The excitement of buying a business and calling it your own is an amazing feeling. Emotions and adrenalin can run high. The initial thoughts usually contain, how do I make this my own, what should I change, and more. For a currently successful business, cash flow positive and profitable, there are a few lessons too many people learn the hard way. They change things immediately and most just for the sake of change.
The secret to keeping the business success is three things. Don’t change anything immediately, learn the business. Lastly, after a minimum of three months, consider what needs to be modified. This is from real life lessons from a new restaurant owner as highlighted when I first started writing this blog almost 5 years ago. More details on the three areas:
1) Don’t change – Unless there is something so obviously wrong (theft, safety issues) – don’t change anything! Ask yourself, can this proposed change wait three to six months. The person that purchased our restaurants immediately changed prices, menu, and daily specials. He wondered why sales were very different than when we had the business…and not in a good way. Items that are services to the business such as payroll, janitorial services and have minimal impact to the day-to-day customer experience, may be considered for change sooner.
2) Learn – Understand what made the business successful. If something appears to be odd, ask questions, and lots of them to really understand the “why”. Just like when starting a new job, don’t assume you already know everything. Or smugly think the previous person wasn’t too smart! Take the time to understand why something was done in a particular way. No mater if you have had previous experience in that type of business or new to it. It doesn’t mean that is the best way and could be something you want to change at a future point. Think about risks if you do change it. Take any modification very slow. This is a perfect time to talk with customers, suppliers, and the community and ask them why they did business with the former owners. Besides having a great food (as the awards proved) at a reasonable price, we had a core value of giving back to the communities we served. In turn, the community strongly supported us. The new owner stopped any and all community involvement to “save” money. No sponsorships, no Chamber of Commerce memberships, etc.
3) Change – Wait at least 90 days before making any significant change. Try to ensure you are retaining key employees, customers, and suppliers. My recommendation, due to the size of our business and lack of restaurant experience, was to wait 6 months and call me anytime to understand the “why”. By the time the new owner hit 6 months – he was already in trouble. Credit card debt sky high, health concerns, and behind in paying suppliers…After 3-6 months, you will understand the cash flow, competitive landscape, and still have your fresh view and perspective to decide on changes. Maybe the prices are too low, maybe the menu needs a refresh. At that point you have a frame of reference to work from and can measure the impact of the change and quickly change if something doesn’t work as expected.
Think through
It still saddens me to see a once thriving business that was part of the community with so many regular guests implode so fast. The new owner questioned us on what we sold him. As we started to go through the advice we gave as written above, found none of it was followed. I further learned and was in shock that he allowed the POS, Point of Sale System, to remain down and not accept credit cards or send orders to the kitchen for over a week and multiple times had issues. A simple call and I would have given him the cell number for the head of the tech support that would have been resolved in hours vs days. This impacted the guest experience and may have been yet another contributing issue and the business never recovered. Returning to previous lunch and daily specials seemed out of the question for the new owner. Looking to place fault with others rather than taking personal responsibility.
Would love to hear your experience buying or selling a business and welcome feedback. Feel free to post comments or email them to me. Small Business, Big Lessons ® How will you handle the transition of your new business?
Small Business
About the Author:
Gregory Woloszczuk is an entrepreneur and experienced tech executive that helps small business owners grow their top and bottom line. Gregory believes in straight talk and helping others see things they need to see but may not want to with a focus on taking responsibly for one’s own business. He and his wife, Maureen, started GMW Carolina in 2006.
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