If you want a solid investment, try buying a restaurant, café, bar or any established business for that matter. They don’t cost as much as building your own and you get to enjoy the benefits of owning a business without the ordeals that owners of burgeoning brands go through. Be warned though: buying a business is not as simple as a trip to the grocery.
Whether you are buying a franchise or an independent business, your first priority should be ensuring that you get the most out of your purchase. Mistakes in business sales can be expensive, so here are some tips you can do to minimise errors while maximising the benefits you gain:
Look for a business from sources you can trust.
Buying a business is now made convenient by the availability of listings on the internet. Websites like SEEK Commercial and Business for Sale are popular providers of listings from a wide range of industries. There are also websites like Redmako Business Sales, which focus on specific sectors which, in this case, is hospitality. If you want more traditional sources, you can still find classified ads from select publications today.
The key to knowing which listing provider to trust is to go where business sellers and your fellow buyers go. Sources with good reputations are usually the ones that deliver and provide the most reliable listings.
Hire a business broker.
Business brokers fulfil a number of essential roles in the business sales process. With their assistance and expertise, you can be more confident that your purchase will proceed smoothly and successfully. Here are several key reasons you should hire a broker:
- They provide sound advice. From where you can find trustworthy listings to whether a business is a good buy or not, brokers can give insights that can save your hard-earned money from being spent needlessly. They are business sales specialists and can help you get more from the transaction.
- They help protect you. They can tell whether a business is overpriced or if it is too risky. They pre-screen the business to determine if it’s the right fit for you and, importantly, your financial considerations. They know the best practices, too, and can give guidance on how to handle the sales process.
- They are experts at price negotiations. If you’ve ever gone shopping with a friend who haggles prices for you, then you have an idea of how it is to have a broker by your side. Brokers understand the needs of sellers and buyers alike, and can use this knowledge to your advantage.
- They help you with paperwork. They act as intermediaries between you, the seller and the government. With their help, you can rest easy knowing that somebody is taking care of the permits, licenses and other necessary documents for you.
- They expedite the process. Most brokers have a database of business sellers and buyers. They can help you find a suitable business from their database alone. This means you won’t have to spend more time in the searching stage.
Examine the business.
Due diligence is when you examine different elements of the prospective business to learn more about it and its worth as an investment. This often entails visiting the business personally or examining its documents with the help of your broker, lawyer and accountant. The Australian government provides a helpful list of items you must attention to during due diligence. This includes:
- Vendor – Why is the seller selling the business?
- Costs – What is the cost of operating the business?
- Profits – How much is the business earning in a given period?
- Inventory – Will the inventory be included in the sale?
- Liabilities – Does the business have outstanding debts?
- Legal issues – Has the business been subject to any trouble with the law?
- Business structure – Do you need to change the current business structure?
- Partnerships – Are there business partners involved?
- History – What strategies worked for the business in the past?
- Tax – What kind of taxes apply to the business?
Buying a business involves much more than simply having the money for the transaction. If you want to experience the best that owning a business can offer, you need to be wise about buying. Researching, getting help from experts and asking the right questions will go a long way in ensuring that your purchase will be worth it.
What do you think should be your top priority when buying a business and why? Tell us in the comments below.