Friday 1st of May 2015
If you have an entrepreneurial aspiration but don't want to go through the extensive trial an
...d errors of launching a business from ground zero,...
If you have an entrepreneurial aspiration but don't want to go through the extensive trial and errors of launching a business from ground zero, acquiring an existing business may be the perfect option for you. In Australia, there was a 2.8 per cent increase in the total number of businesses running at the end of the Financial Year 2023/24, and this is expected to rise further within the next few years.
Since making an entrepreneurial investment is a big decision, most beginners end up making silly mistakes and paying a huge upfront cost. It is essential to consider the legal, financial, and strategic implications before making a final decision. From choosing the right business to negotiations and securing deals, you have to manage everything to prevent financial losses.
In Australia, business acquisitions are subject to various regulations, including the Corporations Act 2001 and the Competition and Consumer Act 2010. Thus, conducting thorough research to find the most suitable business for sale in Brisbane, Adelaide, and other parts of Australia is crucial to drive higher profits and consistent success.
In today's guide, we'll unveil a step by step guide to buying a well established and profitable business in Australia without any stress. From understanding the investment scenario to navigating local laws, the guide provides everything you need to make an informed decision about business acquisition.
Conducting detailed research begins with selecting an industry that perfectly aligns with your skill sets, experience, and passion. Whether you want to own a café shop or a beauty salon, it is always good to tap into the industry that interests you the most. Ask yourself the following questions to make the right buying decision:
- Do you know this specific industry?
- Do your skill sets give a competitive leverage to the sector?
- Is this industry booming?
- Do you have enough funds to acquire an established business in this industry?
Tip: Take your time, understand your entrepreneurial dreams and choose the industry accordingly.
Securing enough funds is essential when seeking an existing business for sale in Brisbane. Many individuals make a serious blunder and take on too much debt in the business venture. This can bring a lot of uncertainty because business performance is never guaranteed, and making regular repayments can sometimes become challenging for novice business owners.
Thus, it is important to know your estimated budget to determine your financial potential. Knowing your borrowing capabilities can help you secure funds from lenders and investors without any unnecessary financial stress. Make sure you do indepth analysis of your financial health (bank statements) and consult your accountant for a genuine advice before putting money into a business investment. Do not forget to consider the working capital, which includes payroll, stock, rent, utilities and other variable expenses. Also, track your spending and allocate necessary resources to prepare for potential emergencies post acquisition.
Tip: It is good to discover more about government grants or small business incentives to reduce a toll on your pocket.
Once you know what type of industry you are looking for and have roughly estimated your funding potential, you can shortlist the best business opportunities in Brisbane as per your specific requirements. It is always good to choose a venture that offers:
- A proven business model
- Loyal customer base
- Consistent revenue stream
- Located in a high foot traffic area in your preferred city
- Offers comprehensive training and support
- Long term leases
- High growth potential
- Know the asking price
Shortlist the best options based on these aspects and generate a high return on investment after a seamless acquisition.
Since you are investing in an existing venture, ensure you know about their business valuation in the market and whether they are close to industry norms. You may need to visit the ATO website to find the industry benchmark for the specific sector. Experts believe that most businesses are either valued based on their 3 years of annual net profits or the balance sheet in the absence of goodwill.
If you find the existing business lucrative and aligns with your entrepreneurial goals, make the final offer to the seller. It should be based on the expert advice of your financial advisors. You will be required to present an offer to the business seller or their solicitor.
After that, you can make necessary negotiations depending on your financial potential. Once the seller accepts the offer, a Heads of Agreement is signed to determine the essential terms and conditions, after which the official business sales agreement is prepared. It is prepared by a solicitor.
After signing a Heads of Agreement, you can begin conducting formal research about the venture. It is conducted to evaluate the business and determine its value, including goodwill, as well as potential risk factors involved in the deal.
You may need to communicate with the business broker of the seller and sign a confidentiality and Non Disclosure Agreement to access sensitive information about the business, such as financial records and tax implications. Ensure you do proper due diligence before hiring professionals to examine the available financial records and contracts.
This legal document outlines the more detailed and specific terms and conditions related to the purchase. It usually includes the purchase price, stock value, assets, handover information, etc.
Carefully read it with the help of a solicitor and sign the document. You will need to pay a deposit, which should be no more than 10 per cent of the purchase price.
Once both parties sign the Contract of Sale, the seller will transfer the business assets, including tangible and intangible items, and licences to the new owner. If required, you may need to renew the lease agreement to access the property after acquisition. This is the best time to obtain necessary insurance and tax records for a seamless transition.
There is no denying that a settlement will happen on a particular date. Make sure you make all the remaining payments to acquire the business officially. You can adjust the settlement date to five to seven days after all due diligence and financial approval are complete.
On the settlement date, you will be given all the necessary operational documents for a seamless transition. The seller may provide you with hands on training to help you become familiar with the new environment, employees, and operations. It is good to liaise with the ongoing owner and clear your doubts for the smooth running of the business in the long run. This way, you can acquire a profitable business for sale in Brisbane for higher profits and strong career growth.
Wrapping Up
The due diligence process of buying an existing business for sale in Australia requires detailed research, patience, a strong financial health, and key details about the potential venture. With the help of this step by step guide, you can seamlessly acquire the right business and create your own success story as an entrepreneur.
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