Wisdon fter buying a great business
After buying a great business embrace the wisdom of others.
Now the real journey begins.
Would you like to know what others who have also bought businesses would recommend you do or do not do when first getting started?
Friends and clients from the last 24 years shared these thoughts for your success.
Refine your business plan1 unless you haven’t created one. In which case, create one now. While many new owners just manage daily as they see fit, having a well-thought-out plan keeps you on target for your budget and goal achievement.
Get yourself a business coach2. Check Bill Gates’s comments on YouTube about “everyone needs a coach.” It’s easy to get distracted with so many new things coming at you. Your first year will be particularly demanding. Make sure you stay on track. Even the best athletes have a coach. Give yourself the same advantage.
Do not spend any money unless it’s essential for the first 3 to 6 months. Making everything look perfect is a big temptation. Nuresh Kumar owns one of the most successful Shell gas stations in the D. C. area. When he took over the business, it was a run-down business, dirty and disorganized. He made the costly changes only after the business generated enough to invest in the improvements. He suggests “conserve money. Invest in your newly acquired business after you know the business. And certainly, don’t buy yourself extra stuff until you get a handle on the business”. Resist the temptation to remodel, refresh, change and fix everything until you fully lived running the business for months.
Start creating your exit plan. Exiting your business might be the farthest thing from your mind but begin to get yourself organized just in case. Steven Covey3 said, “Begin with the end in mind.” Think about the things you wish had been easier when you took over. In the long run, this will add value to your business, even if you have no idea when you might sell.
Establish your mission and your core values4. Get your staff entirely onboard with the new values. Make sure the mission and core values are meaningful to you and your business. Don’t just settle for words that almost any company could post on their website. Consider getting feedback from the staff. Myron Bonkarosky had all his employees, including the cashiers and clean-up crew, carry a card with the customer-focused mission statement at all times. He would often discuss these values with the staff when he visited his many auto repair shops. He took over mediocre businesses and turned them into super enterprises.
Embrace the current company culture5. It might be tempting to revamp your newly acquired company’s culture quickly. Remember that with people, slow is fast, and fast is slow. If the company has a laid-back culture and you are a high-energy type A, go slow at first. Help your team understand the changes you want to see going forward. Get to know what each employee does and what challenges they face. Communicated well, many employees will embrace a new focus. You are also likely to lose some. If you go too fast, you might lose great employees and find yourself scrambling to fill lots of positions at once.
Fully understand what the existing owner does on a day-to-day business basis. Assess your skills, abilities, and what you are best at and excited about. After you master the owner’s training, decide if you’re going to do the things the same way or not. Know the details of what the previous owner did and why they chose those daily/weekly tasks. Then assess your approach.
Spend a lot of time in the business at first. Get your family prepared and supportive. While you might only want to work 35 hours a week, learning a new business is like anything else; learning takes time. Additionally, you will be running a business at the same time that you are learning. Take advantage of the time with the previous owner. Take good notes or even video some things.
Do you what you enjoy and are good at. Delegate the stuff you are not good at or don’t know how to do. Give yourself time to “work on the business, not just in the business.”
Embrace the balance in your life. Make time for family, caring for your health, life plan, and more. Although you might put in tons of hours at first, make sure that eventually, you take time to live fully.
Hold onto all the business records that you acquired during the acquisition. Collect them before the seller is gone for good. Organize all your data in one place. You never know when you’re going to need to look up things.
This just in from one of our biggest acquisition clients. They have bought dozens of businesses over the years.
Hope all is well. A few considerations from an acquisition standpoint (that’s all we do vs. start-ups):
- Diligence beyond the financials. That’s whatever everyone focuses on. It’s foundational, of course – but many other aspects that are easy to overlook in the excitement of the deal.
- Read the lease and get legal advice. The devil can appear repeatedly in the details – and you’ll have to live with it for years and years to come, sometimes over a decade. Be prepared to walk over a bad lease. L/L’s will sometimes make changes with an amendment, but rarely.
- Similar with all applicable licenses and permits. Don’t assume they’ll just transfer, and be “good to go” under new ownership
- And similar with all third-party agreements – vendors, suppliers, technology, etc. – some are way more painful than you’d think. Take the time to read them and meet or at least discuss with the third party when you can.
- Really understand the customer base and, importantly, how it is trending. Is it a younger demographic that is not being replaced as they age? Is it an older demographic that is being replaced by changes in the surrounding community, and those younger folks are not visiting? The key is focusing on transactions, not just revenues. Revenues can grow in some years (i.e. one year prior to sale, how convenient) due to price increases, driving check average (good but not necessarily sustainable/repeatable from a growth standpoint), and even “creative accounting”. The real key is understanding the underlying transaction trend, growing, stable or decreasing. Why and where are they coming from? It’s a painful lesson to take over and see sales that you thought were trending-up from just the previous year actually decline despite your best efforts.
- Be prepared to do NOTHING!!! You have great ideas, big plans, visions – change, improvement, growth!!! You will absolutely shoot yourself in the foot if you move forward aggressively with changes. Vow to yourself to just run the business as-is for at least 60-days, ideally 90. Gain trust (customer and staff, even vendors). Listen to what they have to say. Involve them in the change process, even let them feel like your ideas for change came from them. You’ll do way better with buy-in/support, and you’ll be surprised how much your initial thinking changes as far as what/how to change once you get a real “lay of the land”
More notes from successful people who bought a business.
Be honest.
Don’t let the previous owner work with you any longer than is necessary (recommended by one who bought a plumbing company and recommends 60 days max)
Insist on a solid non-compete and do not be hesitant to enforce it.
Don’t rely on the SBA or Lender to tell you how much you need for operating funds. Get professional insight via your accountant or business consultant
Only take what you need out of the business at first.
Expect to work hard at first. Outwork your staff.
Don’t spend on things you don’t truly need at first.
Work on holding on to staff.
Remember things like their birthdays and essential matters.
Research the industry thoroughly and keep learning.
Be humble in front of them. Don’t have a big head about being the owner
References:
- Help with business plans and more – SBDC (i.e., https://sbdctampabay.com)
- Everyone needs a coach – Bill Gates https://www.youtube.com/watch?v=XLF90uwII1k
- The 7 Habits of Highly Effective People – Steven Covey
- The Value of Core Values – Lisa Huetteman
- Corporate Culture – https://www.forbes.com/sites/davidrock/2019/05/24/fastest-way-to-change-culture/?sh=2dc4c68d3d50
See fresh new listings that meet YOUIR criteria https://bbms.biz/listings/bbf-883/buy-enter.asp
Businesses for Sale with SBA PreQualification: https://bizmls.com/listings/bbf-883/bus-lender.asp
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What is a business Worth- Here is a quick resource to get a general idea of possible value: https://buybizusa.com/value-my-business/