Ask Me Anything Summary

The path from search to successful operation remains one of the most challenging transitions in entrepreneurship through acquisition (ETA). Many searchers excel at finding opportunities and closing deals, but the real test comes in the days, weeks, and months after acquisition when the responsibility of running and growing the business falls squarely on their shoulders.

Recently, our community had the privilege of hosting an insightful AMA with two experienced industry professionals: Abhi Ravishankar, Founder of Truss One Partners (formerly Route One Capital Partners), and Rand Larsen, Founder of SMB Community.

Abhi brings a wealth of experience, having transitioned from a decade in management consulting and two years at a startup to building a holding company that now operates an $8M revenue pool service business (the product of five acquisitions) and a $4M revenue kitchen shelving design/install franchise. Meanwhile, Rand has created a community of approximately 30 (soon to be 50) business owners who have all acquired businesses and regularly meet to discuss challenges, share ideas, and help each other improve their operations.

Let's dive into the key insights they shared that can help searchers prepare for successful post-acquisition operations.

Standardizing Operations Across Acquisitions

One of the most significant challenges in a roll-up strategy is standardizing operations across acquired businesses. When asked about this process, Abhi shared that his approach has been methodical and patient—they're about "60% there" with core processes standardized, but variability still exists.

Key Challenges in Standardization:

1. Moving too fast without employee trust: Rushing changes before winning over the team often backfires. Employees from acquired companies are naturally skeptical of new ownership and may resist changes if they haven't yet built trust in your leadership.

2. Decision paralysis when choosing between systems: When Company A and Company B have different processes with respective pros and cons, deciding which to implement across the organization can be difficult. This requires careful analysis of which processes are actually more efficient or effective, rather than simply imposing the processes you're most familiar with.

3. Compensation-related merging: These decisions are "super sensitive all the time" and require delicate handling. Different compensation structures across acquired businesses may have evolved for legitimate reasons, and standardizing too quickly can lead to perceived inequities or unexpected incentive problems.

The Value of Patience: "Being slow helps—it gives folks more time to digest, pick the best unified process design, and then implement it."

Abhi's approach suggests that standardization should be viewed as a medium-term goal rather than an immediate post-acquisition priority. Core operations can be standardized first, while allowing time to evaluate which systems and processes truly work best across the organization before implementing wholesale changes.

What First-Time Acquirers Should Know

Abhi shared several insights he wishes he had known before his first acquisition:

1. The "In the Game" Advantage: "Being 'in the game' brings you WAY better off-market deals, and your credibility increases odds of closing. So, get in the game quick." Once you make your first acquisition, subsequent bolt-on opportunities become more accessible as you build credibility in the industry.

2. Valuation Perspective for First Deals: "Especially for the first acquisition, paying half a turn of EBITDA or so more than you value it is OK. In the long run, it's your operating ability that is the bigger differentiator."

3. Role Clarity is Essential: "Be very clear about what your role is going to be and how you want your team to see you (e.g., do they see you as an investor who spends 5 hrs/week, or do they see you as someone on the truck with them)."

4. Seller Relationships Are Time-Sensitive: "Build a very good relationship with the seller. They're more valuable for the first 2-3 months than you think; but after 3-4 months things change and you may not want them around you."

Retaining Key Employees Post-Acquisition

Employee retention remains one of the most critical factors in acquisition success. The departure of key team members can quickly derail post-acquisition plans and erase much of the value you paid for. Abhi offered five practical approaches to retain critical talent:

1. Humility and Clear Value Proposition: "Be humble and clear about what you bring to the table. For me, it's 'I'm curious, I know how to build good business, but I'm not a pool guy. Together we can do wonderful things. We'll both learn from each other.'" This approach acknowledges the industry expertise of existing employees while establishing your unique contribution to the partnership. Rather than positioning yourself as the "savior" of the business, recognize the mutual learning opportunity.

2. Compensation Stability: "Don't change compensation models for the first 6-12 months. I see folks pivot to more bonus-oriented models quickly, and odds of success are low." Compensation changes, even when well-intentioned, can create anxiety and uncertainty among employees. By maintaining existing models initially, you provide stability during a period already filled with change and allow yourself time to fully understand the motivational dynamics at play.

