Buying

The Buying process

Do you have to have experience in the industry you are looking to buy in?

It is important to have industry experience and knowledge when you are looking to buy a business.you don't need a crash landing

For example - if you are considering buying an automotive business, it pays to have a history in the automotive industry, you may need to be a qualified mechanic, panel beater or spray painter, or you may wish to own a Café, if you've never worked in the industry than it’s a good idea to go to work in the industry for 6 to 12 months to see if it's the right business for you? Often an absence of experience can create difficulties in completing a purchase as you may have issues in obtaining Landlord or finance approval. 

How much money will I need to buy a business?

This will vary from business to business, however it’s vital to have a strong understanding of the size of the investment that you are capable of undertaking. Generally, you will not only need funds to pay for the business, you may require additional funds to pay for items such as;

Stock at Value (SAV) - How much stock is on hand at settlement, and how much stock will you need to trade with from day one.

Rental Bond – Your landlord will generally request a bond payment equal to 3 months’ rent in the form of a bank guarantee or cash. 

Rent – Landlords will often request that you pay 2 to 3 months’ rent in advance.

Lease - Cost of a lease assignment or a new lease and in some cases, you will be paying the landlords solicitors to prepare the lease as well as your own solicitors costs

Purchasing the Premises - will you be looking to purchase the premises of the business? Cost for property valuations for commercial property can be a lot higher than a residential property. Finance for commercial property is also very different to residential property’ Residential loans repayments are traditionally payed over a 30-year period where Commercial property repayments are calculated over 10-years.   

Working Capital - How much money will you need in reserve to operate the business from the time you complete your purchase until the point at which the business can meet regular expenses from the income the business generates? These cash reserves are referred to as working capital, and it’s important to have 2 to 3 months of working capital reserves set aside for your purchase. 

GST – GST is generally not payable on the purchase of businesses, however in some circumstances it may be payable on the business purchase price depending if the business is a going concern or not a going concern (check with your tax advisor/accountant for advice in this area). If you are buying the property with the business than gst will be payable. Again, check with your tax advisor/accountant for advice in this area. For more information visit - https://www.business.gov.au/

Professional Services

Accountant

It is advisable to engage an accountant to assist you with your business purchase and to help you with your diligence, if you do not know or understand an Add- back schedule or what an EBIT/EBITDA or (P)EBITDA is than seek their advice.

United Business Brokers Australia (UBBA) can recommend a list of accountants in Sydney and Rural NSW areas, call us or visit https://www.cpaaustralia.com.au/FindACpa/Locate.mvc/Index or https://www.charteredaccountantsanz.com/find-a-ca

Solicitor

You will be needing a Solicitor to go through the contract for the sale of the business, lease/s, employment contracts and other legal documents on your behalf. Not all solicitor's deal with business and commercial transactions as some are specialists in Family law or insurance law etc.

United Business Brokers Australia (UBBA) can recommend a list of solicitors in Sydney and Rural NSW areas. that are experienced in business transactions, call us or visit: https://www.lawsociety.com.au/

And there are many other items you need to look at depending upon the business opportunity you are looking at.

For assistance through the process call one of our Business Agents for assistance on 1300 955 170 or email peterf@ubba.com.au

United Business Brokers Australia (UBBA) are members of the Australian Institute of Business Brokers (AIBB) the peak industry body and the Business Brokers Network Australia (BBNA) the largest network of Business Brokers in Australia