Imagine for a moment that a few Wall Street executives, fully clad in their tailored suits, walk into a country bar in the middle of Wyoming. I bet you can feel the tension in the air. The skepticism would be visibly painted on every cowboy’s face as the city slickers made their way to the bartender.
It’s a culture clash. A pretty dramatic one if we’re honest.
Now picture trying to get a Wall Street executive and an old-time ranch hand to work together on a project. If you cringe a little, you’re on the right track. Likely, in order for the project to be successful, a mutual friend that’s trusted by each party would have to smooth the way, possibly putting out fires along the way.
Welcome to the world of integrating your company culture with that of the new buyer. More than likely when you bring the new owner and their team into the fold, it won’t be as dramatic as pairing a city slicker with a lifetime rancher. But, depending on how small your company is and how corporate the new buyer is, it could have some resemblance.
So how do you as the owner make this process as successful as possible? At Exit Consulting Group, we advocate several approaches both before and after the sale.
Tackle Culture Clashes Early On
There are two fundamental truths that we deploy when evaluating a buyer. First, pretty much any buyer will tell you exactly what you want to hear. If family values matter to your company culture, well by golly they will “have” family values. It will be the same story with any core culture value or condition you set as a requirement for anyone buying your company.
The second truth is your gut knows the moment something doesn’t fit.
Regardless if the buyer walks the walk and talks the talk, if your gut tells you that the match won’t work long-term, it’s time to walk away. So before lacing up your walking shoes, dive into an in-depth due diligence on prospective buyers.
For professional buyers or large corporations familiar with purchasing smaller businesses, we suggest that you as the Seller talk to companies they have previously acquired to see how the transition went. How were existing employees treated during the process? What are the real values of the main company? We’ve even worked with owners who have flown out to the headquarters of the company acquiring their business to spend multiple days getting a “feel” for the company culture.
With smaller buyers, we evaluate character references. Talk to former employees, colleagues, vendors, and even competition to get a real picture of this buyer’s character. This understanding and trust-building stage is very important regardless of whether or not you get 100% at close or carry the whole note.
If you think that pairing fits, hang up those walking shoes and move ahead with the deal.
Set the Tone
Once the deal is good to go, you have to set the tone of the transition. This starts the moment you inform your management team and employees. Be honest and honorable with your employees about the transition. Change is hard and can be scary for anyone, so singing the praises of the new owner, painting a glorious picture of how the best is yet to come for everyone involved, will help your team be more open to the new management.
If you present the transition with reservations about leaving, those hesitations will taint the entire process.
You’re the trusted friend bridging the way for the city slicker and ranch hand to work together. This bridge plays a bigger role if you have a continuance agreement or earn out. Oftentimes, owners in this situation keep a pulse on their team’s morale and how the transition is going from a relationship level, working to alert the new management team to potential red flags they see brewing.
To be fair, the new leadership team isn’t always incredibly receptive to the old owner’s feedback or concerns. Additionally, business owners don’t always make the best coaches. Owners are more thoroughbreds ready to tackle the world, less top-notch coaches. We dive more into that particular balancing act in, “Are You Emotionally Ready to Exit Your Business?”
Change is Hard
Regardless if the new owner is your doppelganger, no one likes change. Even when we know that change is better for everyone involved, the process pushes us out of our comfort level.
Nine times out of ten, though, the incoming owner will not mirror your leadership style. Most times we see the incoming owner having a dramatically different style. As the new owner steps into the business and implements strategies to take it to the next level, there is wave of change.
For example, we often see entrepreneurs position themselves at the center of a company. Everything runs through them. They’ve built a team who thrive in that environment, and the business succeeds because of it. Then a corporate buyer steps in and gives the leadership team more autonomy while implementing more reporting structures and procedures. Some managers rejoice, others need more handholding and some will resent an influx of paperwork. This shift in style creates road bumps and often times changes in personnel.
The important piece is to realize that with change on the horizon, even when it’s in the best interest for the entire company, anxiety and tension will be high. Don’t underestimate how challenging it will be for you as well.
Seeing the Big Picture When Selling Your Business
Vetting buyers to ensure a company culture match is just one piece of a very large and complex process. The biggest key to successfully selling your company, from preparing it to go to market to ensuring the transition goes well, is to have a game plan in place at least a year before you’re ready to exit. This plan helps you identify what attributes a buyer needs to have, as well as your long-term goals for the business.
At Exit Consulting Group, we not only help you create a comprehensive game plan, we partner with you at every step throughout the process. We implement a four-phase selling process that establishes your goals for the transition, prepares the business for market, finds qualified buyers, and oversees the transition.
While it may sound simple, businesses have the most success engaging in this process one to two years prior to leaving the business. This gives our teams the opportunity to establish systems, drive additional value, and time the market for the most profitable sale.
If you have an exit on the horizon, give our team a call. We can walk you through what this process would mean for your business, as well as work with you to identify your long-term goals for your business.