Some observations regarding companies that have sold and those that have not sold. 

One of the first things that I observed was the reduction in the hours that the owner had previously worked. I’ve found that the owner needed to average working 50 hours per week once they felt they had the people and the systems in place that they felt they needed within their company. Before the sale, I could reach out to the owner 24/7 to talk with them. After the sale, they adjusted their hours down to half of what they were and started taking a lot more time off. As a result, owners didn’t usually fit in to being a good employee. Most of the owners had never worked in corporate, had a boss to answer to or worked in a corporate environment with big company rules. 

Usually, the company that sold was acquired by a larger company. If the seller stayed with the new company, the seller didn’t do well with change and didn’t function well as an employee. Not to mention, that contractors dislike change and because of this it became even harder for the contractor to function in the new environment that they no longer controlled. Decreasing the number one acquirer of business usually caused a decrease in sales. 

Getting a company ready for the sale is a big effort. In a smaller company, the owner can sense and feel the decrease in sales volume. Since the owner is the first in a small company to feel the decrease in cash flow, the owner is much more sensitive to sales volume not being where it needs to be much quicker than anyone else in the company. Another reason that the owner is more sensitive to getting or losing a sale is that the owner can adjust the sale price much more quickly that a larger company. 

For example, one company I worked with lost a multi-million dollar contract the day it sold. The client no longer had the ability to work with the owner as he had in the past. The ex-owner had no authority to make quick yes-or-no decisions regarding making a decision in a timely manner. In a smaller company, accountability or lack of it is much easier to determine that in larger organization with multiple offices and employees working remotely. 

Former owners also felt that they needed to provide a good environment for their employees. They wanted to make sure they were being paid well, had good insurance for their employees and their families. They also felt a need to help employees out when they had a problem that they needed help with. Sometimes owners helped out their employees too much which caused problems in different ways with other employees feeling left out and not as appreciated by the boss. Looking out for one’s employees seems to be an attribute of an owner of a business, not just a contractor owner. 

The new company has their own systems that they want followed. While the seller had been living inside of their own system that was more strict on their employees, but not on the boss. Being the boss allows one to make exceptions whenever and however they see fit. 

Employees and clients felt that it was a less personal relationship, due to the authority being remove to a headquarters location of the acquiring company. 

Larger company size seems to beget increased overhead and decreases the ability to achieve higher margins due to decreased personal and local relationships. 

So overall it appears that some pluses of consolidation are greater efficiency, scalability and access to capital. Some of the detractors are flexibility and small business competitiveness. 

What it seems to get down to is whether-or-not the seller knows how much money is enough to retire on and are they really ready to retire from their business. There are no going back to the old ways of doing things once the deal is completed.  

My biggest concern for ex-owners is how talented they are, but how frustrated they get when they stay around and cannot make the changes they would like to make when they see a problem. One ex-owner related to me how frustrated he was with a recent situation with the new owner of the business: 

“You know, we thought you had a good business that we thought we could make better. I know that you received your check from us when we took over. So why don’t you let us handle this the way we want to handle it”. 

Selling has its good points and its not-so-good points. It’s up to you to decide what’s best for all concerned.