Queensland is a great place to buy a business in 2021.
Buying an existing business is a fantastic way to become a business owner, particularly in Queensland. According to the Queensland Government, Queensland has a population of 5.2 million people which is increasing at one of the fastest rates in the country.
Investment in manufacturing, skills training & infrastructure, while safeguarding the health of Queenslanders, and growing the regions and protecting the environment have remained the priority.
After being the first state to recover all its jobs lost during the COVID pandemic, Queensland continues to see strong employment growth according to the latest ABS Labour Force data.
All this means there are positive signs for the economy and business confidence. If you are keen to buy a business in Queensland there is much to think about but our Broker Mick Craig is ready to assist.
Why buy an Existing Business?
The main reason most people buy a business, rather than starting one, is for the established infrastructure and ongoing cash flow. People buy franchises for similar reasons – they usually come with supplier agreements and a proven system of what works and what doesn’t. You will need to do your research and conduct detailed due diligence. There’s every chance you’ll need to secure a business loan to pay the required lump sum for the business. Before you rush off and start looking for businesses, it’s important to take a step back and digest these insightful tips for buying a business.
Tips for Buying a Business
Understand That Buying an existing business can be less risky than starting from scratch
Buying an existing business means receiving an operation that is already creating cash flow and you know about it’s previous performance. To reduce your risk when trying to choose a business, start by asking yourself these simple questions:
- What am I good at doing?
- What experience do I have?
- What is my work ethic?
- What do I enjoy doing?
- Am I a people person, social person, or am I more introverted?
- Am I a leader, a doer, organiser, or do I need support being organised?
- Am I creative and innovative, or am I more mechanical and methodical?
Take a personality test to learn more about yourself; maybe you will discover some things you didn’t know.
Develop Your Decision-Making Criteria
There are many businesses for sale and the process of narrowing down your focus will be an important task to complete. Creating your own personalised decision-making criteria will assist in this process. List the features and benefits that the business needs to offer you and take a look. What type of business does this describe. If you need flexibility to pick up children from school, looking for businesses with fixed and rigid opening hours may not suit. Before any investment decision is made, you need to have established decision-making criteria. Your decision making criteria should consider things like:
- The minimum amount of income you are willing to earn.
- The businesses potential to earn and grow further with an invested owner
- The amount of time you want to spend on the business
- The flexibility to work the hours you want
- Whether you are happy to manage staff or prefer a business with minimal or no employees
- Do you want to be front and centre working in the trenches with clients and customers, or do you want a business that is self managed with minimal input from yourself
Narrow down your list by removing the businesses that cannot deliver the decision making criteria you have set.
Work closely with a Professional Business Broker
Business brokers are an invaluable asset in your journey towards business ownership. There will be a lot of questions you will want answered and decisions that you will need to make. Professional Business Brokers will guide you through the entire business sale process. Select someone that has many years of experience, knows their market inside and out and are available to offer you professional insights to help guide you. Good Business Brokers have access to silent listings, and know what other businesses they can bring to the market for sale. So if you work closely with them, you will gain access to this knowledge.
You will need Professional Advisors once you find the Right Business
Your Business or Franchise Broker can recommend professional advisors who are experts in business sales. You should seek advice from your Accountant and Solicitor during the sale process and you may also need assistance securing Business Finance . A Professional Business Broker will surround themselves with advisors that are experts in these fields. Ask them for a referral if you do not already have these advisors in your corner.
Conduct your Due Diligence
Once you have found a business you would like to buy, you must research important information about the business before starting negotiations. Be prepared to sign a confidentiality agreement, ensuring you will only use the information provided to decide if you want to purchase the business. A Professional Business Broker will provide you with all the documents you need in the way of an Information Memorandum (IM) or Business Profile (BP) to review and research the business. This will include information such as the businesses past performance, financial statements, adjusted net profit, lease, operating hours, staffing requirements and general plant and equipment included.
Determine a Fair Price
Determining a price is the most emotionally charged part of the whole buying process. We will discuss how businesses are appraised in a later blog. For now, it’s important to note that the seller will have one idea of how much the business is worth, while you will typically have another. Many factors go into determining a price; usually, the party who is most prepared has the most leverage. A business broker will prepare a business profile and due diligence package for the business you are interested in buying, to help you determine a fair price.
Have a Plan
Since businesses already have an established brand and reputation, you must come to the table with a set plan to continue the success of the business. Demonstrate how you plan to grow the business by preparing ahead of time and maintaining your research. Developing a business plan once you have found your ideal business using our business profile and due diligence packs, can help you when applying for finance. It will assist you in preparing for taking over your business once purchased.
Buy at a Fair Price
Business appraisals are a mixture of art and science. While it might seem complicated, there are ways of estimating a fair price. If you would like an expert in your corner to help you accomplish this, then the Finn Buyers Agent Service will help you along the way. The Finn Buyers Agent Service will help you review the business information to highlight your negotiation opportunities. If you choose to go it alone, then this process could prove to be much more difficult.
Use a professional commercial finance broker who will guide you through the financing process. They will prepare your application and find the best deal for you. Approaching your local bank directly about business finance can result in an unnecessary knock-back. It’s best to speak with a Commercial Finance Broker before you go to get funding from the major banks. When completing your projections, be sure to allow for some contingencies like a 20% drop in sales. Also allow for working capital and cashflow ups and downs which will be a different requirement for each business type. (As a general rule allow between $30-$50k for a small business). Your Accountant will be able to guide you.
Start the Transition Process Before You Take Over
To ensure a smooth transition, start preparing for the handover in advance. Take the time to talk to employees, customers and suppliers and verify you are properly trained in operating the business.
Buying an existing business is a great way to become a business owner, but it’s not without its challenges.