New business owners first decision
What’s the first decision for a new business owner?
The answer should be simple and complete. Do absolutely nothing.
Buying a business is a demanding process. It’s demanding intellectually and financially but it’s more demanding emotionally.
If you’ve bought a business 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 a new business owners first decision is to do nothing?
There are many reasons why the first decision of a new business owner is 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.
It’s much better to delay making a decision with the expectation you will get it right than make a decision so you can feel good about yourself and you can go and work on something else.
Let the seller run the business in the short-term
If you’ve bought an existing business, hopefully your negotiations included the seller staying for a minimum number of days or weeks and provide free or discounted training to transition their knowledge to you.
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, legal or accounting document(s), something the escrow company needs, a business or other type of license and more. Get these outstanding items addressed now while they are fresh because if you don’t get to them now, once you get into the swing of the business and its day to day requirements you won’t get back to them. They are issues you will want to resolve.
What does the seller want to do?
The business under a new owner is the most vulnerable when there is a change of ownership. Before you close the sale with the seller, have a conversation about what they want to do so it’s crystal clear what’s happening in the first month of the change of ownership.
Just as I suggested above that you, as the buyer of the business should do nothing when you first take over, be aware the seller will 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’m suggesting that you, as a new business owner make no decisions when you first buy 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 the list goes on. For most business owners it also includes filling a gap such as an employee that’s on vacation, answering a ringing phone because no one is around and more. As they say, someone has to run the business.
Because of the vibrancy of a business and with so many things happening, it is impossible for a new business owner to understand the flow of many aspects of the business and to therefore make the right decision. Undoing a decision is so much harder as it may frustrate a customer or employee.
You are the new business owner, not “the boss.”
One of the temptations of a new business owner is the need to very early in the change of ownership prove they are “the boss.” That short term need can come back to bite the new owner because if they get it wrong, it can take a long time to recover from it.
Making no decision to arrive at the right decision is so much better as it’s easy to apologize for the delay by explaining you are the new owner of the business and your preference is to get it right.
For more immediate help with buying a business you are welcome to send an email to Andrew Rogerson or give me a call on 916 570-2674.