research

If you are considering purchasing a business you should take the
time to define your “must have” and, to a lesser extent,
“ideal” business purchase criteria before you take your first
step to find a company to buy.

It is important to define what your absolute business purchase
criteria are and what attributes of a company are just “nice to
have”. Having these clearly defined and written will add a
significant amount of efficiency to the entire business
sourcing, definition, qualification and eventual purchase
process. If you choose to utilize a business acquisition
intermediary to assist you in finding your ideal acquisition
candidate, having this fundamental information clearly defined
will help them best serve your business purchase needs.

Business purchase criteria can be divided into two fundamental
categories, “practical” and “subjective”. Practical business
purchase criteria is best defined as purchase benchmarks that
make sense to use no matter what business purchase transaction
is made, these terms simply make practical sense. Subjective
purchase criteria, like the term suggests, are business
attribute measures and conditions that correlate with your own
personal purchase criteria or preferences, business
experiences, knowledge and risk/ reward tolerance levels.

Practical Business Purchase Criteria:

The potential list of business purchase criteria, terms and
conditions can be long. The best way to start the process of
defining your specific practical purchase criteria is to first
list the general practical criteria categories when seeking a
business to buy. These are categorically listed below, you may
want to consider customizing them for your own use:

Business type:
Service provider, manufacturer, distributor, wholesaler,
retailer, software or E commerce based, or any combination
thereof

Type of products or Services:
Proprietary or generic, industrial or consumer, technical or
non-technical, patent protected or not, software based or not,
regional or international demand

Business Existence Phase:
Start-up, early stage, emerging growth, established or
turnaround

Primary Market Focus:
Refer to the established Standard Industrial Classification
(S.I.C.) code list: Construction, Mining, Transportation,
communications, to name a few

Sales revenue and associated profit levels:
Common criteria to define company “size” thresholds, minimum
levels mostly, results defined for stipulated time frames,
audited or not

Business headquarter location:
Domestic only or international, regional or local

Type of business purchase transaction sought:
Complete buyout, recapitalization, bankruptcy revival,
investment only

Subjective Business Purchase Criteria

Defining subjective business purchase criteria, terms and
conditions is often an ongoing process, difficult to do in one
sitting because it truly is a “learn and accumulate as you go”
process. Listed below is a good start at defining some of the
most significant subjective criteria categories you might also
want to consider and edit for your own requirements:

* Voting control
* Availability of future business
buyers

* Owner reasons for sale

* Seller willingness to stay post
sale

* 5 year growth potential

* Quality of existing management

* Brand names

* % of total sales from
international

* Customer purchase loyalty

* Industry leadership position

* Real Estate issues

* Customer revenue concentration/
mix

* Pending litigation

* Existing binding contracts

* Company affiliations

* Level of technology protection

* Internet presence

* Image of the industry

* Cleanliness issues

* Success dependency on # of
employees

* Industry macro trends

* Labor force organization

* Non-compete terms

* Quality of board of directors

* $ level of assets

* Level of owner financing

* Earn out financing terms

* New products in the pipeline

* Seller integrity

* Seller personality

* Relocation requirements

* Level and terms of debt

* Purchase price calculation

* Ease of due diligence required

* Financials audited or not

* Location(s) of satellite
operations

* Status of computer systems

* Condition of manufacturing
equipment

* Level of competition

* Personal interest in their
markets

* “Fit” with existing business

* Liability of the products/
services

* Length Product life cycles

* Breadth and depth of offerings

* Hazardous waste issues

* Pending legislation

* Corporate culture issues

* Level of government intervention

* Seasonality of revenues

* Availability of critical raw
materials

* Representation/ Distribution

* Acquisition candidates in the
space

* Cash flow

* Capital required to grow the
business

* Customer support required

* Financial status of key
customers

* Current level of market share

* Customer churn rates

When you think about it and actually get involved in pursuing a
company purchase, you quickly realize that your success rate of
finding your “ideal” company to purchase is a direct result of
your ability to effectively locate viable potential acquisition
candidates and cost effectively DIS-qualify them via your own,
“well honed” business purchase criteria checklist.

Take the time and put in the effort required to finalize your
business purchase criteria early on in your business purchase
methodology. The old adage, “If you don’t know where you are
going, you are certain not to get there” applies in this
process. Finding a company to purchase that meets your EXACT
purchase criteria rarely happens, but as you learned here, it
all depends on the depth and breadth of your practical and
subjective business purchase criteria.

About the Author:

Mark Smock is President of http://www.business-buyer-directory.com, the
FIRST international business buyer directory of its kind.
Business Buyer Directory provides a non-traditional means for
proactive business buyers to locate businesses for sale
worldwide that meet their exact registered purchase criteria.

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Contemplating taking an existing or new product / service into a
new market? A systematic analysis of 14 critical market segment
attributes should be considered before any additional company
resources are applied to any new market pursuit.

