Thu Jul 29

Why it takes time to buy a business

Written by Vanessa Lovie - Bsale CEO

Covid has sent shockwaves through the business for sale marketplace. At Bsale we are finding there are now more buyers in the market than sellers which creates a unique opportunity.

With enforced restrictions still occurring in many major capital cities, business owners are reluctant to place their business for sale with fears that they won’t obtain an optimal price. Brokes are struggling to get good quality businesses to sell, which means it’s taking longer for buyers to locate good opportunities.

When you're looking to buy a business, you want to make sure you know what is available.

Here are some common reasons why it takes time to buy a business

Finding the right business.

Unlike real estate, owning a business comes with a unique set of benefits and risks. To run a business successfully you need to have the experience. The business you are buying needs to meet your expectations and be able to deliver. It takes time searching online on websites like Bsale to enquire with the sellers and find a business that is best suited to you and your skillset.

If you are a first-time business owner, it’s important to review your abilities and what buying a business entails. Owning a business is hard work. If you want to own a cafe, it’s important you have some experience working in a cafe. We often see people buying a business who have very little experience or are a professional in a completely different industry and want to transfer their skillset. Whilst they can be successful, it is always a good idea to work within the industry before making such a big financial commitment.

Due Diligence

Once you have found a business that is suitable, you then need to perform investigations. It can take a lot of time to analyse the businesses financials, establish how it makes money, review debts and liabilities and perform an in-depth investigation. If you are a first-time business buyer, it’s important to have professional assistance during the due diligence process.

With recent covid restrictions, many businesses now have a buy out period to help the new buyer transition into the business. There may be a period built into the contract where the new owner will repay based on profits. You may also find the financials have been adjusted to account for closures.

Loans

Obtaining a loan to buy a business takes time. There are alot of boxes to tick, and often a business loan falls through at the finish line. A lot of the time, banks want to use something as collateral such as your home. A business is based on ‘future earnings’ and the banks needs some type of security before they will issue the loan. Getting a loan approval takes time.

Competition

There are businesses that are ‘hot’ such as those in prime locations or are experiencing exponential growth. These businesses may be competitive and only come on the market for a short period of time before they are sold. If you are eagerly looking for a business to buy, you need to be constantly watching the market. Sign up for alerts, be aware of what is happening in your industry.

Preparing yourself to buy a business

When you want to buy a business, you need to be ready. Its a good idea to ask yourself a series of questions to establish if you are actually ready to buy a business.

How much do you want to earn per week?
How much capital do you have to invest?
How many hours per week do you want to work?
How far are you willing to travel to work?
Do you have the skills to manage cash flow, staff, operations etc?

Buying a business is a big decision. But it can be rewarding. Recent covid conditions have made it a good time for buyers to find opportunities. In Australia, it takes 6-9 months on average to sell a business, so when it comes to buying a business you could be looking at a few months from beginning to your search, performing due diligence, obtaining loans and settlement.

Vanessa Lovie - Bsale CEO