By Dr. John Psarouthakis, Executive Editor of www.BusinessThinker.com, Founder and former CEO, JP Industries, Inc., a Fortune 500 industrial corporation
This is the 7th of a Series of 15 short articles on “HOW TO BUY THE RIGHT COMPANY” They will be posted at one a week
The evaluation process takes places in successive stages or filters as you progress more deeply into the deal. At any point along the way that you feel uncomfortable with the deal, you should not go through with it. However, be aware that even in deals that go through, extensive problem-solving is often required in order to complete the deal. The filters are as follows:
Filter 1: Initial information provided by your broker (Filters initial lead pool from hundreds or thousands to about 50 leads)
Filter 2: Initial data from the broker after a confidentiality agreement is signed (allows you to weed out all but about 25-30 leads, approximately speaking)
Filter 3: Information obtained from visit to the company and preliminary due diligence (provides you with means to reduce lead pool further to about a dozen target companies)
Dr. John Psarouthakis, Executive Editor, www.BusinessThinker.com. Founder and former CEO, JP Industries, Inc, a Fortune 500 industrial corporation. Adjunct professor, Strategy and Acquisitions, Ross School of Management, University of Michigan
This is the 5th of short articles of my thoughts about Acquisition of a business.
Building a good team is important right at the outset of your search. You will need an attorney almost immediately, to review any confidentiality agreements or letters of interest that must be signed. However, you should also begin to think about the other team members you will need early on in the search process. A good accountant is essential to the adequate review of the seller’s books, and possibly in addition, an independent auditor. Other consultants you need may depend upon your own skill levels and the nature of the business. If you will need outside funding, a financial consultant may be needed. Depending upon your own background in the functional business areas of sales and marketing, operations, engineering and manufacturing, you may or may not require outside help. An environmental consultant is increasingly needed whenever real property is involved in the transaction, to assure that no hidden problems exist.
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)
It’s amazing how we see an immediate increase in our business right after the December holidays and the day after every long weekend. The former may be many “New Year’s Resolutioners” as I call them, and the latter is because most people dread the thought of going back to their job after an extended weekend. So, let’s pretend it’s the holidays right now, and sing to yourself: “All I Want for Christmas is a business of my own…”
If you have any desire to be in business for yourself, then now’s the time to make your move! In fact, there has never been a better time to take that step. So this year, buy yourself the greatest gift of all – a business of your own!