As tax and accounting professionals, we are often amongst the first to know when a client is considering a business purchase.
Generally there has been some research done, but “Where To From Here?” is the key question for most potential business owners.
Helping people through a successful business purchase is one of the most satisfying parts of our role as accountants.
There is a level of excitement about the opportunity, but also usually caution about not wanting to make a financial mistake. This can be particularly important for first-time business owners who have only ever worked as an employee.
Sometimes, to the uninitiated, running a successful business looks easy from the outside looking in. The reality, however, can be very different.
So, amongst the excitement, there needs to be time and money spent on sensible and sober analysis of the opportunity.
The following list of questions is a good starting point for those contemplating a business purchase.
Some of these can be answered by the potential purchaser. Others need the help of professionals such as accountants and/or lawyers.
Key Questions When Approaching A Business Purchase
1. Why is the owner selling? Retiring? Or is the business/industry in decline? Could he/she set up in competition?
2. Why are you considering buying an existing business (instead of starting one from scratch)?
3. How is the business valued? Is it fair or inflated?
4. What exactly will you be purchasing? A business transferred out of an existing tax entity or controlling shares in a
5. What Business Records are immediately available? At minimum should be three years accountant prepared
financials (plus current year to date); last four quarter BAS, income tax returns, asset listing.
6. Are the financial records accurate? Can we get independent verification?
7. Are all the important records you need accessible and accurate?
8. Will You Retain any existing employees?
9. What will the Due Diligence and Handover Period be – with previous owner involved to explain business systems,
key relationships and verify data.
10. Who are the key stakeholders in the business – staff, suppliers, customers – and will you be able to establish
positive relationships with them?
11. Does the business have a business plan and financial forecast?
12. If so, are these plans compatible with your current business plans (if you have an existing business)?
13. Does the business require any special skills, permits or licences?
14. Are the business systems in good order – accounting software, sales systems, record keeping etc?
15. Will lawyers be engaged to prepare and review a Business Sale Agreement?
Usually the first stage, your accountant should get involved with questions 3, 4, 5 & 6. This normally involves contacting the existing business owners accountant with a list of what we require. This obviously requires permission from the existing business owner and sometimes a confidentiality agreement signed.
Covering these issues will give you a first indication of whether this is a business you should consider buying and if the price looks about right.
If the answer is yes, then you start working on HOW the transaction will work – purchase entity, contracts, due diligence, financing, handover period etc.
And never forget that owning a business is not just about making money. It’s about suiting your skill sets and your lifestyle – things that cannot always be measured in dollars and cents.
If you are considering a business purchase and need some advice, contact us on (07) 3359 5344 or at