I remember years ago getting a heart-wrenching email from the spouse of one of my clients who unexpectedly and prematurely died in the night, and would not be making our weekly consult that day. It was so upsetting to hear such news for everyone involved. , Now my client’s grieving spouse, who had been loosely involved in some of the administration of the business, now needed to run the 20 employee business that would be her sole income on her own. So we rolled up our sleeves, and in short order the new owner was doing beautifully.
Inheriting a business can be a rush of emotions. You are most likely dealing with the loss of a loved one, and on top of that you are feeling excited about the opportunity, anxious about the unknown, fearful of accidentally making an expensive mistake and possibly torn about whether you want to do this or not. The process can be overwhelming. So to get your bearings start with these 7 questions.
- What are the Urgent Matters? Sometimes timing itself is the most important thing in front of us. For example, let’s say payroll is due days after you take over the business and the bookkeeper just quit. With one of my clients who had a surprise inheritance all of the passwords to company web and social media sites were missing, and the website domain was going to expire within a few weeks. Urgency will dictate this has to be taken care of first. Start with a list of critical tasks that must done or overseen to keep business moving forward, employees getting paid, cash flow keep moving, and products / services being delivered. You don’t have to run out and take care of all of these items yourself, but make the list and make a plan for how they will get done. You can check with the company’s advisors, key people or suppliers to assist you in finding solutions to this. And the unpleasant fact is that some of the urgent matters may require you having copies of death certificates and other emotional things to gain access to things you are locked out of.
- What Can You Learn From the Cash Flow? Now that business is flowing, its time to examine the cash flow. You can tap into the company accountant as an outsourced CFO project if you are not familiar with financial reports and what they can tell you. Or you can download our special report “The Small Business Guide to Scorecards and Which KPI’s Matter Most” to give you an overview of important numbers, how to get them and what do they mean. Regardless of your familiarity with financial reports, your first step is to check the books and see how up to date things are. If there are not a full set of books hire a bookkeeper to get them up to date. Get several quotes and compare credentials because more qualified and experienced people will have higher fees, but also are likely to not take as long. Set deadlines upfront so everything is not held up for you.
- What Are The Key Functions of the Business? Find the most experienced employees and ask them to give you a crash course from start to finish of the major functions of the business. How are supplies ordered, how are employees hired, prices set, customer service issues handled, how does production occur, and more. Take notes on everything and document the workflow. And also try to learn what the former owner previously did.
- Who Are the Leaders? Would you need to have an active role moving forward in the business? Try to understand the org chart, if there is one. Then schedule one-on-ones with employees to get to know them and their role in the business. Review privately old performance reviews to get a sense of employee’s strengths and weaknesses. And, identify who might be some of your key leaders. Build your own new organization chart, and I suggest making a functional organization chart (see my article “Scalable Functional Organization Chart for Small Business and its Uses”) so you can visualize all of the functions in the business, and identify the right seat for everyone.
- What is the Potential Future of the Business? Try to do a little market research, check with trade groups and review industry trends to see what the growth potential this will be. Often when you inherit a business there is an opportunity cost of something else you will not be pursuing. In order to see if that trade off is going to be worth it you need to see where you think the business will be in 5 years, 10 years and beyond.
- Who Could Be Your Key Advisors? Meet any of the company’s consultants, accountants, bankers, attorneys and other professional advisors and see if you can get a senses for the services they have provided for the company in the past and what they think the best next steps Also, if there are any holes, like maybe the former owner did a lot of things themselves or in house, you may want to add to that team to bring in some expertise during this tricky transition.
- What is the Business Worth? Accountants, some consultants, business brokers and business evaluations experts may be able to give you a rough idea of what the business is worth if you sold it. Also, what it would take to make the business worth more. It’s great to know where you are starting from. You should not invest a lot of money or sign any contracts to sell or anything in order to get this ballpark number.
Hopefully you have a game plan you are ready to execute with your seven questions. A word of advice would be that before you jump into action don’t make any major change in the business until you have a great handle on all seven of these questions. Often it is a good rule of thumb to not make too many changes for a year after the transition. Best of luck on your new enterprise.