Sometimes it is obvious that entering a new market is a “no
brainer” or it is perceived as the “right thing to do” because
a competitor has taken the plunge or a handful of existing
product or service users, within that market segment, are
asking for your market participation.

Taking on a new market is an integrative decision process,
cutting across a broad number of competitive issues, internal
company functions and various targeted organizational entities.
A decision of this magnitude should not be taken lightly
because of the overall affect it can have on the total direction
of your company and prudent use of limited resources.
The cost of making a wrong decision here can be significant
both in actual capital outlays and the opportunity costs
realized of NOT pursuing another, “better” market alternative.

In Al Ries and Jack Trout’s, “The 22 Immutable Laws of
Marketing”, being FIRST in a new market is everything, first is
best! Sometimes deciding to venture into a new market segment
just because a competitor did only makes the same decision one
of duplicate failure.

Anyone who has ever been involved in sales management knows that
sales personnel have a tendency to sell what they don’t have
always trying to solve all of every customer’s problems no
matter whether it makes financial sense for the company they
represent or not. Marketing managers also have to learn to
systematically justify entering a new market not because a
handful of existing market participants have asked them to
enter their market.

The first step in evaluating the overall merit of entering a new
market should be to discuss and determine the applicability of
these 14 market segment attributes:

14 Critical Market Segment Attributes

1) The number of products/ services required to effectively
compete:

* Ideally the more “full service” you can be the better your
chances of success

* Customers prefer “one-stop shopping”, if you cannot provide
the complete customer solution package, they have little
reason to switch suppliers

2) Capital required to effectively compete:

* Understand your costs to enter a new market before you assume
your revenues

* Sales projections are typically too high and cost estimates
too low in new business ventures

3) Long term sales potential:

* Accelerating advances in technology reduces long term customer
retention possibilities. In many markets customer needs are
constantly changing.

* Priority should always be give to retention of existing, short
term revenue streams, ultimately the best means to fund
potential long term growth

4) Relative Profitability:

* Is return on investment greater via a new product or pursuing
another market?

* It is always less costly to grow profits from existing
customers in existing markets than to pursue new customers in
new markets

5) Ease of product distribution:

* New markets are often best penetrated with non traditional
distribution/ sales representation

* Does this potential market “fit” with your current
distribution structures?

6) Post sale service requirements:

* Product/ service information demands of new market customers
can require more and new forms of post sale customer service

* Technical support for state-of-the-art product/ service
offerings can be in limited supply and very costly, difficult
to staff

7) Degree of customer loyalty:

* Every market has a varying degree of customer loyalty
depending on number and quality of competitive product/
service offerings

* Do key targeted users within the new market buy on product/
service value or well established relationships with existing
suppliers?

Time required to get into the market:

* Product/ service “life cycles” in some industries last only a
couple of months

* Can your company develop, test, certify and fill distribution
channels of a short life cycle product/ service within the
time frame required?

9) Anticipated competitive response:

* New market entrants are greeted with new competitive marketing
tactics upon entry by established suppliers who seek retention
of existing market share

* Will existing pricing levels remain once you have entered the
market?

* How will market pricing degradation eventually affect your
margins and ROI?

10) Number of viable competitors:

* If there are a relatively few number of viable competitors
participating within the targeted market, it may more than

justify your market entry

* Sometimes it is less expensive to acquire an existing,
resource limited, market participant than try to take market
share with a new approach

11) Ability to maintain a technical advantage:

* Can you protect your technology within the time frame required
to cover your new market entry investment?

* Maintaining technical advantages requires quality, technical
talent. If your current technical staff is over burdened or
limited you will not compete

12) Fit with existing company resources:

* Can your company absorb the financial, emotional and physical
changes required to effectively compete in the new market?

* New markets often require new, certainly more, talent and
personnel

13) Fit with established customer perceptions:

* How will your existing customers be affected by your pursuit
of a new market and new customer base?

* It is critical to define and evaluate your existing customer’s
perceptions of all your major strategic moves

14) Financial status of key targeted customers and market share
mix:

* Are key targeted customers financially stable?

* Is there a diverse mix of new market participant market
shares?

The justification of entry into a new market segment involves
effectively identifying viable competitors, relevant target
market attributes, competitor and key customer market shares
while correctly defining your company’s current financial,
technical and human resources.

For marketing and sales management this 14 market attribute
checklist is more intuitive than measurable. However, it is an
excellent means to initially come to a “pass or fail” decision
before any additional resources are applied to any market
expansion effort. If you want to further quantify this analysis
you can numerically weight each market attribute with your own
specific market attribute priorities and give numerical
“grades” to any or all new market entry candidates to calculate
a weighted value for any new market.

Like trying to address any noteworthy marketing challenge,
whatever you can do to quantify and measure your potential
marketing alternatives, the more relevant your analysis, the
better your management decisions will be.

