The possibilities may be endless, but your resources are not. For many business owners with limited time and money, deciding which ideas to pursue can be a challenge. Here are three ways to prioritize your options for growth:

1. Start with your company vision

The best way to make sure you’re moving in the right direction is to take a step back from all of your ideas and begin by looking at your vision for your company. Who do you want to be as a company? When you have a clear picture of your goal in mind, it will be easier to visualize what steps you need to take in order to achieve it. Without a clear vision you could end up pursuing options that actually drag you in an opposite direction.

2. Use tools to stay objective

While it’s natural to be somewhat subjective, after all business growth is exciting, you don’t want to make decisions based on emotions alone. Try bringing objectivity into your decision-making process by using tools to evaluate and compare your options. When it comes to external, growth, we typically use the Market Criteria Matrix to evaluate the best markets for growth and the Prospect Criteria Matrix to evaluate acquisition prospects. This tool can be adapted to evaluate any opportunity for growth.

Keeping your vision in mind, develop about six key criteria of your ideal opportunity. Next, you develop metrics to quantify the criteria. For example, if one of your goals is to expand your operations to the West Coast, one of your criterion would be location and the metric could be located on the West Coast. Give each option a rating using a 1-10 scale and see how well the options compare to each other and to the criteria you’ve established.

3. Gather data

Making a decision without the proper information can be a big mistake. Conduct research to validate (or invalidate) your assumptions. You don’t have to uncover every granular detail, but it will be helpful to have an understanding of trends and how they will impact your market in the future. One of the best sources of information about the marketplace is your customers. Try identifying the needs and wants of current and future customers. It may even be as simple as conducting a customer survey or asking your sales department for input.

While it can be overwhelming to process through all your options for growth, the good news is that you have many options! Hopefully these three suggestions will help you organize your thoughts as you plan your next steps.

Photo Credit: Bs0u10e0 via Flickr cc

Most people tend to go with their “gut” when making decisions rather than relying on the accurate data. You might think you’re the exception, but studies conducted by psychologists Daniel Kahnerman and Amos Tversky show that “when it comes to decision-making, humans are predisposed to irrationality.”

No one likes to think of themselves in this way, but the truth is that, as human beings, remaining 100% objective is very difficult. Inevitably, through the course of running your business, emotions come into play – as they should since you must have some passion to run a company and be successful. Especially in the thrill of a potential deal, facts can be brushed aside as feelings take over.

While excitement in mergers and acquisitions is important (you’re not a robot), over-reliance on your gut to process decisions can be a recipe for disaster. You need to pay equal attention to the facts in order to be sure of a successful outcome.

So how can we make good decisions and stick to the facts when it comes to pursuing acquisitions?

1. Recognize You are Human

The first step is simple enough: recognize that you are not always objective, and become an observer of your own natural impulses to emotion-driven decisions.

2. Develop Tools

Once you’ve mastered step 1, you can move on to developing tools that will help you remain objective.

Two of the tools we like to use are the Market Criteria Matrix which we use to evaluate and prioritize the best markets and and the Prospect Criteria Matrix, which serves the same purpose for identifying ideal acquisition candidates.

To use the first tool, you start by picking about six key characteristics of the ideal market in which you would want to make an acquisition.

Next, you develop metrics to quantify these criteria. For example, rather than saying your ideal market is a “high growth” market, you might say your ideal market is one that is growing at more than 5% annually. Do this for each of the criteria you’ve identified.

The Prospect Criteria Matrix works in a similar manner, but you develop and quantify criteria specific to company-level data.

By establishing quantifiable metrics to measure your criteria, you eliminate vague and emotionally loaded terms like “good,” “bad,” “large” or “small.”   You also ensure you collect equivalent information on each criterion for each market so that you can make valid side-by-side comparisons.

3. Ask Your Team

Whether it comes from your executive team, your functional leaders, or your third-party advisor, feedback from others helps your broaden your perspective and bring some balance to your decisions. Hearing a different perspective can help you take a second look at the information presented to you and either confirm or invalidate your analysis. Disagreements are sometimes necessary to arriving at the best decision. What matters is that throughout the process, you offset the inescapable impact of emotions with a good measure of fact-based analysis.

