John Batchelor, Jonathan, Paul discussed on My Worst Investment Ever Podcast
Jonathan take a minute and a further tidbits about your life. Well thank you for that Introduction Action Andrey Over the last twenty plus years is more like twenty three years now. I've made my money from buying and selling companies and most most people in business consider that they make their money from operating the business. A draw money out every month maybe is a bonus at the end of the year. But I've I made my money from sending the companies and typically the companies that I sell companies I bowl a few years earlier. All in some cases I all several companies in the same a sector of putting together a logic company and. That's the company that I sell so slightly different Paul too many businesses and I help nope business owners do exactly the same thing I spent about one day a week working with business owners say. I've been doing this a ten years. I I can't seem to get my company bigger. How do I acquire another business? Double the size of the next twelve months. That sort of thing very exciting. In fact I just had a conversation with my business this partner in one of my other businesses about that exact thing so we may have some talking to do later all right. Well now. It's time the share your worst investment ever since no one goes into their worst investment thinking it will be tell us a bit about the circumstances leading up to it and then tell us your story show so I went to a dinner and the dinner I got talking to someone who told me about company in the sector the I already had. Investments investments in the apparent was doing very very well indeed it was private equity owned and he thought that I should be talking to that so I made an approach and discover they wanted to sell the business and they were very open about the finances of the business and I could see that it John batchelor in the pasta the last year or so hadn't been so good but there was a rationale behind it and I took face by that stage. That's really what do we look to buying the business and we spent some months during due-diligence and we we discovered some things that wouldn't particularly good but that was to be expected. Because we were going to be buying this business for one pound and when you buy a business for a pound you take the library was he's with it. You unrealized Rough with the smooth and it's not going to be a bed of roses and are going to be some challenges along the way so we went into is open but the reality was just terrible in fact usually when you buy business there are one or two skeletons in the closet by ten in businesses over a period of time and they got different problems in different issues. This particular business had every problem in every issue. You could ever imagine all all in one place at the same time times Jane amid it was unbelievable. There was nothing right about this business stuff. With right's management wasn't right finances would right. The product was writes. The delivery was right. The supply was nothing right about this company it was still making money. Who which was our incentive to keep on going and sometimes actually an investment can be quite a good one when a business is making money despite itself so despite being terribly wrong terribly managed it still manages to make some money so the next six or seven months were an absolute loot nightmare because all we did was fire fight and solve problems every day was different? Every day was stressful. My managing drake the right to who I put in there to run everything day to day basis. quit after seven months. He just couldn't take it anymore. Every day was a new challenge. ENJ- we had to make a large number stoff redundant to save the business wouldn't surprise to the slightest. They knew there was a problem. So we had to make seventy five or eighty not star redundant a one single day which actually relieve the pressure and allow the business to survive otherwise would have just collapsed. We moved to small offices. We got rid of all the company. 'cause there was a whole swathe of management that went in the very first week and they actually contributed take a million pounds with the cost to the business but by removing not only do we free up that million pounds that was just being sucked into the salaries reasoning that assistance. Even their assistance had assisted a whole group of people once they gone. It certainly freed up the cash. Interestingly it made zero difference to the business Having no positive impact on the company by being there I replaced all of those people with just one person so we sold a lot of problems but every time we sold to pro there was another problem it seemed a relentless a a never ending stream of issues and problems but we ended up off to seven months with all under control. It was actually a business that I sold. Full months on slater so I owned it for eleven months in total seven months with solving problems. Full months was getting ready for sale. The actual facts. It was a very strong multi-million pound X. which was not a bad return on investment financially because we invested a pound almond to buy the business however I got a lot of grey hair as a result that ownership so even though everything toned down at the end it was is the most stressful acquisition. I have ever done so one of the questions about it before we move into the session where we'll just talk about what you learn. I I just curious you know with your experience and as you said. The sellers were open with their stuff did due diligence. You know obviously obviously everybody expected. You know there's GonNa be some skeletons but how is it that you would have missed all of that. Well because so many of these issues were caused by the people. Don't get close to the people in the business okay. So that I think that's a core thing that I didn't think think about but I mean that's like just right there. I love that you don't get to know about these people until you get close to them so up to that point is just a name on a spreadsheets spread shades with the scenery and the start date. And that's radio you will you have but when you actually meet the people that you've got and you understand the the level of training that they've had you discover. The count manages just deleting on the emails from customers because it's easy to delete the email and have an empty inbox in talks to do the job Colin customers in solving their issues. And that's a really hard cultural. I mean you don't get culture during geologists. You don't understand that so the culture was basically to hide everything under the carpet and little work as possible but take the salary every month. It's the culture of the management's again. Everyone puts their best foot forward executives. We met certainly presented very well in very professionally nationally but all they were doing was taking money