Go beyond the balance sheets when researching potential business acquisitions
For financially healthy companies looking for a new avenue of small business growth, now may be the time to acquire another company. Business valuations are typically lower during a recession, and an acquisition can provide a fresh infusion of customers and cash flow.
Yet when planning or researching a potential acquisition, a significant amount of due diligence is required, reported the Globe and Mail. This is largely because simply looking at a company's financials is not necessarily a good indication of how viable it is, because other factors play a significant role in the health of the small business.
For example, small business owners should investigate the potential acquisition's client and employee loyalty, which can provide a good idea of the health and profitability of the business. Small business owners should also look at the payroll management and other systems and processes for finance and operation management, as poor systems can dramatically increase the headache involved with the acquisition and integration.
Small business owners should also look into the health of the company's industry as a whole, to see if the company is well-positioned for small business growth, said the newspaper.
BizBuySell.com reports that 90 percent of people who begin the search for a business acquisition never complete it, while 50 percent of deals agreed upon by both buyer and seller fall through before closing.
