Jamiesons - Business Brokers - Business Sales - Jamieson Business Valuations

Buying a business outside the boom

Boom periods are often seen as the best time to buy a business. This may well be true but it is not to say that it is the only time to consider buying.

At present, overall economic conditions in Australia are still favorable, however there are signs that business activity may slow in the future.

The Reserve Bank has raised interest rates and may do so again; the US looks headed for recession; global stock markets are declining; tightening finance availability is putting refinancing pressures on many companies and the newly elected Federal Government has signaled its intention to reign in expenditure.

Slower economic growth should not be a deterrent to buying a business.

It could in fact be a good time to buy a business as it can provide time to learn the ropes and it can also place emphasis on possibly the most important aspect of the business - the marketing of it, rather than merely being there to hold the reins.

Naturally proper research and analysis of the business opportunity is just as important as in a boom period. This includes:

• Assessing whether you're suited to running the particular business

• Evaluating the relevant financial

information available to assess the viability of the business and ensure it can be investigated thoroughly.

• Ascertain your obligations to employees of the business.

• Undertaking a SWOT analysis of the business (strengths, weaknesses, opportunities and threats) .will help you assess the proposed purchase.

• Prepare a business plan including financial projections taking into

consideration business downturn.

• Obtaining independent professional business, financial and legal advice.

Finally, remember that many well established profitable businesses are often not advertised, but rather placed in the hands of business brokers such as ourselves, who often discretely source serious buyers and assist with the sale process.

Protecting your business during the sale process

When a business is listed for sale, the seller needs to ensure that information disclosed to potential buyers is not used to the detriment of the business, causing it to lose value.

It is therefore imperative that a Confidentiality Agreement (or non disclosure agreement) is put in place as soon as possible when negotiating the sale of the business.

Confidentiality Agreements help ensure key information about your business is protected by prohibiting its unauthorised use or disclosure.

They place a responsibility on those who obtain the information to keep it private.

This information includes profit and loss statements, balance sheets and cash flows, as well as product specifications, business and marketing plans and client lists.

To ensure the agreement is appropriate for your particular circumstances, legal

advice should be sought, especially where the business is of substantial value and there is the potential for a significant financial loss if a breach of confidentiality occurs.

Key points to be covered in a Confidentiality Agreement include:

• Identifying what confidential information is covered under the agreement and what information is not.

• Stating the specific purpose for which the information can be used.

• Who the information can be disclosed to. Apart from potential buyers, this might include legal representatives, finance providers and professional advisors.

• Controls on how the information is dispersed and stored.

• How long the agreement remains in place.

Potential buyers of a business should understand the need to have a confidentiality agreement in place.

Signing such an agreement demonstrates not only goodwill but strong interest in buying the business.

This will contribute to the sale process being conducted in an amicable, professional and timely manner, which in the end benefits both parties.

Confidentiality agreements do not only apply when selling a business.

In order to protect the long term viability of a business, employees who have access to sensitive business information may also need to sign them.

These agreements can also extend to when an employee leaves a business, especially if they may move to a competitor or start up a similar business themselves.

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