Handling a Take-Over – In Kind or Expansion

Handling a Take-Over – In Kind or Expansion
Monday, August 27th, 2012 Scott Bossart

Taking over a business can be a daunting task.  This type of expansion can be from one form of competition, or a potential branch to expand towards a new market or product segment.  It is important to fully understand the state of the expansion that is about to be added.    Not only is there the understanding of their vendors, debt, inventory, labor force, etc., but also the customer base.  Integrating a new branch of the current business requires a different path than simply taking over a business in kind.  Although it can be hard in many cases to fully understand the current state of the subjected business, some assessment must be made to ascertain the potential status and how it integrates or compliments the current business and business structure.  It is also important to fully understand the extent of risk for failure.  Although it is possible, it is highly improbable, that the subjected business will have a business plan they were working from.  It is also doubtful a strong foundational structure existed, with which they were functioning on, although again, it is possible.  Without it, integration can be harder as it will take some time to determine the facts of the subjected business and how it actually functioned internally.

Hopefully the ground work has been laid as to the business which is being taken over and whether it is a good step forward for your current business.  By ground work, I am talking about the necessary research into the financial linkages and potential transition plans.  Many things have to be considered both internally and externally.  The existing customer base could see your acquisition as a good step for them but then again, they might also see it is a step backwards.  The ultimate goal should be to move everything forward financially, structurally, and professionally.  Without any information as the extent of how the subjected business conducted day to day affairs and customer service, the expected transition plan can be difficult to build ahead of time.  The one thing you should have in your favor is your existing business plan.  If this was developed properly and all the partners agreed and assisted in its development, the foundation is already staged for a smoother transition than if no current business plan existed.  This should be your step off point for the transition.  As I discussed in earlier writings, while you can be successful with sheer luck and guess work, this form of running an organization cannot last for the long term and sustainable future.  Having a formal business plan will establish the structural foundation for long term sustainability and future success.  While I have briefed this topic in long past blogs, I will dig deeper into this topic in future blogs.

Hopefully at this point you have updated your business plan to include the new venture or expansion.  This is important as you work to integrate the existing and the new together.  Not only do you have to focus on earning the respect of the new business labor force and staff, you also have to consider what you are offering the customer base that is a step above what they were getting from the previous owner.  This is not to say, if the previous ownership of the subjected business was literally giving products or services away or selling at a low to no profit margin, you need to continue their practice.  What you do have to do however, is provide the customer with a fair and consistent level of expectation from their new organization.  Yes, I said their new organization.  Stepping into their shoes and viewing your acquisition from their perspective is very important.  One of the high priority items on the agenda should be to fully understand the customer base.  By understand, I mean to understand those customers that generate the most business and those customers that generate the most profit from the subjected business.  This information can then be overlaid with your current statistical information.  Once aligned and a full picture is formed, a sound direction can be determined and communicated to the newly acquired customers.  And yes, typically those two will not be the same customers.

This same logic and process should also be utilized for internal staffing and labor force.  The only difference is regarding the focal points for the statistical overlay.  If you go after a business expansion, you must also be looking for what can be learned.  In most cases, even for business in kind type of acquisitions, it is naive to think everyone does everything the same just some do it better than others.  On the broad view this might be true but when the details float to the surface, it can be eye opening how much of a subtle difference in one exposed operation can greatly improve the entire organization if applied properly.  Not every business owner has the answers to what is the most efficient or effective process.  Even the worst run businesses can have one or some small detail that can be learned, which if applied, can make a huge difference in profit margins, productivity, or general customer service.  Have a plan in place for transition execution.  This will also include your work flow and business process integration.  If you have a solid, thorough, and documented business plan, work flow, and process flow regarding the existing organization, each facet of it should be applied to the subjected business and transition.  The outcome should also a solid, thorough, and documented “updated” business plan, work flow, and process flow for future sustainability.  It is the foundation for growth and sustainability.  Without it you simply run on sheer luck and guess work which is not effective for long term organizational and overall business growth.

Stay Well

Scott B.


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