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Buying a construction business

Interview with...

Leroux Cilliers
Age:
Undisclosed
CV:
Chartered accountant
Business name:
Undisclosed
Goods/services:
Specialist insurance repair
Location:
Portsmouth
When bought:
Two years ago
Price paid:
£600,000
Buying a construction business

LeRoux Cilliers is a chartered accountant who conducted his search for a business with commendable thoroughness.

LeRoux scoped out no fewer than 100 businesses - many of them meticulously. He conducted "in-depth pre-due diligence on 10 to 15 businesses, and proper due diligence on five businesses.

I have a reasonable amount of theory knowledge as well as consulting practice about the buying process but there is nothing like doing it yourself - especially when you have no money

Leroux Cilliers, repair company buyer

"Most of this was done before the initial purchase, but some has been done since I bought the firm," he explains.

"I have a reasonable amount of theory knowledge as well as consulting practice about the buying process but there is nothing like doing it yourself - especially when you have no money."

LeRoux's circumspection is understandable given the personal risk he took. "I raised finance for the purchase mainly through personal assets - house and reserves," he says.

After considering a range of industries, he decided on something that could support his existing work in property development - a general building business.

"The purchase was driven by our desire to restore and renovate property. We wanted to acquire the capability to do it ourselves, rather than use subcontractors all the time."

Thorough research

LeRoux's attention to detail was again evident in his search for information, and specifically, advice.

"I read as much as I could. I consulted all the small business support organisations, like the Federation of Small Businesses and Business Link - who were, in fact, probably the most helpful in terms of process.

"I also consulted with accountants, banks, financial institutions, and attended a BusinessesForSale.com seminar. That was really helpful and it definitely made a difference - I had several follow-up conversations with one of the people I met there.

"For actual hands-on buying advice, Richard Parker's book How To Buy A Great Business is excellent - very practical, I have used it like the bible.

"I have emailed and consulted with him directly, which has been of enormous benefit to me."

LeRoux emphasises that a bit of self-sufficiency can keep expenses down.

"It's easy for me to talk to accountants and the like; however, this all costs money. I have tried to be resourceful, and when looking for advice to get it for free - so Parker was great."

 

Hiccups

The buying process did not proceed quite so smoothly, however.

"The previous owner wanted to pull the plug every weekend; it was an emotional withdrawal process.

"He wasn't completely truthful in some of the things he was doing - and I suspect he was nervous that some of these things would come out.

"To try and overcome this I created two channels of communication - one through the lawyers, which is the usual means, and a direct dialogue with the owner. We had constant communications and if we hadn't done that I don't think the deal wouldn't have been done."

Once control was assumed, LeRoux didn't start with a clean slate; he inherited a demoralised and mistrustful workforce.

"Despite the fact he ran a good business, the distrust was there, even before he left. Some of the people in the organisation had worked for the last owner for 25 years and he never even said goodbye.

"It took a lot of time to build trust. We came along with a very different management style. We were different - we were open, communicative, we listened.

"To combat this we started off, from the very first month, by bringing all the staff together for a meeting. This had never been done before. It now takes place once every two months."

Eventually, the more approachable management style reaped dividends, and the frosty relations began to thaw.

"In the early days people wouldn't talk or say anything; now it's very interactive, people participate and I get feedback from all levels of the organisation."

The company has been rewarded for its efforts, receiving the Investors in People accreditation in its first year of trading.

It must have helped relations that LeRoux retained most of the staff. Only four administrative staff were lost, who left to start their own businesses, or because of illness. LeRoux has since hired a further nine staff, taking the number to 30.

He wishes he had engaged the staff more fully at an earlier stage - before he bought the business.

 

"Although I would have reservations as to whether you get the truth or a made up story, I definitely think it would put you in a better position," he says.

"After all, a business is about the people behind it."

Emotional attachment

Asked what else he would have done differently if he could turn back the clock, he says he "would take longer" over the deal.

"I think I pushed it too hard - given the previous owner's emotional attachment to the business.

"I figured if it went past November, talks would have stopped during the Christmas period and that would have been no good - so I pushed hard to make it happen.

"Now I think that was probably the wrong thing to do."

He also thinks he probably paid too much for the business.

"I did many calculations myself, but there was really a lack of information. Nothing really detailed about what is an acceptable multiple for a small construction company was available.

"You just have to use and rely on your best judgement," he adds.

"Another buyer was offering more than us, but because it was a corporate, and not a family business, the previous owner felt more inclined to sell to us.

"The competition did put the price up for us, although according to the seller, we paid less than the other buyer's final offer. I think we probably paid between 10% and 15% more than we should have."

LeRoux also thinks he should have been "much more cautious about the type of industry.

"You really need to ask yourself: Can you turn this business around? Can you make it successful? What are dynamics of the industry?

"At the end of the day, we bought into an industry that we knew nothing about." One thing they didn't anticipate was the fortunes of the industry as a whole.

"The market has turned against us," he says. "As a hot business environment, things have gone on the slow burner.

"Having said that, the business we bought has a lot of other strengths, particularly in terms of track record and credibility - especially in terms of doing insurance repair work."

 

Specialisation

Deciding to exploit its strengths, LeRoux is orientating the company towards being a specialist insurance repair company.

As ambitious as he is thorough, he says: "Our aim is to be the most desired insurance repair company in the south."

Though they have a "long way to go", the company has made strides towards achieving this lofty goal.

"When we took over the business, it served three insurance claim companies," says LeRoux, who has a wealth of experience in business transformation. "But we embarked on a significant marketing initiative and we are now serving eight.

We are expanding quickly, and we hope to complete two more deals in the next few weeks."

Though time-consuming, the business has actually enabled LeRoux to spend more time with his family.

"I knew this was going to take a substantial investment of my time," he says.

"But the objective was to create a family business, and my wife, son and daughter are all part of it.

"I have spent a lot of my working life being away from home. Now that I work with my family I have a lot of time to see them develop and progress - which pleases me enormously."

LeRoux has learnt "a huge amount" from his experience buying a business.

"All my 25 years of experience in consulting and big business does not actually count for much - it needs augmentation to settle in to small business, which is a very different world.

"I have learnt how to achieve a lot with no money, no resources, and without always having access to highly experienced people."

The problems LeRoux Cilliers has encountered, both in the buying process and in operating the business, have not discouraged him from further purchases. "There's nothing in the pipeline," he says, "but it's always in my mind."

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