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Buying a business

Written on the 8 December 2021 by Business Brokers

A decision to buy a business can be an exciting one, presenting you with both opportunities and challenges that need to be assessed before committing yourself.

Buying a business is a significant investment of time and finances and you should evaluate not only the business opportunity itself but also your abilities to run a business.  Will the business be suitable to your lifestyle?

As an independent business owner, you should consider your skills in the roles of marketer, bookkeeper, human resources manager, accountant and research & development.  You can be responsible for all these aspects of the business until you employ appropriate staff!

A key consideration when selecting the appropriate business to purchase is to look for the warning signs.  The Australian Competition and Consumer Commission (ACCC) recommends purchasers be wary of advertisers who:

  • claim that you can make large amounts of money quickly and with little effort;
  • are reluctant to provide written information;
  • require upfront payments before any information is released; and
  • are reluctant to provide financial information about the profitability of the business.

It is also important to be aware of the key documentation involved in the purchase of a business. This includes the following documents:

  • a Contract of Sale;
  • a Section 52 statement.  (It's a requirement if the business being purchased is less than $200,000 and is being purchased in Victoria.  Check your local government for disclosure requirements);
  • a lease, sublease, licence or occupancy agreement if the business has a leased premises, (in which case an Assignment of the Lease will be required);
  • Transfer of Licences, such as registration of business name, intellectual property, and trade mark certificates (if applicable) and other licences and permits required for the successful operation of the business.  For example, retail food premises may require Food Registration Permits, Liquor Licences or Footpath Trading permits.

Further, if the business to be purchased involves transferring employees, employment agreements will also need to be drafted.

In addition to the above documents, when considering to purchase a business you should seek to obtain the following information:

  • Yearly statements of outgoings;
  • Disclosure Statement;
  • Inventory of plant and equipment;
  • Permits; and
  • Any Hiring licensing or other agreements affecting the business. 

Before committing yourself to any business sale, you should seek professional advice from your accountant, lawyer, and if necessary from appropriate financial advisers. 

In order to obtain the greatest assistance from your professional advisors, you should seek to obtain as much financial details of the business as possible.  This will aid in making an informed decision about the business being purchased

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Author:Business Brokers


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