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SCREENING CRITERIA
Every prospective buyer needs a fairly precise set of screening criteria to help select buyout prospects. They allow you to move quickly when you find what you want and to winnow out any unsuitable prospects. In a sense, these criteria constitute your buying philosophy, so formulate them carefully.
For example, a Monterrey, California-based restaurant developer might want to focus on the following:
Chinese restaurants based in California . . .
That have gross revenues of at least $1 million per restaurant. . .
And which cost no more than $2 million per restaurant.
To prevent your criteria from becoming a straitjacket, you should look at them periodically and assess whether they still reflect your needs -- and whether the underlying performance/earnings measurements still hold up. To continue the example, perhaps you've refined your calculations and now realize that you can make strong profits even if you shell out $2.5 million for a restaurant.
