You don’t get in your car without knowing where you are going, how you will get there, how long it will take, and how much gas will you need. Think of a business plan the same way. Where do you want your new business to be in 3 months, 6 months, a year from now? Great, now figure out what it will take to get there. The specifics of how to get you to your goals should be spelled out and detailed in your business plan. A “business plan” might sound like a daunting task for a new entrepreneur, but most seasoned and highly successful entrepreneurs will tell you that it is an essential road map. Here we will get you started thinking about how your first 90 days as the business owner should look (in our opinion of course).
Period of Observation
When a new buyer takes over a business on closing day, you only know what your due diligence has uncovered, combined with what the seller has told you about the business. So, at this point in the process, you don’t know what you don’t know. You will most likely have a few weeks of familiarization or handover with the previous owner, so take advantage of this time and maximize your learning. Soak up everything you can from them about how to run this business. Then when it’s your turn to fly solo, we suggest keeping the status quo for a short period of time (1-2 months), so that you can simply observe the way the business is running. Take note of anything you see working really well and start looking for obvious areas in need of improvement. This is a crucial time for keeping current employees and customers happy and comfortable, so you don’t want to rock the boat too much in the beginning.
Areas of Weakness to Target
If the business has been performing well year after year, then the previous owner obviously had some things right. So, find out exactly what those aspects are and keep them. Enhance them even. At the same time, keep a list of areas that you could improve upon, and then set a plan into motion to implement changes. Keep in mind that existing employees might be either resistant to change or be hoping for it, so before making any drastic changes, it might be a good idea to get input and feedback from key employees. Getting their thoughts about how your proposed changes could affect the business or their ideas around the best way to go about implementing these changes might help you see any potential challenges. It could also help with getting employee buy-in and support of your proposed improvements.
Also, look for aspects of the business that you can take to the next level with your particular talents or expertise. For example, if the business doesn’t have a website or “Google My Business” page, then those would be great things to add that will really make a huge impact in your marketing efforts. Maybe the business is still using hand-written invoices, and you could put an electronic payment system in place. These are most likely going to be the changes that you had ideas for in the very beginning, when you first decided that you wanted to buy this business. Most buyers will buy a business that they feel has a good solid base to work from, but also has room for growth or potential to make significant improvements to.
Where to Cut and Where to Spend
In your first quarter, closely examine all income and expenses. Looking at the trends, are there any services or products that are doing particularly well? Think about how you could double down on those and multiply sales in those areas. Maybe you need to cut expenses in another area, to make way for more available funds to put towards increasing your biggest income-producing products or services. What expenses are superfluous that you can eliminate altogether? What other expenses might you be able to reduce, maybe by shopping around for better rates or alternative suppliers? Ultimately, you want to work to improve your bottom line, and that will include looking at ways to improve your revenue growth, while at the same time looking for creative ways to reduce spending.
Forward Planning: Be Conservative and Underestimate
When working on your long-term and short-term business plans, it’s a good rule of thumb to be conservative and underestimate your growth projections. In real life, it usually takes longer than you’d expect to make the gains in sales and revenue growth that you would like to see. Budget planning for your expenses absolutely depends on having accurate numbers for projected income, so it’s important that you don’t over-inflate your growth. When that happens, you will end up spending more than you bring in, and we all know that is never the situation you want to be in. We see this happen more with start-ups, rather than existing business purchases, but it is still something that business buyers need to keep in mind when creating their business plans.