Welcome to the Before You Buy or Sell, a business podcast where we help buyers and sellers learn more about the acquisition process, discuss recent transactions, and stay up to date on the latest news in the market. In this episode, we dive into the challenges of acquiring a business and explore a recent deal that unfortunately did not close. Join me, Jared Johnson, as we unpack the insights and lessons learned from this experience.
Background and Motivation
In this episode, I am joined by Tommy Speigner, an aspiring entrepreneur with a background in IT and a passion for art. Tommy shares his journey from growing up in Florida to moving to Atlanta and eventually settling in Las Vegas. Along the way, he discovered his interest in buying a business rather than starting one from scratch. Tommy’s motivation stems from his desire to replace his current income and his fascination with the art framing industry.
The Business Opportunity
Tommy stumbled upon an established art framing business in Las Vegas that caught his attention. The business had a solid customer base and promising initial numbers. Tommy’s personal connection to framed art made it an appealing opportunity for him. He envisioned expanding the business by offering delivery and installation services, as well as exploring digital art and collaborating with local artists. The potential for growth and the alignment with his interests made this business an attractive prospect.
The Negotiation Process
With the help of his business broker, Lindsay Devino, Tommy navigated the negotiation process. They analyzed the financials, considered the market value, and settled on a purchase price of $602,000. However, during the due diligence phase, Tommy discovered some significant challenges. The labor costs were higher than anticipated, and the lease agreement had unexpected increases in expenses. These findings had a substantial impact on the bottom line and raised concerns about the viability of the deal.
Adjusting the Offer
Armed with the new information, Tommy reevaluated the purchase price. He adjusted the multiplier and proposed a revised offer of $535,000. Unfortunately, the seller was unwilling to accept the lower offer, insisting on a price closer to the original listing price of $600,000. Despite Tommy’s willingness to compromise and meet halfway, the seller remained firm in their position. Ultimately, the deal fell through, and Tommy had to cancel the transaction.
Lessons Learned and Future Outlook
Reflecting on the experience, Tommy emphasizes the importance of patience and thorough due diligence. He acknowledges that buying a business is an emotional roller coaster, requiring resilience and adaptability. Tommy remains optimistic about future opportunities and continues to explore potential acquisitions. He plans to take the time to find the right business and build a network of mentors and advisors to guide him through the process.
Challenges of Buying a Business
Tommy’s journey highlights the challenges and uncertainties involved in acquiring a business. It underscores the need for comprehensive due diligence and the importance of understanding the financials and market dynamics. The negotiation process can be complex, requiring flexibility and open communication between the buyer and seller. The experience also sheds light on the need for increased regulation and standardization in the business acquisition industry to protect the interests of buyers and sellers alike.
Conclusion
While Tommy’s deal did not reach a successful conclusion, his experience serves as a valuable learning opportunity for aspiring entrepreneurs. It reinforces the need for patience, thorough research, and a strong support network. Acquiring a business can be a rewarding endeavor, but it requires careful consideration and a deep understanding of the industry and market dynamics. By leveraging the lessons learned from this experience, Tommy remains determined to find the right business opportunity and continue his entrepreneurial journey.
As the business acquisition landscape evolves, it is crucial for buyers and sellers to stay informed and seek guidance from experienced professionals. The Before You Buy or Sell podcast aims to provide valuable insights and resources to support individuals in their pursuit of successful business acquisitions. Stay tuned for more episodes and join us as we explore the ever-changing world of buying and selling businesses.
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If you have questions for Jared, visit JaredWJohnson.com or connect with Jared on LinkedIn.
DISCLAIMER: The views and opinions expressed in this program are my own and/or those of my guests. They do not necessarily reflect the views or positions of my employer.