STREET SMARTS

Making a Smooth Transition When Buying a Business

How can you retain a great company culture when forcing an ownership transition?

Norm Brodsky is a veteran entrepreneur.

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Dear Norm,

In 2002, my wife and I sold the automotive-repair business that we had owned for 15 years. We were fine for a while, but things have gotten very tough. I never thought that, at the age of 48, I would be unemployable. My wife has started a housecleaning business to make ends meet.

Meanwhile, a new opportunity has come up. We're thinking about buying a car-repair shop in Florida. It's very successful and well managed, with 19 employees and 11 repair bays. My wife and I have the experience to make this work, but I'm concerned about having a smooth transition. The company has a great culture. We don't plan to change a single thing. In fact, we want the current owners to stay on for a year while we learn the ropes. What else can we do to make sure the transition is as easy as possible?

Michael A. Dunn
Shamong, New Jersey

When you buy a company, culture is key. In my experience, more acquisitions fail because of cultural problems than for any other reason. So Michael Dunn is right to focus on that issue. I told him he was wrong, however, to think that he won't "change a single thing."

He will make changes. It's inevitable. No two people run a company in identical ways. So my first piece of advice to Michael was to make a point of not saying that nothing would change. To have a smooth transition, he needs to maintain credibility and establish trust. He will lose both if he starts out by making a promise he can't keep. If it were me, I would get all the employees together for a meeting in which I would praise the previous owners, support the approach they've taken, and talk about strengthening it. I would say, "If there are ways you think we can improve, I'd like to hear about them." Then I would put up a suggestion box and get into the habit of reading and responding to every idea. The point is to include employees in whatever changes are going to happen.

Second, I told Michael that, however long the current owners agree to stick around after the sale, their ongoing presence should be at his discretion. He has to be able to ask them to leave at any time. You don't really know someone until you've worked with the person for a long period of time. Michael has no idea how well they will all get along. For that matter, neither do the current owners. But given the responsibilities he'll be taking on when he buys the company, the choice has to be his.

From the December 2011 issue of Inc. magazine

NORM BRODSKY | Columnist

Street Smarts columnist and senior contributing editor Norm Brodsky is a veteran entrepreneur who has founded and expanded six businesses.

The opinions expressed here by Inc.com columnists are their own, not those of Inc.com.



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