Buying a Company

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Dr. John Psarouthakis
, Executive Editor, The Business Thinker and author of “How to Acquire the Right Business”,  xLibris

If you are buying a business for the first time, you will find that buying a business is a unique experience that requires extensive knowledge and skills in a broad spectrum of areas—legal, accounting, banking, financing, the understanding of government regulations, especially in areas of environment, safety, and employee relations. You must learn how to obtain and screen leads, how to evaluate and price prospective companies, and how to conduct due diligence. But even highly experienced entrepreneurs who have completed dozens of deals still rely upon professional expertise for certain phases of the process. Thus expect that even after you learn more about the deal-making process, you will still need to hire consultants to assist you in making a successful purchase.

Buying a company is very demanding because it is an intellectual, pragmatic, and emotional process all in one. It is an intellectual process because to be successful, you have to think it out. It is a pragmatic process because you have to be realistic about the company you are looking to buy, whether it is worth buying, what its real value is, and what it should be priced at. And buying a company, finally, is an emotional process. Throughout negotiations, beginning with first contact with the seller and continuing through to the closing of the sale, you experience tremendous highs and lows. You must be able to handle both extremes of emotion. You must handle the highs, so as not to reveal your enthusiasm to the seller, and after the lows, to be able to come back and find a solution to the problem that might otherwise kill the deal. The emotional component holds true even after many deals, but you do learn to control those emotions with practice.

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