Buying a Business

Are you thinking of buying an already established business? If so, it is essential that you get the right advice prior to making an offer.

At McCabe Weston Accountants we have the expertise and knowledge to cover off on all things required prior to purchasing an established business. Below is a list of some of the things you need to consider. Please be aware that this list does not cover everything as the business being purchased will influence what needs to be done.

  1. What type of entity should you use to purchase the business? This will be determined by the purchaser's circumstances. The main types of entities used to purchase businesses are sole trader, partnership, trust or company.
  2. Is the price being asked for reasonable? Is the price of the business in line with accepted business valuation principles? Will the business return the profit expected given the price paid and the underlying risk of the business itself?
  3. What does "Due Diligence" mean? Due diligence is the term used to describe a period where a potential purchaser of a business can review that business in detail. This may include requesting some detailed financial information from the seller to compare to information already provided to support the business sale, working in the business for a short period to check that daily customer numbers are as advised, etc. Due diligence gives the purchaser an opportunity to satisfy themselves that they have been given correct information regarding the business they are intending yo buy.  The purchaser in conjunction with their advisors will devise a due diligence plan which is tailored to the business being purchased and the purchaser's themselves. Due diligence is most often a clause written into a business purchase contract. If the purchaser is not satisfied with their findings during that due diligence period, the contract can be voided.
  4. Do you need finance to purchase the business? Lending money to buy a business can be difficult. If you do not have assets to put forth as security for the loan you may not be able to get any finance at all. It is worthwhile to review the funding of a potential business purchase prior to getting too far into negotiations.  
  5. Do you have the specific knowledge and expertise to operate the business? Is there a requirement for persons within the business to hold certain licences or qualifications in which to operate?

Buying a business can be very risky. It is essential that you get professional advice before purchasing any business.

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