When you are ready to expand your business, one of the options you may consider is an acquisition. By purchasing an existing business, you get its customers, technology, intellectual property and key personnel, but finding ways to successfully merge the companies can be challenging. Therefore, these are some things you should consider before you pursue business acquisitions.
Do You Have the Finances?
Buying a business can cause a significant drain on your finances. You will either acquire a lot of new debt or you will drain your cash flows and existing business savings. Therefore, you should first review your finances. Evaluate your profits over the last few years, especially those from the previous quarter. You should also underestimate your projections for the next few quarters and years both if you purchased the business and if you did not.
Do you have enough to support your business and still have the money to purchase a new company? What drain or boost in finances can you expect from your expansion plan? You should also overestimate your expenses and underestimate your revenues so you can actually put money away for unexpected challenges.
Why Do You Want To Purchase the Business?
You should also understand why you want to purchase another business and the specific business you have an interest in. For example, do you want to expand your customer base, reduce your competition, move your company in a new direction or to a new industry or provide additional complementary products to your customers? You need to understand your motivation so you can create SMART (specific, measurable, attainable, relevant and time-bound) goals and initiatives.
Will You Need To Make Changes?
If you already have an established company, you should understand how the acquisition will fit in your company and if you have to make any major or minor changes to improve that fit. Will you need to change any part of your operations, including your location, staffing or workflow?
You should also consider the impact on your personal life. You will likely have to dedicate more time to your company because you need to facilitate the integration and get the new company running like your existing company runs. For example, as your business begins succeeding and you have established your corporate culture, you should have had opportunities to step back out of the day-to-day operations, but a new company may require that you step back in more often.
Choosing a business acquisitions strategy means accepting the complications that come with merging two companies. Therefore, carefully evaluate this decision.