3. Trust Building Takes Time: "It takes 3 full payroll cycles for someone to trust you—so get them RIGHT." This concrete timeframe—three full payroll cycles—highlights how fundamental the employer-employee financial relationship is to building trust. Errors in payroll can permanently damage employee confidence in new ownership, so investing in flawless execution here pays dividends in trust.

4. Actions Over Words: "Let your actions speak. Pick 2-3 small things they like to get fixed and do them early." Identifying and addressing specific pain points that existed under previous ownership demonstrates both your attentiveness and commitment to improvement. These early wins build credibility more effectively than grand promises about the future.

5. Demonstrate Genuine Care: "When people have a death or an emergency, don't be a jerk and ask them when they're coming back. Small sacrifices in moments of truth go a long way in building trust." How you respond in moments of employee personal crisis defines your leadership character more powerfully than formal policies. Showing genuine empathy during difficult times builds loyalty that can't be purchased or mandated.

Customer Retention Post-Acquisition

When asked about customer retention following an acquisition, Abhi provided reassuring insights, particularly for service businesses:

For Residential Customers: Residential customers don't care. They just want the person they talk to on the phone and find in their backyard to be the same (that is 90% of the puzzle here). There will always be some customers who use the transition as an excuse to leave, but Abhi noted the root cause is typically something else entirely.

For Commercial Customers: Commercial clients follow a similar pattern but place more value on relationships with owners and senior management, requiring more "TLC" during transitions. Abhi emphasized: "Absolutely no need for discounting."

Common Post-Acquisition Challenges

Rand Larsen, drawing from the experiences of SMB Community members, outlined the most common challenges operators face after closing a deal. These challenges represent the collective wisdom of approximately 30 business owners who meet regularly to discuss their operations:

1. Key employee departures early in the ownership transition Despite best retention efforts, some staff turnover is almost inevitable. Preparing contingency plans for critical roles before closing can prevent operational disruptions.

2. Sellers being less helpful than promised during transition periods The enthusiasm and cooperation sellers show during negotiations often wanes after the check clears. Document specific transition responsibilities in writing and consider tying a portion of the purchase price to successful knowledge transfer.

3. Working capital shortfalls upon taking over New owners frequently discover they need more operating capital than anticipated. Building a cash cushion beyond what your projections suggest is prudent insurance against unexpected expenses or revenue delays.

4. Cash flow struggles, particularly from the "j-curve" of replacing a single business owner with multiple employees, plus software costs and maintenance expenses Many acquired businesses operated lean under previous ownership, with the owner wearing multiple hats. As you professionalize operations, expect a temporary increase in expenses before seeing the benefits of improved systems and processes.

5. Industry learning curve challenges, where many assumptions about growth levers prove inaccurate The growth strategies that seemed obvious during diligence often prove more complex in practice. Be prepared to revise your assumptions as you gain deeper industry knowledge.

6. Finding good operations managers (consistently the biggest challenge 1-2 years post-acquisition) This challenge was highlighted as the most persistent and universal problem across SMB Community members. As Rand noted, this problem doesn't have an easy solution - most good managers are found through months of persistent recruiting efforts on job boards, while those willing to spend more may engage specialized recruiters who focus on local market searches.

Abhi shared a creative solution to this operations manager challenge: "One way I found was to actively look for someone in your industry in a different part of the value chain. For example, I brought on the GM of my local vendor to run ops in my business. I watched him for a year - saw his strengths and attitude, and made an offer."

This approach leverages your growing industry network and allows you to observe potential candidates "in action" before making hiring decisions. It also highlights the value of building strong relationships throughout your industry's ecosystem rather than focusing solely on competitors.

Balancing Diligence Depth vs. Speed

On the question of balancing thorough due diligence against moving quickly to close deals, Abhi offered this perspective: "My belief is that every deal has 'hair' on it—you'll uncover it at various points—but the key question is do you have the unique skillsets to overcome that 'hair' or is it not for you."

This insight shifts the diligence mindset from seeking a "perfect" business to evaluating whether the specific challenges of a particular business align with your capabilities. Abhi shared a personal example where he pursued a deal that had significant family involvement in the business—an aspect that deterred other buyers but matched his interpersonal strengths.

