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

Comments & Replies: 4     Views: 9269     Posted By: Peter Siegel MBA  Peter Siegel MBA: BizBen Founder, Lead Advisor

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.


Contributor: Business Broker, SF Bay Area

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.

Contributor: Broker/Consultant: Elderly Care Services

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
Shalonda Chappel: Escrow & Bulk Sale Services - Southern California

Escrow services to brokers/agents, sellers, & buyers. Established 43 years. Extraordinary service. Experienced with handling difficult transactions. One stop for all your escrow needs: Bulk sales, lien searches, UCC searches, liquor license transfers, publishing & recording services. 951-808-3972.

Diane Boudreau-Tschetter: Escrow & Bulk Sale Services - CA

California Business Escrow, Inc. is a full service independent escrow company serving all of California and has expertise in a wide range of escrows. Our team prides itself on providing an exceptional escrow experience. For more info phone Diane Boudreau-Tschetter at 888-383-3331 or 209-838-1100.

Elizabeth McGovern: Escrow Services - San Francisco 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.

Helen Yoo, New Century Escrow - Escrow Services In Southern California

New Century Escrow, Inc. is a fully licensed & bonded independent escrow company. Over 20 years combined experience in handling bulk escrow transactions. Multi-lingual staff that speaks your language, including Korean, Chinese, Vietnamese. Call Helen Yoo direct at 626-890-1151.

Brad Steinberg, Business Broker: Laundromat Specialist

PWS is the leading laundromat broker in California. Since 1968 PWS has brokered over 2,500 laundromat sales. With over 90 employees dedicated to the coin laundry industry, PWS has 18 licensed agents, a 3 person in-house finance department, 10 service technicians and a 20 person parts department.

Janet Carrera: Escrow & Bulk Sale Service - SF Bay Area

Redwood Escrow Services, Inc. is a full service, licensed independent escrow company. We are EAFC Fidelity bonded, fully insured & licensed with the Department of Corporations. Committed to offering our clients the most comprehensive variety of escrow services available. Phone Janet at 510-247-0741.

William F. Ziprick, Attorney: Legal Services For Buyers And Sellers

Through creative problem solving, attention to detail, accessibility, & understanding that unnecessary delay is often a deal killer, I work closely with my clients and other professionals to consistently achieve a high rate of closings. Office: 909-255-8353, Cell: 509-951-7230.


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