Becoming an entrepreneur is on the career wish-list of every driven individual with a dream to make his mark in the world. Then there are others who feel that taking orders from someone else is not their cup of tea, and thus want to become their own boss. Whatever reason drives people towards entrepreneurship, the fear of uncertainty about the future and risk factors deter them from taking the final plunge. This is the reason why many of them settle for an established business. Buying an existing business is much easier than building an organisation from the ground up. While it is a smart move to invest in a thriving business, you need to do a thorough assessment of the entity before making the final decision of purchase. You definitely do not want to invest your money in a failing venture which has been disguised as a lucrative proposition. Business brokers in Australia can prove helpful in guiding you through the process of finding the perfect business. Once you shortlist the best ones, you need to evaluate their competence by asking a few questions. Let us help you in framing the right queries that can make the decision-making process a cakewalk. Here is what you need to ask.
Direct this question towards yourself to ascertain the suitability of the establishment with your lifestyle, career goals, financial status, work-life balance, preferences and more. You need to ensure that your strengths, experience and qualifications can work in favour of the industry and specific line you have chosen. You must not jump at the first opportunity. Take your time to assess the worth of the company and follow a step-by-step due diligence process to figure out all the essential financial details of the business for sale. Your broker will help you in seeking and evaluating all the vital information and give unbiased and experienced advice on the matter.
The location of the business can have a huge impact on its success. Its significance can be measured by the surrounding community. The company must be placed in a considerably populated area with a high density of target customers. For instance, if you are planning to purchase a child care centre, then you should be located in a region with a considerable residential population of families with young children, or you must be near the primary schools. Also, the place must be easily accessible and visible to passers-by for walk-in foot traffic and high-exposure.
Your business broker will help you in the evaluation of the business which will help you to determine if you are being fairly charged for the purchase. It is imperative to be aware of the expected return on investment to check the estimates provided by the seller in the business plan. You need to assess all the financial documents for the past 3-5 years to evaluate the bottom-line and incomings and outgoings. The broker will help you to put a value to all the intangibles like goodwill and intellectual property which will assist you in appraising the business. You also need to verify all the debts, loans, mortgages and liabilities and any other hidden costs that may have been kept under wraps by the seller.
Once you are satisfied with the costing, you need to check whether you can afford this price. You will have to estimate how much financing will be required and what are the sources for the same. You will have to go through the terms and conditions for bank loans or trade credit and understand the duration and amount of the payments to the lender. You will have to check if the numbers are adding up, which means that besides the asking price, you need money for salaries, stock, lease, utilities, etc. Review the books of the business and analyse the cash-flow and the expenditures.
After signing the non-disclosure agreement, the seller must provide you with all the business information. In order to check the accuracy of the figures, ask for the financial records of the company including the tax return details. You must ensure that the books have been audited by a trustworthy accountant and all the paperwork is in order. Your business broker and bookkeeper will assist you in the financial analysis with due permission of the owner. You can also use various tools to check the viability of the business. If you find loopholes in the documents or feel that the seller is trying to hide some facts, then you must look for other options.
Ask the seller about the sales and marketing strategies that were successful in achieving the desired results. Understand all the details about the market, target audience, competitors, sales channels, marketing platforms and techniques, sales history, suppliers, inventory levels, long-term contracts and more. Check with the outgoing owner which marketing campaigns brought more inquiries and leads. Besides documenting all the policies and procedures, you need to align your marketing abilities with the objectives of the business to ensure the prosperity of the venture in the future.
The outgoing owner must have prepared an exit strategy for himself and you should be a part of this plan. Thus ask him what he intends to do after the purchase agreement is signed. Will he stick around for training and handover or will he be leaving right away? Talk about the fate of the employees and how they have been faring all this while. Check who are the most trustworthy and competent employees and can prove to be your guiding force during the transition. Additionally, inquire when he/she plans to inform the employees and suppliers about the sale and how it will be done. Be on the top of your game so that you are not left out from something important.
It is essential to do your planning and homework when you are purchasing an existing business which comes with its own organisational structure, policies, customers and employees. Keep the above-mentioned questions in mind to equip yourself with all the required information.
Sign Up For Our NewsletterKnow all about the dynamic business marketplace of Smart Business Sales through our newsletter.