Buying a business | 3 min read
Before you commit to buying a business or franchise, you need to understand all the expenses you could have to pay beyond the asking price. Don’t get caught out with the hidden costs of buying a business. Here are some of the most common.
Updating assets – investing in the assets that keep the business running
If the business is run down, consider the cost of refurbishment to get it up to scratch. Some franchises may also expect you to refit the premises before you open to the public, so be clear on what’s expected before you make any agreements.
Consider any necessary maintenance or update costs like servicing vehicles, tools, or replacing old equipment and be aware of any leasing fees that you may owe for building premises.
Professional services – utilising skilled specialists to help you navigate the buying process with ease
Compliance costs – meeting your legal obligations as a business owner
Compliance is about protecting the business and your staff by ensuring your licences and registrations are compliant and up to date, and that you have the right insurance.
At a minimum you’ll need to register your business name, and for an ABN. Based on the industry and nature of the business you may also need apply for specific certifications, such as import permits, liquor licences, Food Act registration, or environmental impact permits.
Depending on the type of business you buy, there are many types of insurance that you may need, including public liability, professional indemnity, WorkSafe, building contents and income insurance. Check out this helpful Australian Government article to better understand the insurance your business needs.
Training costs – learning what you need to know to work in the business
A lot of training can be done on the job and through mentoring, however there may be some skills that require short courses or even tertiary education. If you’re investing in an industry that’s new to you, you may need to do some upskilling before you take over. Training can be expensive and should be ongoing, for you (and your staff), so make sure to include this in your budget.
Staffing costs– employing the people you need
You may need to recruit and train new staff before you can open your business, which takes time and money, so factor this in. Whether a business will retain existing staff depends on what you agree with the current owner.
Note that if you’re buying a brand-new franchise and there are no existing employees, you may need to staff an entire business from scratch.
Marketing costs– driving new business for your new business
While marketing will become one of your everyday running costs, you may also need to invest in some upfront spending while you’re establishing yourself in the business. This can include updating signage, collateral (like business cards), in-store branding, websites and other online assets.
Now you know all the costs to expect you can avoid any budgeting surprises and take some time to work out what you can afford. Once you’ve crunched the numbers, you can confidently continue your journey to become a business owner.
Figuring out the costs involved is a great step towards realising your business dreams. Check out our ultimate guide on how to buy a business to discover what else to expect.