Some things to consider if you are thinking of buying a business
We are aware here at Lombard Accountants that although we may be in a downturn that buying an existing business can be a great way to get started as a business owner or to expand operations if you are already running a successful business.
Established businesses have already done the hard work of setting up so it is easier than starting from scratch and there is no need for a lengthy formation process.
Things you’ll need to consider when buying a new business from the Lombard Accountants team
- Why is the business for sale? – It’s important to understand the motivation for the sale, whether strategic or whether it is an emergency sale. There may also be hidden reasons for the sale which your research can uncover.
- Research – Do more than you think you need to! Market research, investigation, learning and questioning about the potential business, the locale, the industry, the customers, the suppliers, the competitors, the market and the nature of the goods or services being sold will ensure you don’t rush into a decision just because it looks like a good deal.
- Due diligence – You’ll need to see detailed financial records, contracts, licenses, supplier agreements, lists of equipment, assets and inventory, lists of liabilities, loans and debts, and all employee records before making your decision.
- A good business plan – That covers one year, two to three years and possibly five years as well. This will help you to look at the longer-term and big picture, assess the potential of the business and give a realistic picture of what you are committing to.
- Finance – Whether it’s your own funds, a business loan or short term finance options, you will need to work with your advisors and refer to the business plan to assess how much you will really need for the initial purchase, transition period, and future investment.
It is important to remember when considering buying a new business, it is important to analyse the financial reports, activity statements, tax returns and sales and purchases records to give you an overview of the financial performance and potential of the business. This research will be invaluable in making an informed decision.
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