Tips to Start business in Melbourne
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the Australian Taxation Office's small <strong>bus<strong>in</strong>ess</strong> benchmarks External l<strong>in</strong>k (opens <strong>in</strong><br />
same w<strong>in</strong>dow) <strong>to</strong> help you assess how the <strong>in</strong>dustry is perform<strong>in</strong>g overall.<br />
Value your potential purchase<br />
Do your f<strong>in</strong>ancial due diligence – while the owner may set their sale price based on<br />
fac<strong>to</strong>rs such as projections on future earn<strong>in</strong>gs or benchmark<strong>in</strong>g aga<strong>in</strong>st other similar<br />
<strong>bus<strong>in</strong>ess</strong>es, you need <strong>to</strong> <strong>in</strong>dependently collect and check f<strong>in</strong>ancial <strong>in</strong>formation about<br />
the <strong>bus<strong>in</strong>ess</strong> before buy<strong>in</strong>g it. Do<strong>in</strong>g sufficient research also means that you're<br />
buy<strong>in</strong>g it at the right price. A CPA survey says that a surpris<strong>in</strong>g 80 percent of buyers<br />
who did f<strong>in</strong>ancial due diligence with an accountant avoided pay<strong>in</strong>g <strong>to</strong>o much.<br />
Get detailed professional valuations of all assets and liabilities of the <strong>bus<strong>in</strong>ess</strong> you<br />
want <strong>to</strong> buy <strong>to</strong> reduce the risk of mak<strong>in</strong>g a bad purchase.<br />
An objective assessment of <strong>to</strong>tal worth will <strong>in</strong>clude a valuation of:<br />
Goodwill<br />
The reputation, viability and potential of a <strong>bus<strong>in</strong>ess</strong> represent goodwill. This should<br />
be assessed as part of the overall <strong>in</strong>vestment <strong>in</strong> a <strong>bus<strong>in</strong>ess</strong> that needs <strong>to</strong> be<br />
sufficiently profitable, <strong>to</strong> at least cover the capital repayments after tax, and provide<br />
a fair <strong>in</strong>come for the new proprie<strong>to</strong>r.<br />
Assets<br />
Tangible assets <strong>in</strong>clude build<strong>in</strong>gs, land, equipment, s<strong>to</strong>ck, fixtures and fitt<strong>in</strong>gs.<br />
They're usually valued with an estimation of how they've depreciated, or an<br />
estimation of their resale value. Intangible assets <strong>in</strong>cludes <strong>in</strong>tellectual property and<br />
goodwill, such as a strong client list.<br />
Work <strong>in</strong> progress<br />
Work <strong>in</strong> progress represents exist<strong>in</strong>g contracts a purchaser will receive from buy<strong>in</strong>g<br />
the <strong>bus<strong>in</strong>ess</strong>.<br />
Liabilities of the seller<br />
A purchaser may have <strong>to</strong> take on responsibility for employee entitlements such as<br />
holiday and long service leave. These entitlements would have <strong>to</strong> be assessed and<br />
deducted from the purchase price. The liabilities of the seller are not normally<br />
calculated <strong>in</strong> a sale price and a purchaser would not normally take over deb<strong>to</strong>rs,<br />
credi<strong>to</strong>rs or liability for future orders.