Buying a business? Aim for a smooth transition
The advantages to buying an existing business may suit your entrepreneurial spirit more than the challenges of starting one from scratch. You might prefer to follow an established formula rather than create a new system.
When you buy a business, the initial costs are usually more than those connected to a start-up; however, it may be easier to get financing because lenders will be knowledgeable about a known entity.
There are other advantages to buying an existing business:
- You are taking on a venture that has known some measure of success.
- You may experience a lower level of risk than that associated with start-ups.
- You can further develop the customer base.
- Employees may already be in place.
- A reputation has been built on established branding.
- The previous owner may help you make the transition and share valuable insights.
Because a smooth transition will add more value to your purchase, it is a good idea to aim for mutually beneficial negotiations. If both you and the vendor are satisfied with the results, transitioning may be much easier. Expert advice can also be important, so you may want to use on a team of professionals (banker, lawyer and accountant) during the process.
The period of overlap right after the purchase is an ideal time to learn the ropes and ease in with as little disruption as possible. You may wish to:
- Keep the previous owner on as a consultant for a training period
- Invite the previous owner to join you at trade shows and other industry events to provide introductions
- Ask about past mistakes in order to avoid repeating them inadvertently
- Focus on employee morale and allay any fears or worries
- Keep changes minor during the early stages of your ownership
- Provide a special incentive for existing customers as a way to earn their trust
You are not only buying a business, but also entering into a potentially complex and rewarding series of relationships. A smooth transition can help get your new venture off to a good start.
Familiarize yourself with some of the other aspects of making such an acquisition in our section on Buying a business.