By Mark Smock

April 23, 2004

If you have just decided to start looking for a company to buy

you will need to understand the fundamental assumptions

involved before you make your first step to purchase the

“right” company.

This article will give you a quick “fly-over” of basic business

acquisition insights learned over many years of pursuit of

finding the ideal company that meets one’s EXACT purchase

criteria. Purchasing a business can be a complex, iterative

process made up of many steps. Most steps within the process

should be implemented in a logical sequence to achieve maximum

desired results. The very first step in any business

acquisition effort is understanding some of the basic realities

of what to expect within the anticipated business procurement

process.

There are basic or “practical” assumptions and specific or

“subjective” assumptions one must make in every business

purchase effort. Practical assumptions can be best defined as

anticipated realities that make sense to understand no matter

the potential business transaction. Subjective assumptions are

anticipated challenges and events that correlate to your own

personal perspectives based firmly within your own purchase

criteria, prior business experiences, accumulated knowledge and

developed risk/reward tolerance levels.

Like most complex business challenges it is best to make some

fundamental assumptions about the task at hand. These

assumptions are not inclusive and are documented to facilitate

develop of more thoughts and ideas prior to implementation of

any initial step to find a business:

Assumptions to Be Made Before Searching for a Company

It is nearly impossible to find the “ideal” company to buy:

Compromises will abound throughout your search and negotiations

Not all companies are for sale:

Although, this is a common “opening statement” communicated by

an owner of a business you really like

Finding an acquisition candidate is a “numbers game”:

So many letters, calls, e mails and conversations result in

thousands of candidate companies defined, result in hundreds of

qualified candidates to pursue, result in ten’s of viable

companies to visit, result in one company that justifies a

formal purchase offer

The deal is done only when the check clears!

Like in any selling situation, the sale really is not completed

until you have 100% of the committed funds in hand. A business

purchase deal is only truly complete when the business seller

endorses your check for deposit … business sellers can and will

change their minds at any minute!

If you do not know what you really want to purchase you will

never find it.

Developing a clear, well thought out business purchase criteria

list will add a tremendous amount of efficiency to your

business pursuit process and significantly help all

intermediaries you choose to use to help you find your ideal

purchase candidate

If it is not in writing it means nothing:

Given the noteworthy amount of capital involved in business

mergers and acquisitions activities, coupled with all the

required evaluation steps needed to get a deal to final

negotiation, and all the people and associated support services

involved to get you there, it is always best to maintain a

“paper trail” and use binding legal documents to minimize

liability and “misunderstandings” along the way

It will cost you more than you anticipated:

Beyond negotiating an equitable price for the business you

eventually purchase, there are a variety of costs involved to

find, define, qualify and negotiate a business acquisition, no

matter whether you do a deal or not. Service fees, legal fees,

travel and entertainment expenses, market research publications

and industry consultant fees, to name a few “sunk costs”, can

really add up.

The more “creative” you are to find deals, the quicker you’ll

find the right deal:

The more diverse your means to locate viable companies for sale

the better your chances of finding a quality acquisition

candidate. Spread out your business candidate search resources;

utilize brokers, financial institutions, industry associations,

consultants, trade shows and websites to find your next deal.

You never know where your next great lead will come from!

Having a structured business purchase process in place to

maximize your time and capital will dramatically improve the

probability of finding a company that is for sale, reasonably

priced and meets most of your purchase criteria. Buying a

business does not have to be “psychological warfare” or a

stressful process.

Much of the success of buying a business will come from

documenting all your relevant thoughts, plans, processes and

challenges required to achieve your objectives. If it is

written down it can be improved upon, if it is not, it cannot.

Like trying to address any noteworthy business challenge,

whatever you can do to educate yourself on all the is required

to meet your desired outcomes, in advance of the tasks at hand,

the more effective you will be, the less it ultimately will

cost you to find the business to buy that was meant to be

yours.

About the Author:

Mark Smock is President of www.business-buyer-directory.com, the

FIRST international business buyer directory of its kind.

Business Buyer Directory provides a non-traditional means for

proactive business buyers to locate businesses for sale

worldwide that meet their exact registered purchase criteria.