How I decide which businesses to buy
Originally sent exclusively to The Letter subscribers on January 6th. Want to be the first to get my personal newsletter in your inbox every Monday at 7am? Subscribe for free here.
Finally, we can get some routine back.
The vortex of Twixmas has left us behind; at last, there’s no more rummaging around boxes of Celebrations and Miniature Heroes for the ones you like—they’ve all gone with the guests that revolved in and out like a busy bus station.
With the exit of “indulgence” leaving us for another year, who’s that knocking on the door?
Mr and Mrs Motivation are here to say hello.
Even the laziest in society find the energy to get more done with new lists and “New Year, New Me” fantasies for week one of the year.
I say “fantasies” because that’s exactly what it is for most people. The trundle back to normality by the end of January.
Goals are great, and vision is brilliant for getting more.
Enthusiasm gets you going, but to keep the electricity on, you need good habits.
Good habits are the key to lasting success, while bad habits lead to permanent discord with your situation.
In life, you either run the day, or the day runs you.
It’s good habits that allow the world to serve you good fortune and make your goals and visions a reality.
The way I see it, you have a couple of choices in life: the slight pain of enforcing good habits into your routine or the gigantic pain of regret later in life.
I have learned that to have more or be more, you will have to spend a few years like most people won’t, so you can live the rest of your life like most people can only dream.
The reality is that most folk spend 40 hours a week working or being productive before they nestle into the comfort of Netflix and chill or repeat the same cycle, expecting different results.
Rarely do they take a breather to explore through good thinking if there’s another way.
Those who dedicate just 10 more hours a week to productive activities—like learning a new skill, working a bit harder, or growing their lot—find they get a 10x return on the time invested in positive productivity, if applied correctly.
I have also learned that those who understand that giving is the start of receiving begin to receive very well.
It’s akin to investing and holding: over time, you win. It’s the magic of compound interest, but applied to yourself.
Give up a little fun time to enhance your skills—the dividends can be immense, as any successful entrepreneur will tell you.
Entrepreneurs comfortably learn that they must eat last, often paying the bank, the government, suppliers, and their staff before themselves.
One day, that turns. When it does, they eat very well.
I focus on activities that grow our company over merely operating it, unless something needs my direct assistance due to poor performance.
This weekend, I dedicated my time to my future self and the future prosperity of our group and the teams we employ.
I realise that my efforts to grow also create opportunities and prospects for our people.
Sometimes, Monday to Friday just doesn’t cut it if you need to get more from life; sometimes, you need to work on weekends and evenings too to get ahead.
I chose to spend this weekend on the road looking at companies to buy rather than engaging in Netflix and chill, fun, or family time (last weekend, I took us to stay in a treehouse—before anyone criticises me for my ambition regarding empire-building).
It was a weekend where I met two business owners with two very different businesses that would fit neatly into our existing empire.
They fell into two categories:
A fair business for a great price.
A great business for a fair price.
I am busy—busier than ever—and I am now more attracted to businesses that fall into "buying a great business for a fair price" rather than pursuing seemingly “great deals at great prices.”
My younger self always bought for next to nothing and worked tirelessly to repair them (mainly because I had next to nothing).
My first deals were fixer-uppers, which takes time—time I have less of now.
Every time I have bought something cheaply, believing it to be a great opportunity, it was always missing two vital ingredients: the entrepreneur and the manager. (Remember, my formula for success is E + M = Success).
The cold, hard truth of entrepreneurship is that it’s exhausting to turn opportunities into "commercially profitable enterprises that operate without you," which to me clearly defines what a great business is, without either an E or an M.
As my greys grow and sprout like weeds in unwanted places, I look at business acquisition with a tad more wisdom as each season passes.
When I consider buying now, I think in these ideals and in this order:
Does it vertically integrate into our existing empire?
Do I feel good about the sellers and their honour to be good people to work with? (This is so important.)
Is it a good business that makes good profits?
Does it have good management, or can we easily address this with our existing team?
Can we instantly add value, or does it already add value to what we have?
Can it generate cash flow after covering its commitments (servicing debt to buy the business)?
Does it have protective moats (such as IP, contracts, locations, awards, or planning permission)?
Is it over ten years old?
Is it location-based? (I actually prefer this—like a day nursery or hotel.)
Can it save our existing group money?
Does it have repeat customers?
Are we concerned about customer concentration? For instance, does 10% of revenue come from one source? If so, can we quickly mitigate this?
Will it have exit value if we want to sell?
Is there a freehold property we could acquire? (This is preferable but not essential.)
I liked both of the businesses I viewed this weekend.
I reflected on my visits as I travelled around the country. One deal would require my involvement and drain my team's brainpower, while the other would fit in like the last piece of a jigsaw puzzle, needing little of my time.
So, I made a fair offer on the spot for the great business; the other I decided to sleep on.
I was confident I could secure bank finance to assist with the great business, while the other could prove to be a time vampire.
A reputable company with solid accounts, a robust cash balance, and a consistent record of substantial corporation tax payments tells me all I need to know.
I have learned so much about Mergers and Acquisitions, and the best part about looking at companies for sale is the learning experience.
You gain the best insights, tips, and tricks.
Each time I evaluate a potential acquisition, I come away with cost-saving ideas, improved efficiencies, and a new network of contacts. I love it.
The reason for my swift offer was that I liked the business; the viewing was to confirm my impressions after reviewing the financials and meeting the owners.
When something good lands in your lap and you want to pursue a deal, remember this golden rule of M&A: "Time kills deals."
I wanted to make a deal, and so did they, so I got to work. I invested.
At the beginning of any of my seminars, I ask the room a question: What do all successful people do?
Participants respond with answers like reading, learning, starting, networking, selling, marketing, etc.
I distil it down to one word: they INVEST.
I invested this weekend into growing our company’s profits by £500,000 and more.
I devoted my time to this, listening to eight podcasts and an audiobook during the drive.
For me, driving time is learning time.
We all have the same 24 hours in a day. What do you do with yours?
Lastly, I have been attempting to lose weight this past year; it’s been tough. I’ve had a lot on my plate. (I love that joke!)
To your continued success,
James
P.S. Buying Business is on the 25th March 2025 and I’d love to see you there. Find out more here.