Key Points From the Interview
cquiring a business wasn’t something Jason Budd always wanted to do. He knew he had an entrepreneurial spirit, but it wasn’t until a mentor sent him an inspiring podcast episode all about business acquisition that Jason decided it was the way to go.
With a young family, he didn’t want to take on the massive risk of starting a business from the ground up. He also ideally wanted to find something that would fit with his degree in engineering, and professional background in manufacturing. He began reading books and searching online for an existing business.
“Especially in the small-business world, your people are your business.”
Through a local networking seminar and business brokerage connections, Jason discovered Metasystems, a manufacturing software company with a solid 45-year history. After doing some financial due diligence, assessing the technical debt he’d be taking on, and reviewing the company’s employee history, Jason decided to pull the trigger.
The business was listed in the $1M-$3M price range he wanted, and would allow him to qualify for an SBA loan. An expert attorney helped him make the deal happen.
Jason got to know the people behind Metasystems, and was lucky enough to have a key employee who was about to retire personally help him in the transition.
In this episode, Jason shares his advice for analyzing a business’s history and team, why it’s important to hire an experienced attorney, and how to be the project manager of your own deal. He also discusses what Metasystems is doing to upgrade its platform and how the business survived the COVID-19 pandemic.
✳️ About Jason Budd
✳️ Top takeaways from the episode
✳️ Episode highlights with timestamps
Acquisition Entrepreneur: Jason Budd
💵 What he acquired: After listening to an enlightening podcast episode, Jason decided he was ready to buy a business, rather than build one from scratch. He researched businesses in the $1M-$3M price range, and attended a business-buying seminar in Columbus, Ohio. He discovered Metasystems through a business brokerage website. The 45-year-old manufacturing software company was a perfect fit for Jason’s engineering and manufacturing background, and risk profile.
💡 Key quote: “Most sellers are first-time sellers. Most buyers are first-time buyers. And that can be intimidating. But it also creates a little bit of rapport if you acknowledge that early on with the people you’re looking to acquire the business from. It helps frame the relationship.”
👋 Where to find him: LinkedIn
Acquisition Tips From the Episode
Top takeaways from this conversation
⚖️ Your attorney is the only one truly on your side during an acquisition.
When you decide to move forward with buying a business, you’re probably going to deal with quite a few people. The brokers, lenders, and sellers will want to push the sale through, so they may not have an incentive for bringing red flags to your attention.
That’s why it’s important to have a first-rate attorney — preferably someone with commercial acquisition experience. Jason was lucky enough to have a former CFO representing him, and the trust factor their presence provided was invaluable.
🧑🏾🤝🧑🏻 Your due diligence must include the employees.
There’s a lot of number-crunching involved in deciding to acquire a business, but Jason believes it’s the qualitative elements that matter most when you’re evaluating your options. Since he was buying a business with a 45-year history, Jason wanted to be sure he knew about the people behind Metasystems.
Retaining a great team was critical to Jason’s post-acquisition success. In reviewing the company financials, he needed to ensure he could keep the current employees and stick to his growth plan. That meant exploring salary and HR history, department turnovers, and employee satisfaction.
Fortunately, Jason connected with a few key employees, one of whom became a solid partner in helping him adapt to the company culture and transition more confidently.
🤷 Both you and the seller are probably doing this for the first time.
Sales can take longer than necessary because of how many people are involved. Jason says delays are largely avoidable if you act as project manager of your own deal — even if this is your first time buying a business. As the buyer, you’re also likely to be overseeing a lot of the details single-handedly.
He reminds us that most buyers and sellers are newbies to M&A, and there’s no shame in admitting that (although you may not want to call it out to all stakeholders). Connecting over your lack of experience can bring some empathy to the situation, which encourages all parties to pay attention to detail and treat each other with respect.
When Jason looks back on how his deal went down, he sees that there were some opportunities to escalate earlier, and push things through faster. Facilitating communication between attorneys, brokers, and sellers could help you avoid similar standstills.
