Aug 8, 2017
How do you think about acquisitions? Do you think of them as a strategic growth strategy for small to medium sized businesses? If you don’t, you should. At least according to today’s guest on the EO Podcast, John Bly. Since 2004, John has acquired more than 15 companies—including Anytime Fitness—and have grown their principal business from two employees to 80. Tune-in to this episode of the podcast to hear John talk to Dave about the art of acquisition, the realities of being a busy parent, and why every seasoned needs a high-quality assistant.
Time Stamped Show Notes:
- 01:51 – John says he has made Accounting as entrepreneurial as possible
- 02:40 – John wrote the book Cracking the Code: An Entrepreneur’s Guide to Growing Your Business thru Mergers and Acquisitions for Pennies on the Dollar
- 03:09 – There are a few ways to grow a business – grassroots, massive funding, and acquisition
- 03:56 – John started his core accounting business in 2004 and has branched out to the fitness world, he and his wife have acquired 17 companies in 13 years
- 04:19 – John says the passion he had in acquiring companies has changed over the years
- 05:03 – They now have over 80 people in the company starting from 2 when it first started
- 06:05 – Anytime Fitness is one of the franchises John and his wife acquires
- 07:18 – John sends a direct mail campaign to competitors to see if they are interested in selling their franchise
- 07:42 – John usually does the research himself but in one case
they sought the help from India to build a database
- 08:45 – Having the database helps them build targeted lists much faster—size, specific industry, etc.
- 10:02 – On this particular project, John met the folks in India through his connections at Entrepreneurs Organization
- 13:57 – Aside from wanting to grow, companies engage in acquisition because they want to grow their bottom line—to make the business more profitable by securing a high-margin product/expertise
- 16:14 – John says when people get to the $6 to $10 million mark, they grow faster organically because they can afford to hire talent in the different areas, and can afford to acquire
- 17:08 – John thinks people are doing acquisitions because they either want to tap into their unique ability but can’t afford yet, or are looking to enter a new market or new niche
- 18:26: The value of a company depends if they are for sale or not – in case they are not selling and you are cold-calling them
- 19:37 – John says there is no sense in doing a full valuation
- 20:01 – Dave says, in selling a business, he was advised to have an investment banker, accountant, or attorney
- 20:34 – John says you should definitely have someone like that on your team to help you
- 20:48 – Investment banks don’t chase deals that are less than $10 or $15 million in transaction value
- 21:32 – In doing a stock transaction, you are giving up some of your company’s equity to someone else—you are essentially bringing them on as a business partner, so make sure you are aligned for the future
- 22:10 – Dave says he went through a handful of partners and all partnerships, and they’ve all gone really well for him
- 23:34 – John says only 4% of all businesses started in the US get to a $1 million dollars in revenue, but over 90% of all businesses acquired are still in business 5 years later
- 24:33 – In 2004 and 2005, John did 4 transactions in 11 months, all were relatively small and the bank financed 100% of all 4 deals
- 25:09 – The acquisitions were 100% of the revenue and now they are doing more than $10 million in revenue
- 26:31 – The first things John recommends in seeking an acquisition is lunch with the owner to see if their personalities align—if they don’t he walks away
- 27:26 – Some people think they can fall in love with the numbers first and then make the culture fit but it does not work
- 29:33 – The biggest mistake is thinking the owner of an acquired company is worth keeping
- 30:00 – If someone has been an entrepreneur for less than 3 years, they might make a good employee but if they have been an entrepreneur for more than 5 years, they won’t make a good employee
- 32:05 – Dave got contracted for a year and he only made it for 9 months, he thinks he might have got in the way of the new company leadership
- 32:54 – In discussions, John makes the owner or founder aware they will not be around for more than 3 months, and their role will be helping the buyer with the transition
- 33:32 – John has a friend who sold his company to a bigger conglomerate and he was gone on day 1
- 38:17 – The top source for referrals for business valuation work is other CPA firms
- 38:50 – John is finishing his first year of a 3-year term on the Global Board of EO, he is the liaison to the Asia Pacific this year, on the forum committee, the chapter development committee, and is the incoming liaison to Canada
- 39:30 – John also used to work in Vistage, but now he doesn’t—the peerness wasn’t there
- 40:54 – John is a master of leveraging his time and energy
- 41:11 – He has an assistant and other team members executing his tasks and he prioritizes the things that are important to him – his family, EO and business and if does not fit into those categories it will be hard for him to say YES to it
- 42:39 – John’s assistant helps him with tasks outside of Accounting like planning vacations, things related to EO, and general research
- 43:14 – John’s wife joked with him about having an assistant, but she understood it when he started having more time for their children
- 44:09 – John has had a lot of success in finding and hiring people from liberal arts colleges
- 45:18 – Connect with John at johnbly@lbahs.com
- 45:53 – John thinks there is a lot of discussion to be had in selling a business and using it as a growth strategy
- 46:28 – Dave closes the episode and encourages you to visit his website
3 Key Points:
- A good assistant is worth their weight in gold. If you don’t have one, find one, and if you have one, hold on to them for dear life.
- Growth through acquisition is a very real business strategy and one that it always worth at least some of your time and energy.
- Numbers alone don’t justify an acquisition—you need to make sure you fit with the existing culture of the company. If it’s not a good fit, walk away.
Resources Mentioned:
- Entrepreneur's Organization – The EO Network
- LBA Haynes Strand – John’s core company
- Cracking the Code: An Entrepreneur’s Guide to Growing Your Business thru Mergers and Acquisitions for Pennies on the Dollar – John’s book