“In business, opportunities don’t happen. You create them.” – Chris Grosser
For growth-focused business owners and high-net-worth individuals, purchasing an established company in Australia represents a calculated step toward scaling operations, diversifying investments, and achieving long-term financial growth.
Acquiring a business with proven systems, market presence, and profitability allows you to build on an existing foundation, accelerating your path to success.
However, success requires a disciplined approach. From finding the right business to negotiating a deal and knowing how you can improve that business with your skills and resources. This will require careful planning to minimise risks and maximise potential.
Why Buying a Business is a Growth-Focused Strategy
For ambitious investors and entrepreneurs, buying an established company offers distinct advantages:
- Proven Revenue Streams: Avoid the risks of start-ups by investing in a business with a track record of profitability.
- Scalability: Access established infrastructure, customer relationships, and supply chains to support growth.
- Strategic Diversification: Expand into new markets or complement existing ventures to build a robust portfolio.
- Efficient Entry: Bypass the high costs of setup, staff recruitment, and brand building with a ready-made business.
Yet, even with these benefits, buying a business requires a sharp focus on detail.
Key challenges include identifying overvalued goodwill, managing inherited liabilities, and ensuring the business is primed for your future goals.
How to Approach an Existing Business Acquisition Strategically
1. Identify the Right Business Opportunity
Begin with clarity about your goals. Are you seeking to:
- Diversify your investment portfolio?
- Expand your market reach and sales channels or product offering?
- Acquire intellectual property to complement your existing operations?
Look for opportunities that align with your vision. Factors such as the industry’s growth trajectory, the business’s geographic location, and its customer base are crucial.
2. Perform Rigorous Due Diligence
Due diligence is essential to evaluate the business’s value and ensure its viability. Key steps include:
- Financial Analysis: Scrutinise profit-and-loss statements, cash flow records, and balance sheets for at least three years.
- Asset Evaluation: Verify the ownership, condition, and value of equipment, stock, and intellectual property. Determine the efficient use of Inventory turnover and service delivery.
- Market Positioning: Assess the business’s competitive edge and growth potential within its industry.
- Legal Considerations: Investigate regulatory compliance, outstanding debts, and any pending litigation.
Work with seasoned accountants and lawyers to ensure your evaluation is comprehensive and unbiased.
3. Strategise the Purchase Price
Determining a fair purchase price involves a combination of factors:
- Profitability Benchmarks: Compare the business’s financial performance against industry standards.
- Growth Potential: Weigh the business’s potential for future earnings when considering goodwill.
- Tangible Assets: Evaluate physical assets to ensure the deal reflects their true market value.
This is a critical part of the negotiation and determination of the value of the enterprise both to the market and to yourself. Note that the best acquisition is one where the value to the market is less than to yourself . This is due to the fact that you can add or gain more value from the business than the market due to synergies or cost efficiencies that can be gained. Examples include not needing as many staff or being able to utilize existing rental space or providing additional expertise in efficiency or additional sales channels due to your expertise.
Executing a Seamless Acquisition
1. Negotiating the Deal
Focus your negotiations on ensuring:
- Comprehensive Asset Transfers: Include all essential items such as IP, customer lists, and operational systems.
- Mitigated Risks: Protect yourself with clauses addressing liabilities not disclosed by the seller.
- Continuity Plans: Agree on a transition period during which the seller supports the handover.
2. Finalising the Transaction
A successful acquisition isn’t just about signing contracts – it’s about ensuring the business is ready to operate under your leadership. Ensure the following:
- Customer and Supplier Engagement: Maintain relationships to secure continuity in operations.
- Employee Alignment: Meet with staff to communicate your vision and ensure a smooth transition.
- Operational Preparedness: Update licences, contracts, and systems to reflect the change in ownership.
Buying Into a Business: A Simplified Guide
Buying into an existing business means purchasing a stake in an existing company, rather than acquiring it outright.
This option is often ideal for those looking to benefit from a business’s growth without taking on full ownership or operational control. It may also be beneficial as it is a lower cost to acquire while still providing other benefits such as cost sharing or access to new markets.
When you buy into an existing business, you typically become a partner or shareholder, which allows you to share in the profits while also sharing the risks.
Unlike purchasing an entire company, buying into a business requires careful evaluation of the existing ownership structure, partnership agreements, and your role in decision-making.
Key considerations include:
- Ownership Shares: Determine what percentage of the business you’ll own and how profits will be distributed. Ensure the percentage owned provides protection such as ability to prevent actions that may be detrimental to you and require a 75% majority to pass. If you own 26^ you are able to have better control over major decisions.
- Partnership and Shareholder Agreements: Review agreements that define responsibilities, dispute resolution processes, decision making and exit strategies.
- Growth Potential: Assess the business’s scalability and how your investment will contribute to its success.
This approach can be a more affordable and less risky way to enter the business world, but it’s still essential to conduct due diligence and seek expert advice.
At Bishop Collins, we help clients navigate this unique opportunity, ensuring you make a sound investment decision that aligns with your financial goals.
Are You Ready To Purchase Your Own Business? Questions to Ask Yourself
To ensure you’re prepared to make a smart acquisition and ensure you are business ready, ask yourself the following:
- Financial Position:
- Do I have enough money or the financial backing to cover the purchase price and ongoing working capital to cover a period before profitability is reached?
- Will I need to secure finance to complete the purchase?
- Have I considered additional expenses such as legal fees, stamp duty, and working capital?
- Strategic Fit:
- Does this business align with my long-term goals and investment strategy?
- How will this acquisition complement or enhance my existing ventures?
- Operational Readiness:
- Have I developed a plan to transition smoothly from the current owner and manage relationships with staff, suppliers, and customers?
- Am I prepared to integrate the business systems and processes into my operations?
- Risk Management:
- Have I conducted thorough due diligence to identify potential liabilities or legal issues?
- Do I have contingencies in place for challenges like supplier renegotiations or customer retention?
- Expert Support:
- Have I engaged experienced advisors, such as accountants like Bishop Collins and lawyers, to guide the process?
- Am I clear on how I’ll navigate negotiations and structure the deal effectively?
If you answered “no” or feel uncertain about any of these questions, don’t go it alone.
At Bishop Collins, we specialise in helping business buyers get purchase ready, guiding you every step of the way to ensure you make a confident and informed decision.
Partner with Professionals for Smart Acquisitions
Acquiring a business in Australia is a strategic move that can transform your financial trajectory.
You need the right advice to move forward with confidence. When you’re ready to buy a business, you need a partner with the knowledge, expertise, and experience to navigate the complexities of buying and selling businesses.
At Bishop Collins, we offer advice you can’t get anywhere else – tailored to your unique goals and backed by years of experience negotiating successful acquisitions.
Get in touch with us today to ensure your next business purchase is a strategic and informed decision.