The goal of diligence shouldn't be finding a flawless business (which doesn't exist), but rather identifying whether the specific imperfections of a target are ones you're uniquely positioned to address. This requires honest self-assessment about your strengths and weaknesses as an operator.

On diligence approach: "I think folks generally over-complicate diligence and try to do it like a rule-book and checklist... but you have to empathize from the seller's POV too. In a $5M rev biz, does a $1200 error in bank reconciliation matter?"

This pragmatic approach acknowledges that excessive diligence demands can exhaust sellers, potentially souring relationships before the deal even closes. Distinguishing between material issues and minor discrepancies helps maintain deal momentum without sacrificing necessary risk management.

Abhi recommends focusing diligence on two core questions:

1. Are there potential "deal-breakers" or integrity issues? This focuses on uncovering fundamental problems that could threaten the business's viability or legality—issues like regulatory violations, systematic fraud, or misrepresented financials that would undermine the entire investment thesis.

2. What information is critical to be ready for Day 1? This forward-looking question shifts some diligence energy toward operational readiness. Understanding key customer relationships, critical operational processes, and employee dynamics positions you for a smoother transition.

Everything else is secondary, allowing you to focus on pace after addressing these fundamentals. This balanced approach keeps diligence aligned with both risk management and deal execution, rather than becoming an academic exercise that delays closing.

Finding Your Starting Point

When asked about the viability of a smaller acquisition ($315K SDE with high recurring revenue) as a starting point, Abhi suggested considering several questions:

1. What are your long-term goals for size and timeline?

2. Is the industry fragmented enough that you can make additional acquisitions?

3. Are you comfortable with the hands-on nature and key-man risk of a smaller business?

4. Can you see a path to doubling the business size within 12 months through another acquisition?

5. Would you regret it if you couldn't find another good add-on deal for a year?

The answers to these questions help determine whether a smaller acquisition makes sense as an entry point.

Operational Readiness: A Critical Prerequisite

A common thread throughout the discussion was the importance of operational readiness before closing an acquisition. While much of the searcher's journey focuses on finding and funding deals, Abhi and Rand's experiences highlight how crucial it is to prepare for the operational challenges that follow.

Some practical steps to improve operational readiness include:

1. Develop a detailed 100-day plan that prioritizes early actions

2. Build relationships with key employees and customers during diligence whenever possible

3. Identify critical operational processes that must continue uninterrupted during ownership transition

4. Create contingency plans for potential key employee departures

5. Establish clear communication protocols for how and when changes will be implemented

Conclusion

The insights from Abhi and Rand illustrate that post-acquisition success hinges on a combination of strategic patience, relationship-building, and operational focus. While many first-time acquirers focus primarily on closing the deal, the most challenging and rewarding work begins after the papers are signed.

Their experiences highlight several key principles for acquisition success:

• Start with humility - recognize the value of existing staff expertise

• Prioritize trust-building - through consistent words and actions

• Move deliberately - balance the desire for quick improvements with the reality that trust and change take time

• Focus on retention - of both employees and customers through the transition

• Prepare for inevitable challenges - especially the cash flow demands of professionalizing operations

• Invest in finding strong operational leaders - this challenge remains consistent across industries and company sizes

For searchers approaching their first acquisition, these perspectives provide invaluable guidance on what to expect and how to prepare for the operational challenges that follow a successful search. The journey from searcher to operator requires more than just financial acumen—it demands emotional intelligence, adaptability, and the humility to learn from those already in the trenches of the businesses you acquire.

WhatsApp Community

Our community gained actionable insights from this week's AMA with Abhi Ravishankar of Truss One Partners and Rand Larsen of SMB Community, who shared hard-earned wisdom from successfully acquiring and operating multiple businesses. The conversation quickly moved beyond basic acquisition strategies as members dug into real operational challenges - from standardizing processes across acquired companies to retaining key employees during ownership transitions. When member Josh G. raised a question about starting with a smaller acquisition, it sparked an invaluable discussion about building credibility in your industry and strategic growth paths, with experienced operators sharing their own lessons learned. These kinds of practical, granular discussions happen daily in our growing community of searchers. Click below to join the conversation.