10 questions to ask before you buy a business

Before you lay all your cards on the table, make sure you understand the game.  

When buying a business, there’s more to consider than the type of business, its financial potential and the price. There’s the market, the timing, the legal stuff and your own readiness to think about too.

So before you play your cards, it pays to get your thinking right. The quality of your choices will play a large part in determining your success...

What to ask before you buy a business:

1. Why is the business for sale? How profitable is it now and how profitable has it been over the last three years – what are the trends? Your accountant can help recast the accounts to understand this.

2. Is the price is fair and reasonable? Is all plant and equipment in good order and listed, stock accounted for and valued appropriately, and any goodwill appropriate to the strength and earnings of the business?

3. Who are the key customers? What do they represent, how do they feel about the business, and do they have any relationship with the current owner?

4. Is there a sound market now and tomorrow for the product or services this business provides?

5. Is the business is in an industry you have or can gain experience in, have a vision for and can add value to while living and supporting the lifestyle you want?

6. Who are the competitors and how is the business positioned to operate in light of imports, new technologies, regulations and currency fluctuations?

7. What are the relationships, terms and contractual arrangements with suppliers and can they be readily transferred?

8. Are leases, contracts, employment matters and/or intellectual property legally sound? Use your lawyer to assist here.

9. What legal structure will you use to operate the business, how will you fund and service borrowing and how will you contribute to its success.

10. Finally, are you business ready? Understand your own strengths and weaknesses, and have the resources and support necessary to grow the business.

Owning a business can be very rewarding. As well as the potential to amass wealth, you get to decide when, where and how long you work, who you work with, and the manner in which you work.

However, it can also be hard work, so make sure it’s something you really want to do, something you are passionate about, have a vision for and the necessary skills to add value. And always do your homework and consult with professionals. 

Check out some of our Australian Business for Sale opportunities.

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