Sometimes an acquisition that looked promising turns out to be less than ideal as you get closer to finalizing the deal. The question becomes: Should we proceed or should we back out?

Join me for our new M&A Express videocast, “When to Walk Away,” on May 13th. M&A Express is new, complimentary resource for middle market executives that teaches essentials of mergers and acquisitions in 20 minutes or less.

When to Walk Away

May 13th, 1:00 PM – 1:20 PM ET

Register here — it’s free

In this important videocast, you’ll learn clear criteria for abandoning an acquisition before it’s too late. The information here can save your company millions of dollars and years of heartache.

After the videocast I will be answering questions, so please have your questions ready. In the meantime you can contact or submit questions at any time by commenting on this post or using the contact form.

Learn more about M&A Express.

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Entrepreneurs rarely face the challenge of having too few ideas. In fact, like most entrepreneurs and business leaders you probably have a multitude of great ideas for growing your own business.

Your biggest challenge may be figuring out which of all the alternatives is the best way to get from where you are now to where you want to be.

We recommend using a systematic process to sort through all your ideas and create an action plan. Here are some steps in that process:

1. Think about your vision.

Where do you want your company to be in a year and in ten years?  All your initiatives should help you move toward this goal. If an idea isn’t helping you achieve your vision, then maybe you shouldn’t spend time on it.

2. Prioritize your ideas.

While all your ideas may seem wonderful, upon closer inspection you’ll likely find that some are more worthwhile than others. For example, if you envision taking your business national in the next five years, you may rate ideas that help expand your geographical presence more highly than those that do not. Use tools such as the Opportunity Matrix or Weighted Criteria or even a simple pro-con list to help you objectively sort through the possibilities and organize your thoughts. These tools will also give you the confidence that you are selecting the best and most important ideas for growing your business.

3. Get focused.

Without clear focus it’s difficult to move forward. If you’re all over the map, you won’t apply the time and resources needed to grow. Rather than diluting your efforts develop a plan focused on one goal and concentrate mostly on that. You can always modify your plan as time passes and your goals change.

4. Execute your plan.

As Nike puts it, “Just do it!” There comes a time when you need to move from thought to action. If you’ve done the upfront work on planning your growth strategy, don’t be afraid to pull the trigger.

By following these steps you’ll identify the ideas that will help you create a pathway for growth.

Pursuing M&A is a passionate process. Emotions run the gambit from excitement in finding a new deal to anxiety about risks uncovered during the acquisition.

I’ve found due diligence and negotiations to be among the most stressful times during mergers and acquisitions. Here are six ways to help everyone keep their cool during these critical stages.

  1. Write everything down – I cannot stress this enough! Nothing is more frustrating than coming to an agreement only to forget the exact terms. By recording your agreements, you can avoid renegotiating key elements of the deal. It’s hard enough to come to one agreement in the first place, much less two.
  2. Get organized – Have a member of your acquisition team act as the “librarian.” This extremely detail-oriented person will keep track of the large amount of data you receive and carefully organize and catalogue it so that it’s readily accessible when needed.
  3. Gather your questions – There is no need to call or send emails with every question; you don’t want to kill the seller with paper cuts. Collect all your questions together and present them at one time. This will also help your librarian manage all the information gathered during due diligence.
  4. Apply your criteria – Go back to the basics. Use your strategic criteria and objective metrics to calm emotions, help resolve any differences of opinion on your own team and promote meaningful analysis rather than heated debate.
  5. Use a third-party advisor – Your advisor can act as a “lightning rod” when communication between you and the seller is strained. The seller will likely feel more comfortable sharing their concerns with the advisor rather than with someone who might be their future boss. Your advisor can help ease any fears and clear the air while protecting your relationship with the seller.
  6. Have options – Last but not least, have more than one option. We recommend our clients be in serious talks with at least three other acquisition prospects and have many more in the pipeline. This way you won’t feel trapped or pressured into making a deal if you uncover any red flags.

