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The First Steps After You Buy a Business
By
Richard Parker, President of The Business For
Sale Buyer Resource Center™ and author of the
most widely used reference resource and strategy
guide for buying a business for sale –
How To Buy A Good Business At A Great Price©
It's One Thing to Buy A Business, Now You
Have To Run It!
The first 90 days after you
close on a business purchase will prove to be
the most critical time in you new venture's
short-term future. There are several key factors
that if done right, will set the foundation for
your success. It is very important for you to
lay out your plan for post-closing before you
take over so as to ensure the smoothest
transition possible.
Don't Change Anything…. Yet!
Unless you have an intimate knowledge of the
business and the industry, much, if not
everything will be new to you. While it is
normal for you to jump in full-steam ahead and
implement many changes that you've thought
about, the best thing that you can do is
nothing, at least at the very beginning. That's
right, no major changes at all, at least for
now. Most businesses experience a downturn in
the first three to six months after a new owner
takes over. Don't panic, it can happen. However,
if you avoid any substantial changes, things
should rollover effectively.
Since so much is new, it would be impossible
for you to set forth any policies or procedures
that make sense. What you want to do is to first
learn the business: who are the customers, what
do they want and expect, understand the
employees and determine their role and
contribution to the business. Avoid drastic
changes. The old saying that you've got to learn
before you can earn is most applicable in this
situation.
Get in, get comfortable, get smart and then
get going.
A good friend of mine has a great line:
“you've got to know it before you can grow it”.
The Seller's Role
Typically, there will be a period immediately
after the acquisition where the former owner
will be around for a transition period. This
varies from deal to deal. In some cases, it can
be as short as a couple of weeks while others
may involve a long-term training period and even
an ongoing consultation/employment relationship.
This can be a difficult time. Regardless of the
length of the relationship, keep in mind that
the seller will still have a very strong
attachment to the business and the employees
will take some time getting used to a new boss.
Interestingly enough, no seller has ever made
it through the entire training period for any
business I've acquired. Sure, they have a role
to offer some insights, but I've always found
them to be more of a hindrance than an asset. Of
course, if it's a complicated business, then
this may not always hold true. If the business
is far too difficult for you to take over, or,
if it relies on them completely to succeed, you
probably shouldn't buy it.
Pick their brains as best you can. Always
keep the relationship friendly; you never know
when you'll need them and they can remain a good
source for brainstorming down the road. However,
this is now your business, you're the new boss,
it's your show, and it's time to get the show on
the road.
Prepare a comprehensive list of everything
that you want them to cover during training.
This includes everything from how to operate the
alarm systems down to providing you with their
evaluation of the employees. One subject that
should be covered at length is to ask them what
they would do in your situation. Ask them to
outline what their business plan would like and
what things they feel you should explore as the
new owner.
For the first couple of weeks, let them keep
their office as-is. Set yourself up alongside
them as watch what it is that they do each day.
Observe the flow of communication with clients,
employees, etc. Continually ask questions. Do
not simply allow them to do their job as they
did before; you need answers, so question
everything.
Meeting with Employees
Set up a meeting the first day with all the
employees. These people are naturally going to
be nervous about you, their job and their
future. Most people abhor change so be
sympathetic to their situation. No matter what
plans you have, let them know:
- There are no major changes planned.
- You are very optimistic about the
business's future.
- Each one of them has a role to play.
- You're eager to build the business.
- You are available to speak to them at
any time regarding any concerns they have
- They are expected to contribute to the
success of the business.
- You're counting on their support to
build the business.
- You realize that there will be a
transition period and it may take some time
for them to get used to you and vice-versa.
The objective of the first meeting is to set
their minds at ease. Open up the floor to
questions. Do not worry if not a single person
has a question; they're nervous, so don't
interpret this as anything other than a
demonstration of their anxiety. Don't feel
pressured to reply to anything that you haven't
thought through and never make any promises
simply to win them over.
