What’s the first decision for a new business owner of an acquired business in California?
The answer should be complete and straightforward. Do absolutely nothing.
Buying a business in California is a demanding process. It’s demanding intellectually and financially, but it’s more demanding emotionally.
If you’ve bought a business in California, you’ll know the above makes perfect sense as you can remember lying awake late at night, wondering what you were doing.
You probably even had your closest family and friends questioning your sanity, but for you, it all made sense, or you wouldn’t now be the new owner of a business.
Why is a new business owner’s first decision to do nothing?
There are many reasons why a new business owner’s first decision is often to do nothing. However, the primary reason is that there are too many things to do, and as the new owner of the business with limited information, you won’t know where to start. That is, it makes no sense to start making decisions about things you either don’t know about or will need more information about.
It’s much better to delay deciding with the expectation that you will get it right than to decide so you can feel good about yourself and then move on to work on something else.
Let the seller run the business in the short term.
If you’ve bought an existing business in California, hopefully, your negotiations included the seller staying for a minimum number of days or weeks and providing free or discounted training to help you transition their knowledge.
If that’s the case, let the seller continue to run the business on a day-to-day basis while you clean up all the outstanding pieces you had to deal with when buying the business.
This will include:
- legal,
- tax,
- accounting
- and other issues.
For example, it could include paperwork for your new legal entity, an outstanding item for a lender, landlord, or legal or accounting document(s), something the escrow company requires, a business or other type of license, and more.
Address these outstanding items now, while they are fresh, because if you don’t attend to them now, once you get into the swing of the business and its day-to-day requirements, you may not have the opportunity to revisit them.
There are issues you will want to resolve.
What does the seller want to do?
A business under new ownership in California is most vulnerable during the transition period.
Before closing the sale with the seller, have a conversation about their plans, so it’s crystal clear what’s happening in the first month of ownership change.
As I suggested above, when you first take over the business, you should do nothing; be aware that the seller will likely be tired and unsettled from selling the business to you.
Perhaps the seller wants time off to re-energize and decide what they are doing over the next weeks and months. If necessary, give them a day or two off while you “make no decisions,” but keep this as short as possible.
The owner of a business wears many hats.
Another reason I suggest that you, as a new business owner, refrain from making decisions when you first acquire your business is that a business owner typically wears many hats.
They wear many hats as there are many things to get right.
- customer satisfaction,
- accounting,
- tax compliance,
- legal and business regulation compliance,
- sales, marketing, and so on.
For most business owners, it also includes filling a gap, such as when an employee is on vacation, answering a ringing phone because no one is available, and more. As they say, someone has to run the business.
Due to the vibrancy of a business and the numerous things happening, it is impossible for a new business owner to fully understand the flow of many aspects of the business and, therefore, make the right decisions.
Undoing a decision is significantly more challenging, as it can frustrate both customers and employees.
You are the new business owner, not “the boss.”
One of the temptations of a new business owner is the need to prove they are “the boss very early in the change of ownership.” That short-term need can come back to haunt the new owner, as it can take a long time to recover from a mistake.
Not deciding to arrive at the right decision is so much better than it is easy to apologize for the delay by explaining you are the new owner of the business and your preference is to get it right.
If you would like more information about buying a business, please visit my webpage Buy a business.
For our listings of businesses available for sale in California, go to this businesses for sale page.
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The Art of Using Valuation Multiples: A Strategic Approach for Business Owners
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Selling A Business To A Strategic Buyer | 10 Factors in California
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