Taking a new business under your wing is an exciting prospect. It’s understandable you are itching to make your mark on the business. The acquisition process may have taken several months to complete. As a result, you have a long mental list of all the things you would like to change or implement.
So, let’s get started on day one!
If this is where you’re at, there’s something you need to hear…
Taking a new business under your wing is also a potential ticking time bomb. Those first few weeks post-sale are critical. Make one wrong move, and you could jeopardise the stability of your team, customers and suppliers.
In this post, we share our essential do’s and don’ts for new owners who have recently acquired a business. We explain the areas to take action and where you should rein in your enthusiasm. Our advice and recommendations are based on 45+ years’ experience of brokering business sales and the problems clients have encountered after the sale.
We should add, please don’t follow these tips if you have bought an under-performing business, as alternative advice may apply. Contact your local business broker for guidance.
Change leads to uncertainty. It’s a natural reaction. A change in business ownership comes with uncertainty and risks destabilising even the most profitable of companies. When you acquire a business, you must show that you have the best interests of that business and everyone involved in it, at heart – at every stage of the deal.
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This may sound basic, but it’s the simple things that are often overlooked. New owners can be obsessed with big picture strategy and fail to get to know the people who are fundamental to day-to-day operations. Take time to walk around the business and meet the people that make it tick. It’s your opportunity to make a great first impression with everyone from the canteen staff to admin support.
Acknowledge that you are new to the business, and you don’t know everything about it. Immerse yourself in its operations. Talk to the management team. Ask for their views on performance. Learn its processes, systems and procedures. Understand how everything works and the way things are done. You will soon get a good idea of what is working and what needs to change – which might not match your initial thoughts.
As well as getting to know your employees, you need to nurture the other relationships that keep your business afloat: suppliers and customers. Both these groups will be looking for stability under new ownership. Reassure them that the current service they receive will continue under your watch.
Set out your intentions with realistic timescales, so that you can clearly communicate your vision for the future to your employees, clients and suppliers. Share issues that need to be fixed straight away and your reasons for doing this, e.g. if you lost a key employee during the sale and need to replace them. You won’t be able to change everything at once (and it’s not advisable to do so). Drawing up a physical plan can bring to life what is achievable.
Put your big picture hat on and think about the people, systems and outcomes that will be impacted by your decisions. This may mean taking professional advice from a lawyer, accountant, or another expert.
One of our Business Partnership Brokers supported the sale of a coffee shop. After the deal went through, the new owners began changing things immediately. What they considered to be small details turned out to be huge in the eyes of their customers. They changed the background music, the menu, even the mugs! Despite holding the same volume of coffee, customers perceived the smaller mugs to hold less coffee and therefore offer less value. It’s a lesson that all decisions, no matter how minor, have repercussions.
In the example above, if the coffee shop owners had involved their customers in the conversation and perhaps asked for their feedback on the proposed changes, the outcomes would have been different. As well as customers, consider the views of other stakeholders, including shareholders and employees. Allow people to have their say and demonstrate that you are actively listening to their views, not making a token gesture.
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Take your time to review the implications of your actions, and consolidate and review the feedback you receive. New business owners need to build trust and confidence in their leadership before making any major changes. Tread carefully.
Going back to the coffee shop example, if the owner had consulted with customers and the customers overwhelming responded that they didn’t like the new mugs, the owner could not ignore this. The same goes for professional advice. Asking for feedback and then ignoring it would be foolish.
Sweeping away all traces of the previous business owner once the deal is complete would be a mistake. Whether there is a handover period agreed in the deal or not, you may still need to ask the previous owner important questions. Keep your relationship amicable.
When you appoint a broker to help you buy a business, you benefit from plenty more advice like this. Before, during and after the deal, a broker supports you to ensure you make informed decisions at every stage. Whether it’s your first or fifth acquisition, our national network of brokers has the know-how and experience to set you on the right track. From where to start to post-sale, our brokers will help you to integrate yourself into the business and make the right decisions for its future.
If, during due diligence, you identify things that need to change under your ownership, our best advice is to hold that thought. Take a step back, follow our do’s and don’ts, and take your time to get to know your new business before you make any changes.
