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Finance , Small Business , Smart Advice – March 15, 2018

Buying a Business: More than Just Crunching Numbers

There’s a lot of buzz lately about how to buy a business. A strong economy will do that. Not wanting to miss out on the potential growth and looking for a fast way to expand, business owners often look at acquisitions as a solution.

Buying a business does make sense and can be a great way to expand, but there is a lot more to consider than just crunching numbers and potential double-digit returns.

Let’s assume the initial numbers look good, are verified and that the potential buyer can justify moving forward. What nonanalytical aspects of the acquisition should be scrutinized?

Is the acquisition a good fit? Will the acquired company easily integrate into existing operations? If not, be prepared for a lot of management attention, possible restructuring, procedural changes and grumbling from the employees.

The “fit” analysis should include company culture, employee compensation, incentive plans, management style and employee benefits. Any disconnect in these areas can result in higher than expected staff turnover and a breakdown in customer service and sales.

Marketing and branding need to complement each other or at least be relatively consistent. A superior brand with high product margins and profitability could damage its reputation in the market by acquiring a brand that is viewed as lower quality. That damage could lead to lower margins and profitability – sometimes called pricing dilution.

Determining how the newly acquired business will fit into current operations, integrate with staffing and potentially change customer perceptions are critical to the success of the acquisition.

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