5. Not Bothering With Looking At The Budget And Future Cash Flow, Or Understanding What You Are Buying It’s important to produce a cash, flow analysis, and budget, including factoring in tax, and the management time that you will need to put into the business. If you do not produce a budget, how are you going to know you are going to make a profit from this business? Relying on vendor assurances is something you must never do. I cannot emphasise how important it is to produce a budget prior to acquiring the business, so you know you could afford to run it, pay the vendors if there is deferred consideration, pay the tax, pay the employees, replace machinery that needs to be replaced, etc. And it's a harsh reality to say, but if the budget says no, you just say No! 6. Not Knowing What You Do Not Know There are a number of things to consider here, and these are as follows: Working with people like Ken Gorman at Transworld M&A, and using the skills that they have because buying a business is not necessarily just intuitive, there are lots of tricks, shortcuts, pitfalls to avoid, and he knows what items to look for. Having someone experienced at your side makes all the difference. There may be specific terms that are used in a transaction. You just don’t understand them because you’ve not come across them in normal life. For example, the word whitewash may mean a number of things. I’m choosing this to mean an acquisition using the assets of the target Company in order to acquire the shares from the vendor via a loan to the SPV. Financing and personal guarantees are something you should take specific advice on and use experts. It is possible to search the Internet
26
Made with FlippingBook - professional solution for displaying marketing and sales documents online