Deciding to buy a business, what’s the process?
Before you decide on buying a business, it’s important to understand what’s involved and whether or not you’re the right person for that business or the business is right for you.
You are after all entering a long-term relationship.
Operating a business can be challenging, and rewarding, so take some time to assess your suitability. You need to be sure you have the necessary skills to succeed. Once you’ve decided you’re ready and willing, then you need to find the right business.
- A compatible industry, one that matches your experience. (don’t let your ambitions out way your abilities.)
- A desired business model (retail, wholesale, on-line, etc.)
- A favourable location (idyllic customer exposure, potential for growth, distance to travel to and from work.)
- Operating hours (most retailers trade 7 days, restaurants often open evenings.)
- How much money you have accessible to fund the purchase including working capital and other associated costs.
Conducting due diligence.
When buying an established business, it is crucial that you examine the business in detail. This process is commonly known as due diligence. Due diligence is generally conducted once a buyer and seller have agreed in principle on terms.
You should always perform due diligence with the assistance of your lawyer, accountant or business broker.
Examining a business.
To conduct due diligence, you’ll need to prudently review at a minimum:
- Profit and loss statements (min 2-3 years)
- Records of accounts receivable and payable
- Balance sheets, tax returns including business activity statements
- The seller’s claims about their business (e.g. reasons for selling and the business’s character)
- Stock at hand including value
- Details and condition of plant and equipment
- intellectual property (e.g. trademarks and patents)
- existing contracts with clients and staff
- lease arrangements
BisSales provide a detailed information overview of every business for sale that has been compiled with the assistance of the business vendor and their advisors it makes the process easier and less costly.
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