What is a Dealmaker?

If you are a dealmaker, you find, fund, fix and flip businesses for profit. You find businesses to buy, often at below market value, and fund the purchase without using your own money.

If you are a dealmaker, you find, fund, fix and flip businesses for profit.

You find businesses to buy, often at below market value, and fund the purchase without using your own money.

You fix the business by making some very, very simple changes. You don’t necessarily have to implement those changes yourself, often your management team will handle them for you.

You generate cash from the business for yourself every month. In other words, you are paid a monthly consultant’s fee by each of the businesses you own.

Your ultimate goal is to flip, or sell, the business for a big payday.

A dealmaker is not a business operator, which is what I call most business owners. Business operators think they own the business when really the business owns them. A dealmaker, by comparison, is an investor in a business.

Most business operators have a big payday perhaps once in their lives when they finally exit their business. Dealmakers, by comparison, can have many big paydays thanks to the fact they own a portfolio of companies and can sell any of them at any time.

The traits of a successful dealmaker

You might think that you must be brash, aggressive and underhand like Gordon Gecko from Wall Street or The Wolf of Wall Street himself, Jordan Belfort. That’s far from reality.

One of the most important traits of a dealmaker is the ability to get along with people. Most successful dealmakers are:

  • Honest. Being a successful dealmaker isn’t about screwing people over on deals. It’s about buying or selling a business in a way that means both parties get what they want (or as near to it as possible).
  • Hard-working and focused. You will need to work in a very focused way on your business. In the beginning, you might put in a 35-hour week as you ensure that costs are cut and improvements are made. The amount you work on the business will decrease as things improve.

You will also need to devote time to finding and funding more businesses to fix and flip.

  • Respectful. A great dealmaker doesn’t patronise or insult sellers.

You might think, ‘Oh come on, if the deal’s right, they’ll snap it up regardless of what I’m like.’ That’s not the case. There’s so much emotion involved when people sell a business. After all, many owners have grown the business from an idea into something worthwhile. They want to know that you’re going to look after the companies they have created from scratch.

That means you’ve got to tell them what a great job they’ve done and how you can take the business to the next level.

If you’re abrasive or patronising, prospective sellers won’t want to deal with you.

  • Decisive. Dealmakers don’t spend months deliberating over a deal. When people decide to sell a business, they want to move fast, so you need to act fast too.

You need to be able to move quickly through the purchase process because if you drag it out, the deal can fall over. When negotiations drag on endlessly, both parties begin to get exhausted, frustrated and irritated by the process. They start to suffer from ‘deal fatigue’ in which they lose hope of ever reaching an agreement. At that point, there’s a risk the seller will consider other alternatives such as putting a manager in place rather than selling it.

  • Responsible. If you’re buying businesses that have staff (and you will be because there’s no point buying a company without employees unless you’re buying its intellectual property (IP) assets), you need to be aware that people’s livelihoods are at stake.

You must respect that they have families and financial obligations and endeavour to treat them fairly.

Of course, you may need to cut overheads by making some of those employees redundant. The right way to do that is to use the services of an experienced HR person who understands what you’re trying to do.

You need someone to whom you can say, ‘I need to reduce the headcount; we need to get rid of X number of people, and we need to do it quickly and painlessly. Could you do all the paperwork? I don’t want any issues. I want this done professionally, and I don’t want anyone to feel they’ve been short-changed.’

I made seventy people redundant from a company I bought and, with the help of my HR person, accomplished it almost without any issues. The one problem we had was with someone who’d been to a job interview and been offered a job with that company. We had to pay that man for a job he hadn’t even started.

  • Capable of delegating. As you buy more companies, you’ll have to keep your eye on the big picture. You’ll realise that you need to allow other people to take care of the day-to-day running of the businesses in your growing portfolio.

So you see, being a dealmaker is different to being a business operator. You aren’t creating a job for yourself, you are investing in a business and working towards the big pay day when you sell it.

And then you’ll make more deals!

What made me choose nurseries?

As you know, I’m a dealmaker – I practise what I preach – and my current business is in the nursery sector. Why did I choose that sector?

My daughter was about to be of nursery age and I couldn’t believe the cost of childcare in South West London. It’s £2,000 a month, £24,000 a year of post-tax money on childcare. We thought maybe she should just go into the nursery in the mornings at first, to settle in, but you still have to pay for a full-time place, and there’s a waiting list. You’ve got 100 children, £2,000 a month, that’s £200,000, £2.4 million revenue a year.

Oh, my goodness, I thought, this is a business! It had never even occurred to me before. And then I started Googling. I found out about a big group that was sold in around 2016 for about £185 million, and then I got a couple of people who were part of that exit to come and work for me. That didn’t work out the way I’d hoped, but it was an interesting education to see behind the scenes of the business that they had just been part of. So that was it, really.

To be fair, I didn’t really do very much; I just had the clarity and the focus and got out of bed saying, ‘Right, I’m in the childcare business, let’s go and buy some nurseries.’

The first two acquisitions were in Colchester and then the next three were up in Preston, Leyland and Blackburn. It was a case of going with the flow, as we hadn’t planned to build a business in the North. We’re refining the strategy. We’ve got some nurseries in the South and we’re going to be disposing of those, but we’re going to be selling them for way more than we bought them for. We’ve got a few smaller ones that we’re going to be selling on as well, just to rationalise the portfolio, because when you get to a certain size of site it’s way more profitable than the smaller sites.

What’s the worst that can happen?

People often worry about this, but the worst that can happen is you sell the business to someone else. You very rarely close a business down. You might not sell it for very much money or you might just get back what you paid for it. If you’re fortunate, you make a decent profit on it. But that’s the worst that can happen.

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