Old-Fashion Businesses Can’t Scale (Until Acquired That Is…)

The Lexington Candy Shop opened in 1925 on Manhattan's Upper East Side.  Not only has the façade remained largely unchanged over the decades, but it still operates much the way it did when its customers wore Baker Boy hats.  The “Shop” sources their bread from Orwasher’s Bakery, open since 1916 and located only a few blocks away, for French Toast that is out of this world.

The Shop has also gotten international notoriety for one very specific old-school thing that it still does the same way from its first day of business.  What is that you ask?  How they serve Coca-Cola.  They mix the syrup and seltzer water by hand, and top the drink with a scoop of vanilla ice cream.  It is one of the handful of places left in the United States that does this.  Why?  Because it is very labor-intensive and time-consuming.  It doesn’t scale, but it shows that you can still have a profitable business with old-school methods.

The “Service” Mindset

There are a ton of business owners out there who create “lifestyle businesses” for themselves. They deliver a great product for their clients at a solid margin.  Once they get to this point in the business, the only point of the enterprise is to maintain the status quo.  The only “how” that matters is how they got there.  Once that is figured out, just like the Shop everything goes on autopilot.

If a concrete subcontractor does bids on a legal pad, guess what, they will never change the way they do things.  A business that keeps all of its sales leads on an Excel spreadsheet?  Good luck trying to sell them a SaaS CRM.  I call this the “Service” mindset.  The only thing that matters is getting the job done and meeting immediate cash flow needs.  

The challenge is that without proper systems in place, you can build a business to support a decent lifestyle but not much more.

As always, it is important to start with the end in mind.  If a lifestyle business is what you are looking for, you can acquire one and keep it as is.  If you are looking to build a portfolio of businesses or scale an acquisition into multiple locations, it does not mean you pass this type of business by.  In fact, it is a great opportunity.

The Plateau Opportunity

When someone creates a successful business that pays all their bills and allows them to provide a comfortable life for their family, this is a win that must be celebrated.  The skills that are required to do this, however, are completely different from what it takes to grow or scale a business.  This means that every single business that follows this route hits a plateau.  Earnings level off and the business stops growing (or grows very little year over year). 

Skeptics of business acquisition like to ask the question:  Why are there all of these profitable businesses out there that aren’t already scaling?  This is one of the answers.  The owners are unwilling to either learn the skills to scale or unwilling to delegate them to someone in their business.  They don’t have the entrepreneurial mindset of an Acquisition Ace.

Case Study: Zack

Zack is one of the original members of Acquisition Aces.  He is from the tech side of things (which as you will see came in pretty handy).  After five months he was able to close his first deal by acquiring an accounting firm.  

The owner of the business did a majority of the returns himself but did not focus on systems or delegation.  Predictably, the accounting firm plateaued on the earnings and growth side.  Zack was able to acquire the firm and implement some very simple changes that had a very big impact on the business’s bottom line (and Zack’s bank account).  You hear the whole process in Zack’s own words here:

As you can see, Zack will be able to do 5 to 10 things that will allow his new acquisition to scale immediately.  The management requirements are low, so he is in a perfect position to take the cash flow and use it as collateral to acquire another business.  If he decides to stay in the same vertical, accounting, you can bet that the next deal will be more seamless given what he has learned.

If you enjoyed Zack’s story, share it with someone you know.  If you want to follow in his footsteps of becoming an Acquisition Ace, book a time to chat with me here: Calendar 

Have a great rest of your week!

PS - Coaching compresses timeframes. If you want help on finding the perfect deal for you, book a time on my calendar here to explore becoming an Acquisition Ace: Calendar

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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