You are looking for that special business. The one where you don't have to do too much and get well rewarded for owning it? Despite what you may hear they do exist. Usually the more you are able (prepared) to pay for the business the easier it is on you as the owner. There are a few provisos but good businesses exist right down to the small $30,000 business right up to the Million/s dollar businesses.

Basically the difference is your input, working time. Obviously the larger businesses have support staff whereas the smaller business usually requires two working owners with no staff. So, where do we go from here?

Lets pretend you are a first time buyer, the horror of knowing whether you will do the right thing is a tremendous amount of pressure. There are books on buying a business but to read them and follow them takes too long and requires massive note taking. I'll try to explain in a few steps using my experience from a buyers' perspective that have bought a business through our agency. I will assume you have completed all the preliminary steps and are ready to buy.

Step 1: Research the business brokers in your area. Look for a broker that appears professional, has a good window display, clean and modern offices, good presence in the media and specialises in business sales not just "dabbles" in them. They should be Internet savvy and have email ability on their own desks. Ask if they have a list of businesses for sale and that you would like to take a list with you to look over. Once you have selected one or more businesses you should reapproach the broker by making an appointment to see him/her.

A good professional business broker will invite you into their boardroom and ask you pertinent questions. A professional broker will ensure the price range you are inquiring about is achievable for you to purchase; that is you are able to finance the acquisition. With the banks and finance institutions changing their lending criteria regularly, lending changes. In nearly all circumstances the banks will require Real Estate security. For example, if you own a home say worth $225,000 and have a mortgage of say $95,000 and other debts of say $25,000 your equity is $105,000. A bank may lend up to $84,000 on that security to purchase a business. If the home however is in a rural location the ratios may change resulting in a lesser amount. So a good broker will ensure you are able to purchase a business (financially) as well as ensure you will be approved, if applicable, by centre management or the Landlord. (The Sunshine Plaza for example requires an application from the purchaser coupled with a business plan.)

Step 2: Inspect the business

Step 3: Enter into an agreement with the vendor and yourselves

Step 4: Conduct due diligence

Step 5: Takeover the business.

As you can imagine there are a lot of variables to the list; usually once an agreement is entered into the period to settle is around 30 days or less.

Chris Greenfield

Mobile phone 0407 793 994
chris@encompassgroup.com.au