If you are considering acquiring an existing business there are a number of aspects you will have to look at to ascertain whether the business is actually suitable for you. Here are a few pointers that you should keep in view when buying a business in Sydney:
The Right Approach
Once you have zeroed-in on a suitable business, you will have to completely verify the actual the state of that business before you make an offer. This will include:
- Ensuring that its sales are really good as its owner says that they are
- You will also have to make sure that the employees are going to be happy with a new business owner
- Very importantly, you will also have to understand whether its customers will continue patronizing the business once you have taken over
- Ensure that investigate every single aspect in detail
- Check if all the business systems sound & documented
Things to Focus On:
Make all the necessary checks to ensure that purchase will eventually be a wise decision. This is called the due diligence process & you should also know about the broader financial health of that business, its prospects as well as its rivals & the market. Here are some of the things you should focus on:
You can get a certain amount of help from your lawyer & accountant, but you will have to carry-out most of these investigations yourself. If the current owner seems reluctant to provide some relevant information, that should be taken as a warning.
The Confidentiality Agreement:
You might have to sign a confidentiality agreement which states that you will not disclose any kind of confidential information like financial statements. In some cases, these contain unfair provisions and you should have your lawyer check the agreement before you sign it.
When you are buying a business you should conduct some research about who your competitors are and whether they will be able to threaten your business in any way.
Check the finances of the company to get an understanding about whether it will be able to provide you with sufficient income. Have an accountant look at all the profit-and-loss statements, balance sheets, cash-flow statements and annual reports.
Check Tax Records:
Typically, all the income tax returns should perfectly reconcile with the business’ financial statements. If they do not match, it could mean that the business is not really as profitable as the owner has indicated.
Ensure that the seller provides you a list of all the assets that you are to receive as part of the business operations. Conduct a thorough check on the premises to ensure that all the items are there and check the condition of all the stock. Check if there is a business website & domain name that you will take over and about the email addresses that you will require. Check about the rights to various licenses, trademarks, patents & registrations.
The Customer Base:
Make sure that you get the customer database information. It should hold information about the amount of business that each customer provides, all major contracts etc.
Get details about all the key suppliers and understand the basis on which they will continue trading with you.
Check why the person was selling the business. You will rarely get a frank & full explanation from the seller and that is exactly why due diligence is important.
Visit the area’s local council & get a copy of the business’s development approval. Check which government regulations you have to comply with, such as fire regulations, waste, fit- out etc. Make sure that all the relevant permits & licenses are in place
If you are going to take over any existing employees, check which obligations the Fair Work & State laws require you to also take-over for compulsory superannuation payments, leave entitlements and long service leave. Check about employment contracts with the employees.
All-in-all, it’s very important to carry out a 360° check and take all these aspects into consideration when you are buying a business in Sydney. If you would like help with purchasing a particular business, making sure that it is the right business for you and growing that business – speak with one of our business coaches. We have business coaches in both Sydney and beyond that can work closely with you, to make sure the transition is a good one.
About the Author
Ben Fewtrell is a sought-after Business Coach, Keynote Speaker and trainer who has featured in Virgin’s Inflight Magazine and Entertainment Portal, SKY Business and “Secrets of Top Business Builders Exposed”. He is also the host of the popular Business Brain Food Podcast where he interviews leading experts on anything and everything business.