This article are provided for information purposes only, and are not intended as legal advice.


What do you do when you take over a business which you just bought?

February 5th, 2010

You just bought a business but the quarters are cramped, there is not a lot of space and it is poorly laid out.  Papers are everywhere, there is no rational for organizing the office the way that it is, what do you do?  Did you buy the shares of the business or did you buy the assets of the business?  If you bought the shares of the business, you should look at the accounting records very quickly and determine if they are accurate, was anything left out, get an idea who were the suppliers, see if the goods are purchased at a reasonable price or should you switch suppliers.  Can you get better products for your ancillary items.  Do not change the products you sell, at least until you know the business.

 

Should you reorganize the business or move to a newer larger location?

 

Many years ago, a person ran two party supply stores.  They were in totally different neighbourhoods, one in an expensive area, another is a more modest neighbourhood.  The product that each store carried was identical.  The stores were put up for sale and each store was purchased by a different buyer.  The owner of the business in the expensive neighbourhood, learned everything about the business for several months.  She found out what things were selling and what things she purchased in inventory but were never sold to customers.  Got rid of the poor selling items and then started to expand the product line, moved the product mix more upscale, the higher that it went, the more business that she got.  Profits skyrocketed from the original store.  The customers were happy, they bought more things that they wanted and were willing to pay the higher prices.  The owner of the low end store widened the product line but was never as successful as the other store even though his store was 50% larger than the other location. 

 

First, you get a handle on the financial position of the business. This includes maintaining up to date and accurate accounting records, monitor overhead and profits and respond quickly if you can see that the changes that you did do not increase sales.  Watch the cash flows. It is great to have all this new product but if you have no sales, you don’t have the cash flow to keep experimenting.  Do  not alienate the old customers, do changes consistently and regularly but do not change everything at once.  Learn what you have bought, learn who are your customers, what are they looking for and once you have done your test marketing by asking your existing customers what if you brought in this product, would they buy it?.  If the feedback is positive, implement the change.  Your customers are your best market testers.  If the changes are small, you did not risk a lot if you took a risk and it did not work out.

 

Make a large change after you just bought the business and it may be costly if it was a bad decision. Sales could drop, customers could leave and go elsewhere if they are alienated and feel neglected.  Remember, build on what you have, don’t destroy what you have to build a new business.  If you wanted to start a new business, you would have started it from scratch.  Why would you have paid a premiums to buy a business when you were only interested in the real estate and not in the business?


Filed under: Business strategies — Gary Landa @ 1:31 pm


No Comments »


No comments yet.


RSS feed for comments on this post. TrackBack URL


Leave a comment


You must be logged in to post a comment.