What to look for when you are buying an established business

What to look for when you are buying an established business

July 5, 2018

Starting a new business from scratch is not always the most practical option, given that new businesses typically take time to become profitable. The alternative is to purchase an existing business where someone else has done the work to build up its reputation and make it profitable.

Buying a new business can be exciting, it’s also a time when you need to do some due diligence to make sure you’re making the right decision. Here are some tips from a Gold Coast lawyer with experience in corporate law, to help you make the right decision when you’re considering buying an established business.

These tips should not be considered as legal advice from a lawyer on whether to purchase an existing business or not. We are happy to offer professional advice as to your next step through a free and no obligation phone consultation.

Get an overview of the business

One of the first things you should ask the vendor (seller) of the business, is why they are selling their business and how long they have owned it. Most businesses are sold with inventory included, you need to know exactly what’s included in the asking price.

  • Do some basic research about the businesses products or services to learn about your competition.
  • Ask the vendor if you could spend a few days inside the business with them to get a feel for how it’s operating and if you think you’d like it (especially if you’re planning to work in it).
  • If the business employs staff, find out if they will be staying on when the business is sold.
  • Understand your marketplace. It’s important to know who your customers are, what they want, and if any of the services or products are seasonal.

Now that you understand the business itself, you’ll need to know what the numbers are telling you!

Learn the businesses financials

There are essentially 2 sides to the financials that you will need to look at.

Assets

Assets are what the business owns.

  • Intellectual property
  • Physical property
  • Lease agreements and rental costs
  • Utilities

Liabilities

The liabilities are all the costs ongoing and debts outstanding. Here are some liabilities to consider.

  • Outstanding warranties
  • Outstanding loans or debts
  • Wages or salaries
  • Tax obligations

Need an experienced and professional lawyer to help you buy a business?

Purchasing an existing business can be very rewarding, financially, and professionally. It’s important that you seek advice from a trusted professional for financial advice and for legal advice. If you need a friendly and reputable lawyer, you can contact us.

If you require any assistance with purchasing a new business or you wish to discuss any civil litigation matter, call Nicholas Radich at Radich Lawyers on 0412 763 602, between 8:30am and 5:30pm Monday to Friday.

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