I was perusing some files and found a couple of our weekly memos from a dozen years ago. This one is advice to business buyers and in two weeks it will be advice to sellers. They are just as important today as in 2012 and in 2002, 1992, 1982, and beyond.
I’m always asked, what are the biggest mistakes business buyers make and what can buyers do to accelerate the buying process. The first mistake, and it’s a big one, is that they put all their eggs in one basket and stop prospecting for companies when they find a business they like, often before any analysis.
After that, it’s the following three things:
- No urgency is created, no timeline set, and thus the buyer gets stuck. The best thing a buyer can do is get the basic information needed to make an offer, make the offer, and keep moving. It could be moving on if a deal can’t be reached or moving to due diligence if a deal is agreed to.
- Getting bogged down in minutia. There is only one place for minutia and that is after a deal has been reached. Then minutia manifests itself with financing, due diligence, and the contracts.
- Managing risk as there are no perfect businesses and no perfect deals. A buyer can’t go into a defensive mode, they must stay on the offense. It’s how you buy a business and how you grow a business.
The above assumes one important thing and that is that the buyer doesn’t get frustrated and settle for a mediocre business (the only thing worse than no deal is a bad deal). We’re talking about buying a mature, profitable, and fairly priced company. Next, the same but for sellers.
“Buy a good business and make it great.” Richard Parker, Diomo Corporation
