Buying a business can be a very good opportunity to get into an industry without going through the startup process, which can be time consuming, costly, and comes with no guarantees.
That being said, a business that is for sale is like a used car. There are lots of companies out there but only a select few are worth purchasing. Due to this, it is very important for people to do their due diligence and investigate whether or not the business they are interested in has potential.
Owning a company is certainly not for everyone. It is up to individuals to make sure that they have considered all available options before making the ultimate decision to be their own boss. Therefore, it is important for a person to identify their weaknesses and strengths. It is always a great idea to jot these down on paper.
Aside from listing your professional achievements, strengths and skills, you should also note your personal characteristics. These play an important role in achieving success in the business world. This also allows you to compare your traits with the attitudes that make a good business owner. Some of these attitudes include the following:
A person who does not have these attitudes should try their best to develop them. If not, you may need to reconsider owning your own business.
As a potential buyer, you should consider the business structure prior to purchasing a company. This is because there are taxation considerations and protection issues that need to be shored up. Some of the possible business structures that can be adopted include the following:
- Sole Trader
- A combination of a trust and company structure
A potential buyer should always remember that each kind of structure described attracts ongoing compliance costs, setup costs, personal risk and tax rates. At the same time, you should be aware that implementing a particular company structure can impose numerous duties on the administrative officers of that business. Due to this, it is important that you discuss these responsibilities with a lawyer and your accountant.
Always Practice Due Diligence
Another important part of purchasing a business is practicing due diligence. This is done by performing extensive research before buying a company. Some of the topics that should be researched include the business owner’s reputation in the current marketplace, any threatened or current legal proceedings against the company owner, and historical financial and trading reports. At the same time, it is important to thoroughly evaluate the lease. You should also ensure that any type of local government licenses or permits are met as required.
Always Evaluate the Location
A business’s location may be very important if a buyer intends to fully rely on passing trade. If the business’s location is found within a shopping centre, you may request information from the centre management about traffic flow and future projects that may impact this. The local council can also assist in providing useful information about the business’s current location.
Cooling Off Rights
Sale of business contracts often provide a three-day cooling off time frame. It is also possible for a buyer to get out of a contract in circumstances that may include the vendor failing to provide the buyer a disclosure statement.
Sale of Business Contract
Upon buying a business, you need to ensure that the business’ owners personally guarantee that all matters related to the company are in good order. For instance, there may be stipulations that the salaries of employees need to be kept as detailed in the Schedule of Contract. At the same time, the business sale should include vendor contracts if this is appropriate.
Additionally, a further warranty may include a statement that the financial accounts that have been taken over are correct and true or that no employees have any sort of workers’ compensation (U.S.) or WorkCover (Australia) claims.
Purchasing a business can be a serious undertaking. However, a potential buyer can make the right decision with careful planning, financial budgeting, and due diligence along with a detailed business plan.