5 Steps to Buying a Business in New Zealand
1. Carry out an assessment on your skills, experience and immigration goals
What is the primary driver behind your move, have you been in business or a senior management position in the past, where do you feel your strengths lie, what do you enjoy doing, how easily do you believe your experience will translate to the new market.
Determine how much of your capital you are prepared to risk, whether you want to own 25% of the business or 100% the hours you want to work and how this will work with the purpose of your immigration.
When considering each business compare it against the list this assessment has produced.
2. Search for the perfect business
Your initial assessment should have helped narrow your search down to one industry or a single business segment. Knowing this contact the key business brokers in that field, review the businesses for sale on internet sites, newspapers, trade and magazine publications.
If you are seeking something specific contact the relevant trade organisations and discuss the business you are looking for. You never know they may know someone who is looking to sell.
Be patient, finding the right business can take time and effort.
3. Select an accountant and solicitor
Buying a business in a foreign country is a tricky process; don’t get lolled into the false sense of security because the New Zealand system is similar to the UK or South African system.
If you are looking for recommendations contact your migrant bank manager, your business broker, immigration adviser. From the names they give you create a shortlist and then interview several.
Not only are lawyers and accountants a costly and critical resource, the success of your immigration, your financial security and your future in New Zealand will all be in their hands it is critical you feel confident in them, happy working with them and happy with the way they charge before moving forwards.
4. Due Diligence
Ok, so you have found something that you think fits your criteria, now it’s time to do some in depth analysis. Consult your accountant regarding the business’ previous years financial performance, whether it is trending up, down or plateaued. Carry out a brief SWOT analysis (strengths, weaknesses, opportunities and threats) to see what the business core competencies are and what risks you will need to protect against.
With this done ask your accountant to prepare an estimate of the businesses value. There are a number of models but the most common are along the lines of:
Businesses annual profit less the cost to employ a manager to run the business X 2.5 (depending on the risk of the particular business sector) = purchase price for a going concern
To this you should add the value of any fixed assets such as premises.
Now you need to ask the hard questions, is the business you are looking to buy in a market which is growing or declining, what stage in the business cycle is it in, is it well located with good systems and resources, how will you grow and develop the business.
If the business is in a declining industry you will want to be very conservative in your offer, if it is in a growing industry you can generally afford to be more generous.
Now it’s time to make an offer, this offer can be subject to many elements such as the accounts proving correct, the turnover for the next financial year being warranted, the business sale not being completed until your visa is in place.
Finally, remember you are buying a business not a job. You should be able to put a manager in and still draw a healthy income.
5. Decision Time
You’ve made your offer and the vendor has accepted, before finalising the deal ask your accountant and lawyer to have a last look through the information. Produce a simple plan and meet with your migrant manager to talk it through.
Make sure you are comfortable with the vendor and the business, if you are it’s time to buy.