What the Seller isn't telling you with Richard Parker | E118

Knowing what to ask when buying a business.

In this episode of Financial Planning for Canadian Business Owners, Jason talks to Richard Parker, owner of the Diomo Corporation. They delve into the critical aspects of buying and selling businesses, focusing on the complexities around what sellers might not disclose and how buyers can navigate these challenges for a successful acquisition. The conversation offers a wealth of insights, drawing from Parker's extensive experience in helping individuals acquire businesses in the lower market.

Episode Highlights:

  • 00:07: Jason Pereira introduces the episode, setting the stage for an in-depth discussion on the intricacies of selling and buying businesses, with insights from award-winning financial planner and entrepreneur Jason Pereira and Richard Parker.

  • 00:58: The podcast shifts into gear as Richard Parker is introduced, elucidating his role in aiding individuals to acquire businesses, his focus on the lower market, and the blend of education and advisory services he offers, emphasizing the importance of understanding what sellers might not disclose.

  • 02:11: Richard embarks on a discussion about the critical aspects buyers must consider, including the significance of understanding the future of a business from the seller's perspective, the potential for customer concentration issues, and the overarching theme of whether stability or growth presents a more valuable proposition for the buyer.

  • 04:34: The conversation deepens with an exploration of the subtleties and nuances that sellers might not disclose, how familiarity can lead to oversight, and the critical nature of asking the right questions as a buyer to unveil these hidden facets.

  • 06:49: Delving into more specific examples, Richard highlights issues like customer concentration and supplier relationships as key areas of concern that are often glossed over by sellers, reiterating the need for buyers to conduct thorough investigations beyond the surface-level information.

  • 10:06: Important aspects like key employees and their potential impact on the business after acquisition are discussed. Richard sheds light on the necessity of identifying truly key employees and devising strategies to retain them post-acquisition.

  • 12:22: The dialogue transitions to the operational challenges and pitfalls that might not be disclosed by sellers, emphasizing the importance of aligning the business's needs with the buyer's skill set and avoiding the trap of falling in love with the product rather than focusing on the profit.

  • 15:48: Richard and Jason discuss the negotiation phase, debunking myths about deal-making and stressing the importance of approaching negotiations with a balanced perspective, focused on constructive outcomes rather than winning every point.

  • 18:01: The conversation culminates in a discussion about realistic expectations regarding deal terms, the imperfection of businesses, and the potential for sellers to adjust their expectations based on real market feedback.

Key Points:

  • Understanding the future of the business and uncovering hidden challenges are paramount for buyers.

  • Key employees and supplier relationships significantly influence the stability of the acquired business.

  • Effective negotiation requires a balance between strategic firmness and flexibility, focusing on establishing a mutual understanding rather than winning outright.

Tweetable Quotes

  • "Growth is very sexy, but stability provides value." - Richard Parker

  • "Fall in love with the profit, not the product." - Richard Parker

  • "Deal-making is not about winning every point but achieving a balanced outcome that benefits the buyer while keeping the seller reasonably happy." - Jason Pereira

Resources Mentioned:

FPCBOJason PereiraFinancial Planning