In this three part series we will cover the things you need to do when buying a business. ‘Part 3: Getting Advice’ covers what advice you need to get and where.
6. What are the legal issues to consider?
We recommend that all clients seek legal advice from an experienced commercial lawyer for the contract of sale, including terms and conditions of payment, apportionment of price between goodwill, fixtures, fittings and equipment, stock, adjustment of outgoings and statutory charges under the lease, transfer of business name, copyright, trademarks and patents.
The vendor should also supply information regarding customers and a list of suppliers.
Additionally, make sure you are aware (or find legal help to assist in making you aware) of any industrial relations laws that may affect you and your employees.
7. Have you made considerations for finance?
Not only are you going to have to make a sizeable down payment, as well as monthly payments toward whichever financing option you secure (as most businesses do), but you’ll also need to have a savings account to cover any unexpected expenses.
The importance of having “spare money”, should the business take some time to take off, is vital and you’ll need to have funds stored away if the business is slow to generate cash flow.
Some people fail to take this into consideration, and place an otherwise viable commercial opportunity in peril due to lack of foresight. Not every business will take off or continue on a steady run after purchase, so it’s important that you have some kind of insurance against this – particularly if you’re not operating as a sole trader and there are employees involved.
8. Have you spoken to all the necessary professionals?
While this point certainly ties in with previous ones about legal and financial issues, professional help can also include enlisting the services of consultants or mentors who will be able to guide you through the process of running a business for the first time.
It will often be necessary during the preliminary stages of purchasing and running a business to rely on the services of specialists.
You may have a business degree or you may have experience in your prospective business’s field, however, this doesn’t mean that you will have all of the up-to-date information that will help your business succeed.
You should talk to your business advisor about possible tax implications and setting up appropriate reporting and record-keeping systems.
This will ensure that you are able to focus on making the business a success rather than worrying about the paperwork.
Don’t be too proud. Help is there, so if you’re unsure in any way, it’s better to be safe than sorry.
9. Is there a cooling off period?
Know whether or not your sale of business contract has a cooling-off period as these vary from state to state.
There are also many items you can consider to make a contract conditional. These include conditional clauses for due diligence, the need for a premises lease to be assigned or renegotiated, finance approval, handover period, and systems and process training.
10. Are you going to rest on your (business’s) laurels?
While the business that you’ve purchased may well be established, this does not necessarily mean that there isn’t room for improvement. The research that you should have carried out prior to purchase will have given you a good knowledge of the appropriate industry, so why not take a look at what some other people are doing? Can you extend on this? Can you find new ways to bolster or increase your clientele base?
Remember, no one got rich from standing still.
If you’re looking to take the leap and purchase a business, talk to us first. MWM Advisory can guide you every step of the way, ensuring that you’re ready to purchase the business and kept protected from any unforeseen circumstances.
Call MWM today on 07 5596 9070 or email firstname.lastname@example.org