How to buy a business

Find out why the vendor is selling

Before you look at the books, Sharma says, develop a clear understanding of why the business is being sold.

“This is more important than the dollar value,” he says. 

“Is it about retirement, or do they just want a change of career? Are they relocating, or is there something else you should know about? Is the seller going to go and open another practice not far from you, soon after you buy their business?”

When he purchased Sydney-based SNS Accounting in 2022 from IPA Member of the Year 2023 Sharon Roots, Sharma could be comfortable that she wouldn’t open another local business – she was selling to move closer to her daughter in Western Australia. 

Respect the vendor

Of course, the purchase of a business is a commercial decision, but often the sale of a practice is an emotional experience for a vendor as well, Sharma says. 

“While you need to do very thorough due diligence, remember the vendor is not just selling a business, they’re looking for someone to look after their legacy,” he says.

“It’s about legacy, emotion and respect, as much as it is about money.”

Conduct thorough due diligence

Then, of course, the financial side is also of vital importance.

Before the purchase, Sharma says, the potential buyer should have a genuine understanding of what has gone on in the business over the past three to four years.

“Once you’ve reviewed everything, write a set of questions to clarify any doubts,” he says. 

“Why was income lower in a particular month? What changes brought growth during that particular year? Have there been any new services added recently?”

Assess the potential of the local area

Particularly in smaller practices, success will come from activity in the local area, Sharma says. A potential buyer must research what is going on in the region. 

Are other businesses opening or closing? What is the socioeconomic and age structure of the area? Are there any strong drivers of economic activity? 

Just a few kilometres from the SNS Accounting office, Sharma says, is the new Western Sydney Airport, due to open in 2026 and already attracting businesses. 

“That represents great opportunity for the future,” he says.

A new metro station in Luddenham, seen here under construction in August 2023, will vastly improve transport links to the area Sharma’s practice is in.

Look for a cultural match

Culture isn’t just about types of clients, levels of service and behaviours of staff. Those aspects are important and must be considered in terms of culture, Sharma says, but so should the tools being used in the business.

“The way we have done things is quite tech-based, but Sharon’s business was more traditional,” he says. 

This meant that the acquisition of Sharon’s client list didn’t require a complex project to migrate data between platforms that may not have been friendly to such a process. 

“That actually made it simple for us to absorb her client data, and it was not a big cost for us in terms of operating structure,” Sharma says. 

“So, our business was complementary to hers.”

Meeting the clients

Finally, once the purchase is complete, it’s important to make introductions to the business’s clients as positively as possible.

“Best practice is to choose a quarter end where clients are coming in, or you’re naturally having meetings. Inform them face-to-face, rather than by email or mail,” Sharma says. 

“The previous owner should let the client know exactly why they’re moving out of the business, then introduce the new partner. Explain the situation, so the client understands exactly what’s going on.”

Of course, if the previous owner can stay on for a period of time, it’s good for everybody involved. Eighteen months after selling SNS Accounting to Sharma, Sharon Roots is still working in the business.

She is still highly valued in the business as well – Sharma and the SNS team nominated her for the 2023 IPA Member of the Year award.

“At the end of the day, whatever we wanted from Sharon, we achieved as business owners. Whatever Sharon expected from us by selling her business, she achieved,” Sharma says. 

“We met each other’s expectations, but, more importantly, we built a strong relationship of respect along the way.”

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