You’ve finally done it. You’ve decided to throw off the shackles of servitude and strike it out on your own by purchasing a business. No more coffee runs for you. Now you will be the one to whom coffee is brought, or tea, depending on your hot beverage preferences. All jokes aside, purchasing a business is no small task. There are numerous pre-purchase considerations that you must take into account to ensure that you acquire a viable, profitable and value-for-money operation.
These are some of the things that one should consider before deciding whether or not to purchase a business. Please note that the scope of considerations will vary depending on the type of business you plan of buying.
When contemplating the purchase of a business, at the outset you must investigate whether the business is likely to make you money in the long run. This involves an analysis of the company’s;
- current business profitability;
- growth and future earning capacity;
- financial records;
- stock availability;
- key personnel; and
- asset pool.
Before committing to the purchase of a business, it is highly recommended that you either adopt or create a business plan. A business plan is an invaluable tool that will help you set the business’s direction, outline the objections or targets that you wish to achieve and help you map out how you are to go about achieving them.
Certain business operations come with mandatory licensing requirements, i.e. if you wish to serve alcoholic beverages, you must possess a liquor license. Accordingly, before purchasing a business you will need to contact the Business License Information Services to ensure that the business not only has all the relevant licenses that it needs, but also that they can be transferred to you.
Arranging financing – it seems like the logical thing to do. Yet time and time again, prospective business purchasers rush into the purchase of a business without considering their true financial capabilities. Before exchanging contracts, it is vital that the purchase obtains unconditional financing. Once the agreement is entered into, you may not be able to rescind even if you lack sufficient funds to settle the transaction.
Review the contract for the sale of business
The contract for the sale of business may be incomplete, inaccurate and or complex. Accordingly, before purchasing a business, it is highly recommended that the document be reviewed by a qualified legal professional. Once the purchaser commits to the sale transaction, the circumstances under which the contract may be terminated are quite limited. This may be the case even if the purchaser entered into the contract under a misapprehension of certain facts.
The purchase of a business is both an exciting and a stressful process. Such an important decision should not be left to chance. If you have questions concerning the steps involved in purchasing a business or would like to have a contract for the sale of business reviewed or drafted. Our dedicated staff of LegalVision lawyers would be happy to assist you. Call us today on 1300 544 755 to see how we may help.