Buying a business or a buying a job?
Rede Accountants Gold Coast, Brisbane & Byron Bay
These days job security is difficult to obtain.
Businesses may go broke, get bought out or scale down their activity levels.
Employees leaving their positions often have to decide whether they seek alternative employment or buy/set up a business that will provide them with a future ongoing income. Contact us if you need business accountants in Tweed Heads, Brisbane & Gold Coast.
What should you consider?
Will owning and operating a business be for me?
If you have worked as an employee you are used to receiving a regular pay cheque, working between 9am and 5pm, taking regular annual leave and sick leave and probably public holidays.
For a business operator, all that goes out the window.
As an owner-operator:
- There is no guaranteed weekly/fortnightly paycheck
- Work hours could extend to 15-20 hours a day, 7 days a week!!
- Many small business owners can’t recall the last time they took a holiday. As a business owner, there is no one to operate the business if you are not on deck if you’re on vacation.
- You may still have public holidays in some industries. However, if you are in retail or hospitality, forget about it.
Will I earn enough income to maintain my accustomed living standards?
Maybe you will, maybe you won’t. When you open a business your income is not guaranteed. You have to make the running to generate sales of your service or product. If you’re planning on giving credit to your customers, you have to not only have to make the sale but also collect the money. There is no income until the money is in the bank.
Keep in mind, as a general rule, businesses pay their staff, suppliers and the bank finance before they pay the owner-operator.
Will there be enough money to pay everyone and then me?
Many small business owners can recount stories of not being paid for weeks on end in slower times or in the initial establishment of the business.
Is buying a business better than setting up a business from scratch?
It may be or it may not be. The general expectation is that by buying an existing business, it should be generating sufficient income for you to live on.
That is the expectation but what happens if:
- The landlord you rent your retail business from cancels your business lease for not paying rent on time? You have no premises to sell from and you can’t make sales.
- A major customer of your business decides to leave you?
- Key staff walk out the door?
- Your major supplier won’t give you credit for a stock purchase of $50,000?
- Your newly purchased café receives a series of bad reviews on Facebook?
- The bank calls your loan in for missing a payment?
Questions that you should consider before buying a business include:
- Will I be working 60 hours a week and earning what I did as an employee?
- Have I just bought a job with a lower pay rate per hour?
- Can I borrow sufficient money to buy a business or set one up?
- If I have to fit out a new café for $250,000.Will I lose my house if I can’t repay the bank loan on time each month?
- Can I afford to employ some staff to help with the workload and perhaps give me some time off?
Before buying a business, seek the help of a solicitor and an accountant to establish your business structure (eg. a company), assist with financial forecasts and projections, review the property lease arrangements and of course a sale agreement.
After engaging a solicitor and an accountant other professionals which you make seek to engage may include insurance brokers, mortgage brokers, a
business broker and patent/trademark solicitors.
Buying a business is not for the faint-hearted. You need to be confident you will succeed and be better off financially and emotionally than you were as an employee. If you decide to proceed, give it your best shot, it can be rewarding to control your own destiny.
If you don’t like the risks, stay in employment, because they are there every business day.
In any event, if you’re considering buying a business we can help with business health checks, sale forecasts as well as general advice to help you make your decision. Please contact us here.
Related Tag: Business Accountant in Tweed Heads