Ira Jackson Jr. thought he had done all his due diligence when he bought Perfect Image, an Atlanta printing company, back in 1991, but he was in for a few surprises. Jackson, 37, discovered Perfect Image was having problems only after he got in the door. "There was a lot that due diligence didn't reveal," he says. The company was facing slumping sales, and employee morale was way down.
Jackson did know going in that the previous owner had lost his largest customer right before the purchase was completed. Even after he found out, he underestimated the impact it would have on the company. "I didn't know how much [that customer] accounted for the company's success," he says.
Jackson suddenly found himself with a company in need of a drastic turnaround. The virtue of the company, in his eyes, was the quality of its printing service. To boost sales, he pushed that quality aggressively and went after Fortune 500 companies as well as companies with in-house print purchasing divisions. "We wanted to focus on doing business with accounts that brought in a significant amount of printing over the course of the year," Jackson says.
To do that, Jackson had to make the marketing push the previous owner wasn't making. Kramer's suggestion for any company making the same move is to get current, potential and former customers to sample your new offering under new management so you can show them how the business has improved.
In addition to marketing, Jackson also had to trim fat from the business. He streamlined production, updated machinery and eliminated brokers and third parties. He also got employees involved in the turnaround, attacking a growing morale problem the previous owner had left him with. "We spent a lot of time talking internally-sharing ideas about what we wanted to be 'when we grew up,'" remembers Jackson. What Perfect Image has become is a strong company with more than $2 million in sales annually.
101 BEFORE YOU BUY SOMETHING OLD, TRY LEARNING SOMETHING NEW.
Use this mini-checklist from author Marc Kramer to determine what must be done before you make someone else's business your own:
- Check out the market. Is the business in a growing market or a declining one? Trade publications and associations are essential resources.
- Do a background check. Are there lawsuits against the company? Liens? Have the current owners been paying their taxes? Enlist a lawyer or private investigator to help with your research.
- Examine the money situation. Thoroughly check a company's financial statements, from accounts payable and receivable to tax returns and sales and operating costs. Your accountant can help you.
- Get mentally prepared. Are you ready for the emotional, physical and financial demands of buying this business? "If you're going to buy a business, you have to have a strong stomach for it," warns Kramer.
- Pick a business you can get excited about. Because you'll be spending every waking hour making this business succeed, it's essential to have a fiery passion for it. Says Kramer, "When you buy this business, it's going to be your life-so you'd better get used to it."