Tips when taking over a small business
When buying a business what are the most important things you can do?
Rule 1# Do your due diligence
Identify the challenges and create opportunities within your own businesses existing culture, staff and roles. Consider ways to improve the existing culture, staff and roles within the new business you are considering to purchase by implementing the best from both businesses.
What are the costs and how much time will merge the two businesses require?
How will you retain your existing business and new business clients, while also minimising the risk of loss of these clients?
How will you be adding more value to existing and new clients than they received previously?
What potential new supplier relationships will there be and how will these impact your existing relationships?
Do you require non complete clauses (restricting the seller) within the business purchase contract? This should document timeframes and territory restraints.
How is the business valuation calculated? (Past earnings continuation, profit & loss, business tax returns, depreciation schedules etc..)
How will you purchase the business? i.e. Your funding mechanisms. Will the purchase be made with cash, vendor finance, personal borrowings etc. and will there be any milestone payments?
What is the best structure of the new business, taxation reporting, payroll and compliance?
Will you retain continuation of your own business branding or new branding? This goes across social media, logo's, business cards, signs etc.
Where is the preferred business location and sub locations and how to cost effectively maintain the existing footprint and service existing clients?
Do you need to update or change your technology, software and business process across both businesses?
What is your exit strategies for the new business?
What is the expected income, profit and loss, assessing the effort required and cost viability of the exercise vs. organic growth of existing business?
This above list is just the tip of shark errr iceberg when it comes to the different areas one needs to consider when purchasing any new business.
When I purchased another financial planning business the purchase was within the same industry that I knew, even then I've found the process both daunting and exhausting. I would expect even more due diligence would be required if the business was to be in a different industry than one's own.
In my experience the purchasing another business involved all the above areas or diligence and implemtation plus changing licensees, software, locations, residence, business structures, business accounts, changes in location i.e. moving to cairns from Sydney. It's been a massive task!
Very importantly the transition required increased communication with clients and staff and promoting the positives or the expansion. We also had to refurbish the existing premises and much, much more which has been now rolling out over the last 12 months.
12 month gone, with hindsight and on balance, I am happy with the progress the team, our clients and I have made.
The next 12 months our focus is on delivering even more value to clients; giving them greater convenience and reducing clients costs. This too is our business marketing approach because our clients are our greatest advocates and helping them achieve their goals sooner is do what we do and helps us achieve our goals sooner too.
About Peter Horsfield
Peter Horsfield in an Authorised Representative and Investsure Holdings Pty Ltd ABN 16 050 286 630 as trustee for Horsfield Family Trust ABN 55 609 068 513 is a Corporate Authorised Representative of Infocus Securities Australia Pty Ltd ABN 47 097 797 049 AFSL and Australian Credit Licence No. 236523.
General Advice Disclosure
Sources of this information are considered to be reliable but are not guaranteed. Information published in this article has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained in this document is General Advice and does not take into account any person's particular investment objectives, financial situation and particular needs.
Before making an investment decision based on this advice you should consider, with or without the assistance of a qualified adviser, whether it is appropriate to your particular investment needs, objectives and financial circumstances.