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.

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Expanding internationally can provide numerous opportunities to grow your business using acquisitions, joint ventures or strategic partnerships, but before you can decide which market to enter, you’ll need to do some research.

The data sources you use for your research will vary depending on location and industry and the specific information you are seeking. We’ve listed a number of helpful resources we use in our research of international markets and companies.

Kompass – Kompass is a business to business directory and is a great resource for finding privately held, international companies.

Trade Associations – Just like U.S. ones, international trade associations can be very helpful if you know which industry you want to focus on. They typically conduct their own research or have access to in-country market research.

US Chamber of Commerce and the US Embassy Business Consulate Office – The in-country offices will have plenty of information for you. The Chamber of Commercial usually has commercial information while the Embassy will focus on the government.

Region Specific Sources – For example, we’ll use Companies House in the U.K. or JETRO in Japan.

Using these secondary sources are just the first step in your research. Once you’ve conducted your secondary research, you’ll most likely want to conduct primary research in order to gain a deeper understanding of the markets and companies.

“Keep your pipeline full,” I often tell clients when speaking about their acquisition prospects. By this I mean that in pursuing M&A you should research 75 to 100 companies. That’s a lot of companies and research, which of course you must record in an appropriate manner.

How can you keep track of all your data? What member of your acquisition team is best qualified to monitor, control, and update the pipeline database?

The short answer is someone who is extremely detail-oriented and organized. Think of this person as the M&A librarian. I recommend the librarian is not the acquisition champion because this role will require a fair amount of work. The librarian will meticulously keep track of all the information gathered by the acquisition team and catalogue it appropriately.

My clients often use tools such as Microsoft Access, Salesforce, Act!, or other data management software to organize all the data. Recording your findings in an orderly, accessible fashion is critical to ensuring your data is useful and meaningful to you during the acquisition process.

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Once you’ve determined the characteristics of your ideal acquisition prospect, you’re ready to start researching specific companies.  You can begin by using secondary research to identify companies and obtain key data.  With secondary research we want to leverage the information we find to evaluate whether companies are qualified. We’ve listed a couple of resources below:

  1. Bloomberg – Information on publicly traded companies. This service is expensive, but accurate.
  2. Kompass – Information on international companies and transactions
  3. LexisNexis – Comprehensive news database, useful for researching company history
  4. Manta – Free database with information on most companies large or small
  5. OneSource – Information that’s publicly available for privately held companies
  6. S&P Capital IQ – U.S. and Global financial information and analysis
  7. Thomson Reuters – High quality research in a variety of industries
  8. Search Engines – Never underestimate the power of simple online searches. You will be surprised what you can find by simply typing keywords into Google, Yahoo! or Bing.

Remember, you will not find out everything about your prospect companies using secondary research. Your goal at this stage is to fill in a few pieces of information to determine if you want to continue researching further with primary research.

The message I want to share with you here is simple but critical: start your due diligence early. In fact, start it the moment you begin the acquisition process.

Conducting due diligence uncovers liabilities or hidden problems that can decide the success or failure of an acquisition. This could include issues such as past litigation, a questionable patent, or an aging piece of equipment on which production depends.

I advocate performing your research early on in the acquisition process before you spend time and energy convincing an owner to sign a letter of intent. Too many executives mistakenly begin performing due diligence only after the LOI has been signed.

Thorough research performed in the earlier stages of the acquisition process makes it far easier to complete the deal.  The information about a company that you uncover also will help you determine if you want to proceed.  For instance, imagine learning that the owner of your prospect company is facing criminal charges.  You’d want to know that sooner than later. The same principle can apply to far less dramatic, but still significant, issues.

While early research may not identify all liabilities, you will glimpse how the company operates and how it is perceived in the marketplace. By the time you are ready to conduct a formal investigation, you will be in a position to confirm details you had discovered throughout the process.

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

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Research is essential to the success of any business plan, including acquisition. The demand-driven, “markets first” acquisition process that I advocate requires thorough research. Only thorough research uncovers the most appropriate markets, helps you identify the best prospects, and sets you apart from other potential buyers.

There are two levels of research to consider: primary and secondary research.

Primary vs Secondary Research

Secondary research is the easier kind of research, drawing from public sources such as the Internet. Secondary research enables you to explore market size, growth rates, supply chains and other market dynamics. This is an essential requisite that prepares you for conducting the more difficult but more rewarding primary research.

