We often get carried away with excitement at the prospect of a new challenge. We give lot of weight to the positives and tend to brush aside the negatives, often thinking they are minor, they can be overcome or in any case we can make it work. Here are some points we should look at before acquiring an existing business.
Figures and reports analysis
Analysis of Profit and Loss and Balance Sheet should be thorough and if needed the help of a professional should be enlisted. We need to read through the figures (or in between the lines as they say)
Things like Directors salaries and number of staff on payroll should be scrutinized. Anything that could inflate the profits and as a consequence the company value, should be weighed. For instance a very low Director’s salary for when the Director covers a leading role (like Pizzaiolo or Floor Manager)
Macro economic trends and one off events that could have affected demand should be given the right consideration. For instance during the pandemic there was a spike in deliveries.
Customers aversion to change
Although a business may be doing quite well and have a steady regular weekly turnover, this does not mean once we take over that will continue. Unless we are operating a dark kitchen and we intend to maintain our menu and services exactly the same, any change will be noted by the regular customers and people in general do not like change. Do not think that all customers will perceive improvements in service (like newer, faster and easier to use technology) or better quality ingredients. Some may just see change as something they didn’t need or want and turn their nose up.
Unless you are rebranding, which pretty much means starting from zero, you should stick to the same menu and pricing for a while and introduce small, gradual changes.
Staff aversion to Change
Old staff may be stuck in their ways, working hours and shifts that are not beneficial to the business, and this will be hard to change from one day to another. It may take time to change procedures and ways of working (for example a new dough recipe), as well as introducing new technology or getting rid of some (for instance the ability to take payments over the phone). On the one hand we want to change things quickly but on the other we need staff to stay for a bit until we find our feet.
Equipment
Once you take over, you will note that equipment will break down or utensils were not in the good state you thought they were (think chipped pizza peels, oven imperfections, malfunctioning fridges etc) this is in part because when somebody decides to sell ,they will stop caring as much, and in part it’s just a curse!
Slipping standards
If you take over a business as a going concern, you must ensure somehow that standards and opening hours are maintained. The seller may try to save every single penny before selling, for instance buying cheaper ingredients, cheaper packaging and so on.
Opening times
Especially in a competitive market, customers are quick to jump ship if they see a business is opening sporadically and seemingly at random, especially if this is not communicated to them.
Photo by shawnanggg on Unsplash