Leadership & Direction
08 January 2010    Elizabeth

Buying a company:  100 Day Plan - 1 year goals & beyond

So, I'm talking to a guy about the company he is getting ready to buy. I asked him if he had prepared for the first week at work. He said, "sure". He was going to meet with as many people that work at the company as possible. First he would meet with the managers and then the staff. I said, "Great! What are you going to tell them?" But, he didn't really know the answer. He said he just wanted to meet them. He explained that he didn't really want to change anything about the company. He wasn't going to walk in with a bunch of changes. He wanted them to know that they all had jobs. I asked if he had created plans and set goals. But, he reiterated that he wasn't making changes. The staff was going to keep doing what they were doing.

Hmmm, he left me thinking. In all the due diligence that he did prior to buying the company, didn't he know the strengths and weaknesses of the company? Did he know what was good and needed to be built upon? What were the problems? How was he going to fix them? Hey, when I sell a company, I paint as rosy a picture as possible. But, there's always a reason the company is for sale. If there weren't a problem, it wouldn't have been for sale. Besides, when you buy a company, you are buying the people. The people need hope. The people need direction. The people need to know exactly how they fit in to your short and long range plan. Yes, the trash needs emptied and you're not firing the janitor. But, even he needs to know that he is valued and that you have plans to grow the company and secure his job. You're the boss and now is the time to earn their trust, their faith and provide them with hope and vision. You need to emphasize the strengths and address some of the weaknesses that you found when you were doing the due diligence. You'll also tell the employees what they need to be focusing on.

Below are the areas you will be addressing immediately and then regularly each month as you create plans, revise plans and report to owners and management.

• People:    Who do you have? What are their strengths? Weaknesses? What do you need? Do you like them? Trust them? These are people that you are supporting and that you are depending on to support you. Would you have hired them if it had been up to you? Would you keep them? What is it you really need from them? Can they do it?
  
  People are your greatest asset. Keep track of their successes. Keep track of who you recruit to work for you and their successes. You create market value by developing a strong management team and work force. Who is key to innovation for your company? Who are the best sales and marketing personnel? Who are the "key" people? Your identification of these people or obtaining these people are key to the growth of your company.


• Products:    Is your product or service viable and sellable? Does it solve a problem that people are willing to pay "enough" money for it? How are you changing that product or service to increase sales its value. If it is moving into obsolescence, are you planning for it? Do you need new products or services?


• Customers:    This is the only question you should be asking each and every day multiple times a day. How are sales? What are the best accounts? Weakest accounts? What's in the pipeline? What is the company doing every day for business development? Know your target customers! How long does it take from customer identification to actual purchase? What phases are your prospects? How can the customer base be increased?


• Competitive Advantages:    What are your current competitive advantages? How do you grow in market share? What is the next level? Is your product patentable? Trademark potential? Are there processes or procedures that would improve efficiency and allow expansion. What strategies are you developing to build brand awareness and market penetration.


• Net Income:    What is company net income potential? What was it in the past three to five years? Develop goals and budgets that are reasonable. Reasonable goals and budgets are supported by action items. Create a one-year budget. Create 3 and 5 year goals. Take into consideration various accounting methods: accrual, cash and tax basis. Consideration must be given to the timing of cash flow. Review your progress monthly and make corrective actions quickly.


• Assets:    What is the value of the assets you purchased. What needs repair? What needs to be trashed and what can be salvaged? Do you have enough space? Are the buildings in habitable condition? Too much inventory? Too little inventory? Did you purchase the receivables? What is the average turn-around time for your receivables. What are the credit policies of the company? Written policies and plans should be developed and communicated to appropriate employees.


• Inventories:    Inventory is such an important part of the balance sheet that it requires its own discussion here. Who supplies the raw materials for the product? Is there more than one supplier? Are the supplier's prices competitive? Is the inventory obsolete? What is the inventory turnover rate? Can that time be shorter? Can you develop supplier relationships that add efficiencies, provide legitimacy, increase marketing or improve distribution?


• Liabilities:    What is different in your capital structure and your liabilities than the previous owners? How will this affect your business? Can the business handle the debt load? Does it need to be reduced? Or can you take on more debt to leverage the business more effectively?


• Risks:    Identify the risks facing your company. Are there ways to mitigate the risks? Have you created some backup plans? Employee training? Market risks? Diversification risk? Technology risks? List the risks and begin addressing them with management.


• Other:    Each owner is different. Each employee is different. Every industry is different. Identify the key drivers affecting the profitability and future potential of this company and in your industry. Read and research. Look for trends in your financial data and in industry literature.
  
  Most new companies have some investors that they meet with weekly or monthly. All of the above should be addressed in some written form each month. Key management should assist you with some parts while someone inside or outside of the company should compile the presentation and analysis to continuously review the direction and goals and vision of your company. Pospick & Associates has experience assisting owners and management in all of these areas.