- New Property Occupations Act comes into effect Dec 1
- 1. What should we ask ourselves when buying a business?
- 2. Where should you look to buy a business?
- 3. What should I consider when choosing a business?
- 4. What are the key areas of Due Diligence?
- 5. How do I consider the purchase price?
- 6. What conditions can we place on a purchase contract?
- 7. Is there a right time to sell?
- 8. What should I consider when preparing my business for sale?
- 9. What are my options for selling my business?
- 10. How do we find the right buyers?
- 11. How can I maximise my sale price?
New Property Occupations Act comes into effect Dec 1
The real estate world is changing in Queensland
From December 1 industry specific laws will replace the then out dated Property Agents adn Motor Dealers Act, to be replaced by the incoming Property Occupations Act 2014.
What does this mean for you and for us?
Firstly the new Act will simplify the requirements within the industry.
Industry red tape will be reduced and relaxation to licence requirements for developers and agencies are to come into effect.
For the consumer and the agent the single biggest difference is the simplified 1 form for clients to appoint a property agent, as opposed to the 7 forms that currently exist.
Other key changes for property agents include:
1. no longer required to state how they will perform their servies
2. indicate the section of the appointment form that explains the different types of appointments, eg open, sole or exclusive
3. The maximum term of appointment is now 90 days for a sole or exclusive, however these may be terminated after 60 days if needed by the client.
4. End dates no longer required for continuing appointments
5. Deregulated limit on sale commission, meaning agents will be able to negotiate any commission with their clients.
6. Warning Statements no longer required for buyer or sellers with residential property contracts
7. Agents now will also be able to charge commission even though they have beneficial interest in a transaction so long as they declare this to the seller.
8. Buyers no longer require a lawyers certificate to waive or reduce their cooling off period.
These changes along with the single form aims to make the real estate industry more efficient and effective for both the seller and buyer.
You can read more about these changes on our website here
1. What should we ask ourselves when buying a business?
Buying a business can be one of the riskiest undertakings you will possibly ever do.^ back to top
The wrong decision can cost you your money, plus more spent trying to rescue it, not to mention your home, even your marriage.
Ask yourself the following questions:
> Do I really need to buy a business?
> What do I expect from the business?
> What can I contribute to the business?
> Can I run it as well as, if not better than, the current owner.
2. Where should you look to buy a business?
You can find businesses in the papers, in for sale magazines, or if you are already in business, you can talk to competitors, suppliers, customers.^ back to top
But the chance that the business you are looking for, in your price range, experience range and area will be for sale at the time you happen to be looking, is slim.
A Reputable Business Brokers that offer a broad range of product and quality service and advice is definitely your best bet to finding a business which will provide for your requirements.
3. What should I consider when choosing a business?
Business is not easy - there are always competitors doing their best to beat you. So if you don't actually enjoy what you are doing, you are already behind the eight ball. You also need to know why the vendor is selling. A bad business can often lead to a bad back.^ back to top
4. What are the key areas of Due Diligence?
The first test should be the common sense test - are the seller's claims reasonable? Be wary of claims that cash has been taken out of the business. Count only add-backs that can be traced through the books. You can follow up by talking to customers, suppliers etc.^ back to top
5. How do I consider the purchase price?
The true price you should take into consideration is the "Enterprise Value", which includes the stock, and the working capital need to maintain the business.
This would depend on such things as payment terms between customers and suppliers, and any seasonal factors which can influence the cash flow.
There are no hard and fast rules, but your cash flow should enable you to pay off the interest and principal in a reasonable time, say 5-6 years.
Unless you really know what you are doing, it is probably safer to pay more for a solid business with a good track record and prospects, than to pay a bargain price for a shaky business.
6. What conditions can we place on a purchase contract?
If you are dealing with a dishonest vendor, there is not much comfort in having a contract which says he promises not to cheat you.^ back to top
So you need to know who your seller is. And make sure all possible concerns you may have are addressed as conditions in the contract and alleviated before handing over your money.
Alert Property Group recommend you use a good solicitor who specializes in business conveyancing to prepare the contract, and a reputable Accountants to conduct "Due Diligence" prior to completion.
7. Is there a right time to sell?
It is best to sell while the market is positive. While sales and margins are increasing, and there is still blue sky for the buyer. It is tempting to hold on in the hope the price will be higher later. Alert Property Group always recommend to "leave something in it for the next guy"; don't be greedy and take a profit, then move to your next venture. Generally it pays to plan ahead and prepare your business for sale.^ back to top
8. What should I consider when preparing my business for sale?
The most important thing when preparing for a sale is to make yourself redundant.^ back to top
It is very hard to sell a business that is totally dependant on you working a 60 hour week. Who wants to pay good money for a life like that?
In particular, start banking all the money, even if it means paying tax, and write up your closing stock and work-in-progress to full value.
Next is the question of perceived risk for the buyer. The lower the risk, the higher the price.
So the more you can do to instil confidence in the buyer, the better.
You can do this with documentation – document your sales, your supply agreements with suppliers and customers, your procedures etc etc.
9. What are my options for selling my business?
> Close shop and auction the equipment^ back to top
> Talk to your customers, suppliers and competitors
> Advertise it for sale yourself in the local newspaper
> Ask your Accountant to sell it for you
> List it for sale with a local Agent
> “Target Marketing” through a reputable Broker.
10. How do we find the right buyers?
A hairdressing salon has no value to a butcher. If you offered it to him for free, he still wouldn’t want it. The key to selling is to search for motivated buyers who think they can add value to the business. They will see less risk in it, and be prepared to pay more. Alert Property Group achieves this through 'Target Marketing'; where you concentrate your marketing activity on searching for qualified buyers with a strategic interest in buying your business, rather than relying on luck, or paying a fortune to advertise to people who are never going to be buyers.
11. How can I maximise my sale price?
As with any form of selling, you need to focus on what the buyer is looking for, understand his motivation and highlight the factors which are important to them.^ back to top
Are they after your location, your customer base, your product range, your distribution network, your name and reputation? Do they just want you out of the market?
The ultimate limit to the price you can get for your business is the price at which the buyer decides it would be cheaper to start up a new business in competition than to buy your business.
If you know why they wants to buy your business, and what they hope to achieve with it, you can make an estimate of this cost and work out how far you can push them.