Buy A Business
Buying a Business
From finding the right business, and working through all the details required to a smooth transfer of ownership can be a complicated procedure.
A licensed business broker knows the importance of finding one that fits your needs, talents, skills and lifestyle.
A licensed business broker has many different types of businesses for you to consider and the knowledge and experience to walk you through the entire process.
12 Essential Steps to Buying Your Business With Me
Step 1 – Once you have decided you want to buy your business, Schedule a Zoom call with me [click here]
Step 2 – During the call, I will ask a series of questions to help us understand better what type of existing businesses for sale I should show you.
Step 3 – Budget – You should have a general idea of how much cash you have available and how much you can get through finance. Being upfront with your Business Broker will help us know what businesses for sale we should show you.
Step 4 –Have an open mind when looking at businesses to buy. There are so many different types of businesses that you may not be aware of. I can more than likely introduce you to a business for sale in industries you have not previously considered.
Step 5 – Confidentiality Agreement – “CA” (also commonly referred to as a Non-Disclosure Agreement) – Be prepared to sign a CA. I am required by the Sellers to have this signed prior to disclosing the Business Name, Information Memorandum or any other sensitive information.
Step 6 – Once you have seen a business that you are interested in, I will arrange a meeting with the Seller for you to meet and view the business (often before or after the business’s hours of operation).
Step 7: After meeting with the seller, I will ask you if you would like to proceed to the next step in purchasing the business. By this time you have seen the information memorandum, and the financials and you will be prepared to make a conditional offer. Some common conditions include Due Diligence, Finance etc.
Step 8 –Putting an offer on a Sale & Purchase Agreement is not as difficult as you may think when you are working with a Licenced Business Broker such as myself. Our Agreements are designed to protect all the parties invoiced in the transactions covering simple items like the assignment of lease (for you to take over the business premises) to more complicated issues such as key employee negotiations.
Step 9: I will present your offer to the Seller. If the Seller accepts your offer then you will be asked to pay a Deposit to the Public Trust o/a New Zealand Real Estate Trust bank account typically in the amount of 10% of Purchase Price or $25k, whichever is greater. The Deposit is only paid once the Agreement is binding and agreed and signed by both parties.
Step 10 – Once the Offer is accepted and the Deposit has been paid, you will move into the Due Diligence phase where you will have a chance to thoroughly review the books, records and other items you requested to satisfy your due diligence. If you are not satisfied with the information provided during the Due Diligence period, you have the right to withdraw from the transaction and receive your deposit back.
Step 11 – Once all your conditions have been met, your legal representative will notify the Sellers lawyer that the sale has gone unconditional which will take you to the final step of the process.
Step 12 – Your lawyer will prepare the final transfer documents, and transfer of funding to the Sellers account which will take place on Settlement Day. Once this is complete – you have just bought a business and you are on the road to Owning Your Future.
If you are not ready for a Zoom Call yet, but you would like to have a quick chat [click here]
Buyers frequently asked questions
If you start a business from scratch, you will need to build your own customer base from zero, market the new business, hire new employees, establish cash flow and develop all the systems and processes.
An existing business has a track record and reputation and will have demonstrated that there is a need for that product or service in the marketplace. And better yet, the financial records will be available along with other information on the business.
You will have an existing customer database, as well as employees. Most sellers will provide a Vendor Assistance period where they will train the new owner.
- Business Broker – a business broker can help you find the right business and simplify the process on your end.
- An Independent Advisor (such as an accountant) can help you determine whether the amount you are paying is justifiable. They will review the business profitability to date, your financial positions (assets and liabilities), the business cash flow and debt serviceability (if any). They can also review the business and your tax structure and ensure you set up correctly and help you set up for GST and transfer of accounting systems (e.g. Xero).
- Lawyer – Very important part of the purchase team. A lawyer will help you with settling the sale on settlement day. Some of the areas they can assist you with include satisfying any conditions of the sale (e.g. due diligence, finance approval, landlord lease approval and consent, key contract approvals and employee arrangements).
- Commercial lending specialist – You may need a business loan to assist you with purchasing an existing business. A specialist can help you get a loan approved at a competitive rate and maximum amount possible. A specialist specialises in loans for business purchases and they can help you achieve the impossible.
Merriam-Webster dictionary defines Due Diligence as a “research and analysis of a company or oganisation done in preparation for a business transaction”:
If you are considering purchasing an existing business, it is critical for you to review the financial records and other business information. This is a complex process and can be time consuming, you want to be sure the business ticks all the boxes and is to your satisfaction.
You should carefully evaluate the following key factors to help you decide whether you are making the best financial and life decision for you:
- What is being sold
- How good is the business
- How is the overall performance
- What do the financials look like
- Who are the customers and suppliers
- What are the staff like, and what is the culture
When buying a business, look at the remaining term of the lease. If the success of the business is solely dependent on its location, you want to ensure the lease in place will allow you to stay there and continue that successful journey.
Commonly, the existing leases are assigned to the purchaser which is subject to the landlord’s consent. The buyer does have the opportunity to review and accept the approval of the lease agreement. If the lease is meaning the final expiration date, a new lease agreement with a new term may be signed.