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How to … Use the Deal Wheel

If you’re just starting out on your business buying journey, you face a steep learning curve. Even if you’ve been going for a while and have some acquisitions under your belt chances are you’re still learning.

If you’re just starting out on your business buying journey, you face a steep learning curve. Even if you’ve been going for a while and have some acquisitions under your belt chances are you’re still learning. Learning by experience as you go is a powerful way to build your knowledge and skills. But if you want to take a more proactive approach, where do you start? How do you know what you should focus on first?

The Deal Wheel allows you to peg your current levels of knowledge, skills and ability in eight key areas related to business acquisitions. There’s no right or wrong, or pass or fail; this will give you a starting position and, as time goes on, you’ll be able to complete the exercise again and see how far you’ve come.

The Deal Wheel is a circle – obviously – with eight spokes leading out from a hub in the centre to the outer edge. The spokes represent: 

  • Strategy
  • Deal flow
  • Initial contact
  • Understanding value
  • Negotiating and closing the deal
  • Taking ownership
  • Integration
  • Optimising value

Start with the central hub

In the circle at the centre of the wheel, write the number that you consider would be a very satisfactory outcome for three to five years of business acquisitions. Remember what Rob Goddard said about the magic number! If you have to think about that number or aren’t sure what to write down, that tells you that you don’t yet have clarity of purpose around the outcome that you want to achieve. You are far more likely to achieve that outcome when you get that clarity of purpose affirmed.

While you need to have that figure in your head, accept that the figure will change. In June 2020, I had a particular figure in mind for the current project I’m undertaking –but the pandemic multiplied that figure by four, because of the increase in opportunity.

Next, work on the spokes

Imagine the spokes are numbered one to ten, with one near the centre. You will next score yourself on each of the eight key business acquisitions areas. If you are good at something, you will have a high score which will be at or near the outside edge. If you are less good at something, then your score will be lower and nearer the middle.

Strategy: If you don’t have a strategy then your mark is going to be zero. If your strategy is absolutely crystal clear, then it’s a ten. For most people it’ll be somewhere between the two.

Deal flow: in terms of deal flow, how are you doing? Think in terms of data gathered, letters sent, responses gained.

Initial contact: how confident are you with that initial conversation, where you build rapport and establish your credibility? Once you’ve had, say, half a dozen conversations with sellers you’re going to be pretty slick, but where are you now?

Understanding value: how good are you at looking at a business in your sector and saying, ‘This is what I’d pay for it, not a penny more. That’s what it’s worth to me.’

Negotiating and closing the deal: which includes saying ‘no’, solving problems and actually identifying when the negotiation phase is over and the close begins. How do you rate yourself?

Taking ownership: not just the legal process, but taking on the staff and getting behind the scenes of the business. (This is only going to apply to those who have completed a deal.)

Integration: integration – putting two or more businesses together in a group, following acquisition – is tough. Where are you on this?

Optimising value: those who’ve sold a business before might have some experience of taking businesses and making them as valuable as possible so when you sell them, you get the biggest payday possible.

Now join up the marks

Start at ‘strategy’ and join up the marks on the spokes – you’ll end up with an uneven wheel. What is stopping you from achieving your financial goal, the figure in the middle, is not being an 8 9, or 10 out of 10 on the spokes in the wheel. Those areas where your mark is closer to the centre are your areas of development.

Top 10 Tips Planning your learning

  1. If you don’t know what you should focus on, even deliberate learning is scattergun at best. While that’s better than no learning, you might get more benefit from taking a strategic approach. The deal wheel helps you to know where to focus your attention.
  2. You’ll need to work out what order to learn in based not only on current levels of knowledge but also on how important something is (to you) and how soon you need to be able to do it. Say, for example, you scored yourself a three on deal flow and a four on initial contact, you might expect to focus on deal flow first. However, if you have a couple of phone calls lined up next week, you probably need to focus on initial contact and try to get that four up to at least a five!
  3. Learning by doing is great, but it might take a while to become proficient at something if you have to wait for opportunities to present themselves. Not deliberately improving through other means could hold you back.
  4. It’s natural to avoid things that we find difficult, but your business journey will be more successful if you dive in and try new things.
  5. There’s a ton of information available on the Internet, whether that’s blogs and podcasts or social media groups that share tips and knowledge. Aim to find some relevant sources, but be discerning. (The Dealmaker’s Academy is a great start – see page 12 for details.)
  6. Amazon have audio books as well as physical and e-books – if you travel a lot, they might be a good way of learning on the go. (And there’s probably a book for every niche interest imaginable!)
  7. If you need to get up to speed on something fast, you might look for an expert in that particular field – maybe someone in your network can help. A couple of hours chatting to someone with first-hand knowledge can make a huge difference.
  8. You will always be learning when you are involved in business acquisitions. There’s always something new or a different way to approach something. Try to keep an open mind and be alert to new ways of doing things.
  9. If you complete the deal wheel exercise every few months, you should see the numbers improving and that circle – when you join all the ratings up – growing bigger.
  10. If you are really not good at something and it’s holding you back, why don’t you get someone else to do it for you? That way, you’re an instant ten out of ten!

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