The business press would have us believe that buying a business and owning a small company is fraught with peril. Although there is risk in business ownership, the risk need not be excessive and certainly can be managed. Risk management starts with working from a good set of acquisition criteria. If you set up a good team of competent advisors, investigate the company carefully, prepare detailed cash flow and financial projections, and design a transaction insuring the post-sale support of the seller, the risk factors should be dramatically reduced. Another common misperception promoted by the press has been that entrepreneurs are risk takers. That is rarely the case. Although what they do may look risky, upon future investigation you’ll find great attention has been paid to risk management…which is why there are so many good small companies in the world. Look around. There are a lot more small companies than big ones, and often the owners make a lot more money than the top management of the big companies.
After observing many successful purchases, in fact, knock on wood, none of our transactions have been failures. We have seen that the skills and knowledge of senior corporate managers are very applicable to operating and growing a small company. Often, it’s like turbo-charging the business. The most consistent challenge we hear from our clients who have bought a company is not whether they are going to survive, but rather “Wow! How do I fund this growth?”