TIPS FOR THE FIRST TIME BUSINESS BUYER – HOW TO BUY A BUSINESS

TIPS FOR THE FIRST TIMEBUSINESS BUYER – HOW TO BUY A BUSINESS BY http://benchmarkbusiness.com.au/

This blog will explain some of the process and the pitfalls buyers need to know in how tobuy a business.The buying process… So you are looking to purchase your very first business? we understand its a big decision both emotionally and financially – where do we start?, good question.Identify the type of business you want: once you know the industry that you would like to purchase into, then do some due diligence on the industry such as; is this industry growing or declining? Have there been any similar sales of this industry recently? Have there been any changes to legislation surrounding this industry? What do I need to know in regards to; knowledge, lisences, trading trends, cash flow, how to attract business etc…Find a business for sale (in that industry): once you find a business for sale online or in print media start working out your budget for affordability taking into account, the purchase price, the deposit, stock (if applicable) working capital to operate, government stamp duty (if applicable in your state) and then go and consult with your bank manager or finance broker first to gather an understanding of how much you can borrow. This knowledge will save you time and money in the long run. In many instances we see buyers chew up money in, accountants and solicitors fees whilst under contract with them only to fall over because they cannot obtain finance.

Now you know how much you can afford: start looking for a business within your budget. Once you find that business then make an enquiry with the listing agent and complete the necessary NDA forms to allow you to obtain the business information and also book a meeting with the broker to discuss the finer points of the business prior to an inspection.Your feeling confident now: the business is shaping up to be what your’ve been looking for, what to do next? Present the agent/broker with a written offer to purchase with some bullet point conditions such as, subject to: due diligence, finance, lease, training etc…depending on the industry.The offer is accepted: the rest should fall into place under the guidence of the agent/broker your solicitor and accountant. We always recommend you engage professionals such as solicitors and accountants.Tip – there are no short cuts in purchasing a business, it will only cost you more in thelong run. Make sure your ready to purchase so as not to be disappointed and miss out onan opportunity. Being ready means, your aware of how much you can borrow, you have asolicitor and accountant that are commercial business savvy, you have your purchasingentity structure in place with ACN & ABN, and your ready to purchase now.

How to buy a business – The pitfalls…Financials: be wary of management accounts, such as: MYOB, Quickbooks etc as they areinheritaly unreliable and have not been finalised by an accountant. We suggest you oryour accountant annalise the end of year financials completed by an accountant alongwith the corresponding BAS statements and tax returns.Side ways money: what does this mean? If you find a business for sale where the vendorowns multile businesses under the own company entity then this should put up a redflag. Becareful that the business your looking to purchase is not being proped up by theother businesses owned by the vendor. If the vendor owns muliple businesses and theyall operate under separte entities and bank accounts then there shouldn’t be anyproblems and the incoming revenue should be easily tracked and cross referenced.Goodwill: did you know that there are three types of goodwill? They are…commerial,industry and personal, understand the type of goodwill associated within the businessyour looking to purchase and what are the pitfalls.

Documents: don’t sign anything until you understand what it is your signing (yourresponsible) and that you have instructions from your legal representitive to sign. Notunderstanding what it is your signing will stitch you up quickly.Don’t penny pinch: meaning you may have to spen a few thousand dollars with solicitorsand accountants to get to the bottom of the information with the right guidence. This smallamount of outlay is tax deductable – and in the end it could save you thousands.Completion / Settlement: means once all conditions have been satisfied the deal is aboutto complete.Tip – make sure your solicitor and the vendors solicitor are on the same page and the linesof communication are open and that both parties are fully aware of the settlement dateand time. You should have clear instructions from your solicitor of your obligations andwhat you should do prior to the settlement date, be guided by your solicitor so as the dealis completed correctly.

Ian SalterBusiness BrokerREIQ – Business Broker of the Year 2016 & 2015Businesses for sale quick links:Businesses for sale Gold Coast | Businesses for sale Brisbane | Businesses for saleMelbourne | Businesses for sale Adelaide | Business Brokers Brisbane | BusinessBrokers Gold Coast | Business Brokers Adelaide | Business Brokers Melbourne