Tips for buying or selling a business in 2023

New Zealand small businesses have been on a rollercoaster over the last few years, and it has seen many owners reconsider their options.

Some small business owners have decided to call it a day and are looking to sell.

Meanwhile, there are also many Kiwi entrepreneurs looking for opportunities to start their own businesses in the post-Covid-19 world. 

And if they see an up-and-running business that piques their interest, it could be a match made in heaven. 

Are you looking to buy a business?

For some, buying an existing business could make more economic sense than plunging into the uncertain start-up world. It also means you can make the most of existing customers, experienced staff, established suppliers, and a strong brand.

However, there are a few easy mistakes you can make. 

One of the biggest issues is leaping in without doing the legwork. You need to spend a lot of time researching the type of business you are looking for before looking at businesses and purchase options.  

“One of the biggest issues is leaping in without doing the legwork” 

What to consider when looking to buy a business

• Look at the broader market or industry your target business is in and how strong it currently is. 
  
  
• Do your due diligence – get your accountant to thoroughly go over the books. You may be required to sign a confidentiality agreement to proceed. 
  
  
• Make sure price is key to your decision-making, so research the industry rate for the business you’re looking into. 
  
  
• Be driven by the financials and how the business is growing or can potentially grow.

There’s a business saying: ‘Better to pay too much for a good business than to pay too little for a bad business’. Keep that in mind, and good luck with your business hunting. 

Now let’s look at selling your small business.

What to consider when selling your small business

Owners may decide to sell their businesses for numerous reasons.

They could be retiring or might see another opportunity with another business. Or, during tough economic conditions, they may consider selling a business when it is not profitable.

Here are some tips that may increase the chances of a smooth sale. 

• If your business isn’t profitable, consider holding onto it for a few quarters to build it back up, or at least get it to plateau.
  
  
• Try to prepare for the sale as early as possible, at least a year or two ahead of time to give you time to make improvements to the business and ensure the transition for the buyer is smooth. 
  
  
• Ensure your business financial records are in good shape and accurately represent the current state to buyers. 
  
  
• Put together a package (profit and loss statements, balance sheets, and tax returns for the past three years or more, etc.) with professional help so you have all the right information at your fingertips.  
  
  
• Get an accurate valuation of what the business is worth, as an unrealistic asking price can drive buyers away. An independent professional’s appraisal can help. 
  
  
• During the sale process, do your best to keep the business at a high standard, even if you know it won’t be yours for long. 

Be patient, transparent and honest

It can take a long time to sell a business, so be patient. 

Buying or selling a small business is an emotional time for all the parties involved. For the existing owner, it can be like selling part of your life, while the new owner could be finally realising a dream they have nurtured for a long time. 

Do you have the right cover? 

If you’re buying a new business, there’s no better time to ensure the right insurance covers are in place. Talk to one of our brokers today. 

 

Important disclaimer - Steadfast NZ Limited, its related companies and associate

This article provides information rather than financial advice. The content of this article, including any information contained in it, has been prepared without taking into account your objectives, financial situation or needs. You should consider the appropriateness of the information, taking these matters into account, and seek appropriate financial advice before you act on any information.