Buying A Business

A small-to-medium enterprise (SME) can be one of the greatest assets a person can own and provide ongoing market leading returns on the capital outlay and also a capital gain (or profit) on sale of the investment. On average a residential investment property can provide an ongoing return on investment (ROI) typically at around 3%-4%. A commercial or industrial property around 6%-7%. A business can offer on average around 30%-40% ROI.

Most successful business owners can generally be known for working well outside of normal hours and doing whatever it takes, at least, for quite some time until they have built the business and the people around them well enough to then have some flexibility and control over their time. 

People have different needs at different times in their lives and often look for different things so it is important to know why you want to get into business. Are you escaping a temporary issue in your life or are you you driven to be a successful business owner and prepared to work longer hours and risk your financial position.

It’s important to find the right business (independent or franchise) that suits your family, your lifestyle, your needs, match your skill set, work experience and your budget/income requirements. Make sure you are buying a business for the right reasons and at the right time in your life. You need to be self aware and ask yourself if you have got what it takes?

Attitude, commitment and certain skill sets you have can impact on your level of success and may make or break your business ownership experience.

If you have decided to start looking for a business and want to be taken serious by brokers and sellers be serious and communicate your position. Ideally you should have a good idea of what you can borrow and understand your financial position and timing. This may involve talking with your finance broker, bank and accountant. 

There are perhaps two initial aspects that you should get some clarity on before starting the process of searching for a business. What are your strengths? What can I afford to buy?

Example: A banker is not logically going to be good at running an engineering business or a retail trained person perhaps not so good at excavating/building pools or a plant mechanic good at running a restaurant. It is a more logical and realistic path to buy a business that matches your skill sets and your experience.

A good potential buyer may not know exactly what they will end up buying but will have a really good idea of their ability to buy (or an estimate of borrowing capacity) and a good sense of self. They will know what skills and experience might translate into a business. There are many business types that can suit a buyers experience and brokers like us can really help what is on the market, what might be coming on or help identify what other opportunities the buyer could and should look our for.

Not many people are capable of successfully owning and managing a business. Having the courage and financial capacity to buy a business is not enough. Being self aware and knowing your skills and work experience is important but also not enough. You will be coming into a new environment and need to have the ability to manage people and must be able to preserve and hopefully improve culture and relationships with staff, suppliers and customers.

As a potential buyer you should have fresh eyes and fresh ideas.  Look for weaknesses in the business that you can fix or  work on. Opportunity is what a good buyer will seek. If you have ideas and possibilities to bring to the business engaging with the existing staff and having them share the vision and help can be great for culture and productivity. 

Leadership and management should be an inherent skill that every buyer brings to the business especially when the staff are looking to respect and trust you.

We have experienced and witnessed many different scenarios and the most successful buyers are genuine and honest people not just with the broker and the seller but most importantly to themselves.

A good buyer will identify and know their skills are and how they can use them in the business. They will also know their weaknesses and manage these. It might be utilising existing staff, a book keeper or accountant, business coach or by bringing in additional people with the skills required to manage and drive other areas of the business.

We get very excited when we find these types of buyers. Sellers want the business to succeed and continue often as a legacy to what they built and want the staff to continue their journey within the business. Buyers want a smooth training and transition period and should have checklists and take notes in preparation for settlement and beyond. We as brokers feel the greatest satisfaction and successful when both parties are happy with the process and result.