There’s a lot to think about and a lot of questions to ask yourself when you consider buying a business. What type of business should I buy? How do I go about buying it? What research should I do before I buy the business?
Buying an established business can be very rewarding, the opportunity to work in something that inspires you, and that you can grow and nurture and see the rewards of your hard work. Buying an established business means that you are buying certainty, you are buying a formula that already works that has been tried and can be relied on to generate profit, reducing your risk of failure and financial loss.
Things to consider when buying an existing hospitality business.
As a prospective business owner you should determine the current worth of the business and its future prospects. When buying a business and considering its worth, you’ll need to ask the following questions:
Vendor – Why and what are the reasons the business being sold?
Sales – Can you see any patterns or trends? What is the business’ customer base? Who are the current suppliers? Where are the customers coming from?
Costs – What are the fixed and variable costs? What are the staff costs?
Profits – Have you looked at previous financial records? Is the business profitable? Is a section 52 applicable for this business?
Assets – What assets does the business have? Does it have any intellectual property or leasing arrangements? Are all the assets included in the sale of the business?
Stock – Is the stock on-hand being including in the purchase? How is the stock managed? Are there systems in place to control stock costs??
Liabilities – Does the business have any outstanding debts? Are you buying the business asset, or the company with any outstanding liabilities present? Are there debts owing on assets that are registered on the Personal Property Securities Register?
Tax – What kinds of tax will apply? Is Capital Gains Tax applicable?
Legal issues – What are the legal agreements on leases? Have you reviewed the Contract of Sale for the business?
Business structure – What is the business structure? Do you need or want to change the business structure to suit your business needs? Do you know the different legal, tax and record keeping requirements of your current business structure, or the one you want to change to?
History – What has and hasn’t worked in the business for the previous owner?
Expectations – Do you have an idea of what expectations you’ll need to manage as a franchisee or business owner?
Planning – Have you written your Business plan and Marketing plan to help you document your business objectives and identify how this business will meet your goals?
Once you have received answers to the above questions from the vendor selling the business and if you are happy to proceed to make an offer, you then need to work out how much the business is worth in the current market?
There many different ways to value a business’ worth including sales, costs, profits, assets, liabilities, tax and legal issues.
Please call or email Just Business Brokers (jbb) and they can assist you to work out what a business is worth in today’s market on mobile: 0409 965 540 or email Karli@justbusinessbrokers.com or www.justbusinessbrokers.com.