Frequently asked questions (FAQ's)

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  → FAQ's Buying a business   → FAQ's Selling a business

Buying: What type of business

Q. I don’t really know what type of business I am looking for. Where do I start?
A. Many buyers are ready to start looking for a business but have no idea of what they would like or even what they are capable of. It is a good idea to have a chat with us to enable us to give you an idea of the ins and outs of the many different industries available to you.

After an initial meeting, you can be added to our email list which will be sent to you as and when any new businesses are listed for sale. If you are relatively inexperienced and need help in understanding the processes, theories and valuations, we are only a phone call or email away to help you to understand how it all works.

Buying: ROI

Q. What is the ROI?
A. The ROI stands for RETURN ON INVESTMENT. This is the way that most, although not all businesses are valued here in WA. Essentially it means the percentage of the purchase price (if run at the same sort of profit) that the buyer would expect to get as a return each year exclusive of his personal drawings. For example if he were to buy a business at a 50% ROI that would mean he would be likely to get 50% of his initial purchase price back in the first year effectively taking two years to get it all back.

The reasoning behind the ROI difference is the risk attached to each particular business. The heavier the risk - the higher the ROI therefore the purchase price is lower in relation to the net profit. Because it is % based, you will see as the figures get higher, the monetary difference is huge. Remember ...the stronger the business, the lower the ROI and the riskier the business, the higher the ROI! More information and examples are covered in my free client information pack which you will receive when we meet.

Q. I know what I want but can’t find it, can you help?
A. Absolutely. We can contact specific businesses on your behalf. Quite often, a business owner may have not considered looking into marketing his business for sale but when approached directly by a professional company such as Empire Business Sales, knowing that he doesn’t have to place his business on the open market and that we have a good quality buyer to put before him, he can very often change his mind and a successful transaction can occur in a short to medium timeframe. It is important to remember, even if the vendor is happy for me to conduct an appraisal on his business for the purposes of presenting it to you, no information would be divulged to you until a valid authority from the owner has been signed.

Q. Would I expect to pay more doing it this way?

A. Generally the answer is no, once I have made contact with the owner and he/she has given me the go ahead my appraisal is still carried out in exactly the same manner and the procedure would be as usual other than we wouldn’t have to advertise, however in the odd instance the owner may only be happy to sell his/her business to you at a higher price than the value I have placed on it, from then on in it would be your call.

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Buying: How much can I afford

Q. How do I know what I can afford to buy?
A. The million dollar question!!! Buying a business is not like buying a house, there are many factors to consider. The two main ones are security so some sort of equity will be required and of course serviceability, the business needs to be able to pay back the loan in a set time frame.

Each person and every business is different in many ways and we can put you in touch with a commercial finance broker who can offer you the expertise required when trying to navigate through the minefield of business finance.

This can range from a small amount of simple advice right through to a complete business plan / cash flow presentation submitted to the banks in a manner that will not only vastly increase your chance of an approval but also gets you a speedy decision.

 

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Buying: Reports

Q. Do you provide a report on all of your businesses for sale?
A. Yes. Once you have signed a Confidentiality Disclosure Agreement you will be presented with a full report on the business in question. It contains all the relevant information on the business along with the relevant profit & loss statements that have been used in the valuation. This report can be the difference between you getting an approval or a decline from your financial institution when applying for a loan.

Q. Can I show this report to anyone else?
A. You are entitled to take this report along to your accountant or financial institution only. You must comply with the terms of the CDA and also respect the fact that the owner has allowed you to take this highly confidential information which will give you the insight into his business for the purpose of a possible sale.

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Buying: The right business

Q. How do I know if this business is right for me?
A. Do plenty of research and make sure you know everything about the business you are considering purchasing and this should eliminate most of the fears. Ensure that you are aware what the business entails inside out.

Ask yourself some simple questions...what are the operating hours? How long will it take me to travel to and from work each day? What is the owner’s role? Can I fill his/her shoes? Am I out of my depth in this industry?

By all means, talk to your accountant or financial advisor, but remember they can often help you to understand the figures but they don’t necessarily understand businesses...the final decision should always be your own and if it feels right, don’t procrastinate too long or you may miss out, it happens all the time!

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Buying: Broker costs

Q. Do I have to pay for your services?
A. No, generally our fees are paid by the seller.

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Buying: Other costs

Q. What other costs can I expect with the purchase of a business?
A. Along with the purchase price, you will have several other upfront costs. They include but are not limited to:
- Stamp duty
- Accountancy fees (due diligence)
- Settlement agents fees
- Fees associated with the transfer of a lease
- Fees associated with transfer of licenses ( if applicable)
- Bond for rent (if applicable)
- Upfront advertising costs
- Insurance costs
- Bank fees for loan application (if applicable)

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Frequently asked questions - Selling My Business

Q. Why use Helen Sharman – Empire Business Sales to sell my business.
A. Your business is quite possibly one of the biggest and most valuable assets that you own so when you decide to take the huge step of selling it you need to know that it is in capable hands. From start to finish you can be assured that you will be dealing directly with the licensee and not passed around from broker to broker or dealing with a rookie who is only six weeks into the industry! By choosing Helen, you are guaranteed to receive 100% service at all times, emails returned, phone calls answered or returned within the same business day, all the help you will need. Helen is extremely particular and precise when it comes to documentation, taking an enormous amount of pride in her work minimising the room for error! Empire will take care of everything for you, from presenting you with your detailed written appraisal, right through to settlement. We will take care of the production of the Business profile, advertising, interviews and screening of potential buyers, correspondence with accountants, settlement agents, and financial institutions, writing and presenting any offer and acceptance’s and then following through to settlement ensuring that all conditions are met within the set time frame to keep the contract valid. By choosing Helen Sharman at Empire Business Sales you can be rest assured that your best interests will be considered at all times.

