Consideration Upon Purchase of a Business
Important things to consider when buying a business.
Ensuring you follow the correct process before signing any documents when buying a business is a key component of a successful purchase.
Market Research: Understand the market trends, competition, and demand for the product or service offered by the business in the specific location.
Financial Due Diligence: Conduct a thorough review of the business’s financial statements, including profit and loss statements, balance sheets, cash flow statements, and tax records, BAS’s lodged by the business to assess its financial health and viability.
Legal and Regulatory Compliance: Ensure that the business complies with all relevant laws and regulations, including taxation, employment laws, zoning regulations, and industry-specific regulations.
Assets and Liabilities: Obtain a list of stock, all plant, equipment, assets being sold along with current valuations, proof of ownership and information on applicable warranties and guarantees. Obtain intangible assets of the business, a list of debtors and creditors and any outstanding debts or liabilities, to determine its true value and potential risks.
Customer Base and Reputation: Evaluate the existing customer base, brand reputation, and customer satisfaction levels to gauge the business’s goodwill and potential for growth. Make sure that customers have an ongoing relationship.
Employee Considerations: Review the employment contracts, staff turnover rates, and employee satisfaction levels to understand the human resource dynamics and potential HR challenges.
Technology and Infrastructure: Assess the technology infrastructure, equipment, and systems used by the business to ensure they are up-to-date and capable of supporting future growth and efficiency.
Future Growth Potential: Analyse the scalability and growth potential of the business, considering factors such as market expansion opportunities, product/ service diversification, and operational improvements.
Legal and Financial Advice: Seek advice from legal and financial professionals experienced in business acquisitions and evaluations to navigate complex legal agreements, negotiate terms, and structure the purchase deal effectively.
Exit Strategy: Develop a clear exit strategy outlining your long-term objectives and options for exiting the business in the future, whether through resale, merger, or succession planning.
Buying a business can be a complex transaction. Ensure you have conducted adequate research, understand the risks, and have received the right advice.