How to Buy a Business in Australia
How to Buy a Business in Australia
Buying an existing business in Australia is an excellent option for ambitious business owners or those looking to break into the industry. It has plenty of benefits like existing equipment, infrastructure, employees, and customers. Not only does this give you the leverage against competitors but also saves you the time and effort of starting a business from scratch.
Nonetheless, investing in an existing business presents its own set of challenges. If you are still keen to start or buy an existing business in Australia, here are a few points to remember.
Understand the industry
Leaping into the unknown can be a risky endeavour. Conduct extensive research on the industry you want to invest in, learn how a specific business operates and how you can profit from it.
Investigate successful businesses and learn about their strategies. Furthermore, depending on the industry, you may want to investigate international competitors. Examine whether new services or products are being developed in other countries that may affect your business and its profitability.
Assess the business
Once the business has been finalised, evaluate it to see if you want to proceed with the purchase.
Go through finances
Examine all financials from least three years and talk to the broker or seller about potential "add back" expenses that could be put back into the net profit line.
Key financial documents to review include:
· Profit and loss report: A detailed analysis of the performance of the business over time.
· The Balance sheet: The current balance of the business’ finances.
· Cash flow statement: The income and expenses overview of the business.
Supplier invoice
Aside from financial statements, request the most recent supplier invoices to see if the business’ ordering validates the income claimed. To gain a better understanding of the claims, examine the amount of raw material purchased and the amount of stock replenished. You may also go through the inventory list to look at other stocked and replenished raw materials.
Understand the operations
Understand the daily operations and roles of staff, as well as the expected role of the owner, to ensure you are prepared to step into their shoes. Plus, you can determine the changes required in their current work model for better growth and steady work-flow.
Consider business expansion.
Consider the business' and industry's future growth potential, as well as the costs currently spent on growth - Are they marketing their products and services? Are they advertising their business on social media? Do they have an agency to look after their advertising needs? What are the marketing channels used by them? Also, analyse the current strategy and look for room to improve and grow income.
Lease contract
Check the lease agreement and have a lawyer review the lease documents before buying a business in Australia. Look out for things like demolition clauses and ensure you have enough lease time left or that the landlord is willing to extend it.
Please contact us
There is a lot that goes into buying an existing business. If you are having trouble narrowing down your options, contact us at Absolute Business Brokers. We have expert brokers across Australia, who can assist you in locating the best business as per your needs and specifications. Want to explore some best deals? Get in touch with our experts today.