How to Evaluate a Business for Sale
So you want to buy a business, but you’re not quite sure which one to buy? Acquisitions can be tremendous opportunities, but they can also damage an entrepreneur’s finances and reputation if they go sour or end up a failure. Poor decisions can cost money, time, and lead to lost opportunities. As an experienced provider of managing partnerships and strategic alliances, we’ve created this blog as a way to advise business buyers on evaluation tips and techniques.
Make a List of Strategic Criteria
First, consider all the options available to grow your own company, then consider whether or not you have the internal capacity to achieve that growth. If this isn’t possible, an acquisition could be a good move.
Consider the following points when looking at prospective businesses to acquire:
- How does the new company fit into your business plan?
● Is the purchase price within your budget?
● Is the business in a good location?
● Do its employees have the skills and capabilities you’re looking for?
● Does it possess the technology and intellectual property that you’re seeking?
● Does it encourage innovative practices?
● Does it have brand visibility and a respected professional reputation?
● Is the company culture a good fit with yours in terms of its management style and company goals, clients, and suppliers?
Your criteria should reflect any particulars of your acquisition strategy. These could include:
- Acquiring an underperforming business: You may decide to purchase an underperforming company for a low price and try to turn it around.
- Purchasing a competitor: This strategy can allow you to rapidly increase your market share, raise your profit margins, improve, and diversify.
● Buying a distribution channel: Such an acquisition can help to improve your company’s performance while decreasing any transportation delays. It could also create increased buying power, which can lead to improved operational efficiencies and cost savings.
Take a Close Look at Company Culture
When considering an acquisition, your research should go well beyond operational and financial factors. Why is the owner selling? Is the business dependent on a certain market segmentation? Are the current customers loyal? Will they disappear when the current owner leaves the business?
Take a close look at the company’s culture and determine how it will fit with your business and its overall strategy. Be disciplined if you identify difficulties, and don’t be scared to walk away.
For more information on the best way to buy or sell a business, contact Ashley Capital Group today.