Anyone who is considering purchasing an existing business should thouroughly research the business from a financial and non-financial perspective and give consideration as to whether it is the right type of business for you.
As a prospective business owner you should always seek expert accounting and legal advice before progressing too far.
Some important considerations are:
- Vendor – reason for sale of business
- Asking price – Is it consistent with sales and earnings history and how does it compare to independent business valuation or appraisal?
- Sales – patterns, trends, customer base, current suppliers
- Costs – fixed and variable costs, staff costs
- Profits – analyse financial records, future cash flow and profitability
- Assets – identify and check all assets, including intellectual property and leasing arrangements
- Liabilities – outstanding debts, refunds and warranties
- Purchase agreement – review carefully
- Tax – GST, Capital Gains Tax, stamp duty implications
- Legal issues – leases, business structure.
- Working capital requirements – you need to ensure you have enough cash
- Finance – what security can you offer the bank?
- Budgeting – an important consideration before you start trading
If you are interested in acquiring a new or existing business, including a franchise, and would like an independent assessment, appraisal or valuation, please do not hesitate to contact Brett or Matt on (02) 9531-0922.