In 1953, a start-up business called the Rocket Chemical Company and its staff of three set out to create a line of rust-prevention solvents and degreasers. Toiling in a small lab in San Diego, California, they set about to create a “water displacing” formula for use in the aerospace industry. It took 40 attempts to get the formula figured out.
But figure it out they did, and WD-40 was born. The name stands for water displacement formula perfected on the 40th try. Imagine what would have happened if the inventors had given up after two dozen or so really solid attempts?
The story, and the point, of course, is bigger than trying hard and eventually succeeding. WD-40 was initially a product limited to special uses, an example of which was protecting the outer skin of the Atlas missile from rust and corrosion. But that was just for starters. The product actually worked quite well for a variety of other uses–so well that several employees snuck some WD-40 cans out the plant to use at home on more mundane tasks like squeaky hinges and rusty nuts and bolts. The product eventually became a household staple. By innovating and adapting to the market, this small group of entrepreneurs created something great.
Every day we hear from buyers who have not been successful. In fact. 49 out of every 50 buyers who send in an inquiry to one of our open market or closed market listings won’t succeed on that inquiry. That is a statistical certainty. But the problem isn’t just numbers and statistics. Most buyers are not prepared to be successful. This is a problem that can be solved.
The message here, just to be crystal clear, is that as a buyer prospect in this rapidly changing and growing industry, trying hard and trying often is not enough. Innovate. Learn. Improve what you do and how you do it. Think around the problem. Build a practice or a business that is designed for rapid growth, one that has the necessary revenue strength and enterprise strength to accommodate an outright acquisition, a merger, a continuity partnership, a Sell and Stay strategy–whatever makes sense under the right circumstances. Make sure you have a succession plan and a continuity plan–smart sellers are going to ask. Building a base for acquisition is critical, and that is something that starts well in advance of the acquisition.
Frankly, if advisors follow this logic and build strong, sustainable businesses of their own, they will succeed many times over in terms of cash flow, profitability, equity value, and choices, regardless of whether they acquire another practice or two along the way.
This post is adapted from a section of our book Buying, Selling, & Valuing Financial Practices. Available on Amazon.