The Process of "Buying a Business" on the Sunshine Coast
The following serves as a comprehensive overview of the process for individuals seeking to acquire a business on the Sunshine Coast. It emphasizes the significance of proper financial planning and due diligence, as well as the engagement of specialised professionals in the areas of accounting and law.
Key concepts covered
- Financial preparation and position before purchasing a business
- Thorough inspection and understanding of business operations and growth opportunities
- Engagement of specialized accountant and solicitor for business acquisitions
- Due diligence on financials, lease, and other accounting/legal matters
- Timely completion of account transfers and commitment to learning during vendors tuition period
Many buyers looking to acquire an opportunity are new to the process of buying a business.
As laws and procedures are different across the states, here is a basic guideline of how the typical process works for buyers in Queensland.
Firstly, we highly recommend buyers discuss their financial position with their finance broker/bank, to confirm what capacity they have to purchase a business.
In the current market where buyers are plentiful, business owners will often hang out for cash buyers, as they are aware the finance process can be as long as 4 – 6 weeks. So, being in a position to move quickly will often put you in a much stronger position than buyers requiring finance.
When you have found an opportunity that is of interest, you are best to inspect the business ASAP, and get a good understanding of the day-to-day operations, including the owner’s role, the premises, key staff in place, suppliers, customers and what is really required to operate the business.
Buyers often base their decisions purely on financial history, without knowing what growth opportunities the business may offer. Many sellers who have been long term owners are not operating the business near the optimum levels that are capable.
If your interest continues it is essential that you engage a reputable accountant and solicitor. Preferably both of these will specialise in business acquisitions, this could save you money and time.
It is advised you get a preliminary due diligence report done on the financials, the lease and any other accounting and legal related matters. This is also the time when you would seek advice on your buying entity/company/trust, in preparation to proceed to contract (a new entity can take several days to lodge).
Assuming everything checks out and you wish to secure the business you would discuss time frames, price on offer, conditions etc. with the agent. Then we draft a “Contract of Business Sale” as per our standard government documents, for your solicitor’s approval or amendments.
It is standard practice to pay 10% of the sale price as a deposit
It is standard practice to pay 10% of the sale price as a deposit when a contract is accepted by the sellers. This generally sits in the agents trust account, which is audited twice annually.
Most contracts include a due diligence period to ensure everything thing is as presented. This period is generally between 2 – 4 weeks. In addition a contract will state vendors tuition period, a restraint of trade area and time, staff entitlements, equipment included, the ability to be satisfied with the lease on premise and approval of franchisor/licensor is applicable.
Often the business will change hands 2 – 4 weeks after the contract becomes unconditional. During this period buyers will need to complete account applications, EFTPOS, electricity, and phone transfers and be organised for the settlement day.
Vendors tuition is done post settlement. Depending on how much training is required, this will generally last for 2 – 4 weeks. Don’t underestimate the sellers level of knowledge, buyers should commit to learning as much as they can during this period, as often it can determine how successful the business is in future years.
If you have any questions of this process call the professionals at Team Savvy on 5444 3300