Mr. Richard Parker is the author of the “How To Buy A Good Business At A Great Price” series which is sold in over 80 countries. He is the founder of Diomo Corporation and has personally purchased eleven businesses. Learn more about Richard and his materials at diomo.com (www.diomo.com)
The acquisition of business has some very interesting, yet dismal, statistics. When I have mentioned these numbers to people outside this industry, they are stunned.
- § 90% of all of the people who begin the search to buy a business never complete a transaction.
- § Only 20% of all of the businesses listed for sale ever sell.
- § Business brokers are only involved in 10% of all deals.
- § 50% of all transactions agreed to between the buyer and seller fall apart during the due diligence stage and never close.
Why is it so important for you to know this? Let’s look at each one individually:
Why 90% Never Buy
Interestingly enough, a recent poll indicated that 50% of all Americans dream of owning a business. One would think that, with such high numbers, far more people would be successful. After all, a 90% failure rate is abysmal. There are several factors why this happens.
Reason # 1: Most people have never bought a business before. They enter this process completely unprepared. Even if they’ve had a successful career to this point, for most, nothing they’ve ever done adequately prepares them for what’s involved in this process. It’s even new to those who have been involved in corporate acquisitions, because now it’s their money at stake. Clearly, a lack of education is the number-one reason for failure.
Today’s business buyer will face an onslaught of life-altering questions, situations, and decisions during the various stages of the buying process. Lacking the critical knowledge to make these decisions, they simply choose to abort the project rather than seek out materials to assist them. It’s crazy, but most people will spend hours online trying to save a few bucks when booking a vacation, but will not invest any time learning how to buy the right business. To avoid this trap, educate yourself, before you start looking, and certainly before you invest your money. Continue reading
Mr. Alexis Papachelas is a guest editorial writer to The Business Thinker. He is currently the Executive Editor of the long standing and highly respected daily Greek newspaper “Kathimerini”.
This editorial is also appearing in Kathimerini.
ATHENS — Last Sunday (a week ago), as the Greek Parliament adopted the latest reforms and austerity measures, hooded arsonists rampaged through central Athens and riot squads hosed protesters with tear gas.
The measures were so severe that more than 20 deputies in each of the two parties in the coalition government defied their parties and voted against them.
Nonetheless, politicians who had dragged their feet over reforms for the past two years made the tough decisions demanded of them, facing the wrath of a population angered and exhausted by the fifth year of recession, plummeting incomes, higher taxes, collapsing services, 20-percent unemployment and no apparent end to the hardship.
One would have expected that Greece’s European Union partners and its creditors at the International Monetary Fund and the European Central Bank would move quickly to strengthen the hand of the country’s embattled reformers and their leader, Prime Minister Lucas Papademos, a respected former vice president of the E.C.B.
Instead, the vote was met with more skepticism, more demands, and statements that were seen as direct interference in Greece’s politics, undermining the centrist, pro-E.U. government’s authority for reforms in the face of virulent opposition from the left and right.
Dr. John Psarouthakis, Founder and former CEO, JPIndusries,Inc., a Fortune 500 industrial corporation. Publisher of www.BusinessThinker.com
This article covers the letter of intent, which should be negotiated and signed prior to the start of formal due diligence and the formal due diligence process itself.
The most extensive and expensive investigation of a company lead takes place during the formal due diligence. Formal due diligence can be viewed as the fourth filter through which company leads pass. Because of its expense, you should probably plan to complete formal due diligence on a company you are fairly certain to buy. Sometimes the process of negotiating the letter of intent itself weeds out some candidates that looked good after preliminary due diligence. Or you may uncover information during the formal due diligence that you were not aware of during the preliminary due diligence phase. It is likely that during the 18 month to two year period that you scrutinize company leads, if about two dozen leads get subjected to a thorough preliminary due diligence, only four or five will actually follow through to formal due diligence. Some will drop out during the preliminary due diligence phase itself. Other company leads might drop out because buyer and seller are unable to agree on terms in the letter of intent.
For the complete article go to e-reports at:
Reference: “How to Acquire the Right Business”
John Psarouthakis & Lorraine Uhlaner
Published by Xlibris, 2009