Buying A Business In New Zealand

Buying A Business In New Zealand
The main advantage for many migrants on the Investor or Entrepreneur visa schemes is that buying an existing business includes an existing cash flow and existing customers. The advantage, however, costs a great deal more than a start-up, as sellers of existing businesses highly value the 'goodwill' they've built up over the years. An option is a franchise, with the fee to the franchiser equivalent to 'goodwill' but with a strongly established business model and a well-known name. Most importantly, when buying any existing business, professional advice is mandatory.

The rule is simple – check all the documentation linked to the business you are thinking of buying and, if you're not sure about tax or other matters, engage expert help. If the business systems are clear and effective and staff are willing to stay on, its operating principles will soon become clear. Another bonus of buying an existing business is there's no need to engage and train staff. Existing staff may even be able to improve turnover by suggesting improvements.

The groundwork of initial registration of the business with the Inland Revenue will already have been accomplished, saving you the hassle, but it's a good idea to meet with the company's accountant and discuss its immediate condition. Also, before you sign anything at all, your lawyer should be consulted, especially if the business is involved in ongoing contracts.

Due diligence in investigating the business's financial standing is essential, although a confidentiality agreement may need to be signed. The business books for at least the previous three years will require an in-depth analysis and the weaknesses as well as the strengths identified. Leases, contracts, equipment included in the sale and/or stock at valuation will all need to be checked. If you decide to proceed, your lawyer should draw up the paperwork based on an accountant's valuation of the premises and their contents as business assets plus the 'goodwill' element.

It's best to have your lawyer make the initial offer, unless you've developed an excellent relationship with the seller. Special conditions relating to staff, operating licenses, trade restraints and much more will need to be identified, with expert assistance usually essential. The seller will then have to decide if your offer and its special conditions meet his needs. If they do not for any reason, then it's time to renegotiate or walk.