1) Does it make sense?
Do not buy a business just because you can. You need a clear vision of where you would like your company to be in the future, and how an acquisition will get you there. Will an acquisition increase your market share? Differentiate you from the competition? Diversify your revenue streams?
2) Is your business ready?
Entrepreneurs often think only of what they can afford. Furthermore, ask yourself whether you can integrate the new company into your existing business. Acquisitions can be disruptive. They bring an influx of new clients, employees, infrastructure, and organization changes.
3) What is the potential impact be on your business?
Acquiring a company creates financial obligations and operational changes that in the immediate can drain your cash-flow. If those changes are not handled, they will cause your company to spin out of control. Once you have a shortlist of potential acquisition targets it’s important to simulate how different scenarios will impact your company
4) Do you know what you are buying?
Shopping for a business is like shopping for anything else: buyer beware. You want the best value, the best fit and the best price. Ask yourself why a business is for sale and what lasting value it offers, starting with the profits it is generating. Financial records might not always reflect reality.