Buying A Business In Australia: The Ultimate Checklist
- April 23, 2018
- Posted by: Quarles Business and Financial Strategists
- Category: Business Advice
Buying A Business In Australia: The Ultimate Checklist
To be your own boss is a dream for many Australians and for some they have an idea that can be turned into a profitable business. However, what if you want to run your own business but have yet to have the eureka moment? Does this mean you cannot start your own venture?
Of course not!
That is why, for many people, buying an existing business is a great alternative. Not only does it mean you do not have to come up with a business idea, but it also helps you take the steps towards running your own business without having to do all the groundwork of setting up an entirely new business.
Now buying a business is not a simple as buying a car, there is a lot to consider to ensure you are making a smart decision. That is where this checklist comes in to play. Our expert business advisors have compiled this checklist to make sure you have dotted all your i’s and crossed all your t’s before you hand your hard earned money over.
Before You Decide To Buy A Business
The first and most important step when looking to buy an existing business is weighing up the pros and cons. Now we do not just mean do you think the business you are looking to buy will make you money or not, so consider the following.
Does The Location Need Renovations Or Repairs?
If the business has been running for some time, it may be well overdue for a revamp. This is more likely with business in the food and drink industries. For example, if you look to take over a café it may be that the kitchen equipment is pretty old and some of it needs replacing, if you are looking at purchasing a bar, it could be that the interior is outdated.
This is a cost you need to consider as you may get a good deal on the business itself, however, to ensure it turns over a profit, you might be caught off guard with these additional cost.
Does The Business Currently Have A Good Or Bad Image?
How well is the business known to the public? Does it have a solid client base? What do existing clients think of the business?
If the business has a bad public image, it can be tough to turn around. Especially if it has become known for poor service or products. That is not to say its impossible. However if possible, you should try to look for a business that has a loyal clientele. You do not need more on your plate than you can handle when you first start running a business.
This is where the digital age is your friend. Use the internet to your advantage. Spend a lot of time going through the businesses various online presences like their Facebook page, Google Reviews, their websites and blogs. Check anywhere their target customers would interact with the business. Is it generally a positive interaction or is there a lot of complaints?
Is The Lease Transferable Or Will A New Lease Have To Be Signed?
If the business you are purchasing operates from a physical location like a shop or office, you will need to find out if the landlord will transfer the lease to you from the previous owner or if you would have to sign on a new lease. Depending on the market and the Landlords financial plans they may not allow you transfer the existing lease and instead wish to sign a new lease. This would enable them to change the terms of the lease, like the cost of rent and the period of the lease.
If you would like to know more about lease assignment Legal Vision has some great information about how transferring a lease works.
Have You Done Your Research?
Now we do not just mean do you think this business is a good purchase. Have you done in-depth research into this? Find out about the industry the business is operating in, learn about whom the businesses target clients are, research about any competitors in the industry. Learn everything you can about the industry you are looking to buy into.
Take a look at the Australian Governments webpage that collates market research and statistics for each different state here.
Have You Had The Business Valued?
One of the most important things to consider is the actual value of the business you are looking to purchase. The current owner will value the businesses sale price based on projected sales or benchmarking against similar business; this does not necessarily mean it is an accurate reflection of the value of the business. Talk with a business advisor to assist you in doing your financial due diligence; this should include:
- Assessing the reputation, viability and potential of the business.
- Compile a list of assets including but not limited to buildings, land, equipment, stock, fixtures and fittings, intellectual property and client lists.
- Are there any existing contracts or work in progress that you receive as part of your purchase of the business?
- Are there any liabilities you would be required to pay?
Do You Know Why The Owners Are Selling?
You should not assume that if someone is selling a business that it is due to poor business performance. It may be the case that the current owner has decided to try a different business venture or maybe their personal situation has changed and can no longer run this particular business. Whatever the reason, it is essential to ask. You do not want to get caught out after the paperwork is signed. Finding out down the track that the business had poor performance and that is why the current owner was trying to sell it.
Now that you have got all the research done, you are in the perfect position to make an offer on the business.
By being well informed about the market you are buying into as well as the pros and cons around the purchase of the business you will be less likely to be caught out by surprises after the deal is done.
“Wise Men Say Only Fools Rush In…” Elvis
Again, don’t rush this process either and make sure you consult a professional like the expert business advisors at Quarles before you sign any paperwork, they will help you to make sure everything is in order and above board.