IBA, as the premier business brokerage firm in the Pacific Northwest, is firmly established as a respected professional service firm in the legal, accounting, banking, mergers & acquisitions, real estate, and financial planning communities.  Periodically, we will post guest blogs from professionals with knowledge to share for the good of owners of privately held companies & family businesses. The following blog article has been provided by Lisa Garfinkle of Garfinkle Growth Partners (https://www.garfinklegrowthpartners.com/):

Wisdom Gained from Turbulent Transfers of Business Ownership

I learned one of the most important lessons of my career during a $30 million private equity acquisition.

On the first day of the takeover, I was fired.

The people making the decision had never met me. They had never seen me work. They had never spoken to the customers I supported or the employees I worked alongside every day. They had reviewed the numbers, completed their due diligence, purchased the company, and made their decision.

At the time, I was the only salesperson in the business.

For years, customers had called me directly. I knew their businesses, their challenges, their deadlines, and often their families. When something went wrong, they called me. When they needed an answer, they called me. When they were under pressure and needed help, they called me.

None of those relationships appeared in the acquisition documents.

The new owners saw a company with revenue, customers, products, and opportunity. What they couldn’t see were the relationships behind those numbers and the reasons customers continued to buy year after year.

After the acquisition, leadership focused heavily on the largest customer. Looking strictly at the numbers, it probably seemed like the right decision. The largest account represented the largest opportunity.

Unfortunately, the business had never been built on one customer.

It had been built on hundreds.

As attention shifted toward the largest account, service levels began to change for everyone else. Lead times stretched to approximately sixteen weeks. Customers who had become accustomed to quick responses and reliable service found themselves waiting longer and receiving less attention.

Then the phone started ringing.

Former customers were calling me.

They wanted to know what had happened. They wanted to know why service had changed. They wanted to know why lead times had increased. Most importantly, they wanted to know where I had gone.

I joined a much smaller competitor. We didn’t have the resources of the company that had acquired the business. We didn’t have the market position. We certainly didn’t have a $30 million acquisition behind us.

What we did have was the ability to serve customers.

We reduced lead times from sixteen weeks to one or two weeks. We answered the phone. We solved problems. We delivered what we promised.

One customer at a time, the business came back.

The customers weren’t following a company.

They were following trust.

Within six months, much of the business that justified the acquisition was gone.

The experience taught me something I have never forgotten.

The acquirer bought the company.

They understood the numbers.

They did not fully understand what was creating the numbers.

They saw revenue.

The customers experienced relationships.

They saw accounts.

The customers experienced service.

They saw data.

The customers experienced trust.

Revenue was the result.

Relationships, service, trust, execution, and people were the cause.

When leaders focus only on the result and fail to understand the cause, they create blind spots.

Every company has them.

Most are not hidden.

They exist in the gap between what leaders measure and what customers, employees, and the market actually experience.

By the time those blind spots appear in the numbers, the damage has often been accumulating for months or years.

The numbers do not create the outcome.

The people create the outcome.

The numbers simply report it later.

Lisa Garfinkle specializes in identifying operational blind spots, execution gaps, accountability breakdowns, and hidden organizational drag before they impact revenue, profitability, growth, EBITDA, and enterprise value. With more than 40 years of experience spanning manufacturing, distribution, sales leadership, operations, and multiple private equity takeovers, she brings a unique perspective gained from working at every level of an organization—from frontline employee to executive leadership.

If you have questions relating to the content of this article, Lisa Garfinkle, founder of Garfinkle Growth Partners, Inc., would welcome the opportunity to connect. Ms. Garfinkle can be reached at (514) 249-7053 or [email protected].

IBA, the Pacific Northwest’s premier business brokerage firm since 1975, is available as an information resource to the media, business brokerage, mergers & acquisitions, and real estate communities on subjects relevant to the purchase & sale of privately held companies and family businesses.  IBA is recognized as one of the best business brokerage firms in the nation based on its long track record of successfully negotiating “win-win” business sale transactions in environments of full disclosure employing “best practices”.