So you’ve done all your research, weeks, months, maybe even years of it. You’re in a financially safe place to be buying an established business and you know what industry you’re going into and what locations you’re interested in. There is still a lot to be considered and some professionals you need to get involved in the process to make sure that you and your family get the best possible outcome.
First step is cash flow, whether you have money saved or are borrowing you need to have more than what the purchase price will be. Based on all your research you should know approximately what your operating costs will be and you need to be prepared to cover these for at least six months as if no income is coming in. This is a safety net incase things don’t go to plan in the beginning; it’s not a nice thought, but it’s a necessary consideration and something you must be prepared for. You also need money to pay a number of people whose advice and expertise will prove invaluable in the long run. Having everything in order including a small business accounting software is crucial.
An Accountant needs to look over all the financials of the business so they can advise you about what you’re getting into. If someone is trying to hide poor performance it should show in the financials. An accountant can help you decide if the price is fair too based on income and expenses. It’s great if they know your circumstance too so they can guide you on what you need financially to succeed and what your tax responsibilities are.
You will most likely be borrowing money to do this, shop around, seek advice, ask heaps of questions and make sure you get the best deal to suit you and your new business. Even if you’re not borrowing money you will still need things like transaction accounts, merchant facilities and credit cards for day to day operations.
Any business purchase will involve a contract and this must be looked over by a lawyer before you sign anything. Lawyers are expensive, but worth every cent if it stops you getting ripped off or burned financially with a dodgy contract of sale.
Once you have spoken to all these people, negotiated your borrowings, finalised the contract, you and your lawyer are happy with it and you’ve decided on a sale price it is time to sign on the dotted line and make it official. Make sure you have agreed on time for takeover and before this you should be spending time within the business observing and learning the day to day operations.
When you step in and take over there will no doubt be things you want to change and spending time observing will give you a better understanding of what works well in the business and what is not working so well. It can be a ruthless job being the boss sometimes, but you need to do what is best for you, your family and the business. If your staff are not doing what is best for business then it may be necessary to discipline or terminate people and you need to be able to do this, not matter how harsh it feels.
Getting to know your customers is also important. Whether you are a sole trader or a big corporation, your customers are the only reason you have a business, learn about them, get to know what they want and need from you and what drives them to deal with you specifically. Understanding your customer base will help you succeed and grow your business.
Any other tips? Let us know!