Fool’s Gold Adjacent (How To Find The Best Deal For You)

Pyrite, aka iron sulfide, has a long and storied history of getting people very excitable.  If you don’t recognize the mineral because it has been a while since you have studied geology in school, it has another name.  Fool's gold.  A lot of people with untrained eyes have made some bad decisions based on the perception that they held something of extreme value, only to find out they didn’t have anything at all.  Indeed, a large part of the frenzy surrounding the 1849 California gold rush was fueled by pyrite.

However, there is an interesting fact that most people don’t know about the mineral.  It is often a great way to find actual gold because the two minerals are formed under very similar conditions.  This means that although it may seem on the surface you don’t have what you want, if you dig a little deeper you can get to the good stuff.  It may take you a little longer, but no element has more uses than gold, so it is worth it to keep looking if the conditions are right.

Acquiring a business is similar to gold prospecting in this way.  Sometimes, you have to keep on digging.  The mechanism to do this is everyone’s favorite activity:  research! OK, maybe it’s not everyone’s favorite but it is super important to your success when looking at a deal.

The Simplest Business Plan Of All Time

When you are doing a deal to acquire a business, in-depth research is a superpower.  It gives you a lot of clarity and whoever is the clearest on the situation in a negotiation usually wins.  You can never start researching too early.  In fact, the best time to start digging into the data is before you even start looking at specific deals.  Why?  Because in-depth market research allows you to figure out what types of businesses are trending in a positive direction.  

For example, take accounting firms.  Did you know that a ton of accountants are retiring and there are not enough new CPAs coming up in the ranks to replace them?  This means that the demand for accounting services will not only stay steady going forward but will probably increase.  If the other aspects of an accounting firm appeal to you and are a good fit for your skill set, this is a positive set of factors that tell you to start looking for specific deals.  Doesn’t it make good business sense to look for industries that are also experiencing a lack of supply?  These types of trends can be discovered with a little work.

The previous post is my “super secret” method to how I have acquired 7 businesses (and counting).  My portfolio is successful because I know that if I do enough research, both on the market itself as well as the specific deals, I will put myself in the best position to succeed.  Here is the great news:  Research is not a magic trick, it is a learnable skill.

Research Skill: S.W.O.T. Analysis

There are a ton of different research frameworks out there to choose from.  As you get more experienced in business acquisition, you will naturally gravitate toward frameworks you like.  One of the old standbys that I use for every deal is the S.W.O.T. analysis.  S.W.O.T. stands for strengths, weaknesses, opportunities, and threats.

`The earlier example I used of the accounting field is an emerging trend that would count as an opportunity to take advantage of.  If I had a strong math or accounting background that would count as a strength.  You get the picture.  Again, this is not rocket science.  If you do enough research you will find the answers you need. 

One of the key things I stress to my students is that you must find a method that works for you.  You do not have to use S.W.O.T. if it does not resonate, but you must have a plan for how you are going to conduct research.

Acquisition Aces Maxim:  If you don’t do enough research on a deal you are gambling with your future.

Don’t Gamble, Go Deep

OK, so we have established that research is important for every single deal and that it is a skill that you can develop over time.  The question now is how much research do you have to do before you move from hoping a deal works out, to feeling confident about it?  Unfortunately, there is no set amount.  

A lot depends on how familiar you already are with the type of business and the geographic market it is in.  The key is to remember that a surface-level approach won’t cut it.  You have to look at the big picture (market trends), the competitive landscape (size and number of competitors), and understand the customer pain points (the demand for the service or product).

I know that it feels like there are a lot of moving parts.  To help you get your arms around market research, take a look at the following video I put together for you: 

The biggest problem most people have is feeling overwhelmed by what they need to do at the beginning of the research process.  I hope now you feel like you have some tools and frameworks to start on your Acquisition Ace journey.  As always, if you want to compress time frames and have me coach you on every part of the process (including my research methods), book a time to chat with me here: Calendar 

Have a great rest of your week!

Ben, I Want to learn more…

If you feel that you are constantly working "in" the business instead of "on" the business and feel that your goal of financial freedom has led you to a prison of your own design.

You are not alone, I used to be there as well.

I have 5 companies and counting and work less than 20 hours a week on them - COMBINED.

It is not rocket science and I can help you do the same for your business.

Choose a time on my Calendar and we will get to it.

Onward,

Ben

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