About the Author:

Mark Smock is President of http://www.business-buyer-directory.com, the
FIRST international business buyer directory of its kind.
Business Buyer Directory provides a non-traditional means for
proactive business buyers to locate businesses for sale
worldwide that meet their exact registered purchase criteria.

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If you are considering entering a new target market, with an
existing or new product or service, it makes sense to first
systematically analyze the market in question via some
fundamental market evaluation criteria. It is not only
rational but most cost effective to determine if a new market
pursuit makes sense for your company before any significant
resources are further applied to the effort.

A “pass or fail” test of your targeted market is recommended
with your company’s core management team collective
involvement. Discussing the attributes of a given market and
further analyzing the business logic behind your intention to
participate in a new market will generate some very
enlightening conversation among your key decision makers.
Having various management functions present for the discussion
generates the most effective, broad base perspective,
appropriate “next step” for this strategic decision.

Besides further justifying or reducing your intentions to enter
a new market, weighing all the same attributes of any one
targeted market candidate against another target markets of
consideration can lead to a pivotal decision for the future
direction of your company. The opportunity cost of choosing
the “wrong” or “least rewarding” target market, given limited
corporate human and financial resources, can make or break
your collective ability to meet or exceed your company’s short
and long term growth objectives. Again, effectively utilizing
a simple, systematic evaluation checklist made up of some of
the market attributes listed below can be most time efficient
and cost effective.

Our list of market attributes cover various business sectors
and should not be considered a complete listing. To make this
evaluation exercise most productive for your management team,
first evaluate this list for relevancy and then add whatever
number of additional categories or attributes that correlate
to your company’s collective business priorities, resources,
risk/ reward tolerance levels and growth objectives.

MARKET PRODUCT / SERVICE LINE ATTRIBUTES:
* Market has a viable need for product application advancements or transitions
* Market is not dominated by short product life cycles
* Market allows for effective competitive advantage without extraordinary design, engineering or research cost
* Market allows for effective competitive advantage without extraordinary testing, certification or performance compliance issues
* Market offers opportunities for relatively high product / service gross profit margins
* Market does not require a large number of products or services to effectively compete
* Market share is gained more from product value or by high value service
* Market product/ service applications have worldwide demand
* Market product/ services are compatible with existing company core competencies
* Market product/ service offerings can be legally protected
* Market generally does not present extraordinary financial liability exposure
* Market demand is not extraordinarily seasonal or difficult to forecast

MARKET CUSTOMER ATTRIBUTES:
* Market offers a diversified mix of key customer product / service users
* Market offers financially stable customers
* Market offers relatively consistent purchase loyalty
* Market has existing product/ service users who will purchase other related offerings
* Market is supported long term by fundamental economic and demographic growth

MARKET SERVICE ATTRIBUTES:
* Market does not require an inordinate amount of after-the-sale service
* Market can be supported by a centralized customer service location
* Market does not require extensive service certification from 3rd party entities
* Market does not proliferate extraordinary product/ service warranties
* Market service requirements are not hazardous to company personnel
* Market does not require extraordinary distribution requirements
* Market share can be augmented with effective e commerce tactics

MARKET COMPETITION ATTRIBUTES:
* Market is dominated by well known competitors and suppliers
* Market is not dominated by one company (> 80% market share)
* Market has reputable competition, a quality image and history
* Market offers competitors that would be future acquirers or acquisition candidates
* Market is not targeted for international penetration via pricing tactics
* Market requires a reasonable level of financial and technical resource barriers to entry

MARKET GROWTH:
* Market has a proven history of growth
* Market has a high probability of long term future growth
* Market offers traceable causes of growth
* Market has worldwide growth
* Market has regional growth niches
* Market growth cannot be negatively affected by existing or pending legislation
Justification of entry into any new market or niche thereof
involves effectively identifying all viable competitors,
relevant market attributes, key market participants and their
market shares. Being able to strategically apply this
qualified information with respect to your known company
financial, technical and human resources can result in
extraordinary business growth opportunities.

If you want to further quantify this analysis you can
numerically weight each market attribute with your own
specific market attribute priorities and then give numerical
“grades” to any or all new market entry candidates to
calculate a weighted value for each new market opportunity.

Evaluating new business opportunities should be a well thought
out, straightforward, iterative process. Beginning the
evaluation process with a simple tool to justify further
analysis is a prudent procedure. The more effective your
analysis, the greater the probability your strategic decisions
will maximize return on investment.

About the Author:
Mark Smock is President of http://www.business-buyer-directory.com,
the FIRST international business buyer directory of its kind.
Business Buyer Directory provides a non-traditional means for
proactive business buyers to locate businesses for sale
worldwide that meet their exact registered purchase criteria.

Tags: analysis, evaluation, marketing, markets, new, prioritize, research, target, techniques, toolsanalysis, evaluation, marketing, markets, new, prioritize, research, target, techniques, tools

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