In our work here at Tower Systems providing POS software for local small business retailers we are often asked for advice about buying businesses. A common question is: what should I ask for when looking at buying a newsagency?
The question itself, when asked, indicates how green a prospective purchaser is when it comes to purchasing a business.
Here is an updated list of data we suggest local retail business purchasers access from the vendor or their representative. We first published this list ten years ago. It has been regularly updated since. here is our latest version:
- P&L from the accountant for at least the last two full years. i.e. not a spreadsheet created for the purpose.
- Management accounts for the current part financial year.
- Tax returns for the same two years. While note always appropriate given business structures, they can provide a cross check with the accountant P&L.
- A good explanation of any add-backs proposed for the P&L.
- Sales data reports, for the last two years, from the POS software in use – to verify the income claim.
- Sales data reports from any external supplier or data source to verify the income claim.
- BAS forms to confirm data in the P&L.
- A list of all inventory to include purchase price and date last sold for each item.
- Copies of invoices from which you can randomly select to verify the above point.
- A copy of the shop lease.
- A copy of any equipment or other leases the vendor expects you to take on board.
- A detailed list of all forward orders placed on behalf of the business.
- A list of all employees: name, hourly rate, nature of employment, start date, accrued leave and accrued long service leave.
- A testament from the vendor as to the claimed accuracy of sales data.
This is good basic information that will enable any purchaser to undertake reasonable initial assessment of a business.
A good business will shine through the numbers just as a business with upside achievable by new owners will shine through.
Our advice to local small business retailers looking to sell who are concerned about this list is: think about it now and focus on your business so the data we have listed looks appealing to any prospective purchaser.
Every day you make decisions in your business that impact many of the data points listed.
This is why we often say every day is your pay day. Run a smart, lean and profit focused business and you will have a good pay day today and a good one when you come to sell.
The most appealing businesses are those that are easier to run and are making money.
The time to focus on that is now.
Sure a purchaser can turn a business around. They should get the rewards if they are expected to do that for your business.
The price you can sell your business for will be based on what it is making now.
Getting the data ready for the sale of the business could, of itself, help you improve how you run your business.