Are you planning to buy a bakery business in Australia? It can be a great way to get into the booming food industry. However, buying it can never be a cakewalk since you are likely to face many complications. The complete checklist below will help you to smoothly buy a bakery business in Australia.
- Explore and Self-Assess
Envision the kind of bakery you want to buy so you can narrow down your search options accordingly. You should know your current capital amount and how much money is required to be borrowed. Contacting financial institutions and brokers can always help you learn the financing options in Australia. Assess your baking and business management abilities to identify and address the gaps.
Identify the demographics of the target customer base and the most suitable locations in Australia to run a bakery. Find the latest trends, existing bakery businesses for sale in desired locations, their USP, strengths and weaknesses. Learn the usual bakery profit margins to make realistic expectations.
- Find the Right Bakery and Do Initial Checks
Try to find the right bakery by engaging a skilled broker who specialises in the food business. They can help you in finding suitable listings and doing negotiations. You should scrutinise business listings and brochures. Besides the asking price, you should consider the reason for sale, initial financial records, valuations and sales inclusions.
Request sales data of at least the last three years and check for growth and consistency. You should evaluate the profitability trends and get an overview of the bakery’s assets and liabilities. Ensure to visit the bakery at different times of the day to witness the customer flow. Observe the overall appearance, layout, cleanliness, customer service and employee morale.
- Perform an In-Depth Due Diligence
Request and review detailed financial records, including tax returns, financial statements, bank statements, accounts receivable/payable, assets register, stock valuation, payroll records, and GST compliance. You can hire a professional business evaluator to decide the fair market price with the implementation of methods such as the capitalised future earnings method, the earnings multiple method, the assets valuation method and the comparable sales method. An accountant can help in identifying non-recurring expenses and discretionary expenses by the existing owner that can be reincluded to reflect a genuine underlying profit. Working with an accountant helps you in making realistic financial projections for your own business.
Draft a comprehensive Sale and Purchase Agreement with clearly specified terms and conditions. You should review the rent, duration, outgoings, terms and renewal options. Confirm if the landlord agrees to assign you the current lease, or a new lease will need to be negotiated. You should understand obligations at the end of the lease duration. The bakery you buy should hold all required food business permits and licenses from the local health authorities and council, and the business should have or plan to have a certified Food Safety Supervisor. Check permits related to signage, building and the fire department, and confirm all permits and licenses are transferable to you. Review the current supplier contracts to learn if they are transferable and have favourable terms. If they are applicable for transfer, review the employee contracts, recognitions and awards. Check for registration in business name registration, trademarks, domain names, and any branding or proprietary strategies. You should physically examine whether all display cases, refrigerators, mixers, ovens, and other equipment in the bakery are working before buying the business.
- Negotiate and Get into a Settlement
Make an informed offer depending on the due diligence. Prepare yourself well to negotiate on the buying price and other relevant terms. Your business contract should include conditions, such as the landlord’s permission, acquiring finance and desired due diligence outcomes.
Hire a lawyer who can guide you in the settlement process, comprising the transfer of assets, liabilities and funds. Negotiate a fair handover period with the existing owner to ensure the buying process finishes smoothly.
- Work on Post-Acquisition
Register your ABN and update all the bakery business information. Transfer all accounts related to banking, utility and supplier, and get a detailed business insurance.
Implement the most effective marketing strategies to re-establish your brand and attract new target customers. Keep monitoring your bakery’s financial performance, the latest market trends and customer feedback so your business grows.
The Bottomline
You can buy a bakery business in Australia without hurdles and complications by following the tips above. It can be a lucrative venture if you take the right steps at the right time. With professional advice and guidance from brokers, lawyers and accountants, you can successfully complete the buying process.
