Declining Profitability Post Close

searcher profile

May 02, 2023

by a searcher from University of Denver - Daniels College of Business in Boston, MA, USA

Howdy Searchfunder!

If you buy a business, expect profitability to drop for 6-18 months. Prior owner kept it lean, you have debt payments, and errrybody wants a raise suddenly. Seeing this a lot lately and it was a common these at SMBash conference.


5 tips to help post close:

1. Have +3 months cash and a line of credit to buy time while you acclimate

2. Drive more sales with grass roots marketing and new owner energy

3. Focus on gross profit margin - the most important KPI to control by raising prices or getting more efficient

4. Speed up cash collection through online payment and chasing AR

5. Hire a bad bookkeeper so you never realize profitability declined




5
12
277
Replies
12
commentor profile
Reply by a searcher
from The University of North Carolina at Chapel Hill in Cornelius, NC, USA
Experienced this first hand running my business and couldn't agree more. Everyone asking for a raise suddenly was a bit of a surprise to me and it never ended. I'm all for people advocating for themselves but it definitely became a drag.

4 & 5 are critical
commentor profile
Reply by an intermediary
from Wesleyan University in Granville, OH, USA
I've seen #5 work for 30+ years ... though even that came to an end!
commentor profile
+10 more replies.
Join the discussion