There’s no skirting around it: buying a business is complicated. If you’re inexperienced or entering into a purchase for the first time, you could quite easily fall into some familiar traps. Scouring the market for potential investment opportunities can be a thrilling experience, but before you jump feet-first into what’s available, it would be wise to do some careful research, thinking and planning. In this post, we will share five common mistakes buyers make when buying a business, and how to avoid them.
As business brokers for the sale and purchase of businesses, we get calls most weeks from excited prospective buyers wanting to know what’s on the market within their budget. Purchasing a business requires careful thought and planning, and it’s clear when a buyer hasn’t done any of this. If you can’t answer some basic questions, then you’re wasting your own time as well as ours.
We’ve pooled our knowledge and experience of brokering business sales to compile the most common mistakes even the most experienced buyers make, and how to prevent them becoming an issue in the first place.
Before you start searching the market, you need to do your research. You cannot brief a broker to source businesses for sale if you don’t have a clear idea of the criteria you’re searching for.
You can prepare well by being specific and clear about the type of business you want to buy. By the time you pick up the phone to a broker, you should have a clear idea about the type, size, turnover and price bracket of business you’re looking for, and the reasons behind your choices. You should also be able to explain what you don’t want from a business purchase. Read more in this post on where to start when buying a business. Clarity around deal structure and how you are funding the purchase is also an advantage. More on that below.
When you know what kind of business you’re looking to buy, then you can go ahead and register on business sale websites and/or contact a business broker.
Buyers with previous experience in the sector they are buying in have an obvious advantage. If you have no prior knowledge of the sector, you should do your research before entering into discussions with the vendor.
When you’ve settled on the sector of business you want to buy, consider the benefits and risks of running a business in that area. Think about legal restrictions, governance, permits and certifications required, and all the external factors that may affect business operations.
If you’re looking to purchase as an investment where you would have strategic control over your acquisition, but an existing employee team will continue to operate the business on a day-to-day basis, you may feel this background research is not quite so essential. You can compensate by choosing a business broker with knowledge and experience of buying and selling businesses in that particular sector. A good level of sector knowledge is invaluable, especially when it comes to negotiating the deal.
Most people cannot buy a business without access to finance, so speak to your personal banker and commercial lenders about how to fund your purchase. A personal banker may be able to access preferential rates based on your customer profile, while a commercial lender has the tools to search the whole of the market for the best rates. It’s then up to you to make sure the numbers stack up and decide which option is both suitable and affordable.
In our experience, every financial institution prioritises different criteria (banks are businesses and need to have a balanced lending portfolio). Some won’t touch certain sectors of business, so it’s worthwhile doing the research upfront before you start your search to buy. You will lose credibility if your lender declines to fund the purchase after you’ve verbally agreed a deal.
It’s not unusual for a vendor to choose a buyer based on access to funding, especially if they are looking for a quick sale. Buyers who have their funding organised, approved and ready to go are always considered more favourably.
It would be easy to put your feet up and let your broker or solicitor get on with due diligence once your offer has been accepted. But this is the time when you really need to stay alert and on top of things.
Be proactive in managing your professional team and advisers. Be demanding when it comes to timeframes and keeping everything on track. Chase information, ask for updates and make sure all parties keep their promises. The deal needs your focus and drive to push it to the point of completion. Its success relies on your refusal to be complacent.
Establishing a good relationship with the person whose business you are buying is essential for a smooth and successful purchase. Any breakdown in communication could put a strain on proceedings and be a red flag to the vendor and their representatives.
This is the time to put any personality differences aside and be open to getting to know the owner you are buying from. Show respect for the business they have built and what they have achieved. In the long run you stand to benefit from their success.
It’s fine to disagree when negotiating. Honesty will help move the deal forwards. Questioning the vendor is fine, but never criticise their actions or decisions. They don’t have to sell you their business, and you weren’t there at the time. Animosity will only slow progress.
With careful research, thoughtful consideration and respect for the vendor, the process of buying a business can be smooth and straightforward. Drawing on the experience of a business broker can prevent even the most adept buyer falling into common traps and ensure your purchase is a lucrative investment opportunity.
Contact your local business broker to access expert guidance and support, whether it’s your first or tenth business acquisition. We search the market, match buyers with vendors, and guide you through every stage of your purchase.
Whether you’re selling, buying, or planning for the future, Business Partnership is here to help. Contact us today to speak with your local Regional Partner and start your journey toward success.