It’s Not Just the Money: The Importance of Winning a Seller’s Trust When Buying a Business
In 2017, Polo del Barrio purchased his first company, SABSS – a commercial janitorial business in San Antonio. In 2021, he purchased his second company – a scent dispenser business for offices and commercial settings. In both cases, del Barrio acquired two profitable businesses without having the highest offer.
SABSS (San Antonio Building Services and Supply) was on the market because the founder was looking to retire. The company was almost 20 years old and the previous owner had staff that he wanted to make sure was taken care of. Higher offers came in from larger companies. However, their goal was to absorb the business, which would come at the expense of the employees and the relationships that had been cultivated.
Relationships are a Key Element of Successful Business Acquisitions
Polo del Barrio had no interest in cannibalizing the company - in fact, he was looking for a business that he could grow. In fact, he had been interested in an online pharmacy delivery company, but what gave him pause (and was ultimately the reason that he passed on the opportunity) was that it was a family business. Aside from the seller, the only other employees were the seller's children. If he bought the business, he would lose all the employees -- which would make it essentially an asset sale at the price of an existing business.
"It's just about nurturing relationships, a lot of the time, and people forget that." del Barrio says. "Often, people want to break down business to something more quantifiable with numbers, but it really is often down to the people. It is the most important element. You have to trust your people and have their back - you take care of me, and I take care of you. I need them to keep me informed of any issues that I'm not aware of. And if you hire the right people, they take care of your business. You will always have success."
Veteran employees can train the new owner, keep the business operating smoothly during the transition and maintain goodwill within the community. But there's another reason that it's important to have great employees on board. According to the Small Business Association, a new hire can cost an employer 1.25 to 1.4 times their salary.
Be Respectful of the Seller's After-Sale Concerns
After 5 years of owning SABSS, del Barrio, always on the lookout for another opportunity, found an intriguing opportunity on BizBuySell in the form of an undervalued commercial scent dispensary company.
The business was being listed by a seller who had hoped to pass the company down. When it was clear that the business was not going to stay in the family, the seller had two objectives in mind when it came to listing his business: To save the existing employees and protect his professional reputation.
del Barrio was not the only party exercising due diligence. The initial business owner who sold him the scent company declined several offers because he was concerned about fraud being committed against his company. His decision to sell the company to del Barrio was because he felt he could trust him.
Cultivating a strong relationship with the previous owner helped del Barrio stay organized with his businesses even when others weren't. Customers would pay to the old account, and the previous business owner would call del Barrio and let him know they had a check for him. Conversely, del Barrio would be paid by late clients for a service he did not provide, but had been provided by the previous owner, and del Barrio would need to send the payment to the seller.
For this reason, del Barrio recommends keeping your accounts open even after you have sold a business. Customers can be slow to update their records, and often continue to pay into the same account even when a company has changed hands.
When a seller is particularly private about their financials, del Barrio uses a tactic in which he asks the seller if the business can be valued by a third party, as he will be unable to secure an SBA loan without the valuation. If a seller readily agrees to the valuation, it indicates that there isn't anything the seller is trying to hide.
The buyer and sellers had aligned goals and open communication, which benefited all players in the business– the owners, the employees and the customers, which has allowed both businesses to thrive under new ownership.