Business Advice

Ground Rules for Buying a Business

Ground rules outlined below can be useful in providing assistance to Purchaser of a Business in finding the right business.

1.  Take Your Time

 When buying a business, it is important that purchaser allows for a considerable time (2-4 months) to find an appropriate business. Since buying a business requires a major commitment on purchaser’s part, it is vital that the purchaser takes his/her time and makes an informed decision.

2.  Conduct Industry Research

Once the purchaser has decided on the industry in which he/she wants to buy, it is important that the purchaser undertakes relevant industry research considering points such as industry’s performance, no of businesses operating in the industry, main suppliers and customers etc. This would provide purchasers with an increased ability of analysing a business in that particular industry. Information about the industry can be obtained from library, trade magazines, accountants, consultants etc.

3.  Undertake Educational Courses  

Undertaking a technical course specific to the industry chosen is a good way of obtaining additional information about a industry and the management issues involved in that industry.

4.  Don’t Buy the First Business Examined

Examining a number of businesses that are for sale in their particular chosen industry would give the purchasers a better understanding of certain working aspects of the industry like profitability, staff levels and working hours etc.

5.  Obtain a Second Opinion

Purchaser should get a second opinion on the business they find suitable from an individual who is independent of the transaction and also has the relevant industry knowledge like accountants or business valuer in order to make sure that no important details have been overlooked.

6.  Where to Find a Business 

Purchaser should make use of the numerous avenues available to them in order to find the right business. Purchaser can look at the following areas for possible businesses to buy.

  • Classified Advertisements
  • Direct Approach
  • Business Brokers
  • Trade Publications
  • Specialised Magazines
  • Internet

by Paul J St. Clair, Chartered Accountant and Taxation specialist - ph 02 9221 4088