Tips For Buyers
If you’re thinking of buying a business, here are our six tips
1. Remember that you’re buying a lifestyle and livelihood too.
Many buyers of small businesses aren’t just buying assets and inventories and leases. You have to look at the fact that you’re buying a job and, hopefully, a decent return on investment.
Look at the return you are getting for the time invested as well as the financial Investment. Obviously, the more expensive the business the better return on your time will be. However, you may not get as good a return on financial investment.
2. Get your own professional advice, and expect to hear some warnings.
We strongly advise hiring professional accountants and solicitors to help you with the legal and financial aspects of any purchase.
Buying any business involves elements of risk, don’t expect your advisors to always be 100% positive about the purchase, you are paying them after all, to highlight those risks and advise you the best way forward of dealing with issues in the purchase.
3. Ask the seller to remain in the business for training.
In most cases, you should have the previous owner stay on during a transition period following any sale, generally for a couple of weeks.
If you’re buying a business with a lot of customers, you will want to meet the customers and have the prior owner available for introductions or consultation. In these cases, the handover period may be longer than a couple of weeks.
4. Understanding that overpaying for a business may not be a bad thing.
You may have been looking for the perfect business, it has finally come on the market but it seems to be 20% higher than what other similar businesses are being sold for.
So, should you ignore it and walk away? Not necessarily. If the business ticks all the correct boxes and you intend to keep the business for a long time, why not get in and start earning an income. Yes, it may take 6 months longer to pay off, however on the flip side of the coin, you maybe still looking in another 12 months’ time.
5. Do your own research on the businesses value.
Understand that there are both financial and non-financial aspects that affect a business’ value.
Talk to the Broker and ask them how they achieved the asking price in question.
6. Understand the location you are buying into.
What are any infrastructure developments in the location that may affect the business in the future (search Local Government, State Government and Federal Government authorities).
7. Does this business fit with my goals and is it within my area of expertise?
Ask yourself, where am I planning to be in the next 5 to 10 years, will this business help me achieve my goals. Do you have the skills or can you gain the skills to run the business?