Warren Buffet once said, “If past history was all there was to the game, the richest people would be librarians.” When it comes to buying a business, past performance is important. But you can’t get so tied up in historicals that you forget to ask the right questions about future performance:
– Management team –What’s their vision for success and does it match yours?
– Culture – Where do new ideas come from and how well is change embraced?
– Customers – Are customers stable and satisfied? Do they operate in declining, flat or growing markets?
– Maintenance – How well was equipment maintained and what’s the expected life? What is the annual capital requirement to maintain the equipment (capex)?
– Capacity – How much room do you have to grow?
Buyers and sellers take heed: These answers aren’t going to show up on a P&L or balance sheet, but they’ll have a significant impact on the overall success (and value) of any acquisition.