* By acting under pressure and buying a company that's a poor personal fit.
* By paying too much money up front, leaving insufficient working capital.
* By placing too much faith in existing management and failing to bring in new blood.
* By assuming that sales will remain stable after the acquisition -- not realizing that competitors view a change in ownership as an opportunity to strike at existing customer base.
* By acquiring a business in which the buyer has neither experience nor, ultimately, any real interest.
* By assuming that the technology is proprietary and therefore cannot be duplicated.
* By underestimating how difficult it is to change an established company's culture.
* By assuming unwanted inventory, divisions, or real estate can be quickly disposed of to reduce debt.
* By failing to realize that the market is more mature than it appears, leaving little room for growth.
* By learning too late that the seller, by retaining title to real estate or equipment, can continue to extract serious capital from the business.
* By relying too heavily on a contract with the seller, leaving the legal system as the main recourse in disputes.
THE COMPANY BUYER'S RESOURCE GUIDE
Business-for-sale listings services
FirstList (Vision Quest Publishing, P.O. Box 1481, Highland Park, IL 60035, 800-999-0920).
Quarterly listing of 1,600 to 1,900 private businesses for sale. Annual subscription ($350) includes four additional midquarter updates. Entries include selling price, profit levels, product or service description, and general location.
World M&A Network (International Executive Reports, 717 D St. NW, Washington, DC 20004-2807, 202-628-6900).
Quarterly listing of approximately 1,000 private businesses ranging in price from $1 million to $100 million, arranged by industry, size, and location. Annual subscription ($345 and $445, depending on delivery options) includes supplemental updates, sent by fax.
Business Ventures Magazine (Business Service Corp., 569 Division St., Suite F, Port Orchard, WA 98366, 206-876-0204).
The publication ($30 per year) lists approximately 1,000 businesses for sale each month.
Books and publications
Business Valuation Manual, by Thomas W. Horn (Charter Oak Press, P.O. Box 7783, Lancaster, PA 17604, 717-560-9338); $29.95 plus $2.50 postage.
Useful techniques for pricing companies.
Buying a Business: For Very Little Cash, by Joseph R. Mancuso and Douglas D. Germann (Simon & Schuster, Mail Order Billing, 200 Old Tappan Rd., Old Tappan, NJ 07675, 201-767-5937); $14.95.
A soup-to-nuts guide to buying small and midsize companies; includes information on franchises.
Buy the Right Business at the Right Price, by Brian Knight and the Associates of Country Business Inc. (Upstart Publishing Co., 12 Portland St., Dover, NH 03820, 603-749-5071); $18.95.
A comprehensive guide to the process of acquiring small and midsize businesses.
The Business Planning Guide, edited by David H. Bangs Jr. (Upstart Publishing Co.); $18.95.
Valuable information on writing a solid business plan.
Guide to Buying or Selling a Business, by James M. Hansen (Grenadier Press, 7900 E. Mercer Way, Mercer Island, WA 98040, 206-232-8300); $41.
Advice on analyzing financials, evaluating management, and valuation.
Valuing a Small Business, by Shannon Pratt. (Business-One Irwin, 905 W. 175th St., Homewood, IL 60430, 800-323-4560); $75.
Information on the arcana involved in setting a price.
Directories of companies
Thomas Register of American Manufacturers (Thomas Publishing Co., 1 Penn Plaza, New York, NY 10119, 800-222-7900, extension 200); $240 plus $15.80 for shipping.
A listing of 145,000 U.S. companies, their addresses, and the things they make.
Million Dollar Directory: America's Leading Public and Private Companies (Dun's Marketing Services, 3 Sylvan Way, Parsippany, NJ 07054, 800-526-0651); $1,250.
A five-volume series listing 160,000 companies and their addresses, officers' names, and SIC codes, along with a brief description.
Directory of Corporate Affiliations (National Register Publishing Co., 3004 Glenview Rd., Wilmette, IL 60091, 800-323-6772); $687.
A "Who Owns Whom." The family tree of every major corporation in the country. Comprises about 25,000 companies.
Relevant periodicals
The following are trade publications useful to potential business buyers. The journals can provide background about market leaders, major customers, and economic trends.
The National Review of Corporate Acquisitions (Tweed Publishing Co., 49 Main St., Tiburon, CA 94920, 415-435-2175); weekly; $295.
Buyouts (Venture Economics, Suite 700, 75 Second Ave., Needham, MA 02194-2813, 617-449-2100); every three weeks; $395.
Mergers and Acquisitions (MLR Publishing Co., 229 S. 18th St., Philadelphia, PA 19103, 215-790-7040); every two months; $269.
Brokers and appraisers
Brokers: To find reputable business brokers, contact the International Business Brokers Association (118 Silver Hill Rd., Concord, MA 01742, 508-369-5254). The IBBA bestows a designation called "certified business intermediary" (CBI). To earn it, brokers must take classes and pass examinations.
Appraisers: To locate qualified appraisers, contact the Institute of Business Appraisers (P.O. Box 1447, Boynton Beach, FL 33435, 407-732-3202). Or get in touch with the American Society of Appraisers (P.O. Box 17265, Washington, DC 20041, 800-272-8258). Both groups conduct certification programs.
