These include starting with:

• An existing customer base and existing contracts
• Existing suppliers with lines of credit and supply already established
• Existing and already trained staff and management
• Existing plant, equipment, stock and material
• Knowledge of the business from the current owner shared during handover
• Premises that are set up
• Goodwill associated with the name and location of the business

In addition:

• Financiers will lend more readily to an existing business with a trading record
• Good business history increases the likelihood of success
• You will gain immediate income from sales to existing clientele

Once you’ve decided that buying a business is right for you, there are many things to figure out before you begin your search. Thinking about what type and size of business fits with your needs, skills and experience along with your financial capacity and future plans is a good place to start.

Searching for businesses for sale has now become more accessible, but this same accessibility can also make the task daunting, lengthy and confusing.

Scan Business Brokers can assist your search by using our data matching system to compare your requirements against our current businesses for sale, allowing us to quickly gain a list of possible opportunities.

Using Scan’s website can also help you manage and expedite your search. Further information on selected businesses is available at the click of a button, any time of the day or night. Once you have met with a Broker and been provided with further information such as the Business Profile, you can use the website and your log in details to share this information with your professional advisors.

These include:

• Whether the business structure and operations are suitable for your needs
• Why the business is for sale
• Whether you are financially capable of maintaining this commitment
• Current and potential competitors
• Contracts for current and future work with customers
• The operations of the business, including:
  
  
  • 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
  • Tax - GST, Capital Gains Tax, stamp duty implications

So now you’ve checked all the boxes and are excited to lay down an offer. While you are thinking about the future of the business, the seller however is interested in obtaining the greatest return for the work put into the business. Both parties will commonly see a different value in the same business which is unquestionably where the negotiations begin. While both prices may be reasonable, it takes an experienced intermediary to bring the negotiations to a mutually beneficial meeting point.

Your Broker will guide you through this process, however, it is imperative that your solicitor is involved with reviewing the draft agreement before it is finalised.

Some common terms that are often built into purchase agreements include:

• Time to arrange finance
• Time to complete Due Diligence
• Built in trial or handover periods
• Existing lease or tenancy agreements
• Restraint of trade requirements of the seller, including dealing with prior customers and conducting a similar business in a competing geographical area or market

The level of investigation varies depending on the business and your requests, but can include:

Sales

• Check monthly and yearly sales patterns
• Compare sales trends with industry trends
• Determine if the business is expanding, losing sales or remaining static
• Value existing stock - ensure that it is not old or unsaleable and that there is sufficient stock
• Identify the business customer base and percentage of sales from different customers. Check to see if the customers will stay with the business if it is sold
• Determine where each of the business products is on their respective life cycles
• Determine whether you'll be able to increase sales with current resources
• Find out if you are able to continue to buy from existing suppliers
• Find out if there are any local developments that may affect trade

Costs

• Identify all fixed and variable costs and include interest expenses on your borrowings for the business
• Examine the costs recorded for the business and ensure costs are reasonable
• Determine whether recorded depreciation costs are reasonable
• Determine whether you will incur similar costs to the current business owner

Profits

• Analyse financial records, including balance sheets, profit and loss statements, Business Activity Statements and sales records
• Determine whether the business generates sufficient profit for a reasonable income
• Look at the effects of increased or decreased sales on your profit
• Compare gross profits with industry trends

Assets

• Identify all asset items that are included in the sale
• Check depreciation schedule for equipment, fixtures, fittings, etc
• Determine book value, market value and replacement value of fixed assets
• Identify any current leases for fixed assets
• Ensure equipment is in good working condition
• Determine if any equipment is unnecessary for the business or obsolete

Staff

• Determine whether existing staff will continue employment
• Identify key staff and review salaries, employment packages and FBT implications
• Assess any outstanding holiday pay and/or long-service leave liabilities

This means that the current owner will remain working in the business, alongside you, for a prescribed period of time in order to ‘show you the ropes’.

This period can be as long or as short as you and the vendor agree on. In some professional services businesses this period can last years, whereas in some service orientated businesses it can be virtually non-existent.

In many businesses, this transition period is critical to the ongoing success of the business and should be treated with care. Customers generally see change as a negative and can look at this as an opportunity to switch suppliers. There are many simple acts you can complete in order to combat this such as being organised in order to make the transition seamless and basically unknown to the clientele.