Navigating the Path to Buying a Family Business
A unique opportunity has presented itself: I am exploring the possibility of purchasing my father’s business. Unlike a typical inheritance or a gift, this transaction would involve an outright purchase.
The asking price for the business is set at $3.5 million. My father has proposed an arrangement where $2.5 million is required upfront, with the remainder to be settled at a future date. Unfortunately, I don’t have the capital readily available to make this significant investment, so I am considering taking out a loan of approximately $2.7 million. This would allow me to acquire the business while still retaining $200,000 for operational expenses.
Looking at the business’s financial performance, it had a net profit of $1.1 million last year. This year, while we anticipate a drop to around $800,000, there are several contracts lined up that should lead to increases in our profits moving forward. Historically, the business has generated roughly $250,000 in net profit in previous years, indicating the potential for growth under new management.
In the purchase arrangement, all existing debts will be addressed, and benefits such as superannuation and long service leave for employees will be handled appropriately. Additionally, I will gain ownership of all company assets.
I am keen to gather insights beyond what I’ve already received from my accountants and financial advisors. If you have any advice or strategies that could be helpful in navigating this transition, I would greatly appreciate your thoughts.
