The process of buying or selling a business can be complex, time-consuming and stressful. This article outlines answers to some of the most frequently asked questions from both business buyers and sellers, and is a must read for anyone who has ever considered making an acquisition or taking their business to the market.
Should I or Shouldn’t I?
For business owners, the question of whether to sell your business does not always have a clear answer. Seek advice early to understand what the current market value of your business is, as well as the likely chances of a successful sale.
Buying a business is a major financial and emotional commitment. Buyers should assess their appetite for risk, their investment budget and potential industries of interest. Based on this, advice should be sought on what types of businesses will be the best match. Seeking advice early will give you an edge over other prospective buyers.
How is a business valued?
Valuing a business is a mix of art and science. It is important to scrutinize documents including financial records, property leases, employee contracts and supplier agreements. Also look at recent sales of similar businesses to see how the market is valuing different business types.
Just like real estate values, the value of businesses change frequently over time owing to changes in a range of external factors. Because of this, it is important to seek the services of an experienced and market-savy business valuer to advise you in this area.
What is involved in Due Diligence?
Due diligence is the process whereby a buyer thoroughly analyses a business with assistance from their advisors prior to proceeding with an acquisition.
A thorough Due Diligence will consider financial matters, customer composition, staff and employment issues, material contracts and environmental amongst a myriad of other factors.
Many transactions fall over during Due Diligence. Because of this, business sellers should seek advice prior to taking their business to the market to ensure that their business will stand up to the rigour of a buyer’s Due Diligence.
Buyers on the other hand should engage the services of experienced legal and accounting professionals, ensuring their due diligence is completed in a thorough and methodical manner to best protect the value of their investment.
If you require further information regarding selling or buying a business call us today on 02 9223 9166 or submit an online enquiry to find out how we can help you.