• New Wave Accountants

Steps to Consider before Buying a Small Business

Buying an existing business can be more sure than starting from scratch. It is easy to buy an existing business with a proven business model. You don't need to worry about setting up marketing and advertising campaigns, finding suppliers, and negotiating contracts. You will be able to just plug in and take the business over and run it yourself.


If you consider starting your small business by buying one, here are some things you should know.


What Are the Factors to Consider before Purchasing a Business?


Purchasing an existing business is not as simple as buying a refrigerator or a television. When you buy a business, you are essentially buying a business with employees, customers and vendors, real estate, office equipment, and trucks.


Before you can purchase a business, you need to:


1. Analyse the Market


The first thing you need to do is analyse the market of the business to decide if it is a good fit for you. To do this, you need to do your research on the business market, review the company's financial reports, and meet with the business's owners, vendors, and employees.


You need to "kick the tyres" of the business and make sure it is a good fit for you. For example, if you are purchasing a restaurant, you need to ensure that the market is growing and that the area has many potential customers.


2. Know How to Make an Offer


If you are purchasing a business with a loan, you will need to find a lender to finance your purchase.


In addition, you will have to find out what other businesses are for sale in your area. What are the sellers asking for the business? How much cash would they require from you? What are the tax consequences? What are the other fees that come along with the purchase?


3. Find a Way for the Business to Make Money for You


It can be in the form of a salary, or you can charge a fee for managing the business for the seller for a set period.


4. Incorporate Your Business


In the business world, it is good to have a corporation. Owners of a corporation are liable for certain debts and taxes but can also share ownership in the corporation to add security.


5. Negotiate the Contract


There will be legal documents to sign. You will have to agree on the purchase price, sales contract, financing arrangements, payment schedule, and guarantees.


6. Get a Business Licence


You will have to get a business licence or permit to operate your business.


7. Pay a Visit to Your Tax Accountant


Once you have purchased your business, you will have to pay taxes and keep track of other business expenses. You may need to file quarterly or pay estimated taxes depending on your sales.


8. Work on the Details


You will have to ensure that all of the transaction details have been worked out. That means getting employees to sign employment contracts and non-compete agreements, getting customers to sign purchase orders, arranging for your utilities to be connected, transferring your bank accounts, and ensuring you have licenses to operate your business.


9. Get an Audit of Bookkeeping and Financial Statements


You will need a current financial statement and a good understanding of the company's bookkeeping practices and financial statements.


10. Have a Financial Plan


You will need to ensure that you have enough cash to operate your business. You will also have to make sure that the company will have enough money to pay for salaries or fees.


Conclusion


While buying an existing business is simpler than starting your own business, you need to understand the risks involved. You need to make sure that you buy a profitable business with a promising future. You also must ensure that you have enough money to purchase the company and operate the business.


Working with a small business accountant on the Gold Coast can also help you decide whether you should buy a business or start one from scratch. Having an experienced accountant on your side will also help you determine how you will manage your new business.


New Wave Accounting has helped more than 600 happy and satisfied entrepreneurs build and grow their businesses. Contact us today to learn how we can help yours.





5 views0 comments

"We take a holistic approach toward each of our business clients. Our clients consistently experience more profit, improved cash flow, and less tax."

Sign up to receive our FREE DOWNLOAD 

"101 Strategies for Business Owners to Save Tax" 

3d cover .png