Elements of interest in the purchase of a company or business
There are different ways in which the purchase of a company can materialize, but in any case a good strategic plan, organization and expert advice are essential.
Is it the right time to buy a company or business?
This is the first question a potential buyer of a company should ask and answer. To do this, you must essentially take into account the following factors:
The life cycle of the business to be acquired and when it is at
The life cycle of a business goes through different stages (beginning, growth, maturity, decline or liquidation).
It is very important to identify the stage of the company being purchased in order to assess the challenges presented by the investment.
It is not the same acquiring a company in its beginnings, where the company begins to develop the product or service, the processes, present itself to the market, etc. ., that is, when the future performance of the company is still uncertain.
Therefore, it is very important to evaluate your strategic plan and possibilities; in its maturity, at which time the company has managed to achieve sustainable growth and stability in the market, without depending on external financing, and the level of growth achieved and its development possibilities must be analyzed ; or in full decline, a moment in which there are bases and certain historical data, but in which a revival plan will be necessary.
The company’s growth history: successes and failures
The potential buyer must analyze the journey of the company, what are its strong and weak points; what strategies or decisions have implied its development and growth and the causes that, if any, have harmed its sustainability.
In turn, it is important to objectively identify the reasons why the entrepreneur sells the company. On many occasions the seller is not completely honest with the reasons for the sale.
Financial situation of the company
A diagnosis must be made based on a set of accounting variables that measure the quality of the operation of the company being purchased.
To define the financial situation of a company, it will be necessary to analyze its solvency, stability, productivity and profitability.
It is understood that a company is solvent when it is able to settle the liabilities contracted upon maturity and demonstrates that it will be able to maintain said situation in the future
From a financial point of view, a stable company has the capacity to face certain “crisis” situations without seriously influencing development of its activity and results. When your current assets are greater than your current liabilities.
Productivity is the relationship between the quantity of products obtained by a productive system and the resources used to obtain said production. It can also be defined as the relationship between the results and the time used to obtain them. Productivity is an indicator of a company’s efficiency and the quality of its management.
Profitability is the relationship between utility and investment. A profitable company obtains benefits from all the investments made.
Having access to the Financial Statements of the company can be very useful, but not enough, since it is not always possible to fully trust the information that The seller facilitates us. It is important to have an expert determine if the information is real and coherent.
The analysis of the indicated parameters should provide us with the profit potential of the company and, therefore, the moment in which the investment made will be recovered.
Market conditions and the sector in which it operates
Equally, it is essential that the buyer analyze the position of the company or brand in the market, competitors, the state of related businesses, if any, their costs or benefits additions, etc.
The analysis and concretion of the mentioned factors will make it easier for us to identify the future possibilities of the company and the reality of the investment and, therefore, its origin
Although all this process prior to the purchase of a company will be of no use if the purchasing party has not previously identified its own investment and development possibilities, which must be in accordance with the business or company that you intend to buy. Before thinking about buying, the entrepreneur must be fully aware of the challenges that he can afford to face.