Buying a business is a significant step for any entrepreneur. You spend all your time tirelessly researching a company to buy, approaching and negotiating with its previous owners to hopefully securing a sale that both parties are happy with. However, once the deal is done and the realisation you have purchased your first business has set in, it can be difficult knowing the next steps.
The first year is crucial in determining the short-term future of the business and there are a number of steps you can put in place to ensure a smoother process.
Understand the business before you make any changes
Whilst it can be tempting to come in and overhaul a number of policies and processes, this should be avoided right away until you have a deeper understanding of the business and it’s inner workings. Even if you feel you’ve done extensive research into the business you’ve purchased, you won’t understand how it operates until you actually run it.
In order to eventually take full reign of the company and implement your own strategy, you first need to have a clear idea of how the business is currently performing. Are things operating as efficiently as they should be? Are the financial results as expected? Once you have a better understanding of the company, you’ll have more insight into what is working and what needs to be changed.
Speak with current staff to keep them motivated and congruent in your goals
Speaking to current employees is a must do to gain an understanding of the business. It will provide you with valuable insight into the staff, team structure, company culture and the inner workings of the business. Displaying respect from the get go will indicate to your employers that you appreciate the work they do for the business you have just acquired.
A change of company ownership can be a daunting time for employees as they can be uncertain as to where the business will be heading. Therefore, it’s important to communicate to staff as soon as possible what your future plans for the company are. Additionally, you should know that on entering the business whether you can state if current jobs are secure for the long term (> 1 year). If this isn’t the case, it is wise to not make statements regarding the safety of jobs, should you have to revert on this as it could cost you significantly in staff loyalty and trust.
Speak to customers and partners to inform a change in ownership
Similarly, when communicating your intentions and plans to employees, you need to think how best to speak with your current customer base to inform them of the change of ownership. A silent voice following the change of ownership can make customers contemplate the worst. With the unknown about the company’s performance and the soon departure of the previous owner, the continuity of your supply is in question. This is where you start building your own direct relationships with the customers and should be a key aspect of any handover from the selling business owner. Key messages are not only to reassure them that the business is still performing well and will continue to do so but to discuss your future relationship together.
Consider your strategy for the business
When you buy another business, you are essentially buying somebody else’s vision and way of doing things. You now have the optimum opportunity to do things your way. One of the key benefits of somebody else coming aboard to run a business, is that they come with a fresh set of eyes and perspective.
Once you have a better understanding of the business and have communicated your intentions to staff, you can begin thinking about how you want to run your newly acquired business. You can begin this by assessing the current state of the company and what is currently working, what isn’t working and what you want to change. It also goes without saying that the things that aren’t working need to change sooner rather than later.
In order to start implementing your own strategies and policies, you should begin by making a plan that acts as a blueprint to how you plan to run the business. Within this plan you should consider what it is you want to do, who is going to do it and when it will be done by. This will provide you with valuable insight into your strategy and will enable you to plan ahead whether this be financial or expanding the teams.
By Jay Dias, founder of Leela Capital