Is your Aussie dream to own a business? Perhaps your thinking about buying a business and are not sure what is involved? This article addresses what to expect when buying a business for sale.
Deciding on the Type of Business to Buy:
Most people already have an idea on the type of business they would like to buy. The decision is normally based on their previous work experience, a childhood dream or something they are passionate about and want to pursue as a career - like a pastry chef! When making the decision on the type of business to buy, you want to consider all the positives and risks involved and make sure you have the necessary skills and knowledge to operate the business.
Locating a Business to Buy:
This can be the tricky part. There are thousands of businesses for sale in Australia. Many are advertised online with websites like Bsale.com.au. When you begin the process of locating a business to buy, make sure you view a number of different websites and maybe register with a local business broker as they would be aware of the local market and can contact you if something becomes available. Bsale also has a buyers notification email to inform you when a business is listed that matches your criteria.
Making an enquiry:
Once you see a business for sale that takes your interest. Contact the relevant business owner or broker and request more information. You can ask to view more information, inspect the business, arrange a time to talk on the phone and so on.
Why do I have to sign a Confidentiality Agreement?
Most business owners and brokers will ask you to sign a non-disclosure or confidentilaity agreement. This is to portect the business and current owners from people stealing business information and mis-using it. Unfortunately not everyone who claims to be a business buyer is genuine, so this agreement creates another level of protection to the seller.
Ive viewed the business, and am interested to buy, now what?
The next step you want to take is to view the businesses financials. This differs for every business how they release them. Some will only release limited information such as monthly sales. If you want to see more they may ask you to make an offer and deposit. In a business sale, there is a process of due dilligence where you can review the businesses information and financials and decide if it meets your expectations. Normally there is a period of time after you make a deposit to perform due dilligence. If the businesses doesnt meet your expectations you may have an option to remove yourself from the sale and get your deposit back. You will need to ensure you speak with a solicitor or read the contract carefully before you enter due dilligence. As there may be a clause that prevents you from getting your deposit back. So it is advised to speak with your solicitor before you begin.
Everything looks good!
So you have performed the due dilligence and had your accountant look over the figures. You have had your solicitor perform checks on the business and make sure everything is legal and that the sale can proceed. Now you need to confirm the price. Do you think there is any room for negotiations? This is were you can evaluate the business and its inclusions to come to an agreeable price.
We agreed on Price, now what?
Its up to the solicitors and conveyencers to process the sale. You will need to see your solciitors or conveyencer again to process the actual sale of the business and the transferring of money between the two parties. There is often a trust account that holds a deposit and deals with the transfer, but this may vary depeding on how the business is being sold, whether a business broker is being used or it is a private sale.
We hoped all this helped in understanding what to expect in a business sale. Remember... all business sales are different so always consult with a professional such as a business advisor, broker, accountant and solictor when buying a business to ensure you are getting what you expect.
Bets of luck in buying your next business!
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