Helpful Guidelines for Buying a Business

Dealing with an REINZ broker will ensure that the person you are working with is competent to help you put together the information needed to make an informed purchase.

Paperwork to ask for includes:

• A plant or asset list
• A copy of the lease
• Accounts for the most recent financial reporting period
• Copies of any contracts or agency contracts held.

In most cases this will come to you in the form of a business profile put together by the Broker and will also include details of staff, hours and background of the individual business.

Plant or Asset List

This should be a detailed list that will eventually be used in the sale and purchase agreement. On the day of purchase you should be able to check off that all plant listed is actually accounted for. At the time you visit the business ask the owner if all the plant you can see is included in the sale; sometimes they may be retaining plant for their own use and you need to aware of this.

Copy of the Lease

You need to know what the time frame of the lease is and if there has been any special conditions of the lease arrangement. It pays to get this checked by your solicitor to ensure there are no nasty surprises.

Accounts Information

Generally the $$$ are what it is all about! You need to get accounts as up to date as possible. Three years of figures is ideal but don’t be disappointed if you get less than this.

The GST returns can be very helpful for confirming turnover and can also give you a good picture of the seasonality of the business. GST expenses are not a reliable indication of costs as they don’t include wages or bank costs. It is also useful to have this breakdown of turnover so that, after you have taken over, you can compare your turnover performance.

Copies of Contracts or Agencies

If the business holds contracts with outside suppliers or companies, you need to see that they are transferable. These could be distribution contracts, exclusive agency agreements, franchises etc. These could place restrictions on trade or perhaps give you an exclusive customer base access. You want to know that any benefits from agreement will pass to you with the purchase of the business.

Buying a business is a team effort. Work together with you broker, accountant and lawyer to do the groundwork required to make you business purchase a success!!

If you would like information on REINZ Accredited Brokers in your area please contact REINZ