Take Five #130: Types of SMB acquisition risks, how to measure them, and more
Top five must-reads this week in the world of SMB acquisitions and operations
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Take Five #130: Types of SMB acquisition risks, how to measure them, and more
1. How to build a KPI dashboard in 7 steps
2. Buyer beware about stock equity deals…
3. Types of SMB acquisition risks, how to measure them
When it comes to business risk, there are four types of risk:
Strategic: Strategic risk is what occurs when a business deviates from its business plan, which can lead to reduced effectiveness and difficulty in achieving goals.
Compliance: Also known as regulatory risk, compliance risk is found largely in industries that are highly regulated, such as energy, healthcare, vehicle manufacturing, finance, and more.
Operational: Very simply, operational risk is what occurs when a business’s day-to-day operations make the business fail to perform.
Reputational: When a company suffers from damaged reputation, for whatever reason, this can cause customers to leave or diminished brand loyalty.
Find the rest of Buy Then Build’s post here.
4. SMB Buying 101, with process overview, terminology, and some added insights
5. “My Due Diligence Soapbox”
The purpose of due diligence is to kill the deal. That’s it. It’s to uncover a danger that you cannot stomach, mitigate or avoid.
You define upfront what risks you are willing to stomach in a deal – what risks you feel comfortable managing even though you know they could become dangers. That’s what Bradley and I tried to outline in the Compromising to Close post.
Your personal criteria for an acceptable deal should be clear to you BEFORE you underwrite any given deal. It’s not deal-specific.
When you submit your LOI, you’re stating that, based on what has been presented to you so far, the deal meets your acquisition criteria at specific terms.
The moment your LOI is accepted, two parallel processes begin:
Closing Process
Due Diligence Process
The Closing Process involves lining up financing, getting legal papers in order, clearing liens, hiring an escrow agent, etc. These are the mechanics of getting a deal closed.
The Due Diligence Process is simpler: you now have full access to the company, so your job is to turn over rocks to see what’s underneath them.
Find Big Deal Small Business’s post here.
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