While these tips won’t eliminate all stress from due diligence, hopefully they will help you and the seller through to a successful conclusion.

Photo Credit: Amy McTigue via Compfight cc

The New Year offers a fresh start for setting goals and creating a positive tone for the rest of the year. If you strategize well, you will find unique opportunities in the next 12 months to grow your business through M&A.

Before rushing off to find companies to acquire, however, make sure you are looking at the right markets. A business that is profitable today in a declining market may be struggling or even gone in a year. Find out where future demand is. Think about what markets you’d like to reach, which industries are growing, and what your customers are demanding. Evaluate which of these markets best fits into your strategic plan for your business.

Join me for our first webinar of 2014, “Discovering Markets.” You will learn in this presentation how to identify expanding markets and select the best segments to grow your business. Set yourself up for success in 2014 and beyond: register today: https://www3.gotomeeting.com/register/298601502

Date: Thursday, January 23, 2013
Time: 1:00 PM ET

CPE credit available.

Register today: https://www3.gotomeeting.com/register/298601502

Photo Credit: Kamal H. via Compfight cc

As I’ve stressed  in an earlier post, I recommend including not-for-sale companies in your acquisition search. This will significantly expand your universe of potential acquisition prospects. However, with such a large pool, you must develop criteria through which to filter the prospects in order to narrow your options.

The first step in establishing your criteria for prospects is to review your long-term strategy, taking into consideration each fundamental aspect of your business: marketing, production, distribution, management, sales, accounting, etc. Your acquisition criteria should take each of these core functions into account.

Criteria become an objective touch point for you throughout the entire acquisition process. When you reach an impasse in the decision-making process, you should return to your criteria. There are no ‘‘right’’ or ‘‘wrong’’ criteria. They are simply whatever you value in a market or company to address your one reason for growth.

Taking time to identify and prioritize your criteria is one of the key tasks of your acquisition team, and this must be completed thoroughly early in your growth process.

*This post was adapted from David Braun’s Successful Acquisition, available at Amazon.com

As, you know I am a strong advocate for the “markets first” approach to searching for acquisition targets. The idea is that before you look for a company to buy, you define the market in which you are going to conduct your search. The reason for first selecting a market is to ensure that there is a healthy, stable demand for your acquisition’s products or services. Without that certainty, you have reason to beware of even the most tempting buying opportunity.

But, how do you go about researching and selecting the right markets? How can you estimate stable demand?

I’ll be answering these questions and more in my upcoming webinar, “Picking Top-Notch Markets” on Thursday, February, 21 at 1:00 pm EST.

You can register for the webinar here.

I’ll be speaking for about an hour, followed by a question-and-answer session. Come prepared with questions to ask. You can also submit your questions when you register for the webinar.

Photo Credit: GDS Infographics cc

I always emphasize to my clients the critical value of painstaking market research and selection before considering individual prospects. Simply by conducting thorough research, you immediately separate yourself from the majority of company buyers and place yourself at an important competitive advantage.

Choosing Market Criteria

Choosing the correct market criteria may be tricky. Here are some guidelines for building effective market selection criteria, based on years of practice with clients in a variety of industries.

1. Focus on strategic aspects early. For example, if your one reason for acquiring is to bring a current competency to a new market, you want to make sure that whatever new market you buy into is growing sufficiently. In this case, growth rate should be one of your earliest criteria.

2. Be realistic about the availability of information. You may not be able to immediately get the sales figures for the previous year. Don’t worry, as you progress, you will gather increasing detail about the market. In the  beginning, you can make do with relatively broad information.

3. Limit yourself to no more than six criteria. If you have more than six criteria you can lose focus on the most meaningful strategic aspects. However, each individual criterion may have multiple metrics.

4. Make it measurable. When conducting your research, establishing target metrics for each criterion gives more power and focus to your decision-making process.

Establishing the appropriate criteria will help you guide your company’s strategic growth initiative.