There are many advantages to buying an existing business instead of starting a new business from scratch, which is why many people choose to have an existing business. This is especially true for first time business owners who are unsure about where to start in handling a business. An existing business gives a sense of security in knowing that you don’t have to do the groundwork, since this has already been established.
Another reason to have an existing business is because statistically, existing businesses have better chances of surviving than new ones. It’s most likely because existing businesses already have a customer base and tried-and-tested processes, which can simply be improved if or when needed, while new businesses will have to work hard at growing their customer base through brand awareness strategies and going through trial and errors to find what will work best.
If you’re considering buying a business establishment in Australia, there are basic steps & processes you will need to follow. Thus, you need to make a proper assessment of the property and its value before making a final buyer’s decision.
Below are guidelines that can walk you through buying a business in Australia:
Assess Yourself:
Owning a business takes a lot more work than being an employee, so first, ask yourself the necessary questions to determine whether you’re fit and ready to take on a business:
- Do you possess the right skill set for running a business?
- How much time can you invest in your business?
- Are you prepared both emotionally and physically to deal with the time pressure and unusual work hours?
- Do you have the necessary amount of capital to invest in a business and continue it to success?
Find the Right Business:
The best business will fit your needs. Take your time to consider your interests and experience. Listing these will help you narrow down on the industry that may be right for you.
Once you’ve found a business you’re interested in, ask these questions:
- Can the business potentially be successful in the long run?
- What value can you bring to the business?
- Where is the business located?
- Does it have a reliable & established customer base?
Research, research, research:
Before you make any buying decisions, make sure you’ve conducted due diligence. Do an in-depth market research to gauge the business’ customers & type of market. Chatting with existing customers and the business’ neighbors & employees will give you good insight on how the business is faring.
Find out why the business is selling:
While there are many reasons for someone to want to sell their business, it’s always a good idea to find out why the owner is selling the business you’re interested in. You can ask the owner the reason, or do a thorough background check for this. Knowing the owner’s reason for selling can prepare you for what to expect and possibly improve in the business.
List the pros & cons:
Do a critical analysis of the business. Be objective about evaluating its pros and cons in such areas as pricing, inventory, location, employees. The analysis should also include considerations in the company’s image, customer base, suppliers, financial arrangement, distributors and marketing strategies.
Business Valuation:
Make sure you get a current value estimate of the company of interest and its potential growth. This will give you a rough estimate of its earnings & liabilities, which you can use to quote a price. Research the market prices & what other people are willing to pay for existing businesses similar to the one you’re eyeing. It’s always a good idea to get a professional to do a comprehensive business valuation for you, so you can arrive at an unbiased value that benefits both you and the seller.
Gather all information:
Before signing the contract, make sure you’ve gathered all the essential information about the business. This includes the business’ financial records, legal documents and business operations.
- Contracts & leases
- License & permits
- Agreements
- Inventory
- Assets & liabilities
- Financial records
Make your offer:
Once you’ve done ample research & valuation on the business, you can negotiate the rate with the seller. You will then need to have a legal contract that stipulates your agreements.
For professional advice and consultation on business property valuation, you may get in touch with us at National Brokers Network. With over 60 years of service and experience in residential & commercial real estate, you can trust us to provide you with the advice and services you need for purchasing commercial/business properties.
