3 ways to install a GM to run your acquisition without you

Any time you buy a small business, your life after closing can go one of two ways: 

• You'll either be working in the business (putting out fires and basically buying yourself a demanding job)

• Or you'll be working on the business (focusing your energy on scaling and treating it like a true asset that works for you)

What determines which path you'll take?

Almost always, it's whether the business has a competent general manager (GM) running day-to-day operations.

This setup is the golden ticket, because it lets you step in as the new owner and focus on growth instead of getting trapped in operations.

But what do you do if you find a promising business without a GM already in place?

You’ll need to install a new GM yourself.

There’s three main ways of installing a GM that I recommend:

1) The owner becomes the GM

Let’s say the seller is running the daily operations.

This is not ideal… but you can still leverage this to your advantage.

If the seller is willing to stick around after the sale and become the general manager, you can structure a deal where they:

• Stay in a GM role for a certain number of years (say, 3 to 5),

• And as compensation, they keep a small bit of equity (5% to 15%)

Then down the road, you can have the owner train a replacement GM and hand the reins over to them.

2) Take a current employee and promote them to GM

This should be someone who:

• Is a high performer

• Has taken on a management role before

• Already knows the business inside and out

• Doesn’t need much training

• Is trusted by the other employees

If you have an employee like that, this can be a quick way to get a new GM slotted in without much effort.

3) Recruit the GM externally

This is a last resort, but if you absolutely have to…

You can go to a recruiting firm or search on job boards like Indeed to hire someone directly.

This isn’t a bad strategy. People do it all the time and make it work. But this introduces a ton of risk into your acquisition:

• Can you find the right person quickly enough?

• Are they really capable of replacing you to run the daily operations?

• Can you get them trained up, integrated into the team, and ready to start on day one?

That’s a lot to juggle on top of the regular stresses of a business acquisition… so buyer beware!

But if you really think you’ve found a unicorn deal and want to make it work, remember that you have this option in your back pocket.

Interested in buying a small cash flowing business?

I occasionally share promising acquisition opportunities with readers on this email list. 

To receive these deal alerts (I only send when I find something worthwhile), fill out the quick survey below:

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Onward,

— Ben Kelly