End the meeting by asking each one of them to
prepare a report, due within one week, that
outlines: what they believe can be done to make
them more effective at their job, and second, if
they were the new owner, what suggestions they
would have for the overall business. Tell them
that all reports will be kept confidential, that
you will review it with them individually and
that you expect everyone to have it submitted on
a timely manner (a note here: if any of them are
late, you can expect that person to be a trouble
employee and chances are they will not last).
It's Time To Get Busy!
So you've got the transition period
completed, you're feeling comfortable with the
business, the employees are feeling positive,
you've reviewed their reports, it's now time to
get down to business.
Step One: Make the Place
Your Own.
Get the place cleaned up. Throw on a new coat
of bright paint, have everyone clean up their
work areas, remove old files and throw out
unwanted furniture, old posters, etc. Give the
place a new look. You do not have to spend much
money at all. Set the standard by keeping your
work area spotless. There's no need to be a
mess, no matter what your prior work habits
were. You cannot expect any employee to do
anything different than you so if you want to
run a well-oiled, organized business, it all
starts with you.
Step Two: Learn the Business
and What Oils the Engine.
Perhaps the most critical thing you can do in
your initial tenure is to really learn the guts
of the business. The answers are readily
available but you have to ask the questions.
Make it your goal to speak with customers,
suppliers, employees, competitors and anyone
else associated with the business to get a true
picture about the business and the industry and
where you fit in. Generally, the customers have
the answers, and quite often businesses do an
awful job of satisfying the clients. They may
think they do, but the truth is that most don't.
As such, dig into your customers' wants so that
you position the business as a place where they
want to do business.
Your employees are a pivotal link in this
process. Get them involved. They will be far
more effective carrying out plans they have
helped develop than they will executing
strategies that have been dumped on them.
Based upon employee reports and fact-finding,
compile a detailed listing of everything you
want to do in the business… eventually. You
can't do it overnight. However, by noting these
potential items, your business plan will begin
to marinate. Work at organizing your list by the
area within the business (sales, marketing,
accounting, operations, etc.) and keep it up to
date.
Develop a 30/60/90-day plan for each specific
area of the business. Follow up diligently to
ensure timelines are respected. Change does not
have to be monumental or drastic; it's
improvement that you're striving to achieve.
Step Three: Sell Off Useless
Assets if Applicable
If the business has acquired useless
inventory, equipment, or any other obsolete
asset, then get rid of it. There's no need to
keep any assets around that take up space and do
not produce revenue.
Step Four: The Marketing
Plan
In concert with Step Two, assemble the
marketing plan for the business. Keep in mind
that marketing, is without a doubt the simplest
thing to do in a business and something that is
made overly complicated by most companies.
Marketing is simply a matter of finding out what
the customers want, and then giving it to them
at terms that make sense to you and them. End of
story. You may buy a business that excels at
marketing, which is great. However, marketing
also requires continuous testing and measuring.
So even if they're great at it, make certain
that you set forth additional strategies within
this discipline.
Step Five: The Business Plan
Personally, I think most business plans stink
and are completely unrealistic. Companies put
them together to make themselves feel good and
generally little of it ever gets executed. On
the other hand, it can prove to be an invaluable
document and a blue print for success,
Therefore, it is needed, but must be done
correctly. A business plan does not have to be a
long document with unrelated information and
useless pie-charts and graphs. On the contrary.
Done right and it can be a bullet-point
description of:
- Everything you want to do
- Who is going to do it?
- How it's going to get done
- When is it going to be
completed?
- How will it be continually
measured
Now you're set. You've got a solid
understanding of the business. You know what the
customers want. You have a plan to deliver it.
Your employees are sold on you; they've
contributed to the company's plan. Focus like a
laser beam and execute. Measure absolutely
everything. Strive to get better in every way
and everyday! If you constantly think about how
you can make your business bigger, better and
faster then you cannot help but be successful!
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