Introduction
Are you considering buying a business in today's ever-evolving
economic landscape? Acquiring an existing business in the current economy
presents both opportunities and challenges and it can seem scary. To ensure a
smooth and successful transition into business ownership, it's important to be
well-prepared and informed about the unique dynamics of the present financial
environment.
In this guide, we'll walk you through some tips for buying a
business in the current economy. From understanding the intricacies of business
finance in NZ to working with a business loan broker and securing small
business loans, we've got you covered.
1. Do Your Research!
Before jumping straight into the business-buying process,
proper (and quality) research is paramount, regardless of the current economy. Make
sure to analyse how economic factors, such as inflation, interest rates, and
consumer behaviour, might impact your prospective business. Consider how the
pandemic has influenced various industries and adapt your strategy accordingly.
There's no such thing as being too prepared. Buying a business is a large
endeavour and one you want to go into with open eyes.
2. Define Your Budget and Financial Strategy
In the current economic climate, you have to be meticulous
about your budget. Determine your budget, factoring in the specific economic
challenges you may face. Assess whether you need to secure a business loan and
how you can adapt your financial strategy to navigate uncertain times.
Another important factor is cash flow. Whilst you need a
loan to purchase the business as it stands, you also need to take into account
things like marketing costs, staff payments and more. Do you have enough
surplus funds to protect you if things get tight? Not having enough cash flow
is one of the many things that can make a business fail, no matter how prepared
you thought you were.
3. Collaborate with a Business Loan Broker.
Navigating the world of business loans becomes even more
complex during economic fluctuations. Collaborating with a reputable business
loan broker in New Zealand, who is well-versed in the nuances of the current
economy, can be a game-changer. They can help you find the right loan options
and adapt your financing approach.
Compare Business Loans has access to a wide range of different financial providers,
so they can point you in the right direction.
There's no single fit when it comes to a business loan, so
it's best to weigh up your options and get professional advice on the structure
of the loan, the terms and conditions and whether that loan is right for you
and your business.
4. Evaluate the Business's past performance
Whilst you need to take the future into account. It's also
important to consider the past. Inspect the business's books with regards to
how they coped over the past few years. Discuss any discrepancies in the
accounts with qualified professionals, these could include lawyers or
accountants, as well as your business loan broker as mentioned above. It's also
important to ask the following questions:
- How much is the business earning per month?
- Is it profitable or is it struggling to make ends meet?
- Why is the owner selling the business?
- How long has the business been operating?
- Where is the business located?
- How strong is this particular industry, now AND into the
future?
- What does the balance sheet look like? Is there any
equity?
5. Make sure there's enough cash flow to pay yourself a wage.
When buying a business, it's imperative to ensure that the venture
generates enough income for you, to pay yourself a fair wage. So many business
owners make the mistake of focusing on the business growth, and not paying
themselves enough. You should always pay yourself first, then your suppliers.
You need to secure your own financial wellbeing. To do this, assess the
business's financial performance, triple check its profit margins, and factor
in your personal financial needs. Your business plan can help to ensure you
factor in your own income and keep you on track to make the business a success.
6. Know how to negotiate!
Negotiating the purchase of a business during economic
turbulence requires a keen understanding of the current market conditions. Be
prepared to address economic concerns, such as revenue projections and
contingency plans, during negotiations. To put you in the best position to
negotiate, it's important to fully understand the value of the business you are
purchasing. Make sure the vendor hasn't over inflated the asking price, but
don't low ball it either or you may just offend them. You can use an accountant
to help you value a business, or if a business has been listed through a
broker, you can normally use them to ascertain what a fair offer will be.
7. Develop a rock-solid business plan.
Incorporate a range of contingencies into your business
plan. Create a robust strategy that accounts for economic uncertainties and
outlines how your business will adapt and thrive in challenging times. A
quality business plan is a must when looking to obtain business finance. This
is true whether buying an existing business or starting one from scratch.
There are various platforms you can use online to help you
formulate your business plan. For instance, most NZ banks will offer a business
plan template, as does Compare Business Loans. You can also do a health check
to make sure you will qualify for a business loan, before going too far in the
process.
Compare business loans offers a free 5 minute health check
service, which you can access on their website using the link below.
Summary
Buying a business in the current economy is a unique
endeavour. To make the process smoother and increase your chances of success,
remember to do your research, speak to professionals and have a proper game
plan at hand. Going in blind will only lead to disappointment and frustration
on the vendor's side.
Our tips above are designed to help guide you in this
process, but you can speak to one of our representatives anytime by contacting
us or visiting our website.
