\u201cWhat you\u2019re buying is not a client base. What you\u2019re buying is a first meeting with those clients. <\/p>\n
\u201cAnd even then, they might just go like, \u2018Oh, you\u2019re not \u2018Dave\u2019. I don\u2019t like you. I\u2019m gonna leave this business.\u2019\u201d <\/p>\n
Harith suggests negotiating a transition period with the outgoing owner to introduce the new owner to clients. <\/p>\n
He also encourages buyers to calculate what they\u2019ll really be earning, as he\u2019s seen people pay large sums to buy a business, only to find they\u2019ve just bought themselves a poorly paying job. <\/p>\n
\u201cWhen you do the math, they actually end up working for less than minimum wage, despite having paid all that money.\u201d <\/p>\n
Financial due diligence is critical, but Harith urges buyers to not only get financial statements going back at least three years, but current year-to-date figures. <\/p>\n
\u201cDefinitely insist on that monthly P&L [Profit and Loss], because from the monthly P&L, you can see how the business is doing more recently … things could have fallen off a cliff\u201d <\/p>\n
Harith says buyers should also ask for a cash flow statement, which can reveal outgoings that aren\u2019t captured in the profit and loss \u2013 including loan repayments and payments towards tax debt. <\/p>\n
\u201cThe cash flow statement will also show you … how good their clients are at paying on time.\u201d <\/p>\n
If a seller won\u2019t provide enough information to do that due diligence, his advice is simple, \u201cIf a vendor is being cagey \u2026 just walk away.\u201d <\/p>\n
Harith also recommends simply asking why the owner wants out. <\/p>\n
\u201cIf someone has spent years building up a business to the point that it earns them passive income, why would they sell it?\u201d <\/p>\n
Watch or listen to the full episode of The Prosperity Project<\/a> for more.<\/p>\n The Prosperity Project is hosted by Nadine Higgins, an experienced broadcaster and financial adviser.<\/p>\n Follow the show at iHeartRadio<\/a>, Apple Podcasts<\/a>, Spotify<\/a> or wherever you get your podcasts. New episodes are released every Monday.<\/p>\n","protected":false},"excerpt":{"rendered":"\u201cWhat you\u2019re buying is not a client base. What you\u2019re buying is a first meeting with those clients.…\n","protected":false},"author":2,"featured_media":613655,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5],"tags":[138,5098,23788,9439,242513,29163,7799,78,4277,807,117,111,139,69,17286,12968,9769,3263,20586,294,223,684,6035,61,6173,21419,1316,28028,80],"class_list":["post-613654","post","type-post","status-publish","format-standard","has-post-thumbnail","category-business","tag-business","tag-buying","tag-consider","tag-established","tag-fishhooks","tag-generation","tag-heads","tag-in","tag-key","tag-kiwis","tag-new","tag-new-zealand","tag-newzealand","tag-nz","tag-operation","tag-opportunities","tag-owners","tag-project","tag-prosperity","tag-retirement","tag-the","tag-there","tag-things","tag-to","tag-too","tag-towards","tag-when","tag-younger","tag-zealand"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/613654","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/comments?post=613654"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/613654\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/613655"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=613654"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=613654"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=613654"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}