Buying your business in Perth, or anywhere in Western Australia
Advice on from Perth’s leading business brokers
Buying a business can be as great a financial commitment as your home; sometimes even much larger. Before making a decision on which of the many businesses for sale you want to buy, you need to carefully analyse its advantages and disadvantages, its history, and its likely future.
You then need to weigh all these factors against the goodwill that’s being asked, your own strengths and weaknesses, and the likely return on investment (ROI) you’ll receive. But provided you go about things in a methodical, logical fashion with the help and advice of an experienced business broker you can secure a successful business with excellent prospects for a good price.
And best of all, for a buyer, the broker’s advice is free.
Brokers are paid a commission by the seller, but that doesn’t mean they’ll try to talk a buyer into taking on a business that’s not a good fit, because today’s buyer is tomorrow’s seller, and Business Mergers and Sales is built on long‐term relationships and referrals.
So what to consider when buying a business. You ned to carefully analyse the advantages and disadvantages, and consider its history. Despite the disclaimer that investment funds are forced to add to their advertisements, past performance can be a very good indicator of future potential. Then again, some owners lose interest years before they make the decision to sell, or not have kept up with changes in technology or customer preferences, so a fundamentally sound business can be under‐performing – in which case it represents a real bargain for an astute buyer.
To help you decide, Business Mergers and Sales prepares a comprehensive report on every business we sell. That covers not just financial performance over the past three years but examines the existing customer base, the broader market, supply relationships, cash flow, staffing… Our reports aim to give you a comprehensive, in‐depth review of each business we have listed, so you can talk to other investors, your accountant, your financier and others with all the information they’ll want at your fingertips.
When buying a business, you need to think about:
Assets: What assets does it have? Does it have any valuable intellectual property? On what basis has that been valued? You’ll be provided with a comprehensive list of all assets, including any intellectual property or leasing arrangements.
Liabilities: Does it have any outstanding debts? Will the vendor ensure these are paid before settlement, or contract to take them over? What potential refunds and warranty claims might exist after you take over?
Sales: What are the patterns or trends? Is there any seasonality? What is the business’ customer base? What is the market for its goods and/or services and what potential is there for it to capture
more market share?
Suppliers: Who are the current suppliers? What lines, if any, are exclusive? How is supply secured – by contract, letter of understanding, or verbally?
Costs: What are the fixed and variable costs? What are the staff costs (if any) and does the business currently have too few or too many staff? The report will explain whether or not the sellers believe key staff will remain after the sale – a key point for most people considering buying a business.
Profits: What do the previous financial records show? Is the business profitable? Is the profit sustainable? Business Mergers and Sales will not only provide you with the previous three years’ financial records, but also explain why the business is profitable.
Tax: What kinds of tax will apply? Consider GST, Capital Gains Tax, and stamp duty implications. A good accountant can be particularly useful here. If you don’t have an accountant, we recommend consulting one of the firms with whom we regularly work. They have specialised experience in the accounting aspects of buying and selling businesses in Perth and throughout Western Australia.
Lease: Is the lease close to ending? If so, is there an option to renew? If the business would perform better if situated somewhere else, what costs would be incurred in moving it?
Sale and purchase agreement: What are the terms on which the business is being sold? Again, independent advice from an accountant or business advisor is invaluable here. Once you’ve reduced your choices down to a shortlist after studying our reports, our broker will discuss any offer you wish to make, and convey that to the seller. When you’ve decided which one you’re buying, they’ll draft a purchase agreement which not only complies with the law but also draws on their decades of experience to help ensure the process proceeds smoothly and here are no problems during or after settlement.
History: What has and hasn’t worked for the previous owner? Not only does a stable history with a steady upward trajectory in sales and profits suggest that growth will continue after you buy the business, but it will also mean that finance is easier to obtain, and potentially less expensive.
A vendor will normally provide you with Profit and Loss figures for the previous three years, and most will have at least up‐to‐date sales and outgoings for the current year. An experienced business broker will have analysed those figures and added back the owners’ personal expenses and other items, to give you a truer picture of the business’s performance.
Reason for sale: Why is the business being sold? Most vendors are retiring, moving to another part of the country or overseas, or reducing their workload due to health reasons. The report from Business Mergers and Sales will explain why the business is on the market, and what support the seller will provide after you first take over.
That’s just some of the factors you need to consider, most of which are covered in the business report.
Franchising is another option you can consider. This allows a business to operate under an existing, well‐known brand, selling their products or services. There are additional issues to consider when buying a franchise, and we include these in our report.
Business Mergers and Sales are both brokers and valuers, so if you buy a business through us you’ll also have access to a professional valuation, carried out according to strict standards. This gives you added peace of mind in assessing the value of not just the goodwill being asked, but the plant, equipment and other assets, and stock (if applicable). For more details on how a business is valued, head over to our appraisals and valuations section.
If you’re ready to look through our listings, you can do that here.