Published on 10/11/2025 by Any Business.Com.Au

What to Know Before You Buy a Business

Buying a business can be one of the most exciting and nerve-wracking decisions you'll ever make. Whether you're leaving the 9-to-5 grind, expanding your existing operation, or chasing that dream of being your own boss, the idea of taking over an established business can be very appealing.

But before you sign anything or start mentally redecorating your new office, it's crucial to understand exactly what you're buying into.

Understand Why the Business Is for Sale

Every sale has a story. Some owners are retiring, moving interstate, or ready to cash out after years of hard work. Others might be selling because the business is struggling, or the market has shifted.

You need to dig deeper and ask questions that uncover the real reason behind the sale. Has the business been profitable recently, or has it hit a downturn? Are there new competitors or changes in demand?

The reason a business is on the market often says more about its future than its past. And if the seller can't give a clear answer, that's a red flag. Always back up any claims with data.

Review the Financials Carefully

Numbers don't lie but they can be presented in ways that hide the truth. Before you make an offer, get a detailed look at the business's financial history for at least the past three years.

You'll want to see profit and loss statements, balance sheets, tax returns, and cash flow reports. Look for consistent revenue, stable expenses, and evidence of profitability. If profits have dipped, find out why.

It's always wise to have a qualified accountant or business advisor handle the financial due diligence. They'll spot the fine print like unpaid taxes, unrealistic projections, or debts that could become your problem later.

Know Exactly What You're Buying

When you buy a business, you're not just buying a name you're taking over everything that comes with it. That includes assets like equipment, vehicles, and stock, but also intangible items like customer relationships, intellectual property, and goodwill.

You also need to be aware of any liabilities, such as outstanding loans, leases, or supplier contracts.

Clarify whether you're buying the assets of the business or the entire legal entity. The structure of the sale can have major tax and legal implications, so it's essential to get professional advice before signing.

Assess the Business's True Value

The asking price is usually where negotiations start not where they should end. To determine if a business is fairly priced, you'll need to know its true market value.

There are a few ways to do this:

  • Looking at earnings and applying an industry-standard multiple.
  • Valuing assets and subtracting liabilities.
  • Comparing it to similar businesses that have recently sold.

An independent valuation from a professional gives you confidence in your offer and ensures you're not paying for inflated expectations.

Check Licences, Permits, and Compliance

Every business has legal obligations, and if you take over without verifying them, you could inherit serious headaches.

Make sure all licences, permits, and registrations are up to date. Review any lease agreements, supplier contracts, or trademarks. If the business operates in a regulated industry like hospitality, childcare, or finance compliance must be thoroughly checked before the sale goes ahead.

Understand the Market and Competition

Even a profitable business can lose its edge if the market changes. Take time to understand the broader landscape: who the competitors are, how loyal the customer base is, and whether there are new trends or technologies reshaping the industry.

You're not just buying what the business is today you're buying its future potential. Understanding the market ensures you're investing in something that can adapt and grow, not just survive.

Review Staff and Operations

A great business usually has a great team behind it. Take the time to understand how the staff structure works, who the key people are, and whether they plan to stay on after the sale.

Look into employment contracts, entitlements, and workplace culture. You'll also want to review operational systems from supplier relationships and technology to day-to-day workflows. A well-organised business will make your transition much smoother.

Plan for a Smooth Transition

A successful handover is critical to maintaining momentum. Discuss with the current owner how the transition will work whether they'll stay on temporarily for training, introductions, or ongoing support.

Access to key suppliers, clients, and internal systems before completion can make a huge difference. The goal is to ensure continuity for customers, staff, and suppliers from day one.

Sort Out Your Financing

Unless you're paying cash, you'll need a clear plan for how to fund the purchase. Financing options can include bank business loans, vendor finance (where the seller helps fund part of the deal), investor partnerships, or using equity from another business.

Be realistic about your numbers. Build in a buffer for working capital and unexpected costs. Lenders will expect a strong business plan showing profitability, growth potential, and your experience as an operator.

Get Professional Help

Buying a business isn't something to do alone. Surround yourself with a team of experts from the start.

  • Accountants can help you assess value and financial health.
  • Lawyers review contracts, leases, and compliance issues.
  • Business brokers or advisors can guide negotiations and flag potential risks.

It's an upfront cost that can save you a fortune and a lot of stress later on.

Think Long-Term

Before you buy, take a step back and think about your bigger picture. Does this business fit your lifestyle, skills, and long-term goals?

Buying a business is just the beginning. Once it's yours, how will you grow it? Could you expand into new markets, add new services, or modernise operations? Having a clear plan for what comes next will help you make the most of your investment.

Key Takeaways

  • Understand why the business is being sold and verify the story with evidence.
  • Review financial records carefully and have an expert conduct due diligence.
  • Clarify what's included in the sale: assets, contracts, staff, and liabilities.
  • Check all licences, permits, and compliance obligations.
  • Research the market and know your competition.
  • Plan for financing, transition, and long-term growth.
  • Get professional advice before signing anything.

Final Thoughts

Buying a business is a big commitment, but it can also be a life-changing opportunity. The key is to approach it with curiosity, patience, and confidence.

Do your homework, lean on experts, and never rush the process. When you truly understand what you're buying not just the numbers, but the people, systems, and potential you're not just purchasing a business.

You're investing in a future you can shape and grow.

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AnyBusiness.com.au

Curtis is a leading expert in the business-for-sale industry, serving as a senior content creator at anybusiness.com.au.

With a career spanning over fifteen years, Curtis has accumulated extensive knowledge in the domain of business sales, acquisitions, and valuations. His deep understanding of market dynamics and his ability to translate complex industry jargon into accessible insights make him a trusted resource for entrepreneurs and business owners looking to buy or sell businesses.

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