Buying a Business is a 'Numbers Game!'

"A needle in the haystack!" or "A diamond in the rough", both

popular saying's apply to what's involved in finding your

ideal company to buy! Any seasoned business buyer will tell

you that finding viable companies that can be purchased for

reasonable terms is a "numbers game".

Thousands of company purchase candidates defined, that lead to

hundreds of contacts to be made, resulting in tens of

acquisition conversations that hopefully lead to ONE company

acquisition! Many merger and acquisition veterans will tell

you "It takes 100 potential opportunities to get one good

deal" ... a numbers game.

At any point in the business buyer's purchase process, for any

number of valid or invalid reasons, either the business buyer

or the business seller can call off the potential deal. Most

potential business mergers and acquisitions pursuits do fall

apart. The human and financial costs to both parties involved

can be significant, sometimes devastating.

What Is a Business Buyer to Do?

From a business buyer's perspective, there are four fundamental

stages to finalizing a business acquisition: searching for a

business, qualifying the business, valuing it and negotiating

with the seller. This article will highlight how a business

buyer can eliminate many of the major, common mistakes buyers

make within these business purchase steps:

THE BUSINESS SEARCH STAGE:

As a business buyer you want to use as many means possible to

position yourself to get the first shot at a viable business

that can be purchased. Preferably your goal should be to find

a purchase opportunity where you have no other purchase

competition. Herein lies the most noteworthy justification for

being as creative and diverse as you can be to locate

acquisition candidates.

Often the more "creative" you are to find companies to purchase

the quicker you'll find the "right" deal. This is particularly

true if you seek to locate quality candidate companies that

are not officially "for sale". The level of buyer competition

is often most intense relative to quality companies who have

NO KNOWN justification to consider a merger or acquisition

offer. If the business owner has no compelling reason to sell,

knows he has a company of extraordinary value, in great

purchase demand, more often than not, only creativity will get

you in front of that potential seller.

THE BUSINESS QUALIFICATION STAGE:

As a business buyer you not only need to know how to

effectively qualify a business financially and non-

financially, but you must present your financial and management

capabilities to the business seller in a most professional

manner.

Often business buyers have not prepared in advance a formal,

written: resume', identification and qualification summary of

their "purchase team" or validation of their financial

resources, to be provided to the business seller at

introduction. To an owner of a quality business, getting this

information early in the mutual buyer/seller evaluation

process is critical, especially if there are multiple buyer

candidates.

THE BUSINESS VALUATION STAGE:

As a business buyer you need to know "what you don't know"! Do

not try to do everything yourself, especially if you are not

familiar with the task requirements at hand.

When it comes to determining the market value of a business, a

business buyer must hire a proven business valuation expert

for two key reasons:

1) This step in the business purchase process can be very

complex and warrants utilization of proven expertise, and

2) When it comes to presenting a market value to a business

owner who has invested significant time and money to "build

his baby", you as a business buyer want to make sure the

business valuation analysis and final valuation number comes

from a "3rd party". It is much easier to negotiate a purchase

price with the business seller if you weren't the same guy who

established the opening "low ball" offer!

THE BUSINESS NEGOTIATION STAGE:

As a business buyer you essentially want to purchase

controlling interest in a viable business for a fair price,

with favorable purchase terms, financed with as much of other

entity's money as possible.

The negotiation portion of the business purchase process with

the business seller, or their representative, is where most of

this purchase objective can become a realization. Effective

negotiation skills are not innate. They are developed, acquired

and honed over many years of "verbal warfare". Plan

and practice you negotiation strategy prior to meeting with

the owner and hire a professional if you have any doubt about

your desired outcome. This is NOT the point in the business

purchase process to start to minimize your acquisition costs!

The odds of a business buyer finding and effectively buying a

quality business are against him before he even starts his

business purchase program. Ultimately the business seller

knows EVERYTHING about the business for sale but the business

buyer theoretically only knows what he asks about or

determines to be valid via his due diligence ..."buyer beware"!

Buying a business is truly a numbers game ... a game that can be

consistently won if the business buyer truly understands his

challenge at hand and has the discipline to know when to stop

the purchase pursuit and utilize proven business merger and

acquisition expertise.

About the Author:

Mark Smock is President of http://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.