I am negotiating an espresso machine agent company

This week I will write about a company I am negotiating. Maybe it will be a deal or maybe it will not. But there are lessons to be had for startups.

The company I am discussing right now is a potential acquisition of an espresso machine resaler/agent. The company sells products in Sweden only, but there may be a future possibility to recieve an exclusive agent agreement for Europe as well.

The interesting thing about this company is that it is a pure turn-around case. It loses money every year. It also has a low solidity level. But the best part about this is:

-it does have approximately $100,000+ in annual revenue.
-It can be had for a song (meaning for 1 dollar in this case).
-It can easily be turned around.

The things to look for when looking to buy a turn-around object is a good and stable revenue base, it shall be very cheap to buy cash wise and it should be obvious from the get-go how you should get rid of debt on the balance sheet. Or at least how to restructure it so the income sheet and the balance sheet itself can look better. The numbers have to work.

Now, my fellow friends I want you to tell me about your own turn-around experience. I am certain some of you have experience from companies losing money. I have plenty by now. Losing money in business is an easy task. It doesn’t require genius. But having a company turn a profit on a regular basis, that requires an ounce, at least, of genius.

In this case they do have a pretty normal and healthy revenue base. But they somehow do not understand how to increase operating margins and there for they do have a problem with profitability. They spend too much money. For me, it is obvious what has to be done in this case. The biggest problem is found in product purchasing costs. They pay too much for the espresso machines. And they, I am certain, receive too little money for the products they actually sell. I even wonder if they have asked their customers what they would actually be willing to pay for these machines if they had a possibility to give input. If they did, they may have been mighty surprised that they would be able to raise the prices and there for increase operating marginal. Who even knows how much they can increase their prices? No one really knows, do they? The same goes with purchasing costs, do they even know how much they can decrease purchasing costs if they started discussing with the manufacturer? In this case it seems like the espresso machine company purchases via middlemen. I say: WHY? Why are you purchasing machines via a middle man? Purchase instead from the source, dumb people. Isn’t that saner or what?

I know: It sounds easy in theory. But it really is easy in practice as well. The hard part is actually doing it. Stop being a wussy and start doing what will save the company. Doing is what will take your company to new heights. Stop being so afraid of people telling you what an idiot you are for doing certain unconventional things. What will save you is being unconventional. That is how you win in business. You have to compete. And competing is being more clever than your opponents. Right? Everything in business relies on simple economical principles. It works just as well in a turn-around project as it does in a startup project. They are the same if you look at the basics.

It always comes down to this:
- Create revenue
- Minimze expense on that revenue
- Hence receive increased operating margins
- Hence receive a higher profitability level.

It works every time. The same logic applies.

Until next Saturday. Send me comments. Show me that this is a blog worthy reading. I know I am a forceful guy, but I still want comments so that I know what you want me to write about. Otherwise, why writing a blog? Also, show people this blog if you think it is worth reading. Show people this blog, ask them to write comments and ask me things. It is for free and there are no dumb questions. Questions that are never asked are dumb. So please, help me, help you. Take care everybody.

And as you may know from previous posts. You can have your own stories posted on this blog as long as it is startup related. Do you want to advertise your own startup project here? Well, then comment on this post and I will write to your email address and then we can discuss price and I can show you how the format will be. Very simple and fast. You pay what you think it is worth to be shown on this blog and I will agree or disagree to that price. Doesn’t that sound like a fair deal?

Advertisement