A GUIDE TO THE PROCESS OF BUYING A BUSINESS
Buying an existing business can offer several advantages over starting a new business from scratch, such as an established customer base, existing operations, established financials and potentially lower risks.
However, it’s important to conduct thorough research and due diligence to ensure that you are making a sound investment and that the business aligns with your goals and objectives.
Are you ready to buy?
Is this the first time you’ll be a business owner? If yes, take some time to consider if being your own boss is right for you.
While it’s true that business ownership can give you more control, a chance to set your own schedule, and the opportunity to do something you truly enjoy – being your own boss also comes with lots of responsibilities, financial risk, and in the early days, long hours.
If this is a second, third, or even 10th business for you, it’s still sensible to take some time to consider if owning another business is the right decision.
Will another business compliment your current portfolio, or give you the opportunity to expand, or simply have a pet-project.
Who can help with a business purchase?
These are the key people who can assist you through a business purchase:
- Financial adviser
- Business valuer
- Business broker
- Business settlement agent
You will find the role of these key people in our guide for business purchase below.
West Perth Legal has helped many business owners successfully buy or sell a business and we work closely with our clients on all legal aspects of a business sale or purchase.
From contract negotiation to business settlement, our Commercial Lawyers can help. Whether you are selling or buying a business privately or using a business broker, we can tailor our services to suit your needs at a competitive fixed rate.
Checklist for buying a business
We have put together a ‘business purchase checklist’ to help you understand the process and show you how we can help.
Here are some key considerations when buying an existing business:
- Find the right business
We’ve already talked about making the right decision, so once you have established that you do want to be a business owner, it’s time to find the right business for purchase.
It’s wise to take time and consider your interests and background experience. This may help you narrow your search to an industry and marketplace that’s right for you.
Once you’ve found a business that you’re interested in buying you may want to consider:
- Does the business have the potential to be successful?
- What value can you bring to the business?
- Is it in a good location?
- Do you want a business that is already up and running and has an established customer base?
You may also consider engaging the services of a business buyer’s agent to assist with your search.
2. Establish your finances
If you require financing to purchase the business, you’ll need to secure appropriate financing arrangements. This may involve working with lenders, preparing a business plan, and providing necessary financial documentation to support your loan application. Your accountant and financial adviser or mortgage broker will be able to assist you with this step.
3. Evaluate the business before making an offer
Conduct a preliminary evaluation when you find a potential business to purchase. This may involve reviewing financial statements, analysing the market, assessing the competition, and evaluating the business’s operations and growth potential.
If the preliminary evaluation is satisfactory, you can then conduct thorough due diligence on the business to gain a deeper understanding of its financials, operations, legal status, contracts, and other relevant information. This may involve working with professionals such as accountants, lawyers, and other experts to ensure that you have a comprehensive understanding of the business’s risks and opportunities. West Perth Legal can assist buyers with conducting legal due diligence on the business. This is an important step in the business purchase process and highly recommended by our lawyers.
4. Negotiate the purchase terms and conditions
Once you have completed your due diligence and are satisfied with the results, you’ll need to negotiate the purchase terms and conditions with the seller. This includes the purchase price, payment terms, allocation of assets, and any contingencies or conditions. It’s crucial to be clear and thorough during the negotiation process to protect your interests as a buyer. West Perth Legal’s Commercial Lawyers can assist with negotiating Business Sale Agreements and identifying the key terms you need to discuss with the seller.
5. Prepare legal documents
Once the purchase terms and conditions have been negotiated, you’ll need a lawyer to prepare the legal documents required for the acquisition. This may include a Business Sale Agreement, Asset Sale Agreement, Share Sale Agreement, and other legal documents as necessary. It’s advisable to work with a qualified lawyer to ensure that all legal aspects of the acquisition are properly addressed.
You can look at West Perth Legal’s Business Sale Agreement drafting service here.
6. Transfer ownership of the business – business settlement
After both parties have agreed on the terms and signed the legal documents, the sale can be completed. The ownership of the business is formally transferred, including assets and intellectual property. And now all necessary financial arrangements, such as making payment for the purchase price, must be completed. See our business settlement page for more information.
7. Post-Sale transition
After the sale is complete, there may be a period of transition where you receive assistance from the seller in relation to taking over the business.
The importance of having a legally drafted Business Sale Agreement
A legally drafted Business Sale Agreement is important for the following reasons:
- Once signed, it is legally binding between the parties
- It clearly sets out what is being transferred and each parties’ obligations
- It includes key information of the business
- It minimises the risk of dispute during and after the sale of business
- It ensures that the business is sold in a timely manner and funds are transferred
West Perth Legal Commercial Lawyers
West Perth Legal provides a full suite of legal services for business sale and purchase. Our lawyers have assisted many business owners with the sale or purchase of their business and can assist you with the entire business sale and purchase process. We offer fixed fees for many of our services.
Phone: (08) 9321 9395