How To Buy A Business In Australia?

How To Buy A Business In Australia?

Tuesday, August 17, 2021

Your Guide to Buying A Small Business
(From Purchasing a Business to Buying an existing business checklist)

how to buy a business in Australia

Buying a business in Australia is any savvy entrepreneur’s dream. But many people get stuck on understanding exactly how to buy a business in Australia. Buying a small business (verses starting a brand-new business) offers countless perks. Ultimately, it’s an amazing opportunity to become your own boss while, at the same time, mitigating risk.

In our latest blog, we’re sharing Physio Inq’s tips and tricks on how to buy a business in Australia.

You’ll learn:

  • How to buy a business in Australia
  • What are the benefits of purchasing a business?
  • Read our ‘Buying an existing business’ checklist
  • Learn the steps in buying an existing business
  • Know the questions to ask when buying a business in Australia
  • Plus, much more!

Learn the things to consider before buying a business and how you can get the process started today. By keeping this checklist in mind, you’ll be more prepared going into this life-changing experience.

How to buy a business in Australia?

Before we get into the specifics and technicalities of buying a small business in Australia, let’s go through some steps in buying an existing business before you sign on the dotted line. 

  1. Decide whether you’re ready to buy a business.

Before anything else, you need to determine your business readiness. Romanticising the idea of owning your own business and being your own boss is completely different from doing it. And the truth is, not everyone is cut out for business ownership and that’s ok.

The decision to own a business shouldn’t be based on a whim. You must make sure you’re looking at the reality of your skills, the economy, the industry, and your interest.

Ever wondered if you have what it takes to buy into a small business?
Check out our latest business guide:

The 7 Secrets to Starting a Physiotherapy Business
(Even if you’re not a qualified physiotherapist)

Download Now

how to buy a business in Australia

What you’ll discover in your FREE book: 

  • The little known secrets to starting your own lucrative physiotherapy practice (Even if you don’t have any previous industry experience)
  • Starting a physiotherapy business (The key performance indicators you need to know to make your physiotherapy business profitable 
  • The ‘must have’ personality traits needed to be a successful business owner (These personality traits are important to your success no matter the business or industry)
  • The single best way to know how profitable your new Physiotherapy business will be (This is the most important statistic to look at when starting any new business)
  • The 3 most critical transferable skills needed to enter a new industry (If you have all 3 of these transferable skills, you will dominate your first year in business)
  • Why 1 out of 3 Aussie businesses fail in their first year (and how to make sure yours is not one of them)
  • And much much more ...

This leads us onto our next point…

  1. Knowing the business environment

Before you jump into a new business, you need to assess the business environment. Doing some industry analysis will ensure that you are educated about your business decisions. Questions like: which industries are set to take off in the next 5 years? And which industries are becoming obsolete? Will ensure that your new business isn’t set up to fail.

Check out our article on the Fastest Growing Industries in Australia to learn the top 5 industries that are tipped to skyrocket in the next year!

(If you’re thinking of buying a business, we think you should read our article here. You might even consider investing in one of these industries…)

steps in buying an existing business
Image Source: Forbes.com

  1. Know which business structure best suits your business:

Once you feel you’re ready to go all in and open a business, you need to think about which business structure best suits your business venture. Maybe you should consider whether you want to back yourself and purchase a site for a new business (otherwise called a greenfield site), purchase an existing business or join a franchise network. All have a wide range of pros and cons associated with their business structures. If you want to read more about the benefits and drawbacks of each business structure, you can check out our blog article on choosing the right business structure for your business.

If you’re looking to buy a business versus starting one from scratch, you’re probably looking for something that’s already working with systems and protocols in place to make things run smoothly. 

So, depending on how much control you want and how much structure you need, deciding between an independent business and a franchise opportunity is an important step. 

In general, franchises offer more structure and therefore less risk while buying an independent business could give you more control over decisions but with more at stake. This decision should be made depending on your personality and experience.

  1. Do your research and due diligence.

Once you’ve narrowed down some options, you’ll want to get deeper into the nitty-gritty and do some research while also carrying out your due diligence.

In the research stage, investigate businesses that are for sale or those that fall within the industry you’re interested in. You’ll also want to go over the costs involved beyond the asking price. It’s important to start crunching the numbers early on. 

Then, you’ll want to get a handle on the strengths and weaknesses of the business by doing a SWOT analysis and get a better understanding of why the business is for sale in the first place.

Next, you’ll want to do your due diligence to get a clear picture of whether the business is actually a good investment. Due diligence should be handled in conjunction with your lawyer, accountant, or business advisor to do a deep dive into all financial and legal matters.

What questions should you ask prior to purchasing a business?

During the research stage, some questions to ask when buying a business in Australia include:

  • Is this a profitable business?
  • What are the sales records?
  • How much debt is the business in?
  • What is the state of the industry?
  • Why is the current owner selling the business?
  • What is the reputation of the business?
  • What is the current company culture?
  • Are client lists included in the sale terms?
  • Which staff members can stay on?
  1. How to calculate the value of the business?

