ACCOMMODATION & BUSINESS BROKERS
Advice For Buying
What is the prime factor you need to consider when securing the service of a Broker when purchasing a business of any kind, including motels, management rights or freehold investments? It is TRUST.
HIGH LEVEL OF SERVICE
My commitment to your business starts from the moment we start talking together – I will explain the process and requirements and guide you from there. The first thing I will do is provide you with introductory details of the property you have enquired about (and any other possible options), whether you are a New Zealand resident or an overseas buyer looking to immigrate to New Zealand.
ONGOING COMMITMENT & SERVICE
My commitment to service continues through to settlement day when you take possession of your new business. I will be there to assist with the handover.
Once you have secured your new business, I will continue to be a regular visitor and you will continue to receive market updates and newsletters to keep you abreast of sales and movement within the market, so you can continue to measure and develop your own business against market trends.
FAQs
Professional business brokers can provide you with many different business opportunities, including some that you may never have considered. Frequently we have people buying businesses they had never considered buying until we explained how the business could be suited to them. We have owned our own businesses, we understand and relate to the process you, as a buyer are going through and can provide you with helpful information on the business you are considering buying.
As experienced specialist business brokers, we have industry knowledge that can assist you when considering buying a business and we will normally have a selection of businesses for you to compare. We prepare the necessary information, gather financial documentation and compile it in an information memorandum for you to review.
There is no cost to you in buying through us as business brokers; our fee is paid by the seller, unless we are specifically contracted as a buyer’s agent.
Most of the businesses for sale with us are valued on the following;
- The amount of money they earn.
- The desirability of the industry.
- The associated risk factor.
Higher prices will be paid for businesses in more desirable industries which are operating in a market perceived as low risk. These types of businesses are in strong demand. Therefore, the value of the business will be greater than for one in a less-sought-after industry and perceived to have a higher risk factor attached to it, despite the fact that both businesses may make the same amount of money.
Most small owner-operated businesses are valued according to the cash surplus available to the owner. Depending on the industry this will vary. The amount will depend on factors such as the industry, location and length of time in business.
Larger businesses are valued on either a return on investment (ROI) or a price to earnings ratio (PE). Once again, this will vary depending on the industry and the amount of net profit generated by the business.
When you have your first meeting with us, we will give you an overview of values of businesses within the industry sectors of interest to you.
Once again, buying a business through us will help you in this process. We will explain explain the process to you and guide you through it.
We will prepare the sale and purchase agreement for you. This is the document used for making an offer to purchase the business and needs to include special conditions to protect you throughout the process. Likewise, the owner of the business will want to know that the confidentiality of his business is protected through this process.
The agreement used is an Auckland District Law Society Sale and Purchase agreement (or equivalent territorial document) and contains conditions that protect you, the purchaser and also the owner of the business. The document details information regarding the business, along with the price you are offering and the special conditions relative to the offer. When your offer is accepted, you will then need to pay a deposit (commonly 10%). If you are buying through a licenced Real Estate company such as LINK, the deposit is held in an independent trust account until the agreement becomes unconditional. If the conditions upon which you are prepared to buy the business are not met, then your deposit is refunded in full without any deductions. The trust account is audited and operated under very strict legal requirements.
Before signing the agreement it is advisable to have your lawyer review the agreement. When choosing a lawyer, it is important to use one familiar with the process of buying a business. Business brokers are not qualified to give legal advice and likewise, lawyers are not experienced in selling businesses. Your lawyer will be looking after your interests just as the lawyer for the seller will be doing for their client, and the agreement must be workable for both parties. Ultimately the lawyer works for you and you must have a say in everything that is done.
Once you have signed the agreement, it is then presented to the business owner who will either accept it, or make the necessary alterations before returning the agreement to you for your acceptance or further alteration. This is called negotiation and the agreement may go back and forth several times until both parties are in agreement. This is the work of us, your business brokers - we will liaise between both parties and almost always, through experience, bring solutions that result in both parties reaching agreement.
Confidentiality of Vendor information is paramount and you will be required to complete a confidentiality agreement for each business you inquire about, prior to receiving the comprehensive information. We will arrange a time with the business owner for you to inspect the business.
A physical inspection of the business is best when you have considered and are satisfied with the financial and other information provided to you, and of course, you are confident in your financial capacity to proceed further. Remember however, that the owner of a business will be very sensitive about your visit. On the one hand they will want to provide you with all the information you require, yet on the other hand they may not want staff to know why you are really there. Please be sensitive to the owner’s needs in such cases.
