And Ways to Avoid Becoming One
In 1990, my CPA questioned why I was spending $700 a month ($1,788 in today’s currency) at a restaurant. “They have tasty food there and the ambiance is great! For this reason, I frequently take clients, associates, and employees there.”
He scratched his head and a week later called me to tell me why he knew I liked it so much.
Part of the experience was that one could easily understand that the positive energy was also high because the employees were happy.
Soon, as a result of their success, the owners decided to expand locally and nationally.
So far, so good.
One could visit one of their many West Coast locations, and the experience along with the food was always spectacular.
A few months after returning from an extended stay overseas, I anxiously entered through the doors of my favorite restaurant. Yet something had changed distinctly.
Gone were the happy, engaging expressions from the cooks and wait staff. The manager was gone. Sitting up at the bar, a favorite server greeted me. Upon returning with my many favorite dishes, I asked her, “What is going on?”
What Happened?
“The owners sold the business,” she sadly replied.
“Now we have to play corporate music, measure everything, and run any remaining salad mixes through a process to preserve them. So much for freshness.”
“Basically, they have taken all of the fun out of both working and eating in here,” she continued.
She was right; the equity partners who had purchased this gem were only interested in quick profits. Maintaining the restaurant’s great legacy — which the founders had built — was ignored.
Over the following year I frequented it less and less. The familiar employees were leaving, and it wasn’t too long until I saw the rapid turnover of the next group of employees.
Not long after this, they filed for bankruptcy. In the process of squeezing out another dime or so, the group at the “bean counter” had ruined the business the buyers had purchased.
While maintaining protocols and systems for smooth operation is important, doing so in a way that takes away the original formula for success can be counterintuitive.
Important Points to Ponder
If you have been considering buying an existing business:
- Ask yourself if you will be willing to let it continue as the profit machine that originally caught your attention.
- Be cautious about making drastic changes that will anger customers and cause you to lose good employees.
- Rather than simply counting on your business broker, engage with a seasoned business adviser whose key areas of expertise include cultural business transitions. He or she can provide a deep dive into the business culture and client expectations that you want to preserve.
- Rather than mandating operational changes from the get-go, seek input from existing team members of the organization so that changes are coming through them and not you.
- Control your “bean counter team.” Be certain that they are not merely taking a slash-and-burn approach. Keep in mind that people in this area of expertise may be very good at numbers, but not always so great at understanding human behavior, habits, and needs.
If you are considering the option of purchasing another business then contact russellstategygroup. With over 30 years of experience, John Russell has worked with buyers and new business owners who want to ensure a flawless transition from one owner to the next.