Last month we spoke about the process of selling a business. This time, we’re looking at it the other way around, and working through the steps of buying a business!
This guide will help walk you through the process, to ensure you’re purchasing something that is right for you and your situation, with no nasty surprises to pop up once the settlement has happened.
- Do your research
Finding the right business to purchase can be a time-consuming process. You should think about things like what your passions are and whether you have the necessary experience to run a business in your industry of choice. When looking at businesses to buy it’s also important to consider its potential to be successful, what value you can bring to it, whether the location is a good fit and what its current customer base is like.
- Value the business
Like when selling a business, it is important to get an accurate valuation done before you put in an offer or make a purchase. It can be a complicated process, with many different aspects of the business coming into play to reach that final number. For this reason it is a good idea to use a professional who has the knowledge and ability to assess the business assets and liabilities, as well as other tangible and intangible elements, to do the work and determine a suitable figure.
- Do your due diligence
As well as assessing the assets and liabilities of the business, there are plenty of other areas you should investigate before signing the contract. This includes things like licenses and permits, contracts and leases, status of equipment/machinery owned by the business, tax returns, BAS statements, balance sheets and more. Working with a professional on this will help to make sure everything has been thoroughly reviewed.
- Make an offer
Once the above steps have been completed and you feel ready to move forward, it’s time to make an offer. As mentioned in the selling process, you may need to negotiate back and forth with the vendor in order to reach a final agreement, but it is crucial that you feel 100% confident about the price you are agreeing to pay.
- Sign the contract
Once a price has been agreed upon, a contract will need to be created outlining all the terms of the agreement and the payment method. This should be done in conjunction with a conveyancer to ensure everything that should be in the contract is in there, and that the information is true and correct. Once both the purchaser and vendor are satisfied with the contract, it’s time to sign on the dotted line!
- Settle the transaction
Once the contract has been signed, it is essential to utilise the services of a conveyancer for the settlement. A settlement date will be agreed upon and on this date the conveyancer will facilitate the transfer of funds from the purchaser to the vendor, and ensure the title is officially transferred over to the new owners. Once this is done, the transaction is officially complete and it’s time to celebrate!
If purchasing a business is something you see in your future please don’t hesitate to contact us for pre-purchase advice. We’ve been in the industry for more than 20 years and have helped with many successful business purchases over the years!