Are you interested in buying a business? If you are, consider the following points carefully as it can save you a lot of money and heartache.
For those of you who are contemplating buying a business, I have the following 10 points for you to consider:
1. Never sign any offers to buy any business until you have received legal advice. The lawyer should help to draft your conditions of purchase that will protect you. If you see the lawyer after signing the contract to purchase, it will be too late to make changes to protect you.
2. Always ensure there is a clause to allow your accountant to check the figures. That makes sure that the business income is as represented by the seller. You will be surprised how often I get complaints from a buyer that they have been cheated by the seller as the turnover of the business has been exaggerated by the seller.
3. Make a list of all assets that come with the business. If the photocopier, vehicles or coffee machine are supposed to be included, make sure it is listed in the schedule. Find out if there is any equipment that has been leased and repayments are still needed to be made by the seller.
4. Ensure that you have a clause to allow you to opt out of the contract if the lease terms are not favourable. There is no point in buying a business if the lease for the premises is going to expire soon. Make sure you get your lawyer to read the existing lease terms to make sure that the terms are favourable.
5. Ensure that any employees that are going to continue to work with you have all their long service and other leave benefits paid out. If you do not check this point, you could end up paying a lot of money for a liability which is the responsibility of the seller.
6. Have a clause that allows you to check the business turnover just before you purchase the business. That means you want to sit in at the business and see if the customers are really spending as much as the seller tells you.
7. If the business is a franchise, make sure that the contract is subject to your lawyer approving the franchise terms. You should also ensure there is a clause that the purchase is subject to the franchisor taking you in as a franchisee on terms that you are happy with.
8. If you are borrowing money to purchase the business, make sure that you update the vendors regarding the finance approval. There should be a clause that states that if finance is not approved within a certain time, you can get out of the deal.
9. Discuss with your accountant what business structure you are going to use. This should be done before you even make any offers. Your accountant should advise you on what is the best tax structure you should use bearing in mind the income of the business.
10. Ensure that you are happy with your settlement date. Will everything be ready by then?
There are many other minor details which can make your purchase a breeze. When in doubt, speak to a lawyer.