When I evaluate a business for acquisition, one of the most important factors I study is the management team. Numbers tell me what the business has done in the past, but management tells me what it will do in the future. A strong team can carry the company forward even through ownership changes. A weak or dysfunctional team can drag down even the most profitable business.
I’ve learned that evaluating management isn’t about resumes or titles, it’s about observing how people think, lead, and operate under pressure. In this article, I’ll share my approach to evaluating management teams before buying a business, the mistakes I’ve made, and the signals I look for that tell me whether leadership is an asset or a liability.
Why Management Teams Matter So Much
I can buy the assets, the contracts, and the systems of a company, but without capable leadership, none of those things will run smoothly. In fact, most small and mid-sized businesses are only as strong as the managers guiding daily operations.
Management teams matter because they:
- Drive employee engagement and culture.
- Maintain customer relationships.
- Execute strategy consistently.
- Handle problems before they reach ownership.
- Provide continuity when the seller exits.
When a management team is strong, I can focus on growth and strategy. When it’s weak, I end up firefighting.
My First Wake-Up Call
In one of my early acquisitions, I underestimated the importance of management. I assumed I could step in and lead directly until things stabilized. What I didn’t realize was that employees looked to their managers far more than to me. Because the management team was weak and disorganized, employees felt confused, productivity dropped, and customer service suffered.
That deal taught me a hard truth: if I don’t evaluate management upfront, I’m setting myself up for operational headaches later.
How I Evaluate Management Teams
Over time, I’ve built a process for evaluating management before I commit to a deal. It includes observation, interviews, and analysis of both soft and hard factors.
1. Observing Leadership Style
I pay close attention to how managers interact with employees. Do they empower staff, or do they micromanage? Do employees seem comfortable approaching them with problems? Leadership style is one of the biggest indicators of culture.
2. Communication Clarity
I watch how managers communicate. Are instructions clear and consistent? Do they share updates regularly? Poor communication at the management level always trickles down into inefficiency throughout the business.
3. Problem-Solving Ability
I ask managers how they handle challenges. Do they bring every issue to ownership, or do they take initiative? A strong management team solves problems at its level, freeing me to focus on strategy.
4. Employee Feedback
I make a point to ask employees what it’s like to work under their managers. Employees often reveal more about a manager’s true style than the manager themselves. If I hear respect and trust, that’s a strong signal. If I hear frustration or fear, I take note.
5. Track Record of Execution
I review the history of projects and initiatives. Did the management team deliver on past goals? Do they hit deadlines? A strong track record of execution builds confidence in their future performance.
6. Depth and Redundancy
I also evaluate whether the management team has depth. If one manager leaves, is there someone ready to step up? Or is the company overly dependent on one or two individuals? Depth creates resilience.
Red Flags I Watch For
Over the years, I’ve learned to spot warning signs of weak management:
- High employee turnover in specific departments.
- Managers who can’t articulate clear goals.
- Employees who avoid speaking about their supervisors.
- Constant reliance on the owner for decisions.
- Poor documentation or lack of reporting systems.
If I see multiple red flags, I know the management team may need restructuring, which affects both valuation and transition planning.
The Role of Incentives
Another factor I evaluate is how managers are incentivized. Are they compensated only for showing up, or are they rewarded for performance and results? The best management teams are aligned with business outcomes.
In some acquisitions, I’ve introduced performance-based bonuses or profit-sharing for managers. This not only motivates them but also reassures me that leadership has skin in the game.
Why Cultural Fit Matters
Even if a management team looks strong on paper, I ask myself whether their culture aligns with mine. If I value accountability and transparency, but the team is used to operating informally with little reporting, friction will occur.
Cultural misalignment doesn’t always kill a deal, but I factor in the time and energy required to realign expectations.
Lessons I’ve Learned From Evaluating Management
One of the biggest lessons I’ve learned is that management strength is often invisible in the financials. A company can look profitable, but if leadership is weak, those numbers won’t hold. Conversely, a company may have average financials but excellent management that makes it a strong long-term play.
I’ve also learned that evaluating management takes humility. It requires me to listen more than I talk, observe more than I assume, and respect the existing dynamics before deciding what needs to change.
How Management Affects Valuation
Strong management increases valuation because it reduces transition risk. If I know the team can operate without the seller, I can pay more confidently. Weak management decreases valuation because I’ll need to invest in rebuilding leadership.
That’s why I always factor management strength into my offer. It’s not just about revenue and profit, it’s about who’s running the show day to day.
Final Thoughts
When I buy a business, I’m not just buying assets or customers, I’m buying the leadership that makes everything work. A strong management team can make my life as an owner easier, while a weak one can drain my time and energy.
That’s why I take management evaluation so seriously during diligence. I want to know who I can trust, where I need to support, and whether the leadership culture aligns with my vision.
In acquisitions, management teams are often the difference between success and struggle. By evaluating them carefully, I give myself the best chance of building companies that thrive long after the ink on the deal has dried.
I share more about acquisitions, leadership, and private equity strategies at DrConnorRobertson.com, where I continue to document the lessons I’ve learned deal by deal.