Every year, over 500,000 businesses change hands. This figure is only expected to increase in the coming years as baby boomers retire and sell their company.
Purchasing an existing business is an enticing business tactic since it allows you to become an entrepreneur without starting from scratch. You get to avoid all the pain points associated with launching a new business.
If you already own a business acquiring another company allows you to expand your business much more quickly and enter new markets or offer new services or products that you are currently not offering.
However, changing ownership has its own challenges as well. A company’s financial feasibility for success does not always tell the whole story. You need to ensure that the processes that worked for a previous owner will work as well for you, if not better.
This article will discuss tips to help you make a smooth transition after buying a business.
How to Have a Smooth Transition After Buying a Business
The first three months after purchasing a business are the most critical in determining your success with the new company. During this period, you will set the tone to determine how things will run under your helm.
If this transition period goes smoothly, chances are you will have a bright future in your venture.
Here are the steps to take to ensure a smooth transition.
1. Keep the Seller Near During The Transition
It is typical for the seller to stick around to help you through the transition period in business acquisitions. You are taking over the last business owner’s position, so you want to stay close to the last business owner. Becoming the new boss is a daunting task, but if you are continually around the last boss, your transition will be easier.
However, this is not always guaranteed, so you should go out of your way to request them to stick around and show you how things run.
During this period, do your best to pick their brains as much as you can. Moreover, keep the relationship friendly as opposed to strictly business.
It is important to keep that in mind since the seller’s attachment to the business might show from time to time, and you might feel that they do not understand that you are the boss. Nonetheless, understand that it is only natural and do your best to keep the relationship good and extract value from the transition.
To help you in that endeavor, have a comprehensive list of everything you want them to take you through. This means everything from how all technologies and systems work to a complete evaluation of its employees.
A topic that should definitely be on your list is ‘What would you do if you were in my situation?” Ask them what their plan would be like if they were the new owner.
Therefore, this means that you will let them run the office for the first few weeks as you observe. With anything you don’t understand, make sure to question the reasons behind why they do anything they do.
2. Introduce Yourself to the Employees
When people learn that their company is being taken over by new management, their first thoughts are usually about their job security. Therefore, you can expect them to be nervous about you.
As such, be empathetic about their situation. Empathy as well as caring about your new employees will help to make the business transition more effective.
The first thing you will need to do is to put their minds at ease. Let them know that there are no major changes planned out and that you are optimistic about the company’s future.
Also, let them know that you are available and eager to speak to anyone who might have any concerns.
At the end of the meeting, you can request that anyone that wants to can help you with the following:
- What they think needs to be done to make them more effective at their job.
- What they would do to the company if they were the new owner
However, keep in mind that the employees might not be as responsive or interactive during the first meeting as you would hope for. Mostly, this is just a case of nervousness.
Therefore, do not try and read too much into it or start making promises to win them over. Just play it cool.
3. Introduce Yourself to Suppliers and Customers
In some industries, it usually doesn’t matter who runs the show as long as it is business as usual. However, there could be long-standing relationships whose integrity can be compromised by a change in leadership in others.
Therefore, during your internship with the seller, ask about the important relationships the business has and how to handle them best. Next, ask the seller to organize meetings with these people so you can get to know each other.
4. Make the Place Yours During A Business Transition
After the transition period is over, you might consider giving the place a new look with some exterior and interior décor improvements. Remove unused or unwanted items such as furniture or old files. Also, consider automating some systems.
All this helps drive the point home that the business is indeed under new management.
5. Sell Unnecessary Business Assets
If there are any obsolete assets in the business’s inventory, get rid of them. There is no point in keeping assets around that take up space and aren’t producing any revenue.
6. Get Deep Into the Business
Regardless of what you have learned from the previous owner during the transition period, it would be best to do a deep analysis of the business to derive personal insight. The previous owner might not always let you in on every last detail.
To help you with this, make it your goal to speak with everyone associated with the business. This includes employees, suppliers, customers, and possibly even competitors so you can get a deeper understanding of your environment.
7. Implementing Your Strategy
After analyzing the business, its processes, its environment and getting insights from associates, you will have a good idea of what the company needs to improve.
Create a strategy that will enable you to implement your ideas. If you already had a plan for the business, tweak it to match your findings to be a good fit for the business.
8. Leave the Door Open
You can always expect some resistance to the changes you are trying to incorporate when transitioning into a business you purchased. Communication is key when transitioning into your newly acquired business. When you purchased the business, there was a large amount of communication between you and the previous business owner. Now you need to communicate with your employees. They can be your greatest asset or your biggest challenge.
Make sure you are not hostile to those who question your motives; instead, be transparent about your plans and let them know that your door is always open for input.
Making the Transition Into A Company You Purchased
There are many reasons why one would want to buy an existing business. However, making things work for you as they did for the previous owner is not straightforward.
Consider utilizing the above tips to ensure a smooth transition after buying a business.
Are you looking to buy or sell a business?
Synergy Business Brokers is an award-winning business brokerage firm that has successfully matched sellers to prospective buyers for nearly two decades. Talk to us today to learn more.