Thread by @joshuamschultz

Most small businesses are family affairs. Even if its just the owner with no other family. There are emotions, family problems, ego-tied actions, and more.

These businesses are great businesses... but be ready. Here are few thoughts to help worker/acquirers in these businesses

1. 70%+ of owner net worth is the business itself.

They feel a lost customer or sale, a mispriced item, a wrong margin, a bad review, or any negative hit as a threat to their financial security and future well-being.

The thought "what if this continues" is always there

2. Owners see the success of the business as their personal success. Some take it to identity.

Realize, when you are talking about the business, you are talking about a piece of themselves, not just an asset they own.

Its more like discussing their heart than their car.

3. The bulk of an owner's income is paid from distributions, not salary. This basically means "what's leftover".

So when they go crazy over a lost sale due to an employee not caring, its because they just "had that employee take money from their paycheck" from their view.

4. Related, every major expense or investment means a lowe paycheck.

It doesn't mean they don't want to spend the money, but they don't want to do it for no reason.

5. Their business is where they are in charge and undisputed.

Some have had fights at home over the years, and work was the one place they could come and exercise unquestioned authority.

So challenges to authority with owners don't usually go well.

Why am I sharing this?

a. To help give better perspective to employees. Walk in their shoes.

b. To help acquirers and searchers with the unexplainable behavior they are about to encounter

Here are some tips to make this go smoother...

1. When talking about the business, discuss issues as areas of opportunity, or "things that they laid the groundwork on, and you'd like to build on".

Remember, this is an extension of themselves, not a disconnected asset. How would you talk to your friend about a problem?

2. When reviewing add-backs, explain that you need to model what the business will look like after the acquisition, should it go through.

Ive seen people start asking for personal expenses and the owners feel like their integrity is being questioned. They get defensive.

3. Talk about the acquisition like its a time for the legacy to continue.

Avoid overexcitement for changing everything. Reality is, you will prob see the owner did things for a reason, and they weren't far off from ideal.

4. Even though they are selling, they don't want to see the business broken, or changed, they want to see it continue growing.

Remember, this is part of them, and they are most likely 50+... they don't want to change.

5. During negotiations, there will be outbursts and angry moments.

Almost every time, this has nothing to do with you or the process.

Something was triggered. Could be something a wife or husband always says, employee experience, or a personal issue.

Give them space

5b. Realize a lot of them are not just struggling with the acquisition.

They are questioning:

What will they do?
Do they have enough $ to survive?
Who am I?
Will my family still see me as successful? Will others?
How will I think of myself?
Will I still be successful?

In summary: you are interested in buying a business.

They started it.
They battled for years.
They provide for their family with it.

So while you see opportunity, realize its part of them, its enough for them. Be respectful, humble and appreciative.

Don't think of owners as "in your way" when it comes to acquiring a small business.

Think of them as providing shoulders you can stand on.

Consider them as a father or grandfather, not an opposing side of legal case.

Just sharing the very real and emotional side to SMB M&A.