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Buying a business…
Apart from purchasing your own home, purchasing a business is often
the most expensive investment we will make and involves an element
of risk. By obtaing relevant professional advice you can greatly reduce
the risk. Here are some important factors to consider when contemplating
the acquisition of a business…
| 1. |
Am I suited and committed
to running a business?
Many people are eager to take on a business, but do not realise
how much dedication and time is required to run one successfully. |
| 2. |
Which industry am I best suited to?
Consider which industry your skills, background and personality
are suited to - eg do you have good "people skills",
do you prefer to be indoors or outdoors, how much flexibility
do you require? |
| 3. |
Does the business have sufficient growth
potential?
Does the industry sector you are contemplating entering have
good prospects over the long-term? Are there external factors
that are likely to impact on the industry and therefore the
ongoing profitability of your business?
Will the business produce sufficient profit to:
- enable you to maintain your lifestyle
- facilitate ongoing business growth?
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- repay any loans required for its
purchase; and
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Could the business be easily re-sold?
Find out why the existing owner is selling and ensure they cannot
set up as a competitor in the local area. |
| 4. |
How much should I pay for the business?
Often buyers do not do sufficient homework in relation to the
business they are contemplating purchasing. They do not carefully
review lease documents, option terms and any restrictions placed
on the business. In many cases they accept the vendor’s
information as true and correct. This could lead to costly mistakes
and could be disastrous in the long term. Prior to making any
final decisions it is recommended that a full and thorough due
diligence of the business is conducted. |
| 5. |
What structure should I purchase the
business in?
It is imperative that you seek professional advice prior to
placing an offer, to purchase a business. If the business is
purchased in the incorrect structure (sole trader, partnership,
company, trust) it could have dire tax consequences, expose
the purchaser to unreasonable liability and limit flexibility
considerably. |
| 6. |
What are the GST implications of the
purchase?
If the business is not being purchased as a going concern GST
issues will need to be considered. |
Selling a business…
Selling a business is often sensitive and can be daunting at the
best of times. In most cases the business has been the owner’s
“baby” for a considerable period of time and consumed
much of their passion, time and effort. In many instances it has
provided the sole income for the business owner and their family.
It is therefore important that you obtain sound advice in relation
to the worth of your most valuable asset as well as investigate
options that will allow you to maximise your return.
As is the case when buying a business the vendors need to do their
homework. It is important to know what the buyers demand for your
type of business, as well as consider other factors that may influence
the sale price of your business.
Some questions you need to ask…
- Does my business have any goodwill?
- Are my accounts in order and can they verify
the performance of my business?
- Can I sell my business as an ongoing concern?
- What GST and other tax consequences should
be considered?
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- Do we tell our staff and customers? If
so When?
- Who will sell the business?
- How do we apportion the sale price?
- When should we sell the business?
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