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Buying a Business? Here’s What You Need to Know

Buying Businesses September 22, 2016

Buying a business requires a little expertise and a great deal of research. Understanding as much as possible about the limitations and liabilities as well as the tangible and intangible assets you’re acquiring can be the difference between success and failure in your first year.

A business is a convertible asset. Like your home or investment property, it will accrue value, but only if it’s nurtured and protected. Buying an existing business means you can hit the ground running. Making sure you’re the right fit for an existing business is as much about the price being right as your skills and interests being a match.

3 Simple Questions

Before you even consider undertaking a full analysis of inventory, assets, financial records, legal limitations, customers, debtors and creditors, ask yourself three important questions:

  1. Why is the business for sale?
  2. Does it have good financial and social capital, i.e. is it profitable and does it have a good reputation?
  3. What’s the outlook for the services or products it provides and the location, be it local, national or international?

If all the answers add up, make sure it’s a business you’re interested in and can operate with a passion. There’s no point buying into a hairdressing business if you can’t keep a secret and have never cut hair. You won’t know what to look for in hiring new staff and certainly won’t be able to retain customers, for whom a trip to the hairdresser is an opportunity to discuss confidences!

Identifying the right business should be part of your due diligence before looking to buy. A good broker can help you with referrals to career coaches.

Understand Every Aspect

The next step is a thorough undertaking of all available documentation relating to the business and thorough inventory of assets. Liabilities including debts need to be considered too. There are physical and intangible assets to every business. Employees can be the most valuable asset a business has, particularly in customer-facing roles and where the knowledge base has been established and accrued by one or more employees.

Goodwill or the permission to exist, expand and innovate within the community is also an extremely valuable asset. Manufacturers who have a rigid relationship with their customers may not have sufficient social capital to sell another class of products. Consider every asset class on its own merit. A business broker can be a valuable part of the due diligence cycle in determining both the physical and intangible assets.

Engage a Business Broker with Experience and Expertise

LJ Hooker Business Broking is Australian’s leading business broker. Our clients include Dominos, Snap Printing, Kwik Kopy, Dairy Farmers, Oporto and Michel’s Patisserie.

With follow-up sales support built into the only database designed for business broking in Australia, our bespoke services enable buyers, sellers, brokers and third parties to be fully compliant. For more on how to buy a business or secure a franchise, visit our homepage or call 02 9552 1111.

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