Letters of Intent

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Issue #6 - Making Changes in a Newly-Acquired Business
lettersofintent.substack.com

Issue #6 - Making Changes in a Newly-Acquired Business

Letters of Intent
Jun 28, 2022
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Issue #6 - Making Changes in a Newly-Acquired Business
lettersofintent.substack.com

The collection of Tweets below provides interesting insights into one of the common questions among the EtA (entrepreneurship through acquisition) community: How quickly should changes be made in a newly-acquired business?

The consensus is typically that during the first 6-12 months of ownership, the operator should be in "learning mode" and tread very lightly with any changes. After all, the acquired company was healthy at the time of purchase (usually), so why rock the boat before a better understanding of the business has been developed and relationships built among the staff?

Rich Jordan, an acquirer of successful home services companies with a background in the Marine Corps, takes a different approach. He's not shy about making aggressive changes immediately upon closing to realign the business and culture and drive near-term performance improvements. In the series of tweets below, he outlines his approach. Even after reading it, I'm not convinced that there are many first time CEOs/owners who have the skills or will to risk substantial value erosion through misguided or misinformed judgments based on limited information, all gathered very quickly. Clearly though, Rich has a special touch, so it absolutely can be done.

Zooming out, can a generalized approach to rapid transitions in non-distressed companies be developed and taught such that the rewards outweigh the risks and the amount of experience required to successfully execute the game plan is reduced to 'mere mortal' levels? Given the elements Rich outlines below about his process, I think it can. I'm not totally certain about that, but I love finding aspects of SMB operations where an advance in general knowledge might be possible. One of the goals of this newsletter and our investment firm is to build a community that can explore these challenges together and learn, share, and grow in the process.

With that, enjoy the tweets...

It begins with the conventional wisdom...

Twitter avatar for @chrisxmunn
Chris Munn @chrisxmunn
Come into a recently bought business like a wrecking ball and you will be the one wrecked.
12:26 AM ∙ Jan 19, 2023

...and then Rich jumps in to share his alternative viewpoint...

Twitter avatar for @StrongpointRich
Rich Jordan | Strongpoint @StrongpointRich
@chrisxmunn Yes but with these small businesses, "I'm not going to touch anything for 6-12 months" is a straight-up fantasy. Early change is absolutely possible with the right approach.
12:26 AM ∙ Jan 19, 2023

...and what is that "right approach"? Here's Rich's explanation...

Twitter avatar for @StrongpointRich
Rich Jordan | Strongpoint @StrongpointRich
@Adam_Tkaczuk @chrisxmunn We make fast charges, but they're rooted in an initial aggressive push to get to know the team, their struggles, etc. On latest acq, we shotgunned 3 of us across the co for a wk of ride-alongs and mtgs, synced up each evening, surged efforts at diff. ppl, got clarity on findings
12:26 AM ∙ Jan 19, 2023
Twitter avatar for @StrongpointRich
Rich Jordan | Strongpoint @StrongpointRich
@Adam_Tkaczuk @chrisxmunn Compiled those findings, prioritized each by level of lift / urgency / impact, immediately turned to making changes. Team was floored at how quickly we took action on things they had wanted to see done for years.
12:26 AM ∙ Jan 19, 2023

How did this approach translate into financial performance? Well, when it works, it WORKS!

Twitter avatar for @StrongpointRich
Rich Jordan | Strongpoint @StrongpointRich
Just closed out our 1st full calendar month with the new HVAC co. +47% YoY for same period revenue. -10% YoY for same period OpEx. https://t.co/VLRDF2ei7G
12:26 AM ∙ Jan 19, 2023

And in closing, a bit about WHY Rich takes the approach he does. "Zero tolerance for bad ops"...

Twitter avatar for @StrongpointRich
Rich Jordan | Strongpoint @StrongpointRich
Bad operations: +make your team's life more difficult +degrades the customer experience +harms the bottom line Once it's yours, it's yours. The poor practices you inherit are yours to own. We refuse to let them persist.
12:26 AM ∙ Jan 19, 2023

Coffee Chats - Thank You

As many of you are aware, we facilitated a round of inaugural virtual coffee chats on June 24th. We had 85 people sign-up to be matched and, by all accounts, some great conversations took place and valuable new connections were made.

We hope to do more of these in the future and the invitations will always be open, so if you missed out on this one, but have an interest in connecting with someone the next time we arrange these calls, please register when we announce our next round of chats.

And, to all of you who participated in this first round, thank you, and for those that provided feedback, double thank you!

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Issue #6 - Making Changes in a Newly-Acquired Business
lettersofintent.substack.com
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