Buying an established business can provide customers, revenue, employees and systems from day one. It can also transfer problems that were difficult to see in an advertisement. The difference is often the quality of the process before settlement.
The Australian Government's buying guide moves from readiness and research through valuation, due diligence and a formal offer. The 12 steps below expand that journey into practical actions for small and medium business buyers.
1Set your acquisition criteria
Define the business you can operate successfully—not simply the business you can afford to buy.
- Preferred industries, locations and operating hours.
- Your skills, licences and realistic weekly involvement.
- Maximum purchase price, stock payment and additional capital.
- Minimum commercial return after paying yourself or a manager.
- Acceptable customer concentration, lease exposure and owner dependency.
- Non-negotiable exclusions such as unresolved compliance issues or unsupported cash sales.
2Prepare funding and a cash buffer
The purchase price is rarely the full cash requirement. Budget for professional fees, lender costs, stock, working capital, bond, insurance, licences, technology changes, repairs, initial wages and a contingency buffer.
Speak with lenders before making a binding commitment. Funding capacity can depend on verified financial performance, security, buyer experience, lease tenure and the industry.
3Search for businesses intelligently
Businesses for sale can appear through brokers, commercial agents, industry contacts, accountants, franchise networks and online marketplaces. Searching more widely creates choice, but use the same written criteria for every opportunity.
- Track listings in a comparison sheet with price, location, revenue, claimed profit, rent, owner hours and date listed.
- Note whether the price includes stock and whether property is included.
- Research industry demand, regulation, labour availability, local competition and major cost trends.
- Avoid paying for “potential” that depends on untested assumptions or work you must fund yourself.
4Screen the listing before investing time
Ask for a high-level information memorandum and quickly test the arithmetic.
| Listing claim | Early question |
|---|---|
| “Under management” | Is a market manager wage already included in the profit? |
| “High turnover” | What is gross margin, wage cost and cash profit? |
| “Long lease” | What are the options, rent reviews, outgoings and landlord conditions? |
| “Loyal customers” | How concentrated is revenue and are relationships contracted? |
| “Huge growth potential” | Why has the seller not achieved it, and what capital will it require? |
| “Price plus stock” | What is the current saleable stock value and ageing profile? |
5Protect confidentiality and information
A seller may require proof of identity, buyer background and a confidentiality agreement before releasing records. Read the agreement carefully. Establish who may receive the information, how it will be stored, whether employees or customers can be contacted, and when it must be returned or destroyed.
6Verify the seller and what is being sold
- Use ABN Lookup to confirm the entity, ABN status and GST registration.
- Search ASIC registers for the business name holder, company status and officeholders.
- Match the seller to the lease, licences, tax returns, bank accounts, employment records, contracts and asset invoices.
- Clarify whether you are buying selected assets or shares in a company.
- List every included and excluded asset, contract, employee arrangement and liability.
An asset sale and share sale can have different legal, tax and risk consequences. Obtain specialist advice before agreeing on structure.
7Make a carefully conditional offer
A letter of intent or heads of agreement can set price, structure, exclusivity and a due-diligence period. It can also create obligations, so have a lawyer prepare or review it.
- Subject to satisfactory financial, commercial, operational, legal and tax due diligence.
- Subject to finance, landlord consent and an acceptable lease.
- Subject to transfer of licences, franchise approval and key contracts where relevant.
- Define stock treatment, working capital and the assets included.
- State which provisions are binding and non-binding.
8Conduct due diligence
Due diligence should verify the seller's material claims and identify the risks, costs and dependencies that will remain after settlement.
- Financial: three to five years of accounts, BAS, tax returns, bank/POS records, margins, cash flow, debt and working capital.
- Commercial: customers, churn, pricing, competitors, suppliers, contracts and market demand.
- Operational: site condition, capacity, quality, systems, maintenance and reliance on the owner.
- Assets: ownership, condition, PPSR interests, stock ageing and replacement needs.
- Employees: payroll, awards, contracts, leave, superannuation, key-person retention and transfer issues.
- Technology: licences, domains, subscriptions, cybersecurity, backups, privacy and transferability.
- Legal, tax and compliance: have suitably qualified professionals review contracts, disputes, tax, licences, notices and regulatory obligations.
Maintain a findings log that records the evidence, seller response, dollar impact, risk rating and proposed action.
9Value the business and renegotiate
Update the valuation using verified maintainable earnings, asset condition, stock quality, working-capital requirements and due-diligence findings. The result may support the original terms, justify a price change, require stronger protections or show that the risk is unacceptable.
Do not negotiate every finding as a price reduction. Some issues are best resolved before settlement; some require warranties or indemnities; some affect future cash flow; and some should stop the transaction.
10Finalise the contract, finance and approvals
Your lawyer should document the commercial agreement and explain the effect of conditions, warranties, indemnities, restraint, default, adjustments and completion obligations. Your accountant and tax adviser should confirm the structure and financial implications.
- Secure lender approval and satisfy all funding conditions.
- Obtain landlord consent or negotiate a new lease.
- Obtain franchisor, regulator, supplier and key-customer consents where required.
- Agree employee offers, recognised service and treatment of entitlements.
- Arrange business, workers compensation, asset, cyber and other appropriate insurance.
11Prepare for settlement and handover
- Complete the stocktake and asset inspection.
- Check agreed PPSR releases and settlement adjustments.
- Transfer domains, phone numbers, software, passwords, social accounts and intellectual property through secure processes.
- Set up banking, merchant facilities, payroll, accounting, supplier credit and licences.
- Prepare communications for employees, customers and suppliers.
- Document seller training, introductions and post-settlement assistance.
12Manage the first 100 days
Protect revenue before changing everything. Meet key people, stabilise cash, preserve knowledge and monitor the assumptions that supported the purchase.
- Daily or weekly cash and sales reporting.
- Retention plans for key employees, customers and suppliers.
- Immediate compliance, safety, cyber or maintenance priorities.
- Clear authority, access controls and approval limits.
- A 30-, 60- and 100-day plan with owners and measures.
- Review of actual results against the acquisition model.
Before you commit, know what you are buying.
Business Due Diligence provides independent, risk-focused reviews for Australian buyers. We examine the evidence, explain the findings in plain English and help you approach the decision with clarity.
Book a complimentary consultationFrequently asked questions
What should I check before buying a business?
Check the seller, financial records, assets, stock, lease, customers, suppliers, employees, operations, systems, licences, compliance and the assumptions supporting the valuation.
Should an offer be subject to due diligence?
Obtain legal advice about making the offer subject to satisfactory due diligence, finance, lease arrangements, consents and any other essential conditions.
What is the difference between an asset and share purchase?
An asset purchase generally involves selected assets and operations. A share purchase acquires the company that carries the business and its history. The legal and tax consequences can be very different.
Do employees automatically transfer?
It depends on the transaction. Fair Work transfer-of-business rules can affect service and entitlements. Review each employee and obtain employment advice.
How long does buying a business take?
There is no universal timetable. The size of the transaction, record quality, finance, lease, approvals, negotiations and due-diligence findings all influence timing. Avoid compressing the review merely to meet sales pressure.