One of the biggest issues that business buyers overlook is what happens after they complete a purchase. Quite often, buyers get so wrapped up in the sale that they forget they will soon have to run the business.
There are a number of fundamental mistakes that buyers make soon after they take over, when reality sets in. During the process of buying a business, it is easy for the buyer, as an outsider; to hallucinate about all the “wonderful” things they are going to do to improve the business. Then, reality sets in, their ideas do not produce the instant results they anticipated, and they figure they bought a bad business. However, that is not necessarily so.
If you want to avoid this predicament, here is what you need to do.
Don’t Do Anything Major…Yet.
Most buyers purchase businesses in a new industry. As such, you cannot expect to be an expert in the field on day one. Sure there may be some obvious improvements you can make, but until you get a true “gut feel” for the business and the industry, you cannot implement anything significant. So the first lesson is not to do anything drastic at the beginning. While an effective due diligence prior to the purchase should address the following issues, you must dig in and learn how the business really works, what the company does well, what are its weaknesses, how does the competition perform, who are the key players in the industry, what prior initiatives have worked well, and which ones have failed. In other words, you cannot do anything meaningful until you know the business operations intimately.
Get The Employees On Your Side
When a company changes hands, the employees will naturally fear for their jobs. Their concern is really unfounded because the fact is that their job is generally safer with a new owner than the former one because you do not know them, or the business well enough to determine with absolute certainty whether or not they are helpful, or a detriment to the business. But, new ownership brings change, which most people fear. So their concern is generally more about not knowing what will happen rather than what is truly going to transpire.
By the same token, you do not need to go overboard assuring them their job is safe, because it isn’t. And, you may in fact have to make some personnel adjustments over time. If you promise them job security, you are setting yourself up for a potential problem.
So, what do you do?
The most effective way to communicate your intentions with the employees is to tell them that your goal is to build the business, and part of the reason you bought it is because there are good employees in place upon which the company can grow. Insofar as their job security is concerned, be very clear that as long as they do their job well, work hard, and help you fulfill your objectives, they should not have any fear. Let them know you need and welcome their feedback and that you are open-minded to their ideas. One common thread in small businesses is that employees often do not feel appreciated or part of the process. The quicker you can demonstrate the opposite, the sooner you will win them over.
Getting The Most From The Seller
You should never be reluctant to aggressively negotiate a long transitional training period from a seller. Unless you are buying a little pizza joint, it is completely unreasonable for any seller to think that a two week training period is acceptable. Each business dictates the necessary time required, but don’t be afraid to push for a longer transition. Similarly, if you do not believe within a few months you can easily assume the role of the boss, then the business is probably not right for you to buy altogether.
I am not suggesting you need the seller on hand full-time for months after the sale. However, you may need them around to provide additional consultations, or be available for any questions you may have. This is another reason why it is good to have the seller on the hook, with money set aside from the deal to ensure they honor their post-sale transition work. It is also the reason why you want to have a good relationship with them during negotiations because you will need them after the sale.
Get In and Get Them Out
Your agenda with keeping the seller on board for an adequate training period is to learn the basics but the sooner you can get get in, get comfortable, and get them out, the better it usually is for you. . Until they are completely removed from the business, you will not be able to put your stamp on the company, or show the employees, suppliers and customers that you are in charge. In some cases, it is important for continuity to these same stakeholders, that they perceive the former owner is still involved. Use your judgment but again, the goal is for you to take over and assume the leadership role as soon as possible.
Have A Plan Before You Get The Keys
No matter how ell suited you are for the business, everything will be new to you at first. It can be overwhelming. That is why you need to take over with a concrete plan in place. Lay out very specifically what you want to learn from the seller by week for the transition period. Don’t wait until you buy the business to get your plan into place. Throughout the time that you are evaluating and analyzing the business, compile your notes of “things to do” after you takeover so you hit the ground running.
You need to show up on day one with great optimism and confidence to show the employees that you are well-prepared to be their leader. Even if the company has no employees, you need to feel you are as ready as a marine to begin running the company immediately. Having a concrete plan is the only way to accomplish this objective. If you show up on day one looking like a dazed employee, you won’t know where to even begin being the boss.
If you want to learn a proven step-by-step approach covering the entire business buying process, get a copy of How To Buy A Good Business At A Great Price. Along with this guide, you will receive unlimited personal consulting from me and my team of business buying experts. To learn more click here