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Discussions > What Are Some Tips In Ensuring A Smooth Transition When Buying A Business?
What Are Some Tips In Ensuring A Smooth Transition When Buying A Business?
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Posted By: Joe Ranieri 
Changing hands of business ownership can seem both exciting and daunting to all parties involved, but it's important that a smooth transition occurs to maintain or achieve success of the business. Here are some tips I recommend ensuring things go smoothly when buying a California small business.
Topics: Buying A Business Tags: buying a business, escrow bulk sales
Changing hands of business ownership can seem both exciting and daunting to all parties involved, but it's important that a smooth transition occurs to maintain or achieve success of the business. Here are some tips I recommend ensuring things go smoothly when buying a California small business.
Topics: Buying A Business Tags: buying a business, escrow bulk sales
Changing hands of ownership can seem both exciting and daunting to all parties involved, but it's important that a smooth transition occurs to maintain or achieve success of the business. Here are some tips I recommend ensuring things go smoothly:
1. No major changes: I specialize in bars and restaurants, although I sell all types of businesses, but a major piece of advice I would give to any new owner would be to make no large changes to the business. A new owner should make no large staffing changes, price adjustments, major renovations, because this could hurt foot traffic that the previous owner has established. Customers are fickle, and many come to a business based on habit, and when they sense too much change, they'll often stop coming, and once a customer leaves, they are difficult to get back.
2. Maintain high employee morale: Point number two plays into point number one, no major changes, but it's so important, that it bares repeating. Many customers have developed a relationship with the employees that have been solidified long before the business was listed and changed hands, so it's extremely important that employees feel secure in their jobs and are productive, because many times, if not most, they know more about how the business runs better than the new owner, and can be a major asset to ensuring success.
3. Strong training period: Knowing the ins and outs of a new business can be overwhelming, and many times an old owner might have "seniorities" and want to be on their way, but it's imperative that the new owner is properly trained. The old owner should stay on after the close of escrow for a minimum of two weeks or 80 hours, and introduce the new owner to customers, so they know that the business is in good hands. If the owner has carried a note, they may want to stay on longer, possibly as an employee, if they can, to make sure the business succeeds, because future loan payments depend on the business being a success.
4. Meet with vendors: A new owner should familiarize themselves with vendors and establish a relationship with them. Having a good working relationship with vendors is important and in a way they, with their timely arrivals and flexibility, help a business owner succeed. During the due diligence period, a new owner should see a paper trail of who the current owner does business with and continue to use their reps and vendors to maintain quality and consistency.
Unless the business is a total disaster, and a new owner creates a major shake-up, but then there really is no transition because it's an asset sale, and total change occurs, but other than that, a major theme that I would recommend to any new owner is: keep things the same, at least, at first. Make small changes, nothing major. There are other things that play into a smooth transition, and I encourage others on this BizBen Discussion Post to post their thoughts and ideas.
1. No major changes: I specialize in bars and restaurants, although I sell all types of businesses, but a major piece of advice I would give to any new owner would be to make no large changes to the business. A new owner should make no large staffing changes, price adjustments, major renovations, because this could hurt foot traffic that the previous owner has established. Customers are fickle, and many come to a business based on habit, and when they sense too much change, they'll often stop coming, and once a customer leaves, they are difficult to get back.
2. Maintain high employee morale: Point number two plays into point number one, no major changes, but it's so important, that it bares repeating. Many customers have developed a relationship with the employees that have been solidified long before the business was listed and changed hands, so it's extremely important that employees feel secure in their jobs and are productive, because many times, if not most, they know more about how the business runs better than the new owner, and can be a major asset to ensuring success.
3. Strong training period: Knowing the ins and outs of a new business can be overwhelming, and many times an old owner might have "seniorities" and want to be on their way, but it's imperative that the new owner is properly trained. The old owner should stay on after the close of escrow for a minimum of two weeks or 80 hours, and introduce the new owner to customers, so they know that the business is in good hands. If the owner has carried a note, they may want to stay on longer, possibly as an employee, if they can, to make sure the business succeeds, because future loan payments depend on the business being a success.
4. Meet with vendors: A new owner should familiarize themselves with vendors and establish a relationship with them. Having a good working relationship with vendors is important and in a way they, with their timely arrivals and flexibility, help a business owner succeed. During the due diligence period, a new owner should see a paper trail of who the current owner does business with and continue to use their reps and vendors to maintain quality and consistency.
Unless the business is a total disaster, and a new owner creates a major shake-up, but then there really is no transition because it's an asset sale, and total change occurs, but other than that, a major theme that I would recommend to any new owner is: keep things the same, at least, at first. Make small changes, nothing major. There are other things that play into a smooth transition, and I encourage others on this BizBen Discussion Post to post their thoughts and ideas.
Contributor: Christina Lazuric: Business Broker, Orange County
All good points Joe. In addition I would say that, although different brokers have different styles, my way to handle the transfer of the business regarding employees is to not say anything to anyone until the deal is close to closing. Once it's close to the end I suggest holding a mandatory staff meeting for all the employees, thanking them for their service and introducing them to the new buyer right there and then. This gives the buyer the a chance to introduce him/her self right away before they get any strange ideas in their head about the new buyer.
Buyers have to sympathize with how the employees must feel when they get a new boss. They have no idea what is going to change and if they still even have a job after the transition. The best thing you can do as the new owner is to assure them that their positions are secure and there service is valued. The first pep talk is crucial in setting the tone for who you are and what the new regime will look like. It's your opportunity to let them see that you are going to be investing in growing the business and they're assistance will be more important than ever. Also, growing the company could create opportunities for advancement that haven't been there before. Now instead of dreading the new ownership they are excited at the new possibilities.
Buyers have to sympathize with how the employees must feel when they get a new boss. They have no idea what is going to change and if they still even have a job after the transition. The best thing you can do as the new owner is to assure them that their positions are secure and there service is valued. The first pep talk is crucial in setting the tone for who you are and what the new regime will look like. It's your opportunity to let them see that you are going to be investing in growing the business and they're assistance will be more important than ever. Also, growing the company could create opportunities for advancement that haven't been there before. Now instead of dreading the new ownership they are excited at the new possibilities.
| Helpful Resources To Assist In Selling And Buying California Businesses |
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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. |
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Diane Boudreau-Tschetter: Escrow And Bulk Sale Services 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. |
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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 805-428-2063. |
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Helen Yoo: Escrow & Bulk Sale Services - 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. |
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Bob Baumgarten, Business Broker: Orange, LA Counties National Business Brokerage is a full service brokerage company that has been serving buyers and sellers of Southern California businesses since 1994. We are dedicated to providing the highest standards of professional service for our clients. Phone Bob direct at 949-588-8727. |
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George Lanza, Business Broker, At Plethora Business Sales Plethora Businesses, a division of A Premier In Services, Inc., is a Business Intermediary Consulting Firm headquartered in Orange, California. Plethora specializes in the listing and sale of small and medium sized private businesses. |
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Mike Brewer: Liquor License Brokers, ABC Consulting Services Liquor license brokerage and consulting services. We provide: Alcohol License Transfers Application Consulting & Processing, Liquor License Purchases & Sales, City Zoning Permits & Land Use Entitlements, Public Convenience or Necessity Findings and Letters. Phone Mike Brewer direct at 800-437-1100. |
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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. |
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