Buying a Business in New Zealand

Setting up a new company from scratch when you emigrate to New Zealand can be daunting, and it can take some time to build up a new business. Another option is to buy an existing New Zealand company or franchise when you emigrate, so that you hit the ground running. 

We've asked Christchurch business broker Sam Williamson from Tabak Business Sales for his advice for Brits who are thinking about buying a business when they more to New Zealand:

So you're thinking of emigrating to New Zealand, and you'd like to buy your own business and work for yourself rather than finding a job - congratulations, business ownership can be one of the most financially rewarding and intellectually stimulating pursuits that you can follow in life.

Buying an established business can be lower risk than starting one up from scratch. Here are some tips to help you with your search:

1. Understand What You Want

Prospective purchasers are often "willing to consider anything" when in fact the opposite is true. A good way of defining what it is you want in a business is to identify what it is you don't want or like.

If, like most Brits, you are emigrating to New Zealand for a better lifestyle, you need to think about what hours you would like to work. There are also more specialist considerations - for example:

• Does your preferred business have a physical, mobile or virtual presence?
• Does it hold stock; is it reliant on plant and equipment?
• Could it be a franchise?
• Does it deal direct with consumers or other businesses?
• Does it deal in domestic and/or overseas markets?

2. Know Your Limit

It is also very important that you know what you are actually capable of buying. A visit to a local business banker before you start you search to gain an understanding of your borrowing ability will be very useful and give you a good idea of all documentation required in order to take out a loan. Bear in mind that banks often prefer to finance buyers:

• Who have previous business experience,
• Who have some knowledge of the industry they intend to operate in,
• Who have good advisory team around them, and
• Who have a good lump of capital to invest into the business (approx 60%+).

3. Look At Everything and Understand What You Are Looking at

It is important that you get to know the market before you buy and therefore you should look at quite a number of businesses early to get a feel for the numbers, ratios and jargon that is commonly used in the business sales world. During your search for a business you will find that there are many types of "business" out there on offer:

• Some "businesses" are in fact opportunities, they tend to involve the payment of some key money in return for the right to put in hard work starting something up from scratch e.g. a licence to do or sell something perhaps using an existing system. These tend to be the cheapest to get into although higher risk.
• Some "businesses" are in fact jobs, they provide the owner a financial return and lifestyle that is no better than the benefit an average job provides.
• Then there are true businesses, they provide the owner a financial return and lifestyle well in excess of any of any job or opportunity. These tend to be the most expensive to get into although lower risk.

A good way to find good businesses for sale is to consult a reputable business brokerage.

4. Business Value

The value of a business is very often based a multiple of the annual earnings of the business. There are many reasons why one business may be worth more than another, major factors are the attractiveness and security of the business model (how the business operates) and the outlook (future expectations for the industry). Not all businesses are the same, two businesses of the same type and size may command different values. As a general rule of thumb most small to medium sized New Zealand businesses sell for a price in the range of 2-5 times earnings.

5. Find and Use Good Advice

Make sure you use the services of professional advisors such as business brokers, accountants and lawyers. Business brokers represent businesses for sale and have a wealth of transactional experience, and can guide you safely through the sale process. They work for the vendor and as such their services are free to a prospective purchaser. Accountants provide advice on the financial aspects of the subject business and depending on what type of accountant you engage perhaps business strategy. Lawyers check legal documentation and advise on legal risks. The best way to find reputable professionals to engage is to ask around for personal referrals from people who have used their services.

Where to Next?

If you're interested in buying a business in New Zealand, take a look at the featured listings on the Tabak Business Sales website. This is not a comprehensive list of the many businesses that we have for sale at any one time all over New Zealand but it will give you a good idea of what is available - and, of course, how much it will cost. If you are serious about finding a good business, register your interest on our website, and be among the first to hear of our new business listings.

This information is of general commentary only and should not be regarded as specific advice.

Please contact us if you have any questions about the financial side of life in New Zealand, and don't forget to order your free copy of our comprehensive New Zealand Guide.