Mergers & Acquisitions Advisory

A Neumann & Associates, LLC

June 10, 2018

A Buyer’s Top Five Mistakes When Buying a Business

By Jeremy Albelda


Over the years, we have seen certain buy-side mistakes that recur again and again. Here is a list of some of the more common problems seen over the years.

#1 – Insufficient Information Verification
Important information about the business should be verified, in particular as it relates to trend lines. How have customer relationships developed? Structural changes? Are there any supply constraints – now or predicted? How difficult is it to attract future talent? Is the company dependent on key employees?

Some of the investigation can be done by the principal to save money, but this is not the place to cut corners, as it may cost a lot of money in the long run. For example, prior to an acquisition, a CPA can review the key financial information like payables, receivables and inventory. The attorney can review leases and contracts, and a business valuation professional can appraise the competitive landscape, the economic conditions, and help establish a Fair Market Value for the business (if such had not been done before). An independent appraiser can value any real estate and equipment.

#2 – Overpaying or Paying For Potential
At times, some new business owners position themselves into challenging positions by overpaying – triggering too large of an acquisition debt load on the business with too little cash flow and reduced borrowing capability for future investments / expansions.  

This is particularly true, if the new owner pays for the ‘potential’ of a business. The ‘value’ of the business should be determined primarily on the basis of its current condition, not what it could be yielding at some day in the future.  Simply speaking, often it will take time and money to develop its future (additional) potential, and if the new owner undertakes these risks and efforts, then he/she should deserve to be paid for them.

#3 – Letting Emotions Rule
Having dreamt of owning a business, one can easily get caught up in strong emotions in seeing such dreams come true. However, often these dreams fail. For example, the reason many restaurants end with a high failure rate is that the owner starts them because he/she likes cooking. The truth, however, is that few truly successful restaurant operators cook, rather, time is spent on ordering supplies, managing staff, handling administrative tasks, and resolving day-to-day issues.

To counteract one’s emotions, the advice and input of an objective, external advisor might be the best advice ever received.

#4 – Poor Self-Evaluation
Owning a mid-sized business takes many talents, and to be successful, the new owner needs to have most (if not all) of these qualities in place – in other words, the new owner should match his/her strengths to the key duties required in the new business.

Having said so, nobody can be good at all of them; thus, provisions need to be made for areas in which the new business owner is weak. For example, tasks like accounting or payroll can be subcontracted.

At minimum, the help of an attorney and CPA should be recruited for the ongoing business. Many buyers also consult business coaches. The attorney can make you aware of legal and liability issues with the business, whereas the CPA can support with a continued financial analysis and advise respective taxation matters. In sum, a good self-evaluation is needed to give the business its best chances to grow.

#5 – Making Too Many Changes, Too Fast
New business owners are often tempted to immediately implement wholesale changes to the newly acquired business – often destroying goodwill they just paid for.

Unless the business is a ‘turn-around’ situation in bad financial condition, a smarter way is to spend some considerable time to understand the business first, its employees, and its customers before executing changes – also a perfect time to solicit suggestions from stakeholders. After all, the business has been profitable in the past because ‘something was done right’!

# # #

[The blog contains excerpts out of the recently published book “ The Road Beyond – What Nobody Tells You About Selling a Midsized Business by Achim Neumann]

About A Neumann & Associates, LLC

A Neumann & Associates, LLC is a professional mergers & acquisitions and business brokerage firm having assisted business owners and buyers in the business valuation and business transfer process through its affiliations for the past 30 years. With an A+ Better Business Bureau rating, the company has senior trusted professionals with a deep knowledge based in multiple field offices along the East Coast and has performed hundreds of business valuations in its history. The firm’s competitive transaction fees are based on successfully completing transactions. For more information, please contact A Neumann & Associates at 732-872-6777 or

Leave a Reply

Your email address will not be published. Required fields are marked *

Any questions? Please contact us at 732-872-6777
Call Now

Client Testimonials

“Your vetting is simply outstanding, among the best I've seen from a broker.”

Eric H., Investor

“I recently contacted A. Neumann and Associates about getting a valuation of my business done. I spoke with Marc, who explained the process in detail. After meeting with Marc in order to get a clear understanding of my business, and what I was hoping to accomplish. His patience in answering all my questions and his knowledge of the proper way to market my business gave me great confidence that this is the firm I will be using to sell my business for max value. Working with Marc at A Neumann & Associates was very easy and professional. I did not know all that was going to be involved in selling my business but they helped me through the process. What I thought was going to be a just another one of those pushy sales companies was just the opposite. Polite, knowledgeable, and a pleasure to talk to and deal with. I highly recommend this firm to anybody who wants to sell now or down the road. Marc not only knows his stuff, but actually is a real nice guy.”

Double Diamond

“Used A Neumann & Associates to sale my business. could not imagine having done it with out the patience and experience Gary provided. Thanks Gary,”

Dennis Frazier

“Working with Marc and his company was a pleasure. What I thought was going to be a just another one of those pushy sales companies was just the opposite. Polite, knowledgeable, and a pleasure to talk to and deal with. Marc handled most of the interaction and he has one of the greatest demeanors. Again, it was a pleasure working with him and his firm.”

Douglas DiCeglio

“I recently completed an acquisition using A Neumann & Associates. Tony Valentino was very helpful and accessible during the entire process. They do a thorough job vetting both parties and got us to the finish line.”

Srini Mudambi

“Claus out of Florida helped us with the sale of our business. We had never done anything like this and him and his team walked us through the process from start to finish. We had some challenges through the process and Claus continued to show up even in the difficult conversations.”

Colby Harris, Co-Owner, Del Mar Designs

“Claus Madsen thoroughly helped us with selling our company. From the 1st introductory meeting explaining to us what was possible, to providing us with resources to assist with the sale. Claus was invaluable throughout the whole sales process. Claus was with us every step of the journey and always made himself available for any questions or issues that came up along the way. If you are interested in selling your business, I encourage you to reach out to Claus and the ANA team so that they can let you know what’s achievable. These guys will make it happen!”

Ron Harris, Co-Owner and Vice President, Del Mar Designs

“A Neumann & Associates is the only business broker I would use or consult with. They have assisted with 3 business sales over the past 15 years with me. They are honest and sincere and have always performed better than my expectations. They are the only one i would use for the sales of my businesses.”

James Belanger, Business Owner

“I wanted to take a second to commend the exemplary customer service from both you [Karin Neumann] and Mr. Valentino. It’s both a rarity in the industry, and very much appreciated.”

Andrew G., Investor

“We worked with Neumann & Associates to investigate the purchase of a research company in 2010 and found Achim to be capable, forthright and realistic. His depth of experience enabled us to fully understand our options, offering creative options that might enable the acquisition. While we didn’t acquire that particular company at that time, we know exactly who to call whenever we’re looking to buy or sell a business.”

Daniel Coates, Buyer
view all testimonials

Contact A Neumann & Associates, LLC

If you are considering selling your business, please contact us to learn more about our comprehensive service spectrum. Our experienced professionals will answer all your questions about selling a privately held business in complete confidentiality. Please fill out our contact form, or call us at 732-872-6777. We will contact you directly and will never identify ourselves to your employees.

call us now
Contact Us for a Free, Confidential Consultation

Experienced M&A Advisors available

Full Name
Email Address
Phone Number