It’s never been easier to buy a new business. There’s a multitude of tools at your fingertips and a whole range of supportive resources. But on the flip side, there is unprecedented competition for the same slice of pie.
Small businesses account for 33 per cent of Australia’s GDP and employ over 40 per cent of Australia’s workforce. That’s more than two million small businesses in Australia, all looking to find their niche. That’s a lot of niches.
So before embarking on your exciting new business here’s a ‘self-check’ list of questions to answer.
First things first – is running a business right for you?
Being a business owner is a rollercoaster ride of emotions, and it’s empowering to be the master of your destiny. But it’s also hard work, and in the beginning, you’ll have to wear a lot of hats and do most of the legwork yourself.
Leaving the safety of full-time employment is not for everyone, and you’ll need to assess whether it’s the right decision for you. Think about:
● What type of business you want to run
● How much experience you already have
● What capital you will have to outlay upfront
● What support networks you have
What does the market look like?
To get a picture of the longevity of your idea, thoroughly research the business sector. Look into market forecasts and monitor similar businesses to check success rates.
Some other considerations might be:
● How technology is predicted to affect your chosen industry.
● How many other businesses are doing what you do – it will be hard to get a foothold in a saturated market.
● Is there a disruptor waiting in the wings to swoop in and change your sector? For example, now would not be a good time to open a DVD store, in the age of Netflix and iTunes.
What makes my business different from the rest?
With so many new businesses starting up, what makes yours stand out from the crowd? Or, in business jargon, what is your value proposition? You need to figure out:
● Who your audience is
● What problem you are solving for them
● How to clearly explain why you are the best.
Before you buy a business, it’s essential to brainstorm these ideas and use the answers to form the backbone of your business plan. These are the questions that you will revisit again and again during the lifetime of your business, and they will require continuous refinement as the market shifts around you.
Which business structure is right for my business?
There are four main types of business structure: sole trader, partnership, trust and company. It’s critical to get it right, so it’s worth taking the time to research the pros and cons of each one. This article suggests considering the following criteria:
1. Your personal liability exposure from your business products or services
2. Whether you have (or plan to have) partners or investors in the business
3. The administrative costs of setting up and maintaining your business structure
4. The tax-effectiveness of the business structure.
Read more about which one would suit you here.
Do I need a plan?
Short answer: yes!
One of the best ways to make decisions is to create a business plan. It will help you assess the viability of your idea and give you a structure from which to work. There are also these practical reasons for a plan:
● Help to get financial funding – you need to show banks and investors why they should invest in you.
● To assist with prioritisation – outlining your long-term goals and strategies gives you a roadmap to work from.
● To give you control – a business plan is not only for the beginning of your venture, it’s also useful as a periodical check-in, to assess how well you’re doing and what needs to change.
You can find business plan templates on the business.gov website, to help you get started.
How do I fund my business purchase?
If you already have the capital to get started, that’s a significant advantage. But don’t despair if money is short – there are other options. You can talk to your bank or broker about obtaining a loan, look into angel investors, or start a crowdfunding campaign. It’s also worth investigating whether you’re eligible for a government grant.
What are my tax obligations?
Without prior experience of owning a business, it can be confusing trying to figure out what taxes you need to pay. Avoid getting stung, by doing your research and talking to your accountant. Some items to consider are:
● Employee taxes
● Payroll tax if you pay salary and wages over $750k
● Income tax if you make profits
● Workers compensation
● Fringe benefits tax if you provide benefits.
Ok, I’ve done all that. Now, how do I buy a business?
Once you’ve ticked off all the above, the real fun can begin.
In a nutshell, the formal buying process can be broken down into four main areas:
1. Offer and acceptance – the first thing to do is place an offer, preferably in writing to the seller. You can agree terms like price, assets and staff. The seller then chooses whether to accept the offer. There is no obligation to go through with the sale at this point.
2. Contract – the seller or their lawyer prepares the contract. It’s at this stage that you should engage a lawyer who will negotiate terms on your behalf.
3. Negotiations and exchange – after reviewing the document, formal negotiations will take place. Once agreed on, both parties will sign and exchange the contracts, and you’ll pay the deposit.
4. Settlement – now’s the time to complete your due diligence and ensure that assets are ready for transfer. After that, it’s finally time to hand over the cheque and pick up the keys!
From the initial business idea to the first day of trading, there is a lot to consider. By asking yourself a few critical questions and taking the time to honestly and thoroughly answer them, you’ll put yourself in the best possible position to start a new exciting venture in your life.