What's the biggest blunder entrepreneurs make when selling their businesses? They're too passive, says Robert Shuman, who last year sold his seven-year-old company, Frontline Ambulance, to CareLine, a national provider of emergency medical services based in Irvine, Calif.

"If you don't aggressively investigate potential buyers while they're investigating you, you can't possibly wind up with the best deal," warns Shuman, whose $12-million company was wooed by three would-be acquirers during an industry consolidation in 1992. Here's how he chose CareLine:

1. He made on-site visits. "While potential buyers are visiting your operations, you should visit theirs," he advises. You're looking for assessments of management's strengths: how the company will integrate an acquisition into current operations; how well the company has handled previous acquisitions, if any; and intangible factors (for example, how well employees are treated and whether or not you'd trust this company with your own staffers). Shuman recommends as many visits as necessary to fully interview all top managers and to visit sites of (and talk to employees of) previously acquired businesses.

2. He analyzed the future value of each proposed acquisition. "All three of the companies offered me some combination of cash, debt, and registered or unregistered stock," says Shuman. "You've got to assess the financial realities and future of each -- its capital base, cash flow, bank accounts, liquidity, stock value, or potential to go public -- to get a sense of how much the deal will ultimately be worth to you."

By choosing CareLine, which intended to go public soon after the acquisition, Shuman increased the value of his deal substantially: the stock he received as part of the deal went public at $8.50 and was trading at around $13 when Inc. first spoke with him. Another suitor, a nonpublic company, offered stock options, "but I had serious questions about whether those would ever have any value, since the company might never go public," says Shuman.

3. He made the sale his full-time job. "If you're trying to sell your company, you'd better be able to rely on your management team for day-to-day decisions," Shuman says. He estimates that most of his time during a six-month period was spent researching his three potential purchasers while tracking down figures and documentation for them and then negotiating terms.

4. He brought in an outside lawyer and a certified public accountant early on. Even though Shuman is a lawyer by training and one of his minority partners is a CPA, he believed the deal was too complex for them to handle easily themselves. Also, he believes it's cost-effective to bring in specific expertise in mergers and acquisitions before the letter-of-intent stage is reached. (See "All Hail Letters of Intent," Financial Strategies, October 1993, [Article link].) "After all, you're going to do this deal only once," he says, "so it's essential to work out the best total package."