You have decided to buy an existing business. What do you need to know?
Here's a simple checklist of some of the things you should consider
when you are looking at that business and deciding whether you should buy it or not.
A simple checklist for buying an existing business.
Buying an existing business is a great way to hit the ground running without the difficulty of starting from scratch.
However, it is still a complex process that comes with its own challenges.
On top of finding a balance between a business that is financially viable and one that is suited to your
skills and interests, there are a number of different factors that should be taken into account.
A purchaser will need to understand the turnover, reputation and culture of the business you are buying,
as well as the broader conditions of the industry and the market they will be operating in.
This is a simple checklist of items needed to ensure a smooth and easy changeover
Make sure you have copies of current leases, employment contracts, insurance policies
and any other legally binding contracts with suppliers and customers.
These should be thoroughly examined by a legal professional to ensure that there are no restrictions
that could impede your ability to do business.
Transferring leases and contracts over to a new business owner requires consent and approval from all relevant parties.
For example, leases require the new owner to provide a statement of their financial position and details
of their relevant work experience to the landlord to prove they will be a reliable tenant.
It’s important to ensure that there’s adequate time to complete these processes.
Financial statements tell a story about the business, which you can use to form your decisions and plan for the future.
An existing business’s financial statements should be thoroughly examined by an accountant.
This includes examining cash flow cycles and outstanding debts, forward budgets and funding cycles.
A full list of assets and inventory is crucial to ensure the business has the necessary equipment to function.
This includes a depreciation schedule to determine the age and value of current assets.
Marketing is one of the most important contributors to the success of a business.
Did the previous business owner have a marketing strategy in place? What was it?
Does your new ownership present a marketing opportunity?
Improving or establishing a quality marketing strategy should be one of your highest priorities after buying an existing business.
Does the business have current employees?
Inheriting staff can be a great way to keep the business running seamlessly.
They can also provide valuable tips and ideas to help the business to improve.
Keep in mind that if you need new staff for your business, it can be a costly and time-consuming endeavour
to train them at the same time you're busy establishing and familiarising yourself with the operations of the business.
If you get the right information, you’re on your way to succeed and should confident in your purchase.
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