Taking over an existing business
From the Institute of Chartered Accountants
Taking over an existing business, whether it is buying an established business or taking over the family business requires careful analysis and planning.
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When buying a business, some aspects to consider include:
- Why is the business being sold? What is the vendor’s history with the business?
- Are there any sales patterns or trends? What is the business’ customer base? Who are its current suppliers?
- What are the fixed and variable costs for the business? Are there any staff costs?
- Is the business profitable? How does the business’ previous financial records look? Has it consistently run a surplus?
- What assets does the business have? Does it have any intellectual property or leasing arrangements?
- Does the business have any outstanding debts? What refunds and warranties still exist for the business?
- Have you reviewed the purchase agreement carefully?
- What kinds of tax will apply? Consider GST, Capital Gains Tax, and stamp duty implications.
- What are the legal agreements on leases? What is the business structure?
- What has and hasn’t worked for the previous owner?
While a prospective business owner must carefully consider the factors listed above prior to purchasing an existing business, taking over a family business requires consideration of a different set of factors.
They include:
- work-life balance – business creeping into family life
- different expectations and work ethics between generations
- rivalries – family members who don’t work well together or are too competitive
- older generations not willing to let go and handover control, or younger generations not wanting to join the family business
- deciding the future direction of the business
- choosing the right person to take over the business
- managing disagreements between family members.
The benefits of such a takeover can be significant. Those that take over a family business often have a longer term view of success and plan for returns over a longer period. They typically have an increased responsibility for those who control and manage the business potentially leading to stronger customer focus, community reputation and special care for employees.
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One of the biggest challenges of owning a family business is balancing the relationship between work and family. Regardless of which option you choose – buying an existing business or taking over a family business, we highly recommend you come meet with us to ensure you are making a full informed decision.
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