Thinking of buying a small business?

Australia, the Small Business Nation

Australia really is the Small Business Nation. Almost half of the country's workforce are employed in small businesses (those with less than 20 employees) and they contribute 35% of Australia's GDP. They are also literally everywhere - 98% of all businesses have less than 20 employees! So if you're looking for a business to buy, the odds are you'll be buying a small business. When you're deciding if a business is worth buying you'll need advice from a financial adviser such as an External CFO. A CFO works with owners and managers of businesses to ensure businesses achieve their desired outcomes. We're often called in to advise on buying and selling businesses by conducting due diligence, helping to plan strategy, feasibility studies, forecasting, helping to obtain funding, and more.

Should you buy a small business?

I can't stress this enough - if you don't have a very good reason for buying a business, DON'T BUY IT! Have you always liked eating donuts and that's why you want to buy a Donut King franchise? The technical term for this is "not a good reason to buy a business". Other not good reasons include:

• Having no prior experience in the industry - even if you learn quick, it will be a painful and expensive learning curve.
• Wanting to work for yourself - if this is the only reason for buying a business, invest your money instead.
• Not understanding how the business works - this is surprisingly common, especially when buying a franchise.
• Not having a plan for the business - you need to drive the business, or it's not going to go where you want it to go.

If you have a very good reason for buying a small business, then go for it - Just do your due diligence first!

Due Diligence

If you've heard the term due diligence before you probably understand that it means investigating the business to verify what's on offer. You may be able to verify some aspects for yourself if you have through knowledge of some aspect of the business (eg the industry, the staff, the customers, the suppliers). This is rare though, and you need to be aware that you're likely to be biased.

What do you do then? The simple answer is, get good advice in key areas. This sounds obvious, right? But it's worth saying, because often emotion takes over and decisions are made based on things like "a good feeling", or "trust" ... and unfortunately these don't lead to good decisions being made.

Getting good external advice takes the emotion out of making decisions, by expert advice in areas that you probably don't have enough knowledge in. For any business purchase this means getting solid advice from:

• Lawyer - legal due diligence means reviewing commercial agreements/contracts the business has (think leases, large customer/supplier contracts, and even staff employment contracts).
• Lawyer - to create the sale contract and make sure that all the specific things you've negotiated are included properly. For example, do you want the previous owners to stay for 12 months to handover? Your lawyer will ensure this is in the contract. Want to make sure the previous owners don't just start a new business and poach your clients? Your lawyer will make sure the contract allows you to enforce this.
• Accountant - financial due diligence will help ascertain if the business is actually as profitable and secure as the seller claims. It will help unearth as many skeletons as possible so you can make an informed decision about buying the business, and help you to negotiate the price.
• Other industry or technical experts - depending on how the business operates and what it does, getting other specialists in will help you understand the pain points within the business, or where there are opportunities for improvement. If the business sells online, you might include an SEO review or assessment of their webshop. If the business is highly dependent on an overseas supply chain then a sourcing specialist may identify opportunities to reduce cost or improve production time. This aspect of due diligence is sometimes forgotten but can actually be the most beneficial.

If you’re thinking of buying a business but don’t know who to trust, reach out for a chat.

Written by David Harreveld, CFO / Consultant

About the Jumpstart Collective

At Jumpstart Collective, our goal is to ‘jumpstart’ your business, regardless of the stage of business you’re in. Every business, big or small, start-up or mature goes through stages of evolution. With each stage of evolution comes a different set of possibilities and challenges.

Jumpstart Collective is made up of a growing team of specialists covering every facet of a business. From Operations to HR, Market management and development, Finance to Marketing and Sales, we’re here to help.

Our specialists have been specifically chosen as experts in their relevant fields to coach, mentor and guide you in the areas where you need the most help. They’re here to help you every step of the way.

As Michael E. Gerber, Author of the ‘E-Myth’ rightly puts it, “A mature business knows how it got to be where it is, and what it must do to get where it wants to go.”... “Companies like McDonalds, Federal Express and Disney didn’t end up as Mature companies, they started out that way! The people who started them had a totally different perspective about what a business is and why it works.”

In order for this to happen, we need to start our businesses with an ‘Entrepreneurial perspective’, this means that we start by asking the right questions.

We need to ask the questions of ‘how’, instead of ‘what do we need to get done?’

We need to see a well-defined future, return to the present and then make changes to match that vision.

We need the discipline, motivation and deep passion to break through the hustling and focus on ‘just getting as much of the work done.’ We need to learn to let go, focus on our zones of genius, hire a great team to help fill in the gaps and who share that same drive and belief in your vision in building a successful and healthy business.

What Business Owner Archetype Are You?

As business owners, we wear many hats at any given time and we tend to have 3 main archetypes fighting for our attention and time:

1. The Architect
2. The Visionary
3. The Mechanic

The challenge that we face is that we tend to give time to any one of these archetypes without structure or careful consideration. If we keep doing this on ‘auto-pilot’, we find ourselves burnt out, exhausted, frustrated and ultimately, throwing in the towel.

Now there may be more than three Business Owner Archetypes according to other research and studies, however, these three were the most common we’ve seen in over twenty years of working with businesses of all shapes and forms. As a business owner, we have all three of these archetypes in us in varying degrees of dominance.

Now you may be wondering, "What Business Owner Archetype Am I?". Well, to find out you can take this FREE 60-Second Quiz and you'll receive a full report about YOUR Dominant Business Owner Archetype.?

“The?JumpStart team?delivers an incredible amount of passion and energy to everything they work on.”?

Iain McDonald

“Executing on effective marketing. Saving thousands of dollars in marketing & sales activation costs, JumpStart cuts through all the fluff and executes on fast and effective outcomes. Highly recommended”.

Ian Jacobs