Buying a business involves considerable thought and intensive research. The process also involves a leap of faith, based on good evidence of past profitability. Business purchases generally involve a number of parties, including the buyer, the seller, a broker and attorneys for both sides, all of which have specific parts to play to help make the deal a success. If you are considering buying an existing business, here are some points to keep in mind to ensure a smooth transition of ownership:
1 – Conduct Thorough Due Diligence
Get to know the company you are buying on paper as thoroughly as you can. Stay alert to current problems, as well as the company’s strengths, and develop some ideas on how to manage negative issues with profitability. Do some research on your own on how similar businesses operate and methods for enhancing their operation. If possible, consult with individuals who are experienced in that industry to help develop new ideas.
2 – Have The Previous Owner Stay To Aid Transition
Businesses that utilize the knowledge and experience of the previous owner, even for a short period of time after the change in ownership, have an increased chance of making a smooth transition with the least number of problems. Business legal professionals, such as those at Strauss Troy, can help you to structure the sale to incorporate the previous owner’s help during the transition period.
3 – Develop A Close Relationship With Key Personnel
Hopefully, the previous owners will have implemented incentives to keep key personnel in place even after a change in ownership has occurred. If not, you may need to include employment agreements with the key personnel as part of your deal documents. These individuals can be an important resource for information about customers and processes that have been helpful in the business’s success. Make a concerted effort to get to know their strengths and how they can be utilized in the future to increase the business’s efficiency and profitability.
4 – Have A Strategic Plan For Informing Customers of The Change in Ownership
Another area where collaboration with the previous owner can be of benefit is in notifying the current customer base of the change in ownership. Customer relationships are based on trust and good experiences. The previous owner can help to reassure customers that levels of quality and service will remain the same even after the transition has occurred. A concerted plan for informing them of changes that will be implemented during the transition will help to cement these important relationships.
Your actions before the sale and during the transition period can have a significant impact on the success of the business after it changes hands. The ability to have a good working relationship with the previous owner can be an important advantage in making the transition. The experience and the relationships developed in the past can be utilized to provide a launching pad for your plans to make the most of your new acquisition.
About the Author
Emma is a freelance writer currently living in Boston, MA. She writes most often on education and business. To see more from Emma, say hi on Twitter @EmmaSturgis2