Now things will start to get a little more serious as you calculate the value of the business or franchise you’re planning to buy. 

At this stage, you’ll want to have a look at similar businesses and how they’re valued in the market. You’ll consider both tangible assets like real estate and inventory as well as intangible assets like intellectual property, existing customer base and brand recognition. 

Two common ways people tend to calculate the value of a business is either by calculating its net worth (assets vs liabilities) or by calculating its capitalised future earnings (expected value). Again, you’ll want a lawyer or accountant to help you in this stage.

  1. Present an offer.

Once you feel good about the value of the business, it’s time to make an offer with a lawyer or business accountant on your side. At this stage, you should expect a bit of back-and-forth negotiation when you decide to put in an offer.

During negotiations, remember to always have your maximum budget in mind. That means setting your first offer lower than your maximum budget to give yourself a fair bit of wiggle room. But don’t offer a price too low either. 

In the same vein, you won’t want to take the seller’s first offer. Play it cool and keep your negotiation strategy in mind, even if you really want the deal to work out. 

Negotiations can take a while, so do your best not to rush the process. This is another reason it’s important to have an expert like a lawyer or your accountant helping you out. A third-party advocate can help you stick to the plan even when emotions are running high. 

In fact, this stage can be an amazing learning experience to get your feet wet prior to running the business itself. 

  1. Organise the contracts.

Once you and the seller have agreed on an appropriate sale price, it’s time to organise the contracts. These contracts will give legal force to your agreement and the written nature of a contract allows both parties to be crystal clear about what each person agrees to.

Your purchase contracts should include the purchase price, method of payment, how much the seller will be involved after the contract is signed, a restraint of trade clause to protect you from any loss of business should the former owner open a competing business in the area, and any other conditions that are applicable. 

As you can imagine, a lawyer should draw up these contracts. However, if you’re buying a franchise, this process is generally a lot more straightforward. 

  1. Secure financing for the business purchase.

After you’ve organised the contracts but before you sign on the dotted line, it’s essential that you’ve secured financing for the business purchase. We recommend speaking to your account and employing the help of financial institutions.

purchasing a business

  1. Buy the business.

From there, the only thing left to do in the process of purchasing a business is to make it official. 

In Australia, the next step in the process of buying a business is buying the business name as well. Since business names need to be registered with the Australian Government in order to legally operate nationwide, this is one of the first things you should do once the ink has dried. 

How to buy a business name in Australia?

Our buying an existing business checklist wouldn’t be complete without noting that the business name must be legally transferred from the former business owner to the new business owner. 

The good news is that the process is relatively simple and can be done in only a few minutes using the ASIC Connect website.

First, the former business owner must submit a transfer request by logging into ASIC Connect and following the steps to “Cancel/Transfer” a business name.

Then, in 24 hours, the former business owner will receive an email with a 13-digit transfer number to pass along to the new business owner. Once the new business owner has the transfer number, they can begin the business name registration process, also using the ASIC Connect website.

Go to the ‘Licences & Registrations’ tab and select ‘Business Name Registration’. Follow along until you’re prompted to enter the business name that is being transferred and select ‘Check Availability’. This is when you’ll enter the transfer number you’ve received from the previous owner.

Continue with the process and submit payment either by credit card or BPAY. It costs $37 to register for one year or $88 to register for three years.

After this step, you can officially say that you’ve purchased an existing business and that the business is now fully and legally owned by you.

Ever wondered if you have what it takes to buy into a small business?
Check out our latest business guide:

The 7 Secrets to Starting a Physiotherapy Business
(Even if you’re not a qualified physiotherapist)

Download Now

how to buy a business in Australia

What you’ll discover in your FREE book: 

  • The little known secrets to starting your own lucrative physiotherapy practice (Even if you don’t have any previous industry experience)
  • Starting a physiotherapy business (The key performance indicators you need to know to make your physiotherapy business profitable 
  • The ‘must have’ personality traits needed to be a successful business owner (These personality traits are important to your success no matter the business or industry)
  • The single best way to know how profitable your new Physiotherapy business will be (This is the most important statistic to look at when starting any new business)
  • The 3 most critical transferable skills needed to enter a new industry (If you have all 3 of these transferable skills, you will dominate your first year in business)
  • Why 1 out of 3 Aussie businesses fail in their first year (and how to make sure yours is not one of them)
  • And much much more ...

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As you can see, buying a business in Australia is no simple feat. And it’s for a good reason. Buying a business is a huge undertaking and you don’t want to go into this process lightly. There’s a huge amount of responsibility that goes along with owning a business but by following these steps, you’ll have a better chance of finding success.

At Physio Inq, we have over 15 years’ experience in helping our Pinq Business Partners source, purchase and run Physiotherapy businesses. There’s a reason why we Physio Inq won Franchise Network of the Year in 2020. Click to read more.  

Contact us today to learn more! Reach out to our Pinq Partner Cultivator, James Appleton on james.a@physioinq.com.au or by phone on 0419 137 400.

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