Buying an existing business
Purchasing a pre-existing business can have benefits.
Businesses with a successful trading history are more likely to have established staff and processes which will increase the chances of future success when compared with starting a business yourself from scratch.
It is also easier for these businesses to obtain financing.
However, there can also be drawbacks to having an established business.
This can include hidden or outstanding issues that you must resolve.
You must examine the company’s records, plans, and operations, as well as become acquainted with your competitors and the industry.
Steps to Buying a Business
Decide on the type of business you want – Purchasing a business is a huge decision that will impact your life and livelihood for many years so the first step is deciding on the type of business you want to get into. This goes beyond just picking an industry or sector you want to get into, you should also know your preferences for the size of the business, location and the price. You also want to consider your own background and experience among other things.
Research and looking phase – Once you’ve determined what you’re looking for, you’ll need to begin researching businesses for sale. You can either search on business for sale websites such as Seekbusiness, Gumtree, Commercial Real Estate and many others or you can speak with one of our business brokers who will be able to guide you through the entire business buying process from start to finish.
Due Diligence – When you find a business that is a good fit, it’s likely you will be itching to jump in head first and purchase the business.
Before you get too excited, take a deep breath and do your homework. A business that appears to be in good shape on the surface may have serious problems lurking beneath the surface, making it an unsuitable candidate for purchase. If you are buying a business for the first time or buying a business in an industry you are not familiar with, it’s a good idea to hire a business buyers agent to assist with the due diligence. You should also have an accountant look over the financials and a solicitor to check the lease.
Making an Offer – If everything checks out after conducting due diligence, you must make a final decision on whether to make an offer to purchase it. Before you reach an agreement, you may need to negotiate the purchase price with the seller.
Sales Contract – After you and the seller have agreed on a price, you’ll need a contract drawn up to get the transfer process under way. This is traditionally drafted by the sellers solicitor and it’s recommended you get your own solicitor to go over the finer details before signing.
Buying a Business FAQ
This will depend on the business and industry. It is exceptionally hard to obtain any type of finance for businesses such as cafes, restaurants, convenience stores etc since they don’t usually have enough verifiable financials to satisfy a bank. For businesses with clean financials, you can usually borrow up to a maximum of 50% for the goodwill portion of the business and up to 70% for the tangible assets.
In some instances, a seller may be willing to offer vendor financing to a qualified buyer.
Obtaining finance from the bank via a business loan without any money down will be difficult unless you have unencumbered personal assets you can put up as collateral.
You can either search on business for sale websites such as Seekbusiness, Gumtree, Commercial Real Estate and many others or you can speak with one of our business brokers who will be able to guide you through the entire business buying process from start to finish.