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If you are trying to take over a small company you will get a series of figures from their financial people that paint as good a picture of the company’s finance as a half decent accountant can conjure up.  Always make sure that the figures you use to make your judgment on the value of the business are right up to the minute.  It is too easy for your target business to demonstrate reasonable figures for the quarter before last knowing that the last quarter was a different story.  You may pick that up if you go to the expense of doing proper Due Diligence, but by that time there is agreement over the amount that they are expecting you to pay.
Take their figures and turn them into a monthly cashflow document.  Look carefully at the overheads because that is the first area where you may be able to make substantial savings if you do buy the company.
Separate out expenses on premises and the cost of administration.  With regard to premises, work out if you could integrate the people and stock you are taking over into your own premises.  If you can, then look hard at the leases they have signed up for.  Suppose there is still six months to run on a lease on premises that you do not need.  Negotiate with the leaseholder.  If there is a sniff that the target business may go bust then they will probably be open to offers that guarantees that they get paid what they are owed in return for waiving, say, the last quarter in the contract.  Now look at administration: it is likely that you can subsume their administration into your own or one of your other companies without any extra cost.  At a stroke you have improved the performance of the target company by stripping these two items out of their costs.  Look carefully at their insurances – again the combination of two companies together can often lead to savings.

Whether it's a family home or a full on business don't forget the value of the assets you or your businesses live in.  You miss an opportunity if your landlord is the person making money out of the upward revaluation of properties.  This gives me a bias towards buying property assets rather than renting – even including warehouse space.

There is much less employee loyalty around now than was the case, mainly due to the behaviour of employers who, in reacting to very fast, and often very painful, changes in the business environment, have had to become markedly less loyal in the other direction.  This means that people are more willing than before to move to a competitor to build their careers.
So, if you make wrong decisions in staffing and have to put them right by firing people and letting people go, you may find yourself with a morale problem leading to the loss of the people you desperately needed to keep.
One way out of this dilemma of “Do we need another person and is this the right one,” is to use temps and contractors.  (Be very careful of the tax position on contractors, especially in the IT business.  The Government is bearing down on contractors who use their employer’s equipment and only have one customer.  They regard such individuals of being in reality employees and want the tax and National Insurance contributions appropriate to that status.)
But temps and contractors are not in fixed costs.  You can dispense with their services whenever you want and they are never regarded as full members of the team.  This means that their departure is met with more equanimity than if they were.  The two disadvantages of this approach are cost and the fact that you have no real hold over the people. 

i am always looking for the skills and attributes that link successful businesspeople and entrepreneurs. I figure that if I can find the magic bullet that is the common factor of successful people I can improve my own performance and help my people to do the same.

Anything written by these people and the talks and interviews that they give emphasise a basic communication skill. This skill is not only not the gift of the gab but actually the opposite – it’s listening.

I have made a lot of money out of buying businesses where the current owners were either underestimating the value of their assets or, the more likely version, overestimating the value of their assets.  In the first case some owners do not think sufficiently outside the box to realize that their assets could be worth a lot more if they were combined with another customer database, for example, or enhanced with the addition of another line of products.  If I can realize the potential value of the undervalued assets, then buying them for a price that reflects their current owner’s valuation makes good business sense.

The second case often arises because the owners are being unrealistic about the effect of a change in market conditions to the value of their assets; the current property market is a good case in point.  People do not want to admit that the value of their house has gone down along with the rest of the market.  In the case of a house owner this need not be serious; they simply stay in the same house until things recover.  In the case of the owner of a business such unrealistic thoughts are potentially very dangerous.  Suppose I am looking at a business with assets that I think are worth £1,000,000, half the unrealistic value that the owner puts on them.  I offer, say, £900,000 and they reject it.  Three months later I notice that the business is still for sale.  I have another look and it is obvious that things have got worse and that the cash situation must be becoming serious. 

Do I repeat my offer of £900,000?  No I do not: this is getting close to what is known as a fire sale and I go in much lower.  If I have judged the precariousness of the owner’s situation correctly I will get the business for that lower price and the owners have cost themselves a lot of money by forgetting that the value of an asset is an opinion, not a fact.

An alarming number of people go into small businesses with little or no understanding of the financial side of running a business.  I’ve spoken to one woman who is setting up a company. When I suggested she draw up a spreadsheet of her costs and estimated revenues she replied that she just couldn’t get her head around figures and was going to leave all that to the accountant.  To be honest, I think that’s a bit like driving a car and only seeing road signs every six months.  I guess it’s one of the reasons that I get so many opportunities to buy businesses cheaply and turn them round.

How fast should you grow your business: answer, as fast as you can manage it, with the emphasis on ‘manage’. There is no point in trying to create a stratospheric business if you can’t manage it day to day. It’s better to grow less fast and stay in control than to shoot for the stars and explode in space.
As we have discussed, I recommend that meticulous cash management should stop you getting into a syndrome called ‘overtrading,’ where the expansion of your business goes too fast for your cashflow and people resources.  It is very likely that you are in it for the long haul, so take it easy.  Steady growth will get there better than explosive growth if that threatens the foundations of the business.

I once went into a conversation with two business people who were masters of their highly skilled trade but whose lack of business sense made me reel.  They owed some £750,000 on an overdraft whose actual limit the bank had set at £700,000.  They had their houses at risk as guarantees against the bank lending, and they were, to say the least, worried.
Looking around at the end of February I discovered that no one had sent out January’s invoices.  Not only that but there were amounts in debtors well overdue.  Their explanation was that they were too busy trying to deliver a service to a big customer in a contract that was worth a lot of money, and eventually cash.  But that cannot be right.  Make sure that invoices happen as soon as possible, that your collection terms are known by and agreed by your clients and put someone in charge of keeping the system up to date and chasing debt.  Lots of companies simply do not pay their bills until someone chases for payment.  Get payment up front whenever you can.

There is absolutely no place in the Boardroom for dishonesty, particularly of the sort that pretends there is no problem where there actually is.  Suppose you are planning a new takeover.  You have researched the product market, decided on your competitive strategy and the only thing left to do is make it happen.  Now ask yourselves “Do we have the knowledge and experience in this room to manage this project?”
If it involves, for example, the entrepreneur on the Board managing a new group of staff doing a repetitive job and already suffering from low morale, you may want to think again; it may not be their thing.  Try not to put anyone, including yourself, into the position of doing something they are not good at.  This requires the honesty of everyone to admit gaps in their skills or knowledge and volunteer to put them right.

There are a number of similarities between selling and negotiating.  The main one is how vital it is to see the situation from the other person’s point of view.  In selling a business, for example, you are trying to make the buyer realize the benefits of your proposal to them – how much profit they will make, how the merging of their current business with the new one will save costs and so on.  You find out what these benefits might be by asking probing questions on a broad base of topics; seemingly insignificant things can in fact be important.  For example, I sold a business to an entrepreneur who was looking for a job for his son to do.  If I had not found that out during our early discussions I would not have known how important the deal was to him and would probably have sold the business for a lesser sum.
In a similar way, the importance of knowing as much as possible about the other person negotiating cannot be over-estimated.