How To Buy A Good Business At A Great Price?

The marketplace is flooded with business listings that promise excellent returns. However, identifying a viable business opportunity from a sea of established entities is not an easy feat. You have to be sure about your decision as it will decide the future of your investment. Therefore, you have to carefully examine every aspect of the deal and make sure that you are not paying more than the market value of the business.

There are several steps to buying a profitable business at the right price. It requires appropriate evaluation of the venture, profound research, and extensive negotiations. Thus, if you are looking for a business for sale in Australia, you must be aware of the strategies needed for the buying process. Here is how you can grab a good business at a great price.

Find A Business That Matches Your Experience

Analyse your individual interests and passions. You would not want to run a business that does not match your sensibilities. Look for the domains that would require your expertise and will keep you motivated. Do not just shortlist a business because it is trending currently or something similar is owned by a friend or a relative.

The best way to find a suitable entity is to determine your strengths and weaknesses and know how you can leverage them to run a business. Also, understand the commitment level of the venture. If the business you are planning to buy asks for 24x7 availability, you should be ready for it. In addition, you must find something that fits your budget and will not leave you bankrupt in case of failure. Thus, it must match your lifestyle, financial standing, passion, and professional experience.

Evaluate the Profitability of the Business

Identify the size of business that can be handled and managed comfortably by you and look for only those opportunities. Find out the size of the target market covered by the business and the level of demand for its products and services. The next step will be determining the existing competition in the sector and how the business is positioned to deal with it.

Conduct thorough market research to understand the satisfaction levels of the customers and any gaps in the offerings that need to be filled. All this information will help you once you take over the business to prepare your strategy and marketing communications. Examine the cash flow of the business and its expenses. Evaluate the management skills and the efficiency of the workforce.

Read the Purchase Agreement for Terms and Conditions

Before negotiating the price, you must understand the terms of the sale. Find out if the business is being sold with the plant and equipment or not. Check if the office is leased or owned by the outgoing owner. If it is a leased premise, read the commercial lease document and terms of transfer. You should also ask the seller to create a provision in the agreement where you can act against them if the business incurs a huge restoration cost or any other expense immediately after the purchase.

Enquire about seller financing, outgoings, and the value of the stock. You must have a clear idea about the ongoing expenses, working capital and projected income so that you can arrange for financing accordingly. Make sure that you have some extra amount to stay afloat if the sales go down due to any reason after the transition.

Evaluate the Business

Find out about all the assets and liabilities of the business. Determine the amount that you would have to spend if you started the business from scratch. Identify the price of the equipment and stock and its depreciation value. Take a close look at the balance sheet as it will give you the precise value of the company’s assets and debts. If the books of the business appear to be disorganised, you must walk away because it would be impossible to gauge the financial well-being of the business in such a situation.

Look at all the financial documents, income tax reports and loan documents to evaluate the cash flow and the net profit of the business. You must hire an accountant for this purpose as he can accurately calculate the profitability of the venture. Examine the business plan and the financial projections for the next three years before going forward.

Negotiate the Price

Never agree on the asking price suggested by the seller even if you think it is reasonable. Start from the lowest bid that seems appropriate for the venture and then move up. However, make sure that you do not bring it too low as it can make the seller disinterested. Ask questions that are relevant to the pricing, such as how the price will be affected if the industry faces a downturn.

Also, do not provide information about the amount that you can secure as a business loan as it can make the seller quote a higher price. It is better to maintain your composure during the conversation and avoid getting too excited or too depressed at the mention of the price. Ask for concessions wherever you deem necessary, and you must note down all the points before the meeting so that you do not miss out on anything. Use your bargaining skills to get the best price.

Financing the Acquisition

After the price and terms of the agreement have been negotiated, the next step is to arrange the finances. You can use some part of your savings, borrow from your friends and relatives, and apply for a business loan. When seeking a loan, you must find out the one that is suitable for your business type. Examine the interest rate, duration of the loan, hidden charges, and terms of the loan before signing up for it. Make sure that you secure funding that allows you to make the purchase and pay the debts comfortably. In addition, you must have some extra amount to be used as working capital. Keep saving for the emergency fund as you start earning. Begin with a small amount and keep increasing it as you move forward.

Conclusion

If you have been looking for a business for sale in Australia, you must buy a profitable one at the best price. The points mentioned above will help you to identify a high potential entity and negotiating the asking price for a rewarding deal.