We've since made two bolt-on purchases to that firm: a 3D printing company, and a plastics injection moulding business in Christchurch. And at the end of October we bought Masport Foundry, which employs almost a hundred staff and pours several thousands of tonnes of cast iron each year, primarily for export to sectors like automotive, mining and construction.
What have been the main challenges for you in buying these businesses?
The biggest problem is a lack of time. You go into the process and even if you have 90 days, that time evaporates very quickly because of all the things you have to check. Obviously there are different complexities in different-sized businesses, but it can be a short time to do all of your due diligence.
What have you found helpful to overcome that lack of time?
You've got to have the ability to do all your homework and educate yourself, so when you are told things by the vendor you can relate to what they're telling you and how that information fits into the process. Because another thing you must do is check everything you're told; you can't just take everything at face value.
What other resources or sources of support have you found helpful when buying a business?
It's crucial to use professionals to assist in the process. Firstly, buying a business is not something you do every day. We've purchased five businesses in 24 months, but there are still things we need professional help with, even down to things like understanding the technical requirements in a business. It's like if you're buying a lunch bar; you need to understand what's required around the health regimes, your suppliers, your council requirements and all of those things before you go into a business like that.
Which professionals or channels of advice have you found most useful?
That's an eternal problem and a key piece of advice I'd have is don't be afraid to change professional advisors. I see some people in business who have had the same lawyer or accountant for 20 years, but I don't believe that's right and correct, because not all professionals are good at all things.
I think the key to finding a good professional is they need to understand the difference between what is a commercial decision - which should be the business owner's domain, based on their entrepreneurialism - and the technical advice they can offer on the particular subject. But in my opinion, too many paid professionals think they know all about the commercial side of it things, when they should just be advising on the technical.
Would you have any other advice for people considering buying a business?
I'd say look for businesses with proven systems. The danger when you buy a business is the culture of the business will change when the current owner leaves; if you're going to buy a smaller business, the owner operator of that business will have their own culture and if they leave you won't be able to replicate that. So unless the business is well systemised you won't be able to achieve the same results, because all of that knowledge is in their head. So I'd recommend looking at operations that have clearly set out systems and schedules on how to do what's required in the company.
Coming up in Your Business: How do you figure out what to pay yourself as the owner of a business? What are some of the different formula or guidelines people use and why? If you've got a story to share, drop me a note: nzhsmallbusiness@gmail.com
For more on NZ business ambitions go to www.businessambition.co.nz
