For most business buyers, pursuing a viable business to acquire
is a once in a lifetime event. Because of the infrequency and
the complexity of pursuing a business to purchase, buyers
typically risk unnecessary financial resources and waste
valuable time to find their “ideal” acquisition. With a
complete understanding of business purchase process
fundamentals, a business buyer can effectively reduce the odds
of not finding the right company or paying too for one.
As a business buyer you want to use the most cost effective
means available to ultimately position yourself to get first
shot at your most viable business acquisition candidates and
properly qualify the company to maximize your eventual return
on investment.
Business buyers are prone to commit common errors within their
business acquisition process. Most of these errors can be
reduced or completely avoided with proper understanding of
their cause and affect and a proactive focus to eliminate them
within the multi-step process of buying a company. These common
business buyer errors manifest themselves in six key areas.
You Can Choose NOT to Make These Common Mistakes!
Does making these common business buyer mistakes have to apply
to your pursuit of a business? Absolutely not! A comprehensive
understanding of these common acquisition errors will add
noteworthy efficiency to your business pursuits:
1) Buyer Image:
In a business acquisition process, especially in the initial
contact phases, establishing a credible buyer image with the
business seller is paramount to positioning yourself among
other potential business buyers. There essentially are two
different, but related, selling processes going on
simultaneously within these initial meetings between the
business seller and buyer. The business seller wants to sell
the company and the business buyer wants to position himself
first among all buyers in consideration.
2) Buyer Qualifications:
As a business buyer you are essentially applying for the top
job in the seller’s company. The business seller needs to
quickly understand your unique buyer qualifications. Initially
providing the business seller with an effectively formatted
resume that showcases your most applicable leadership and
management education, experiences and skills is an excellent
first step.
3) Buyer Team:
Again, because of the infrequency and challenge of properly
purchasing and eventually managing a business acquisition, the
buyer cannot afford to approach the business seller without a
qualified acquisition team of advisors. Without a professional
group of advisors on your team the business seller will
justifiably be concerned about the effectiveness of your “one
man band” leadership style post acquisition.
4) Buyer Funds:
Providing the business seller with a written summary of your
financial resources is appropriate, however it can be a “double
edged sword”. If you show too much financial capability
sometimes it increases the probability that the seller will not
negotiate on purchase price, down payment level or seller
financing. If you do not show enough financial wherewithal you
can unknowingly disqualify yourself from further evaluating the
company for purchase.
5) Buyer Criteria:
Without effectively identifying all your critical company
purchase attributes early in the acquisition process a business
buyer quickly finds himself looking at inappropriate
opportunities, dramatically increasing his investment risks and
effectively reducing his creditability with the business
seller.
6) Buyer Methodology:
If a business buyer does not have a well thought out business
acquisition process defined and documented, a faulty business
search program will result in lost opportunities, unnecessary
expenditures and many “false starts”. Disqualifying acquisition
candidates is truly an iterative and evolving process, unique
to each purchase opportunity. The more you can standardize the
acquisition process the better results you will achieve.
Quality acquisition candidates typically represent situations
where the business buyer must do what they must to not only
keep themselves in purchase contention with the business
seller, but ultimately to position themselves as the preferred
business buyer. This takes preparation and a concerted effort
on the part of the business buyer to show the businesses seller
that you are obviously prepared, disciplined in your evaluation
process, well advised and extraordinarily qualified.
The penalties for NOT documenting your management
qualifications, your financial resources and exhibiting your
advisors, purchase criteria and search methodologies to the
business seller can be obvious, but sometimes not. As a
business buyer you must continuously ask for feedback from the
business seller in these fundamental areas. Seller perceptions
of you cannot be assumed and they certainly cannot be assumed
that they will remain consistent throughout a lengthy purchase
due diligence process.
Similar to meeting any noteworthy business challenge, whatever
you can do to educate and focus yourself on eliminating common
business purchase errors in advance and during the mutual
business buyer/ seller evaluation process, the more effective
you will be in ultimately finding a business to buy that was
meant to be yours.
About the Author:
Mark Smock is President of
, the
FIRST international business buyer directory of its kind.
proactive business buyers to locate businesses for sale
worldwide that meet their exact registered purchase criteria.
