How to tell if you are ready to buy a business

Before you make the jump to business owner make sure you are ready for the hustle, responsibility for daily decisions from sales and customer service to financial administration and employee management.

If you are ready for the challenge then you should consider the following when looking at buying a business.

Buying an existing business can be a great way to get started as a business owner, or to expand your operation if you are already running a business successfully.

Established businesses have already done the hard work of setting up a business, so you can get up and running on day one without a lengthy formation process.

 

Things you will need to consider

  • Why is the business for sale – it is important to understand the motivation behind the sale, whether it is strategic or an emergency sale. There may also be a hidden reason for the sale which your research could uncover.
  • Research – Do more than you think you need to! Market research, investigation, learning and questioning about the potential business, the location, industry, customers, suppliers, competitors, the market and nature of the goods or services being sold will ensure you do not rush into a decision just because it looks like a good deal.
  • Due diligence – You will need to see detailed financial records, contracts, licenses, supplier agreements, lists of equipment, assets and inventory, list of liabilities, loans and debts, and all employee records before making your decision.
  • A good business plan – that covers one year, two to three years and possibly five years. This will help you look at the long term and big picture, assess the potential of the business and give a realistic picture of what you are committing to.
  • Independent advice – from your tax agent and other business advisors such as an industry expert, business brokers or lawyers. You may think a business looks like a great opportunity, but objective observers may pick up on issues or queries that you may have missed.
  • Finance – whether it is your own funds, a business loan or short term finance option, you will need to work with your advisors and refer to the business plan to assess how much you will really need for the initial purchase, transition period and future investment.
  • Commitment to the work – Being prepared for the responsibility required to run a business. Running a business does require certain skills, as well as time, energy and money. You will need to be clear on your reasons for going into business and be sure you are up for the challenge!

When considering a business, we can help you analyse the financial reports, activity statements, tax returns and sales and purchase records to give you an independent overview of the financial performance and potential of the business.

We can assist in understanding the financial performance and benchmarks of a business you are considering buying, so that you can make the best decision possible!