- BUSINESS SALES EXCHANGE - TASMANIA
There’s no doubt that buying an existing small business is generally less risky than starting one from scratch. Much of what you need to generate income is already in place — equipment, inventory, premises, employees, customers, and an established reputation.
However, risk still exists. The following ten tips can help you reduce that risk and make a smarter investment decision.
Before you even begin looking, determine the type of lifestyle you want and the income you need. This will prevent you from buying a business that doesn’t align with your personal and financial goals.
Conduct thorough online research. Check Google reviews and social media, and speak with customers, suppliers, and others in the industry to understand how the business is perceived.
Engage an experienced business advisory accountant, a commercial lawyer, and a commercial finance broker before signing an Expression of Interest. Early professional guidance can prevent costly mistakes.
Even if you’ve found a business privately, consult an expert business broker. They can advise you on comparable businesses currently on the market and help you assess value.
Objective and detailed due diligence is essential. Review financials, tax returns, lease agreements, employee arrangements, supplier contracts, and compliance matters. Use your broker and accountant to guide you through this process.
Work with your accountant and broker to establish a fair and realistic price based on earnings, risk profile, industry conditions, and future potential.
Understand where and how the business can grow. Develop a clear and practical business plan tailored specifically to that business before committing to purchase.
Buying a business can be exciting, but emotional decisions are dangerous. Rely on independent advice from your professional support team and focus on facts, not feelings.
Investigate current competitors and consider whether new players are likely to enter the market. Understand how defensible the business’s position truly is.
To ensure a smooth transition, start preparing for the handover in advance. Talk to key employees, customers and suppliers and verify you are properly trained in the business’s operations from day one.
Obtaining finance to purchase a business can be challenging. Always engage a professional commercial finance broker who can approach multiple lenders on your behalf to secure the best possible terms.
Approaching your bank directly can sometimes result in a discouraging rejection. A finance broker can help position your application effectively and shield you from unnecessary knock-backs.
We have reviewed 1,000’s of businesses over our long careers in public practice accounting and business broking. The reality is that no business is perfect. However, this creates opportunities for business improvement. Meaning higher profits and a greater business value.
Keywords: Business acquisition finance, Business purchase loan, Business loans Australia, Commercial finance broker, Buy a business