With primary research, you get on the phone and talk to a variety of industry players and observers about the market, industry trends, and where possible, your acquisition prospects.

Both primary and secondary research are key to your acquisition process. At the planning stage, understand the importance of research ensures that you and your team are committed throughout the rest of the process.

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

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Quality research is an important part of the acquisition process. Thorough research allows you to fully understand the market and prospects for acquisition.  In the Association for Corporate Growth (ACG) blog, I explain how to effectively conduct primary and secondary research, including who to contact and how to overcome challenges you may encounter during your research. Head on over to their blog to learn more about researching as you pursue acquisition.

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Let’s say you have identified a specific company as a prospective acquisition. To get to know that company, you must do primary research, not just secondary (online or library) research. This involves getting on the phone and talking to people who deal with the company on a regular basis, and eventually to the principals themselves.

Primary prospect research often requires a deft handling of phone conversations. This is what I call ‘‘the information dance.’’ Through years of experience, I have developed some general guidelines on how best to conduct yourself when eliciting information about a specific company.

Be prepared with a plan and appropriate contacts: Before you dial, know what information you are trying to uncover and whom you can best get it from. For example, if you are discussing a technology, the engineering department is probably your best starting point.

Be informed about the prospect and the market: Through your market research and secondary prospect research, you should have obtained a baseline of information that gives you credibility when speaking to a source.

Be honest: As with market research, honesty in prospect research is always the best policy. This doesn’t mean that you need to reveal your entire strategic plan to a stranger on the phone. It means don’t lie. You can reveal as little or as much information as you feel comfortable with, but understand that your own disclosures may not be enough to persuade the other person to reveal the data you seek.

Be creative: When discussing a company, you often want to start off slow before zeroing in on specific information. You can even ask questions you already know the answers to in order to get the conversation rolling, and then move on to more significant areas. You need to gain the trust of your source before extracting the gritty details of a company.

Be persistent, but not annoying: Leaving messages is fine, and if you don’t get a call back, wait a few days and then try again. There is no need to call every day or multiple times in a day. If there is no reply after the first few messages, move on to another source.

Be realistic, and prepared for rejection: Some people are so skeptical of your motives that they simply won’t want to talk to you. Others become uncomfortable if you ask them to reveal too much information. You may hear the word ‘‘proprietary’’ over and over. Don’t let this get you down. Just move on to the next source.

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

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If you have started to look at individual acquisition prospects, you may be wondering, why use a prospect funnel? That’s to say, why pursue lots of possible acquisitions, rather than focus on just one?

I have frequently been approached by clients after a deal suddenly fell through—a deal they had been working on for months or even years. I recall a manufacturer of agricultural equipment that was convinced from the start that they had found the ‘‘Holy Grail’’ of acquisition targets. They believed this prospect was the perfect fit for their external growth needs. They cast aside all other candidates and poured all their energy into the pursuit of this one company.

After months of positive negotiations, the prospect abruptly got cold feet and backed out. The owner decided he wasn’t ready to sell a business that had been in family hands for multiple generations. The agricultural equipment manufacturer was left to start the entire acquisition process over.

The lesson is clear: Have one reason for making an acquisition, but have many viable prospects. Don’t just have a Plan B. Have a Plan C, a Plan D, and so on. Create a funnel and fill it with likely prospects. This approach yields many benefits.

The concept of the Prospect Funnel is that you begin by considering a broad sweep of companies. It could be dozens or even hundreds. Gradually, you filter this list through your prospect criteria, eliminating weaker candidates step-by-step.

At each stage, as you move down the funnel, your research becomes more detailed and your analysis more exacting.  Finally, you identify a handful worth engaging personally, and from these you select the company or companies with whom you initiate negotiations for a purchase.

The Prospect Funnel is an insurance policy: Your acquisition process can continue unhindered if there is a breakdown with a favored prospect. There are other benefits, though. Having several well-researched prospects gives you a sound basis for comparison as you gather more and more information on your priority targets. Finally, the funnel approach enables you to tee up for the next acquisition the moment the first purchase is complete, and in rare circumstances, it allows you to consider buying multiple companies at the same time.

 

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