10 Things that are important when purchasing a business:
Purchasing a business is a difficult and sometimes daunting task. There are many things to consider before you sign on the dotted line so a helpful way to make this job easier is to come up with 'purchasing a business checklist' to keep track of everything you need to do.
Rose Lawyers have over 35 years of experience in commercial law and have helped countless clients through process of purchasing a business. We can help you navigate the potential risks and benefits, ensuring you get the best possible return on your investment. Here's our list of tips for purchasing a business.
Please note that this is general advice only, and not tailored to your particular needs. For legal advice for your specific circumstances, Call Rose Lawyers today on 03 9878 5222 for a free phone consultation.
Checklist Item # 1: Feel confident that you can handle the type of business that you are purchasing.
If you are purchasing a business, you must have either experience in the field, or know that you have employees upon whom you can rely to provide experience. A Trial Period and an Assistance Period is always a good idea to get to know the business and how it is run.
Checklist Item # 2: Do a proper due diligence.
When you are purchasing a business, you must find out what is happening in the immediate area surrounding the premises. You need to know what, if any, competition is around which may severely affect your business. You must also check with the Council to see whether any planning permits have been lodged for nearby properties.
Checklist Item # 3: Your due diligence for purchasing a business must include a trial.
If you see large purchases being made then be suspicious. Question everything. The Pareto Principle tells us that 20% or your customers will produce 80% of your sales. However, if one or two customers are producing an extremely disproportionate and high proportion of sales, then be very concerned. The loss of one such customer who may be loyal to your vendor will create severe problems for your business.
Checklist Item # 4: Check all equipment that is being purchased to ensure that it is sound and in working order.
Once the Contract is signed, it is too late. Before purchasing a business, don’t be afraid to test machinery and equipment to ensure that you are getting what you pay for.
Checklist Item # 5: Get to know the main suppliers and all the important customers.
You will inevitably need to build a rapport with your new clients after purchasing a business. Being introduced to them from the beginning can help ensure that they remain with you. If necessary, you should make it a special condition of the Contract that the Vendor introduce you to such people or entities.
Checklist Item # 6: Never believe what you are told by your vendor when purchasing a business.
The Vendor wants to sell their business. They are looking after their best interests (including obtaining the best possible price), not yours. You should always check what the Vendor tells you – do your due diligence and use your trial and/or assistance period to verify as much information as possible.
Checklist Item # 7: If you are in a food business get the food handling certificate as quickly as possible.
You do not want to be in the situation where you have settled, but cannot run the business because you do not have the appropriate certificate. It will also show future customers, suppliers and the mortgagee (if relevant) that you are serious about the business.
Checklist Item # 8: If your business involves service of alcohol then get your Responsible Service of Alcohol (RSA) Certificate as soon as possible.
Again, you do not want to be in the situation where you have settled, but cannot serve alcohol because you are not qualified. The sale of alcohol is often a great source of income and you want to make sure everything is in order for when the time comes for you to take over.
Checklist Item # 9: Obtain very good accounting and legal advice for how you are going to structure your business.
When purchasing a business, the advice you receive could reduce your tax burden and improve your cash flow. You also want to ensure that the business structure provides you with as much protection against liability as possible.
Checklist Item # 10: Get legal advice for the Sale of Business Contract.
Your Lawyer will check to see whether there is a Mortgage over the property that the business is running from, and whether there are any charges on the Principal Properties and Securities Register over any of the goods. Your Lawyer can also ensure that there is an appropriate restraint clause for the Vendor to prevent them opening a similar shop down the road.
So there it is, a quick checklist that will save you time and money. In order to get the most out of your business purchase, it is important that you have clear goals and are check all the details thoroughly. Our list of business purchasing tips is a good place to start but it is important to make your own checklist to make sure you don't miss anything.
Better yet, get expert commercial law advice from Rose Lawyers. We will help you with everything you need to do to purchase your business, ensuring the best possible terms and return on investment.
Talk to a commercial lawyer about purchasing a business today, call Rose Lawyers on 03 9878 5222 to schedule your free phone consultation.