Deciding to buy a business is not an easy decision to make, with many ifs, buts and maybes. But, Team Bolter has your back. When considering whether buying a business is right for you, there are a few things to consider. Below are our tips to help you prepare:
- Finding the right business for you. Finding a business for sale is pretty simple, but finding the right business for you can be a complicated process. If you’re looking to buy a business, then it’s likely that you already know the type of business that you are interested in buying. Whether that is a café or a panel beating business, you need to find a business that aligns with your values and expectations. A tip is to understand what you want from the business and your goals. Consider the type of lifestyle that you are aiming for now and when you’re ready to exit the business. After all, being your own boss can be tough.
- Getting finance ready. It’s really important to start the conversation with your banker or finance broker early on in the piece, even if these conversations are preliminary and no formal finance application is submitted. Just like a home loan, you can find out how much you can borrow and how much security the lender requires from you – if any. You should be realistic with your current monthly budgets and be prepared to cough up some security to keep the banks happy.
- Find a sales agent who works with you. Your sales agent plays an integral part in finding and connecting buyers with sellers and can create a positive relationship between the two. Finding a great sales agent should be like interviewing someone for a job – after all, you are going into business together. You should focus on the agent’s prior sale history and their average listing timeframe, but also ensure that the agent understands you, your buying appetite, and what your ideal business would be.
- Find out how much the business is actually worth. This is a difficult task to achieve as a business is only worth the amount of money that a buyer is willing to pay for it. Different accountants have differing methods that they use to calculate the value of a business. Still, it ultimately comes down to a mixture of the professional advice from your accountant and the information that you obtain from your leasing agent or the sellers. There is also a term called ‘EBITDA’ which is important in any potential purchase of an existing business. This term means Earnings before Interest and Tax, less Depreciation and Amortisation. We recommend that you speak to your account more about this.
- Keep your advisor on standby. Letting your accountant, lawyer and financial advisors know of your plans can be helpful to you and your business planning and buying. Getting in early may mean your advisor can recommend ways to structure your business or the deal, keep you protected and find ways to minimise your costs.
- Sorting your structure early. Choosing the right business structure for you and your business to operate from is one of the first big decisions that you will make. It will remain important throughout the life of your business. Trading as a sole trader, partnership, company or company with a trust structure sitting behind it, shouldn’t be a decision left to the last minute and should be a decision that comes with tailored advice.
You now know a little bit more to help land you the business of your dreams. Remember, whether it’s buying your business or sorting your structure, Team Bolter is here to get your legals right and guide and support you through the process. We’ve got your back!