How to Buy a Business and Why in 2021

Thursday 21 January 2021, 10:08AM

By Business for Sale NZ - NZBizBuySell


Owning a business can be a great career option especially when the job opportunities in some sectors are limited. You get to run your own show, reap the rewards of your efforts, back yourself and enjoy the flexibility and status of being your own boss. All this can be hugely rewarding.

“Buying an existing business or franchise has some huge advantages over starting a business from scratch - for a start much of the hard work has been done,” says Richard O’Brien from the New Zealand Business for Sale website

There are a host of reasons why it makes economic sense to buy an existing business. You skip the risky start-up phase and the high set-up costs, and the need to develop a winning product or service. You also benefit from an existing customers and from an established  business model and systems.

Buying an existing business eliminates many of the headaches involved in getting a start-up off the ground. Despite the benefits, existing businesses are rarely perfect, so it’s important to do your homework and not overlook any faults.

Most established businesses come with a customer base and cashflow; they have proven products and/or services, business systems and processes that work, trained staff, and an existing reputation.

Buying an existing business allows you to focus on growing the business from day one, rather than simply trying to ensure your business idea is viable. 

Firstly establish what you want in a business?
Determine what you are after. Are you looking for a lifestyle business to provide a living income, something to grow and develop, or to add to your current business? Make sure it’s something you can get passionate about and that you have the necessary skills to add value to the business.

Work out your budget
Work out what you can afford. Your budget is often determined by the business’s cashflow, your cash reserves, equity you may borrow against, and the bank and/or vendor finance. It’s important to ensure you allow for working capital and some cash reserves.

Search for the right business
Work out your must-haves, and like-to-haves. Calculate what income you will be needing, and which industries you are most interested in.

With your criteria, search the key internet sites, such as the New Zealand business for sale website nzbizbuysell; chat with business brokers that work in your area of interest, and network with anyone you feel that could be helpful.

Do your research and evaluate
It pays to research the industry and read everything you can so you build your knowledge and ask the right questions to get the facts for making a well-informed decision. You will need to look at lots of businesses; so search and enquire about many, and ask your questions - sticking to your criteria to stay on track.

Seek professional advice
Once you find a business that ticks all the boxes, consult with your solicitor and accountant to get their input and to hopefully help draw up an offer. Use a business broker, accountant or lawyer to assist you with the business buying process to ensure you get it right. Your offer will usually be conditional upon certain aspects being verified and satisfied as more information is shared - your accountant and lawyer are key here.

Preparation and knowledge is key to buying a business that will succeed and will best work for you. Read more on "how to buy a business"