Newsletters

Newsletter - July 2025

Ten Things to Focus on Before You Buy a Business

I have shamelessly plagiarised much of this content from Richard O’Brien at www.nzbizbuysell.co.nz who is happy for me to use it, and I have added some succinct additional comments.

1. Are you business ready? Understand your skills, strengths and weaknesses, and have the necessary resources and support to buy a business. Please do your homework with the banks and/or a Finance Broker re-funding ability plus any lender will want to see a compelling fit between the buyer and the business that they are purchasing.

2. Is the business in an industry you have or can gain experience in, have a vision for and can add value to while living and supporting the lifestyle you want?

3. Is there a sound market now and tomorrow for the product or services this business provides?

4. Who are the competitors? Are they a threat, and how is this business positioned to operate in-light-of, imports, new technologies, regulations and currency fluctuations? It is often useful to try and better understand the relevant USP’s (Unique Selling Propositions) within the business you are buying. If it has none, then you need to be happy that you can add some real value to the marketing, production, sales or customer service to ensure the business stays relevant into the future.

5. Who are the key customers? What do they represent, how do they feel about this business, and are they are friends or related to the current owner? Whilst most businesses will not have contracted customers, you need to be comfortable that you can relate to the customer and personality type serviced by the business.

6. What are the relationships, terms, and contractual arrangements with suppliers and can these be readily transferred?

7. Why is the business for sale? How profitable is it, and has it been over the last three years, what are the trends? Whilst your accountant will help recast the accounts to confirm this, the key financial data, history and potentially forecast should be available within the IM produced by Tabak – or as a second tranche of financial data available after the IM has been supplied...

8. Are any leases, contracts, employment matters and/or intellectual property legally sound? Use your lawyer to assist here – in fact Tabak recommend that any buyer always engage a solicitor.

9. Is the price fair and reasonable? That all plant and equipment required is in good order and listed, that the stock has been accounted for and valued appropriately, and that any goodwill is appropriate to the strength and earnings of the business. This is probably the biggest “grey area” when assessing value, but rest assured when Tabak takes a business to market, we have completed a comprehensive appraisal of value and will have the appropriate market data, industry multiples etc. readily at hand.

10. What legal structure you will use to operate the business, how you will fund and service the borrowing of the business and how you will contribute to its success i.e. be very clear and focused on how you can “add value” to the business.

Owning a business can be very rewarding, apart from the potential to amass wealth, you get to decide when and how long you work, who you work with, and the manner in which you produce the product or service. However, when buying a business, make sure it’s something that you really want to do, something you are passionate about, have a vision for and have the necessary skills to add value to. 

Damien Fahey; Partner
Tabak Business Sales, Christchurch