Buying a business can be exciting but daunting at the same time! Here are my top tips:
Always read the contract – even though the agent or vendor may say that these are “standard” the requirements vary from state to state so make sure you read and understand your obligations.
Ask as many questions as you can – buying a business is a big decision. You need to make sure that you know what the business makes, how it is run, what debts are owing (including staff entitlements) and what adjustments need to be made. You need to know what contracts you’re taking over (including leases) and what stock and equipment you are buying.
Ask to see their books – numbers don’t lie! If you are carrying debt from the previous owner, you need to know exactly how much this is and make adjustments accordingly. You can always sign a confidentiality agreement if the vendors are worried about disclosure.
Understand your risk from the minute you sign – most Business Sale Agreements state that you will need to pay the Vendor something up until the contract (sale) date. Some vendors can also put exclusions into the special conditions which may mean that you may be liable for a debt that they incurred.
ALWAYS ALWAYS read the Special Conditions – Beware of exclusions! If there are exclusions of warranties and representations made from the vendor, this could mean that you may not be able to run the business the way you thought you were able to, or in some cases, at all.
Remember, if its too good to be true, it usually is – if you are paying less than what the business is worth, there is ALWAYS a catch – usually this means that the vendors have adjusted the sale price to take into account the debts of the business, or there is some other reason that they are selling that they don’t want you to know.
Due diligence as a purchaser and good legal advice pays off. If in doubt, talk to a lawyer and get them to look over the contracts for you before you sign. We can review a Business Sale Agreement and give you advice for a fixed price of $650.00 + GST. Simply click here to upload your contract for review now or give us a call on 1300 272 878 for a free confidential discussion.
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