What to consider when buying a business abroad
Buying a business abroad is a great option for many aspiring business owners. There’s little to no reason why you can’t make it work. In Australia, it seems more of a foreign (pardon the pun) concept though as we don’t share borders with our neighbours, making it seem less attainable. That isn’t the case though. Bsale were lucky enough to chat with Erika Engelbrecht from Blue Lizard Gallery & Framers about her business purchase which was located in Western Australia while being based in South Africa.
What is your business name?
What made you decide to buy the business?
Becoming a WA State-Sponsored business Visa requirement served as the driving force at the time. The business on offer suited the requirements necessary and my personal passion and appreciation for art paired up well.
Where was the business located when you bought it? Where were you located?
The business was originally located in Joondalup, Western Australia. I was living in Applecross WA, at the time which was a 3/4 hour's drive from where I lived. However, I purchased the business from my tiny hometown in South Africa. I am now located in Brighton Business Park, Butler in the northern suburbs of Perth.
What are three pieces of advice you would give to someone looking to buy a business abroad?
Get a good financial due diligence done and then, get a second opinion of the first one. Ensure your financial accountant checks the BAS figures with the bank statements, not only the BAS, as this can be misrepresented. Companies are sometimes presented in a positive state, but that is not always the case.
Ask for a breakeven analysis for the past 3 years and sit with an accomplished financial analyst and dissect these figures.
Also, make sure you understand the profit-sharing as this may be misrepresented. Don’t be afraid to ask for the figures or for help to make sense of them.
How did you ensure your success?
I had to diversify to make things work. I realised that for this large investment to succeed I would need my family, faith, to be forward-thinking, to have entrepreneurship, vision, resilience, and tenacity. I had to take a stewardship approach towards the business.
I also began to build relationships with local artists to ensure beautiful art was on display for clients in the gallery section. This built on connection, culture, and community which became a large focus of what the gallery represented. This is something I still promote today, all these years later, and we often have local community groups come into the gallery to meet our gallery painters and watch them work.
What were some challenges you faced along the way?
I felt that the business was somewhat misrepresented regarding its financial capacity. Although it was advertised as a gallery, there was very little original artwork in stock, and I found mostly prints of classics. So, this motivated me to partner with local artists to re-establish the business as a contemporary gallery.
The previous owners also recommended that I continue to use their original manual management systems. After a year I went digital, implementing my own systems which overnight saved both money and administrative time.
The location, unfortunately, was not the best long term either. I had a very strict rental agreement in place, that didn’t allow for the leniency necessary to build the brand. The rent was very high, and demanded many extra costs long term, like replacing the very worn and old carpets after the lease ended but with no evidence of what they had been like the seven years prior to my taking over.
I was also not notified that the very busy tenant next door had plans to close within three months, so I lost a large amount of foot traffic almost immediately. This was only revealed after I had signed the agreements.
I felt very taken advantage of as a foreign business owner, and unfortunately, I know of several business owners who had similar or worse experiences than mine. I was able to plan a recovery though, closing the gallery and framing business to open in a new location that I now own, and re-built my brand from the bottom up. My clients followed me, happy to drive the extra 25 minutes to our new premises, which has become a beautiful haven to arts and culture by the sea.
By being open to diversification, we are now in the process of opening an in-house café, we hold local business network events, book launches, host school excursions, art classes, and aged care events. I partner with other local businesses and have really built a true sense of community here. The business has evolved so much from how it was originally that I feel now that I have truly created something I am proud to share with others.
We’d like to thank Erika for taking the time to share her story with us at Bsale. There are some very valuable lessons here that are relevant to buying a business both locally and abroad.