Preparing to Buy a Business

Is running a business for you?

Buying an existing business doesn’t mean you can skimp on the planning. It’s still important to have the right skills and research completed before committing yourself and your money to a business. Use the Step-By-Step below to check you’re on the right track.

Step-By-Step: Are you ready to start a business? A short guide to help you decide if you have the right skills to run a business, whether you’ve done enough preparation to start your business, and where to get the help you need.

Is buying a business the best choice for you?

The immediate benefit of buying an existing business is that it's already in operation and will provide you with an immediate cash flow. However, a common problem is the departure of the owner may negatively affect the business and so the current takings cannot be guaranteed.

Advantages of buying a business

Buying an existing business or franchise has advantages over starting a business from the ground up. Advantages can include:

• existing customers, contracts, suppliers, staff, plant, equipment and stock
• acquiring goodwill associated with the name and location of the business
• acquiring knowledge of current owner
• premises are set up and the lease on the premises already negotiated
• financiers lend more readily to an existing business with a trading record

There is a sense of security that comes with buying an existing business – and you can see what you are getting for your money.

Disadvantages of buying a business

The disadvantages of buying a pre-existing business can include:

• customers and staff may leave when a new owner takes over the business
• paying existing staff entitlements such as long service leave payments
• the business may have a bad image which is difficult to change
• business may be overpriced or not be easily transferable
• premises, plant or equipment may be inadequate or old
• there may be difficulties in getting the lease assigned with existing entitlements, with the landlord only prepared to offer a new lease
• if land or buildings are part of the sale, then as the purchaser you will also have to pay duty to the State Revenue Office

Have you checked the business you're planning to buy?

The final step is to check out the business or businesses you’re interested in buying thoroughly. Business Victoria's Checklist for buying a business will give you a list of questions to ask and documents to check to make sure the business is worth buying (and what price to pay for it).

	Checklist for buying a business (PDF 63Kb)
	This checklist covers questions to ask before you start, information about the documents involved, and warning signs for buying a business.