Job Search Red Flags = Business Buying Red Flags
Sometimes topics just come my way and I can’t pass up the opportunity. In this case, my friend Matt Youngquist’s March newsletter on job search offered me a great template for comparing the search for a job with the search for a business to acquire. Below are Matt’s, “7 Red Flags to Watch For in a Job Opportunity” along with my comparison to business buying and the search process.
1. The company is vague about the job description or keeps changing the description.
Business buying: everything about the company is great, there are no warts, blemishes, or problems. This is explained by saying things like, the owner only works 20 hours a week and spends most of his time playing Words with Friends (until you find out the owner works 10 hours a day plus comes in on Saturdays), or, there’s incredibly low employee turnover (unless you go back longer than three months), or, new processes have improved margins (until you see the financial statements).
2. The recruiter uses guilt, shame, flattery, or other obvious emotional tricks to manipulate you.
Business buying: I’ll admit, in my market I don’t see a lot of this as the sellers and intermediaries are more sophisticated than those selling micro-businesses. I do know it’s prevalent because I see all the business summaries on bizbuysell.com, DealStream, and other sites.
3. The hiring process is not handled in a professional and well-organized fashion.
Business buying: “Here are last year’s financial statements,” which should be enough to make an offer. A little hyperbole here but there are those who think it’s sufficient to show a few years of P&Ls from QuickBooks and a few paragraphs about how great the business is (versus a memorandum covering all aspects of the company).
4. Online reviews of the company are either consistently negative–or almost unanimously positive.
Business buying: Same thing here with the added item of when many reviews mention the owner by name there’s personal goodwill (the owner) not company goodwill.
5. The company isn’t really clear about why they want you versus another candidate.
Business buying: Not caring if the buyer’s skills and experience match with what the business needs as long as they have enough money. When does this work? When there’s buyer fever, often when the buyer falls in love with the product, not the business model (and what it takes to run it).
6. The company seems annoyed when you ask reasonable, polite questions.
Business buying: Buyers ask a lot of questions but to the seller, it’s often not appreciated because they see their business as the cutest little puppy imaginable. So, Mr. or Ms. Buyer, why all the questions, can’t you see how adorable it is? And as I like to say, just when the seller thinks they’ve answered every possible question the bank asks more.
7. You’re pressured to make a decision on the spot or without time to consider the offer in careful fashion.
Business buying: It’s pressure to get an offer in without time to deeply analyze the business. As Arnold Goldsmith wrote back in the 1970s, “Sign ‘em up, suck ‘em in,” meaning once a buyer makes an offer they’re emotionally attached. About five years ago a buyer called a broker, who said he’d send him the package on the business. He then said offers are due tomorrow so if you don’t want to lose out, get an offer to me ASAP.
A recently released five-year study by Gallup shows that 70% of the difference between successful and other businesses is the quality of the managers. Great managers make great business owners and we’ve been fortunate to help a lot of them buy their own businesses. They don’t fall for business buying equivalents of Matt’s Red Flags.