Up next? Begin researching local businesses fitting this criteria and initiate targeted outreach to potential acquisition targets.

Hunting Down Prey

No need for a Sherlock hat; simple moves like sending personal letters to businesses with low reviews do the trick. Fewer reviews often signal smaller fish ripe for your net.

Locating a business doesn't need to be complicated. I started by mailing letters when I found my first and second businesses. I hopped on Google and searched for 'plumbing company, Akron, Ohio,' then began sending out letters.

I'd send a hundred at a time to those with under a hundred Google reviews, signaling their smaller size and potential fit for acquisition. Reviews can serve as a metric for company size. Less than a hundred reviews likely mean a smaller operation—perhaps two, three, or four technicians.

500 reviews might indicate a 20-40 technician business. Companies with a thousand or more reviews might be too large for your scope.

Target those under a hundred reviews; competition tends to be lower for such deals. Tailor your approach to find residential service businesses in your industry of interest. My advice? Consider acquiring within your current market.

You're already familiar with it—you've got connections and know the lay of the land. The initial challenge is gaining leads and customers. If you're established somewhere, it's a good fit.

Avoid uprooting your life, moving across the country, and diving into one of the toughest jobs, managing a small business, at the same time. Stay grounded, send those letters, and let folks know you're part of the community. Strike up a deal right where you are.

Now take action! Fire up your laptop, make a hit list of local service peeps, and drop them a friendly note. Stay put where you've got roots. Flaunt those local ties; it’s like waving a magic wand when chatting up potential sellers.

My best advice here? Do the numbers! You’re gonna reach out to a lot of businesses in your initial search, so don’t hold back and send more than you think you need to.

Seller Financing FTW

Decisions, decisions! When it comes to financing your business buy, you have to choose between cash, seller financing, or SBA notes. Let me tell you, seller financing feels like that warm, cozy handshake where everyone wins.

I've seen seller financing work like magic in almost every deal I've closed. It's a game-changer, benefiting both the buyer and the seller. Trust me, it's a win-win scenario that I encourage everyone to explore.

When you're at the negotiation table, that's where the magic happens. Telling the seller about the perks of seller financing and how it smoothens the transition? That's the secret sauce for sealing the deal.

While seller financing rocks, there are other routes to consider. Cash payments or snagging SBA notes? Yep, those are on the table too. Getting savvy about these financing options is all part of prepping for that dream business acquisition.

Remember, your financing strategy should align with your long-term vision for this business. Think big picture! Weighing these options isn't just about the now—it's about where you see this venture in the years to come.

The Bottom Line

Bagging that dream service company is all about street smarts, homework, and a dash of charm. Keep your eye on the prize, hustle smart, and stay flexible.

As we gear up for the New Year, remember, every step you take towards your goal is a step closer to success. Here's to a year of seizing opportunities, making strategic moves, and carving your path to business triumphs.

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