Checklist for buying a business

Guide for Buying a Business

Starting the journey to buy a business or franchise can be challenging. To assist you, we’ve
created this comprehensive checklist.

Initial Steps

1. Confirm Business Fit: Reflect on whether this business aligns with your interests and lifestyle. Consider the industry, potential income, flexibility, and other personal factors.
2. Conduct Online Research: Thoroughly investigate the business online to gather as much information as possible.
3. Verify the Seller: Obtain and verify the seller’s name, details, and personal references. Ensure you review the business ownership documentation. Understand why the seller is moving on and ask all pertinent questions.
4. Check the Business’s Reputation: Investigate customer, supplier, and credit references to gauge the business’s standing.
5. Analyse Competitors: Identify local competitors and evaluate the business’s position within the market. Understand their offerings and how they compare.
6. Identify Opportunities: Look for growth opportunities and assess the business’s potential for future success. Can sales increase with existing resources? Consider the long-term viability.
7. Gather a Professional Team: Assemble a team of professionals, including a lawyer, accountant, and business advisor, to guide you through the buying process and due diligence.

In-Depth Examination

1. Examine the Assets: Verify the condition and compliance of the business assets. Check
   for regulatory adherence, especially regarding occupational health and safety. Assess lease terms for any leased assets.
2. Review Intellectual Property: Obtain a list of intellectual property, such as trademarks and patents, and confirm ownership.
3. Study the Business Finances: Review financial accounts. Ensure the business fits your budget, with your accountant’s assistance.
4. Inspect the Premises: Review leases for business premises and visit them. Ensure continued operation viability and lease terms are in line with market conditions. Consider nearby developments’ impact.
5. Review Stock: Check if existing stock includes outdated or unsellable items. Assess stock levels and potential need for additional cash flow.
6. Investigate Insurance Details: Ensure all taxes, insurances, and WorkCover premiums are current. Verify adequate asset insurance and the possibility of obtaining similar coverage.
7. Check Permits, Licences, and Contracts: Confirm with relevant authorities about permits or licensing obligations. Ensure these are transferable.
8. Understand Contract Transfers: Review material contracts and their transferability.
9. Get Employee Details: Obtain a list of employees with full salary and entitlements. Verify employment costs against financial accounts. Assess the risk and impact of key staff not continuing with you.
10. Review Customers: Examine customer lists to evaluate the business-customer relationship strength.
11. Secure Finance: Prove your financial capability to buy the business. For a bank loan, prepare evidence of the business’s success, a business plan, and financial history.

Final Steps

1. Get Legal Advice: Hire a qualified practitioner to manage the Contract of Sale, leases, and employee-related documents.
2. Check the Contract: Ensure the draft Contract of Sale includes comprehensive warranties, key dates, and obligations. Thoroughly review before signing.
3. Understand the Non-Competition Clause: Confirm the Contract of Sale includes a clause preventing the vendor and its directors from competing within a specific time frame and distance.
4. Review Approvals: If the purchase depends on financier approval, ensure a relevant condition is included in the Contract of Sale.

Contact us today to learn more:
(03) 9103 1317
info@abbass.com.au