Q. How is a Business Broker different form a Real Estate Agent?
A. Real estate agents do a fantastic job at selling properties but don’t generally have the training, knowledge, expertise or skills required to negotiate and fully understand the financial and legal aspects of selling businesses. The whole procedure from start to finish is much more complex, even in the simplest of businesses. We understand the legalities of a contract and the ramifications to both parties if not followed through correctly with precision and accuracy.

Q. How do I know if my business is saleable?
A. We can offer all the help and advice that is needed to get your business ready for sale. By providing us with the information requested and answering a few questions, we can give you a written appraisal in a relatively short timeframe outlining the basis on which the appraisal has been completed. Most businesses are in fact saleable it’s just a case of determining the correct sale price in the current market. An overpriced business will not sell and of course by selling your business below the market value you will be doing yourself an injustice.

Q. What is the process for having my business appraised?
A. After the initial contact and once I have received the information requested such your up to date accounts, details of the core business, staffing structure etc... I will provide you with a written appraisal outlining the reasoning behind the valuation along with timeframes, suggested marketing plan, summary of add backs and fees associated with the sale.

Q. Can you give me a ‘ball park figure’ if I don’t supply written information to you?
A. No, I would be doing you a disservice, the appraisal could be severely over or under valued without all information considered.

Q. What is the ROI?
A. The ROI stands for RETURN ON INVESTMENT. This is the way that most, although not all businesses are valued here in WA. Essentially it means the percentage of the purchase price (if run at the same sort of profit) that the buyer would expect to get as a return each year exclusive of his personal drawings. For example if he were to buy a business at a 50% ROI that would mean he would be likely to get 50% of his initial purchase price back in the first year effectively taking two years to get it all back. The reasoning behind the ROI difference is the risk attached to each particular business. The heavier the risk - the higher the ROI therefore the purchase price is lower in relation to the net profit. Because it is % based, you will see as the figures get higher, the monetary difference is huge. Remember ...the stronger the business, the lower the ROI and the riskier the business, the higher the ROI! More information and examples are covered in my free client information pack which you will receive when we meet.

Q. Can we chat after hours?
A. Absolutely. We understand that confidentiality is paramount therefore we are happy to visit you after hours so as not to arise any suspicion in the workplace.

Q. Can I visit you rather than you coming out to my place of business?
A. Most definitely. We can chat over a cappuccino in our very comfortable private offices conveniently located just off the Mitchell Freeway on Cedric Street in Stirling.

Q. Can I use management accounts (i.e. MYOB) for the appraisal?
A. We can use the management figures but prefer to use audited figures prepared by your account. The reason for this is to ensure that we are using the same figures that a buyer will be using when conducting a due diligence. Management figures can often be incorrect and adjustments are still yet to be made. The last thing we want to happen is to set any doubt in a buyers mind as to the legitimacy of the accounts.

Q. Can you sell the freehold along with my business?
A. Yes we can list it at the same time. It often works very well. In some cases, the buyers are adamant that they will only buy the business if they can get the freehold at the same time.

Q. What is a due diligence?
A. A due diligence is carried out by the buyer as a condition of the contract of sale to satisfy them that the information we have provided to them is a true representation of the business they are buying. It can vary in timeframes according to the size and complexities of each business. It is generally conducted by their accountant although it can be carried out by the buyer themselves, bookkeepers or financial advisors etc...

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Q. Do you provide a report on all of your businesses?
A. Yes. Once you have signed an authority to act, together we will compile a report on your business. It contains all the relevant information on the business along with the relevant profit & loss statements that have been used in the valuation. With the precise information provided in this document it can be the difference between the potential purchasers getting an approval or a decline from his/her financial institution when applying for a loan. After the initial interview with Empire Business Sales to ascertain their suitability for your business and once a confidentiality disclosure agreement (CDA) has been signed, the potential purchaser will get a copy of this report and as per the conditions of the CDA, they are entitled to take this report along to their accountant or financial institution only.

Q. Where will you advertise my business for sale?
A. We have different places where we will advertise depending on the nature of your business. We use our own website along with other external sites. We occasionally advertise in the printed media if we feel that this is right for your particular business. At all times your business remains confidential, we keep the information advertised vague enough so that no one will know it is your business yet we give enough information to grab a buyer’s interest.

Q. Where do you find the buyers?
A. We have a large database of clients who we have screened when they first approached us looking for a business. Some of them are previous vendors who we have successfully sold businesses for in the past or may be looking for an additional business to compliment what they already have. We keep in regular contact with the clients in our database and they are our first port of call when a new business is listed. Along with individuals, we also have several accountants, financial advisors, buying groups and conglomerates that are always on the lookout for good solid businesses to acquire on behalf of their clients.

Q. How can I be assured of confidentiality?
A. We take the time to screen our buyers assessing their suitability for the businesses that we have on our books. All potential purchasers must sign a Confidentiality Disclosure Agreement (CDA) prior to receiving any information on any of our businesses that we have listed.

Q. What about Work In Progress?
A. Not all businesses will have work in progress but for those who do, a formula must be agreed on as part of the due diligence process to decide the best way to calculate the work in progress which is acceptable and fair to both parties and this shall be paid in addition to the agreed selling price.

Q. If my business isn’t ready for sale, what will happen?
A. Depending on the reason, we will advise you on the best steps to take to help you to achieve the maximum selling price for your business later down the line. It may be a few months or it may be in a couple of years. It is not our intention to get you to list your business as soon as possible if we feel that you can achieve a much higher selling price and smoother transaction after the changes have been put in place. We trust that by doing the right thing by our clients, you will return to us in time and we can achieve a fantastic result for all concerned. We can meet in the interim to ensure that you are moving along on the right direction.

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