Purchasing a business can be an exciting and challenging time for prospective buyers. Whether you’re a first-time business owner, a cautious investor or a skilled industry expert, you’ll want to ensure you’ve weighed up all the pros and cons of your purchase before you sign over the dotted line.
Aside from the potential returns of your new business it’s important to understand the responsibilities of your new venture and what the risks involved are.
To help you get started, here is a guide to some of the questions you’ll want to ask when buying a business. If you need assistance or further advice about buying a business, you will benefit from consultation with LawPath’s experienced business purchase lawyers.
Questions to ask when buying a business
What are the costs involved?
When looking to buy a business it is important to form a detailed understanding of the costs associated with the business aside from the purchase price itself. What are the daily costs involved in running the business? Bear in mind that most businesses have an existing labour workforce. How many staff are employed? What would be your weekly expenditure on staff remuneration? Lastly, will there be increased costs needed to maintain and expand the business in the future?
What is included in the business?
Although it may sound obvious, it’s critical to establish exactly what you are buying as part of your business. Discuss whether the sale will include all items that are necessary for you to operate the business. An arrangement may be made for necessary items to be included in the sale if they aren’t already. Remember that inclusions do not have to be limited to the physical premises, equipment of the business may also include intellectual property, licenses, contracts and existing clients.
What is the industry like?
Before purchasing your chosen business, always ensure you are familiar and well-informed with the nature of the industry. Is it an expanding or diminishing field? How fierce is the established competition in the market? Is there room for future growth? Ensure you have done your research on any new legislation or market changes to the industry.
What is the size/structure of the business?
An important factor to consider is the size and structure of the business you are acquiring. Is it a local business or international? Is it an independent body or part of a franchise/brand? Are you able to manage the size and structure of the business you intend to buy? Evaluate how many people it will take to run this business and whether you will require contracting outside your business.
What skills and experience do you need?
For buyers looking into a new business or venture, it’s essential to assess the skills or experience necessary for its operation. Is a degree or qualification relevant to the business required? Are there roles which may require specialist knowledge or expertise? Try to be realistic about your skills and experience and which type of business they are best suited to.
What are the risks involved?
A thorough risk assessment is a vital step before considering any business purchase. What are the risks involved with this business? What can be done to mitigate these risks?
When conducting due diligence of the business, you’ll want to employ the services of an accountant to analyse the financial figures of business and a lawyer to provide legal advice on your purchase. LawPath’s experienced business purchase lawyers can provide you with a comprehensive legal risk assessment.
Every business has it’s own unique operational structure and risks. Buying a business is a big commitment which comes with contractual obligations and financial responsibilities. Make sure you have conducted thorough background research on the industry and the market trends of your business before you commit.
LawPath has access to highly qualified business lawyers who can assist with the purchase of your future business. Contact a LawPath consultant on 1800LAWPATH to learn more about customising legal documents, obtaining a fixed-fee quote from our network of 600+ expert lawyers or to get answers to your legal questions.