Business Set Up and Purchase

Business Set Up And Purchase

Alan Lewis
Accountants

www.lewistaxation.com.au

 Determine salary and profit
expectations for:
your time
your investment
your expertise
 Be realistic in your expectations
 Survey the market


 Obtain work in that type of business
 Lifestyle?
 Match skills, knowledge and
experience
 List assets that you will require
 Are there any businesses for sale?


 Type of entity
 Documentation
required
 Explanation of
entity’s operation


 Feasibility Study:
Sales
Overhead expenses
Wages
Set up costs
Budget
Break even levels
Sensitivity Analysis
Cashflow Forecasts
Pay As You Go (PAYG) tax payable
Business Benchmarks Comparison


 Statement of Net
Worth
 Projected Balance
Sheet
 Ongoing role of
accounting firms
 Competent
Commercial Solicitor
 Bank interested in
small business


 Financial accounts
last 5 years
 Tax returns last 5
years
 Debtors’ Aged
Analysis


 Access to:
Cash Payments Book
Cash Receipts Book Creditors’ Aged
Tax Invoice Books Analysis
Journals Creditors’ Invoices
Bank Deposit Books Stock records
Bank Statements Work in progress
records
Ledgers
Wages records
Order Book
Lease Agreements


 Is the Vendor running a similar
business?
 Check purchases, sales and wages
 Restraint of Trade
 Will customers remain?
 Review stock
 History of the business
 Market share
 Competitors
 Suppliers


 Suppliers’ Terms of Trade
 Terms of Trade with Debtors – are they enforced?
 Are Tax Invoices and Statements prepared
promptly?
 Check plant and equipment
 Is the plant owned, leased or on hire purchase?
 Leased premises – get a copy of the Lease
Agreement
 Landlord’s approval for transfer of Lease


 Check the Lease – what would your
obligations be for:
removal of equipment at the end of the Lease?
rectification of premises?
option periods?
exercise of options?
painting?
repairs and maintenance?
re-fit requirements?


 Acquiring the building? – Check
 Title Deed details
 Zoning
 Apportionment of price
 If taking over Debtors – BEWARE!
 What employees are you retaining?
 Holiday, Sick and Redundancy Pay
 Long Service Leave


 Customer List
 Vendor’s intention
 Vendor assist in the
changeover?
 Valuing of stock
 Politics
 Gazetted hours
 Wages for staff
 What is the state of the
economy?

90
 Monthly Sales Dissection 80
 Review Debtors’ Ledger – 70
any large credit notes?
60
 Credit Worthiness Report
on the business 50 Men
 Social behaviour changes 40 Women
 Technology changes 30 Children
 Town Planning 20
Regulations 10
 Customers – who are 0
they? – demographics? 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr


 Review the operations  Creditors’ Aged
of the business Analysis
 Employee work  Check the bank
specification reconciliations
 Does the business have
 Quality control
the right product mix?
 Any  Check suitable
patents, trademarks, lic systems and
enses, copyrights? policies for GST
 Order Book  Check on stock
 Partially completed buying patterns
contracts – check!

 Remember, what you are looking for are
clues that the business is not what it is
being built up to be!

 The buyer must beware – check, double
check and cross check everything!

 Once you sign the contract, it is very
difficult to renegotiate
.


 Business Name
 Australian Taxation
Office:
Withholding Tax
Public Officer
(Company)
Australian Business
Number
GST Registration


 Work Cover
 Payroll Tax
 Government
 Bank Accounts
 Insurance
 Directories/Association
s


 Business Objectives
 Business Mission  Business Plan, Budgets
Statement and Cashflow Forecasts
 Accounting and  Regular accounting
Management reports
Information System  Board of
 Internal Control System Directors/Board of
 Types of books and Advice
records  Employees’
Agreements, Condition
s and Contracts
 Key Performance
Indicators

 Location
 Layout of premises
 Does the market
exist?
 Estimated expenses
 Break-even level of
sales required
 Break-even
point, including your
salary
 Credit Policy

 Bankcard, Master  Local events register
Card, Visa Card  What is happening in the
 Other cards – Diners’ local area?
Club, American Express  Do you need all the
etc assets?
 Government and Council  Buy carefully
requirements  Listen to experienced
 What are the potential employees
risks?  Develop an ability to get
 Can you handle the on with people
work?  Staff Manual
 Communication facilities
 Traffic flow
 Off season planning

Business Set Up and Purchase

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