🏦 Keep your pipeline active.
A deal is not done until it’s done. Jason felt Metasystems was a great fit for him, but he had some other businesses that met his criteria lined up — just in case.
It’s tempting to set your heart on a particular business, but there are so many reasons a deal could fizzle out. Jason recommends keeping other options in the pipeline until you’ve signed on the dotted line.
Inflection points from the show
[2:10] Entrepreneurial roots: Jason says he’s always had an entrepreneurial spirit, especially when it came to engineering and software. He liked to ask challenging questions in every work environment, and ultimately decided he’d like to own a business himself.
[4:04] Why buy rather than build: Because Jason has a young family, he found the lower risk of buying more appealing. He bought a stable business with good cash flow, banking on the potential of earning a higher reward for his efforts sooner rather than later.
[5:35] The power of a podcast: Jason hadn’t considered buying a business until he spoke with his mentor, who shared an informative podcast episode all about acquisition. These influences put him on the path to finding an existing business that would match up with his goals and skill set.
[7:08] Deepening the search: In addition to scouring the internet for businesses for sale, Jason read a book and attended a seminar hosted by a business-buying brokerage in Columbus, Ohio. This networking connected him to the brokerage website where he found the listing for Metasystems.
[9:39] Finding “the one”: Jason has an engineering degree, and until this point, his career was focused on business systems and intelligence. He also had manufacturing experience. When he came upon Metasystems, an enterprise resource planning (ERP) software expert for manufacturers, it just felt right.
[11:22] Getting the financial ducks in a row: There were three things Jason was looking for when it came to the financials of a potential deal: a $1M-$3M price range, SBA loan eligibility, and being able to swing it on his own with a down payment.
[13:32] The backbone of America: When he dove into the world of small business acquisitions, Jason realized just how many small businesses there are, and how many of them are ready to change hands.
[15:57] Understand the business: In Jason’s case, it was an asset that his skill set aligned well with the business he wanted to acquire. A lender generally needs to be comfortable with the buyer taking over, especially if it’s the type of business that will require hands-on management.
[20:43] Why your attorney is a key player: Lenders and brokers will help you figure out the financial side of a deal, but its ultimate success depends on having at least one person looking out for your interests. Jason says the only person who can truly do so is your attorney.
[21:57] Uncover the story behind a team: When you’re buying a business with a long history, it’s important to familiarize yourself with its employees. Learn the story of your team because people are going to be your greatest asset.
[24:39] Know your product or service: Even if you don’t have the direct experience that Jason did in the given industry, you can do some due diligence to understand the strengths and weaknesses of a product or service. Jason scheduled demos and considered the technical debt he would be taking on with the somewhat dated platform.
[32:32 ] Previous hardship signals: You can gauge a business’s resilience by its history. When a business has already successfully made it through a transfer of ownership, or challenges like a recession and a pandemic, it’s a pretty sure sign that it will survive your takeover.
[34:01] The relationship investment: Don’t forget that, for most industries, you’re buying client relationships as well as the internal aspects of the business.
[38:40] How Jason made the financing work: The sale of Metasystems happened with a combination of an 80% SBA loan, 10% seller financing, and 10% buyer financing. While Jason wasn’t able to completely replace his previous salary due to the specifics of the business needs, he ended up in the 20%-30% net margin range.
[41:49] Keeping your options open: It’s important to keep other business possibilities alive, because deals can fall through for any reason (and at any time).
[42:54] Most sellers and buyers are new to this: Even though this is likely the first time you and the seller have been involved in a business sale, you may have to be the one keeping the deal moving forward by facilitating communication between lenders, brokers, and attorneys.
[45:30] Act as a project manager: “Time kills all deals,” as the saying goes. It’s important to keep a business sale transaction moving. So see yourself as the project manager of your acquisition, and when the other parties involved drag their feet or get distracted by other clients, keep things moving and don’t be afraid to push when necessary.