Buying a Business
Buying a business is a major investment and life decision. The benefit of purchasing an established business is that you get existing customers, suppliers, and staff. This means you can hit the ground running. For a business to succeed, you need to be able to invest your time in the important things like making sure you have good customers good suppliers and good staff. That is why you need lawyers who are experts in representing, protecting, and documenting your interests. We can assist you to make sure your business purchase is painless and stress free. Furthermore, we make sure your interests are protected every step of the way. We have been advising on business purchases for over 25 years.
We have acted in over 600 hundred business purchases worth in total over $400 million.
In fact, we wrote the book “How to Go About Acquiring a Small Business” You can download it here. It contains a complete guide to purchasing a business.
When buying a business, there are many things to be aware of. Get it wrong and it can be a disaster. On the other hand- get right and it can give you the lifestyle and income you deserve.
Now more than ever now is the time to be cautions when buying a Business. Covid-19 has raised new issues and challenges. Covid-19 has changed how many businesses operate. It’s important to look at whether historic trading figures are realistic and whether the business model is pandemic proof. Would you be able to trade profitably during a lockdown? Are there distance limits on any services you provide? What about hotspot classification? Has the business been listed as a COVID hotspot repeatedly and as a result is it being shunned by the public?
Lockdowns (there have been a few) have provided Richter-scale shakeups to many industries and some simply have not survived the lockdowns of Covid-19.. As a result, some business models just won’t survive an extended lockdown, even with Government support. Don’t buy a sinking ship.
In particular, consider whether or not the business will survive the economic upheaval and social disruption of a pandemic. We have precise information to help you when buying a business during the pandemic of Covid-19.
Regardless of whether the business you are buying is large or small, we have the experience and skill to prepare, negotiate and manage your business purchase so you are protected and get what you bargained for. This leaves you to focus on what is important- namely making your business a success.
TYPES OF BUSINESS PURCHASE WE HELPED WITH
We have helped people purchase every type of business some examples are:
- Auto repair and service centres
- Beauty and hairdressing salons
- Cabinet makers
- Child day care centres
- Cafes with or without a liquor licence
- Ecommerce businesses
- Fitness centres and gyms
- Horticultural business such as nurseries and garden maintenance
- Manufacturing businesses
- Medical clinics
- Restaurants and Hotels
- Well known franchise businesses
To name a just few- and every other type of business and industry imaginable.
WHAT ARE THE QUESTIONS TO ASK WHEN BUYING A BUSINESS?
There are many things to look for when buying a business. For a full guide you can download our eBook, using the button further down the page. But in summary you need to carefully consider these things.
When looking at buying a business the first thing you must do is conduct a thorough due diligence.
Due diligence is the process of assessing and testing all the information about the business. Only after you have all the information are you able to make a commercial and unemotional assessment on whether the price is reasonable, and business are right for you.
Our Due Diligence checklist is a good starting point and can help you through the process. Download a copy of our Business Purchase Checklist, created especially for business purchasers.
WHAT DOCUMENTS TO REQUEST WHEN BUYING A BUSINESS
If the business purchase price is less the $450,000 then the first document, you should ask for is the vendors statement or Section 52 statement.
A vendor must give you a vendor’s statement or Section 52 statement.
A Section 52 statement is important as it provides essential financial information on the business you are looking to buy such as is the business making a profit.
Some other important documents to ask for are:
- The lease;
- A Customer list;
- A Supplier list;
- The Business Asset Register;
- Inventory Register
You will also need any major contracts such as distribution or supply agreements.
If the purchase price is over $450,000, then in addition to the documents above you will want a full set of financials and 3 years trading history will be your starting point
This is a good starting point and will give you a clear insight on the past performance of the company. But remember past performance is not necessarily a clear indicator of future performance.
Once you have identified a business to buy you will need expert legal advice. This will ensure you get what you bargained for and there are no hidden surprises. We can help you with the legal advice. We are experts in all stages of the business purchase process.
We regularly advise on:
- Due Diligence;
- Contract negotiation or contract review;
- Legal structuring;
- Settlement and transaction completion;
Every Contract is different and there are lots of things to check.
- Does the contract state what the minimum takings of the business will be in the 2 weeks before completion will be? (2 weeks is standard, but longer or short periods can be negotiated).
- If the seller is a company do the directors guarantee that all representations made in the contract are true and correct?
- What will be happen with the existing employees and their accrued wages, long service leave, superannuation, and other entitlements?
- Does the vendor have an obligation before and after settlement to assist and train the purchaser?
- How will stock be handled is it included in the sale price or an additional cost.
- Stock is it old or current?
- Is there a lease. How long is left on it what is the rent and rent review mechanism are there any options most importantly is it fair and reasonable?
Does the business trade under a particular name is that name registered does it have a trademark? See our page on the need for a registered trademark when doing business. Otherwise you could find yourself in a situation similar to Gordon Bleu. Read about it- and see the report by A Current Affair.
How will your business be structured? This is important as it has consequences for personal liability and tax. There are four main options. Each has its own benefits and disadvantages they are:
Partnership Agreements and Shareholder Agreements
If you are partnering with someone for your business purchase, then you must look at a partnership or shareholder agreement or Partnership agreement. It is important right from the start to set out in a formal document how you will run the business. Partnership agreements and shareholder agreements cover many things.
Some important issues to consider are:
- What are the initial cash contributions of the parties?
- What is the future obligation to contribute cash?
- What are the work responsibilities of the parties How will you deal with a situation where one party wishes to leave voluntarily?
- How will you deal with death or incapacity of a party?
- Must all decision be unanimous?
- How and when will the income of the business be distributed to the owners?
- What time commitment does each party need to make?
- What happens if one of the owners dies or decides to retire.
- How will you deal with conflicts?
- Will there be an agreement on annual leave, sick leave long service leave etc?
Do you need a licence to run the business? Do you need to have completed an accredited course? If so, this may involve applications to various government authorities. You may need to be granted a licence or registration or have an existing licence or accreditation transferred to you as purchaser. For example, a purchase of a restaurant or café which is licenced to sell alcohol will require a transfer of a liquor licence. Your due diligence will have identified whether there are any formal licencing or accreditations required to run the business. If there are it is important to understand the licence or accreditation requirements before signing a contract. If you sign a contract and do not have the necessary licence or accreditations you still may have to proceed with a purchase.
We are Expert Business Lawyers
We have helped hundreds of people with their business purchase. We are experienced, cost effective, proactive and can help you get the best possible outcome. Buying a business demands expert legal services. For assistance give us a call or simply complete the form on this page and we will contact you.