out the company for example the day before completions day before we legally became the owners. I saw him the bank statements that had been transferred. Ten thousand pounds out to the finance director and try to find out what this was. I discovered that it was an expense account with a finance to not been paid expenses for according to her for the last three years. Quite frankly I don't believe that and is a very nice nice round number ten thousand pounds it was thrice by the CEO on a very quick email exchange thing. Yes no program really what was happening. They thought will will pay ourselves a little bonus here here if the sale goes through and this is coming from the finance right now if sites. UW that for a few days during our ownership we moved her all very very quickly. Okay so these are the things that Diligence you realize until you own the business which is one. I think you've got to be very flexible. If you're going to make acquisitions like it's because if you are original you know everything about everything you will never be able to adapt to constantly ever changing minute committed situation one could take the day all it seems. The people were quick. A if this person just quick do we know job they do. We don't even know what job they do and they've just quit so you've got to adapt to these changing environments. Got It got it and it's interesting because you know you're such an expert in this area and and what you've learned through this experience has gotta make you even so much more valuable to your clients now so tell us a little bit about like. What did you learn from this? That's what you've got to be resilient. I think if you get stressed by very small things lying businesses may be is not for you because there's always was gonna be some degree of stress and there's always going to be the unknown which some people find stressful in itself. I think what I learned from this. was that if you want the big opportunities than you've got to expect it to be lots of uncertainty and my resilience level certainly went up during this protests. I thought I was pretty resilient already. But this this really toughened me off and I suppose also that you should never believe anything including the diligence that you have painful. It can look great in a revolt but really you don't know a business until you own the business Which is why you must always expect the unexpected? Every day is a surprise. One of recent acquisitions was Tena Astray. Childcare is this and we asked the manager of the business while the reputation of the business was in the local community because really wants I find out whether yeah we keep the original brand or do we rebranded what we do with it and she said the reputation is that this is the nursery that you send your children if you don't you want to pay the bill and this statement but never heard this before and it was up. So what do you mean. Don't pay the bills. Will everyone knows that I'll billing link processes Poll that you can get away for months and months and months without paying a penny for the childcare so an actual fact. That's an opportunity for us. Because could we have to do is tighten up the money that we're and the business tons of coal in the very very quickly indeed so. This adaptability is absolutely K.. Yeah and I think that you know you've also highlighted. The point is if you're buying a successful smooth running business and all that well you don't have as much opportunity for that gain going from one town to massive exit. Yes Sir to talk. It'd be a sometimes. A business can be too perfect and there isn't any value to be added by the new owner and sometimes when you're at the point of perfection the only way down the value of the business gotcha diminished. It's what I look for. Businesses is the having a hatred for myself might seem to actually add value and as a result lagging adding that value business in itself increases fantastic. Well let me summarize what I took away from it a couple of things. I mean the first thing that you said is that due. Diligence doesn't really reveal the culture and I thought that's really valuable also the idea that people are just names on spreadsheets. But the reality is there's much more there than just is the name on a spreadsheet and I think it's a good lesson for for the listeners out there like myself that are very quant oriented looking at numbers and all that to always remember ember that humans are much more complex than a name on a spreadsheet. The other thing I'd take away you know you used the word stress quite a bit now. I think that the a type of business that you do of taking over businesses you know that it can be a pretty stressful thing and whenever I think of stress I always always think of health. You know the importance of maintaining your your health and your your vitality through that because if you don't maintain that you know it's critical and I remember many years ago people used to come see me when I was head of research and they'd say my staff would say you know how to go. I'm so stressed stressed and so one day I kind of looked at myself itself and I realized I wonder what they say about me when somebody asked what Andrews like and I thought I bet you. They say he stressed. So that was the day Eh. I stopped and I removed stress from my life because I stopped seeing stress and I started to replace the words dress with pressure. I'm under pressure but stress is definitely a component of your business. Yes the last thing that I would highlight that something that I've experienced. Is You have to it. Come to the realization. That sometimes the team that you have around you may not be able to survive that stress you you know a lot of times the leader light yourself or others can handle it but I think we always have to remember that the people around us they may have a much lower threshold for what what they will want on this and so always keep in mind when in the world of startup. They always talk about a runway and they're talking about financial runway. But I always say there's a there's an emotional runway that you have to deliver for your team at some point and that delivering release the stress On the people around you so those are my takeaways any thoughts. Yeah I I think you're spot on with those. I do think that if you can handle the Prussia Russia then the opportunities are huge and pressure can be a good thing because some people formal better under pressure when the back's against the wall up up against a deadline we often get more done leading up to that deadline that we have done in the weeks right to that. Wait a minute I think a lot of our listeners are just smiling as they're listening right now thinking thinking Oh yeah when I have that deadline looming. That's when I get stuff done some growing. Get your work done this evening before you go in your holiday so pressure can be applied allied in.