For buyers
Questions to ask before you buy a business
The questions that uncover how a business really runs, before you sign anything.
Why is the owner selling?
Retirement, health or a move interstate are common and fair reasons. Be more careful if the answer is vague, or if something nearby is about to change, such as a new competitor or roadworks.
Can I see the financial records?
Ask for at least two or three years of profit and loss statements and tax returns, and check that they line up with the business activity statements lodged with the ATO. Ask what's included in any "add-backs", such as personal expenses run through the business.
Who are the customers and suppliers?
Find out whether a large share of revenue comes from a few customers or contracts, and whether those contracts can be transferred to a new owner. Ask how long the main supplier arrangements have been in place.
What happens to the staff?
Ask who will stay on, what they're paid, and how leave and other entitlements will be handled at settlement. Key staff leaving soon after a sale can change the business quickly.
Which licences and permits does it need?
Liquor licences, food permits, childcare approvals and council permits don't always transfer automatically. Check what's needed and how long approval takes before you commit.
What's included, and how will the handover work?
Get a written list of the equipment, stock, intellectual property, website, social accounts and phone numbers in the sale. Ask how many weeks the owner will stay to train you, and whether they'll agree not to open a competing business nearby.
Who should check it with me?
An accountant can review the figures and the price. A solicitor can review the sale contract and the lease. Their fees are small compared with the cost of a mistake.
This guide is general information only, not legal, financial or tax advice. Talk to an accountant and a solicitor about your situation.