Just because you have bought a business does not mean that everything will run on autopilot. I’ve worked with entrepreneurs that really have no solid business plan to follow up their acquisition. They live in a world where they firmly believe that business will continue “as usual” after the acquisition. Regretfully most entrepreneurs quickly discover that there really is no such thing “as usual” in the field of business entrepreneurship and management.
Myth #1 You don’t need a business plan if you are buying an existing business. The previous owner has a general guideline or plan already.
Reality – The purpose in buying a business is to reduce risk and take a good business and make it great.
Myth #2 You need a 300 page business plan for your business purchase that will take roughly 3 years to write, rewrite, revise, and edit.
Reality – Business plans are a very personal and individual resource. Your business plan needs a few basic elements including a pro forma/cash flow analysis/ (for a minimum of one year and a maximum of the length of the time to pay off the debt); milestones for your business, and a few other basic elements.
Myth #3 I’ll write a business plan and wipe off the dust to show it to potential investors, executive management, and the occasional motivation session for the employees.
Reality – Business plans are part of effective management and entrepreneurship. Your business plan should be a dynamic document that should be shared with everyone in your organization on some level.
Myth #4 In business planning – sales will solve everything.
Reality – This is by far the most common mistake that first time business buyers make. I’ve made this mistake myself. You’ve just bought a business, you want to pay off the seller and become debt free. You figure if you boost your sales you can pay off the seller and keep all the profits. You need to factor your first 3-6 months after your acquisition with sales at 70%, 80%, and 90% of target. The reason for this is you need to spend time with the previous owner focusing on learning the processes, vendors, and employees. Your job for the first 3-6 months is to learn the trade. A good business may have clear and precise processes so consequently the business can run on auto pilot without the owner’s daily babysitting of day to day duties. My personal experience is that the previous business owner needs to help with the day to day responsibilities until the transition process is complete. The business owner or owners naturally drive sales.