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How Does A Company's Culture Effect The Sale Of A Small Business?

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Comments & Replies: 4     Views: 1783     Posted By: Peter Siegel MBA  

When purchasing a small to mid-szied business, there are a multitude of things to evaluate. One area that is often overlooked is the business's culture. Peter Siegel, MBA with BizBen discusses with potential buyers the importance of understanding how the business runs on a day-to-day basis.

Topics: Buying A Business, Selling A Business     Tags: buying a business, selling a business



Before purchasing a small to mid-sized business, you must perform a thorough examination of that company during the due diligence process. Reviewing financials, valuing assets, and inspecting equipment, are all necessary and important matters to focus on, but there are other areas of concentration that don't receive enough attention on the front end of a business deal. One of these factors that is often neglected is the company's culture.

Company culture is primarily focused on the business's employees, from the overall attitude of these employees, to the morale and comradery of the group as a whole. You will want to learn as much about the workforce as possible, because these are the very people that will be contributing to the success of your business on a daily basis. How do these people feel about the job they do? What motivates them to come to work everyday and put their best foot forward? After you identify these things that will help you become an effective leader, you will want to figure out how the company is structured and how work is best completed.

Understanding the core values and structure of the business will help you understand what day-to-day operations look like and where the bulk of decisions are made. For example, does the business value their employees' independent creative processes and allow them to make their own decisions, or is their a hierarchy where the orders are handed down from management for the employees to follow? To learn the most about company culture, you could briefly interview employees that are in supervisory or managerial roles. Obviously, you won't have time to interview everyone, but it would pay off to gain different perspectives on how the business operates, to ensure that you are inheriting a healthy work culture that you can maintain.

The thought of inheriting a mess is enough to scare the majority of buyers out of purchasing a new business. If the company's culture is effecting the production of the business in a negative way, you must identify the main causes and determine if you are readily capable of fixing them. Would inheriting a workforce with no motivation and zero comradery be too risky, or does this give you the ability to start new and clear out the problems at the very beginning? Buying a business is filled with risks, but having a game plan and clear vision for your new business makes it much easier to overcome these small hurdles, and build a successful business.

Replies To This Comment
I agree, having a positive company culture is not only beneficial to the employees and owner, but also to their customers, because happier employees will stay at the job longer and give better customer service, which later equates to higher sales. An owner can have monthly meetings with their staff to identify goals and work out "wants and concerns". Creating the right company culture should really start with the HR department, and so if a new owner decides to let get of employees and hire new ones, they should really take their time to find someone who will work with others in the company.



In addition to the current culture, it is important to consider how a culture may change if a new owner comes into the picture. Many employees may feel the current owner isnt interested in the business because they don't invest in training or new equipment and this affects employee morale. However, when employees see a new owner who spent a significant amount of money to acquire a business shows that they are serious about it and the employees may in turn, show new vigor in their duties. Also many small business owners don't take advice very well especially from employees for many reasons but mainly because the owner has years of experience and don't see the opinion of new employees as valuable. However a new owner who listens to front line employees and begins to implement the changes they suggest will see a revitalized culture among the employees. If you can find a business and pay an amount based on what it has done in the past, but make simple changes to affect profitability in the future you have the winning combination. Employee morale and company culture are one of the easiest changes to make in a small business, without spending any money.


I recently met a human resources consultant who enlightened and broadened my perspective about due diligence. She is often called in by buyers to review and advise about not just the ongoing employment of key personnel, but also to assess the culture and atmosphere of a business in a professional, dispassionate, objective way. It makes great sense, since so much of business success depends on the people and their ability to work effectively and efficiently as a team, both internally and externally. So, for anyone purchasing a business with more than a few employees, I highly recommend investing in an HR specialist to do some investigation of the business during due diligence.


Understanding "company culture" is imperative in the Elderly Care Home field.

Just imagine the mix of personalities at a care home; you've got Elderly Clients, Hospice Nurses, Care Givers, Dishwashers, Doctors, California State Regulators, The Gardener, an Administrator, ... Makes my head hurt just thinking about all the different personalities, and skill sets. But maybe that's the beauty behind the success of an Elderly Care Home, it takes a village to care for our Kids and our Elderly.

My suggestion is to get in as soon as possible and learn as much as possible about all of the Employees, the Care Givers, and Residents prior to taking ownership. Confidence is gained in experience and time on the job. Enjoy.


  Helpful Resources To Assist In Selling And Buying California Businesses

Janet Carrera - Escrow & Bulk Sale Services - SF Bay Area

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Helen Yoo: Escrow & Bulk Sale Services - Southern California

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Willard Michlin, CPA, Certified Fraud Examiner, Due Diligence Services

Willard Michlin, CPA #106752, offers buyers step by step training & assistance in doing Due Diligence Services when they are thinking of making an offer, or are in process of investigating a business purchase. He helps to determine the actual net profit even when there is cash. Call 800-864-0420.

Mark Chatow, Esq.: Legal Services For Buying, Selling Businesses

Mark has a broad range of small business purchase & sale experience from analyzing potential acquisition targets to successfully guiding buyers and sellers through the purchase & sale of small businesses. Mark can assist with contracts, negotiations, legal matters, etc. Reach Mark at 949-478-8393.

Elizabeth McGovern: Escrow Services - SF Bay Area

McGovern Escrow Services, Inc., is a leading independent escrow company. We are a trusted partner with our clients, assisting them through the tangled bulk sale & liquor license transfer process. We provide attentive, quality & innovative customer service. Phone Elizabeth McGovern at 415-735-3645.

Brad Steinberg, Broker - Laundromat Specialists

Laundry specialists - founded in 1968 by three laundry professionals, PWS is a family-owned corporation. Through the years it has grown to become the largest vended laundry equipment distributor in the United States. Call Brad Steinberg at 323-721-8832 to sell or buy a coin or card laundromat.


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