Forget What You Know About 90-Day Plans

During my career I've experienced both sides of a business change in ownership. I've seen good and bad ways of handling the crucial first 90 days after a business is acquired.

There are many guides and plans on the internet about what to do in the first 90 days after buying a business. You'll find pages of advice from business consultants, coaches, and others on how to handle it.

While some of this advice can be helpful, it often misses real-world situations. Many experts talk about “pulling levers” and “cost-out programs”. To be frank, it’s a lot of overcomplicated jargon. I find a lot of this advice to be too heavy handed and not often practical.

At Arbor Permanent Owners, we use a real-world approach to handle the change of ownership. This article covers how we manage the first 90 days after taking over a business.

And no, it doesn’t involve pulling any levers...

Talking to Staff

On the first day, staff members will likely feel very stressed. Some might even think about updating their resumes. They might have liked the old owner and now worry about changes, especially if they think private equity is involved, which is a common concern in small businesses in Australia.

Effective communication from day one is very important. It’s not just about giving information but making sure everyone understands it. A single speech on the first day is not enough. Employees need to hear the message many times in different ways to really understand it.

The "Theory of 7" in marketing works well here – say things 7 different ways, 7 times. This could include company-wide emails, posters in the lunchroom, face-to-face talks during factory walks, BBQs, and other methods. Repeating the message in different ways helps everyone understand.

Understanding Cash Flow

Understanding cash flow means more than just looking at a cash flow forecast. It means really learning how money moves from suppliers to customers and back to the business. This helps us understand how cash should flow.

We spend time with suppliers to learn their cash needs, follow work-in-progress around the factory floor, watch production processes, ask machine operators about possible improvements, and look at the invoicing process to understand customer cash flow challenges.

Improvements in working capital usually come from focusing on small details and making tiny changes that gradually reduce the need for working capital. These are the 1% improvements that we focus on, which overtime, compound into meaningful results.

Evaluating Leadership's Ability

Marshall Goldsmith's saying, “What got you here won’t get you there,” is very relevant. Any big changes require teamwork. It’s important to understand if the current leadership team has the right qualities to lead.

During the first 90 days, we carefully watch the leadership team’s actions and decision-making processes. 

It is tempting to step in and take charge, but patience is necessary to evaluate their abilities. Key questions include:

• Do they influence and inspire or micromanage tasks?

• Do they have a growth mindset or prefer the status quo?

• Do they focus on developing people or processes?

A leadership team with the right qualities is essential for growth.

Engaging with Customers

In the small business world, our businesses are often very important suppliers to other small businesses. These customers may feel worried about the acquisition because of the risks and uncertainties. They might even look for other suppliers. Also, we may not know their current situation, such as big expenses or financial problems.

Early and frequent engagement with customers is essential to ease their worries and build confidence in our plans for the business. While we plan to make changes in the long term, many customers prefer stability and continuity.

Managing Administrative Tasks

If the business was bought through an asset sale, the first 90 days will involve a lot of administrative work. This includes writing and signing letters to suppliers, customers, and staff, signing new trading applications with accounts payable, and navigating complex online government portals. These tasks must be managed while ensuring the business runs smoothly.

Despite the busy and stressful nature of these tasks, it’s important to be available to the team to get these processes done quickly. This helps the business operate smoothly and earns goodwill from the team.

Managing a change of ownership can be a nervous and disruptive experience for everyone involved. A gentle approach and focus on these critical areas can help ensure a smooth transition and establish a solid foundation for the future growth of the business.

At Arbor Permanent Owners, we don’t look at a business through a spreadsheet. We understand that businesses are ultimately comprised of humans working together towards a common mission. 

If you’re a business owner exploring a succession plan and you care about what happens next, maybe we’re an option for you to consider.

About Arbor Permanent Owners

Arbor Permanent Owners is a holding company that acquires and invests in exceptional, private businesses, deliberately built for long-term success. Our goal is to be the long-term custodian and permanent home of Great Australian Small and Medium Enterprises (SMMEs).

We are actively looking for businesses with the following characteristics:

• Business Model: B2B industrials: manufacturing and mission critical services

• Business Size: $3 to $6 Million of EBITDA

• Business Profile: Sticky B2B customer base

• Business HQ: Australia

Whether you’re a business owner interested in working with us, or an intermediary with a deal to share, I’d love to hear from you. Please email us at [email protected]