Just how much value in dollar terms do you place on the potential of a business? Generally the industry opinion is very little. All businesses have some future potential under the right management but are you the right person to realise that potential? Using a S.W.O.T. test (Strengths, Weaknesses, Opportunities and Threats) on yourself can be a useful tool to establish if you will be good for your future business. Of course the same test should be used on the business you are considering buying. A business is not like a house. It’s difficult to turn a $1,000,000 house into a $100,000 house. However, turning a $1,000,000 business into $100,000 business can be surprisingly easy. It’s not possible to guarantee 100% that the business you buy today will still be worth the same or more in 12 months time.
Give yourself the best chance of success by carefully assessing the business you are thinking of buying. Get professional advice. A few hundred dollars spent now with your Accountant or independent Business Advisor could save you $1000’s in the future. A business needs to provide an income for it’s owner and make a profit. The following are essential for assessing a business and will be required when getting professional advice and applying for finance:
- Profit and Loss Statements and Balance Sheets for at least 2-5 years
- Tax returns for the business and proprietors
- BAS statements for the last 12 months
- Year to date figures from management accounts and BAS statements to match
- A list of Plant, Equipment, Fixtures and Fittings
- An estimate of Stock to be purchased
- A copy of the Lease Agreement
Please note that this information is of a general nature only. Buyers and Sellers are urged to seek independent financial and legal advice when buying or selling a business.