ACCOUNTANTS FOR BUYING A BUSINESS · MELBOURNE
Buying a business? Financial and tax due diligence before you commit.
WHAT WE DO
Understand the business. Before you buy it.
Due diligence when buying a business is the structured check of the seller's financial, tax and commercial position before you sign a binding contract. It tells you whether the earnings behind the asking price are real, what working capital and cash the business will need after settlement and what the purchase will cost you in tax.
The asking price is one number. Whether the business can support that price, pay you a market wage and repay the debt used to buy it is a different question, and it is the one most buyers leave to assumption. Our acquisition advisory work answers it before you commit.
We test the dealbreakers first (revenue, cash flow and profit), then review the seller's figures, query the add-backs, model your working capital and cash requirements and advise on how the purchase should be structured for tax. If you proceed, we stay involved through the first 100 days so the assumptions behind the purchase are measured against actual results. Where the target is a medical, dental or allied health practice, this work draws on our medical and allied health accounting experience; see also our guide to buying a dental practice.
This service covers financial and tax advice on an opportunity you have already identified. We do not source businesses, negotiate on your behalf or act as a buyer's advocate, and you remain free to keep your existing accountant for everything else.
Independent. Buyer-paid. Fixed fee.
Accountants for buying a business, based in Melbourne
OUR ACQUISITION SERVICES
Three stages. Engage for one, or all of them.
Each stage has a defined scope, a fixed fee quoted before work starts and a written deliverable. Due diligence is priced by workstream, so you pay for the parts you need. Where earlier work can be reused, the later quote shows a credit for the overlap. Fees are quoted exclusive of GST.
Before you commit
1. Strategy Session and Initial Deal Review
Set your objectives and budget, then take a first look at a specific target before you spend on full due diligence.
STRATEGY SESSION
- Short questionnaire, then a 60-minute meeting
- One-page acquisition brief: objectives, income needs, budget, target criteria and next steps
- Written brief within 2 business days
INITIAL DEAL REVIEW
- One target and its information pack
- Seller earnings adjustments queried
- Price assumptions and missing evidence identified
- Indicative funding position and an estimated return on the cash you put in, prepared for you and talked through at the walkthrough
- 3 to 5 page summary and a 30-minute walkthrough, ordinarily within 3 to 5 business days
Important. An Initial Deal Review is a limited screen. It is not due diligence and should not be relied on to complete a purchase.
Before you sign
2. Financial and Tax Due Diligence, Structure and Cash Flow
The work that tests whether the business can support the price, and how you should hold it.
OUR APPROACH: DEALBREAKERS FIRST
We test the dealbreakers first. That usually means revenue, cash flow and profit, along with any others specific to your deal. If the numbers that justify the price do not hold up, we tell you before you spend on the rest of the review. Only once these stand up do we move to the standard workstreams below. Each workstream is scoped and priced on its own, so you engage the ones your situation calls for.
FINANCIAL AND TAX DUE DILIGENCE
- One trading entity, ordinarily three financial years plus the current year to date
- Earnings bridge from reported profit to sustainable earnings, separating verified adjustments from seller claims
- Revenue recognition and cost recognition reviewed: the two items most often misaligned and the most likely to distort EBITDA
- Working capital, liabilities and commercial dependencies: customers, staff, suppliers and owner involvement
- Scoped tax review (income tax, GST, PAYG withholding, superannuation and payroll tax) with exposure estimates where supportable
- Findings report, issue register and meeting, ordinarily within 10 to 15 business days of receiving complete information
ACQUISITION STRUCTURE AND CASH FLOW
- Asset purchase or share purchase: the tax consequences for your situation, including GST and going-concern treatment
- Ownership structure, and sources and uses of funds
- 24-month monthly three-way forecast (profit and loss, balance sheet and cash flow) with base and downside cases
- Assumptions meeting and one revision
Important. Due diligence is performed on agreed procedures. It is not an audit and does not guarantee that the business is free of fraud or that it is suitable for you.
After settlement
3. First 100 Days and Ongoing Support
Turn the purchase assumptions into a practical ownership plan, then measure actual results against them.
FIRST 100 DAYS
- Opening balances and systems transition plan
- Obligations calendar: BAS, PAYG withholding, superannuation, payroll tax and lease dates
- Cash reporting set up in Xero
- Three monthly management reviews against the acquisition forecast
- Handover to ongoing support
ONGOING ACCOUNTING AND VIRTUAL CFO
- Compliance, bookkeeping and payroll on the firm's fixed monthly packages
- Forecasting and virtual CFO support where the business warrants it
- Separately scoped; you are under no obligation to move your accounting to us
Note. A decision not to proceed after review is a good outcome. We do not earn more if you buy.
FOUR QUESTIONS
What to answer before you commit to a purchase
Most acquisition problems we see trace back to one of these four questions being left to assumption.
1. Do the earnings behind the asking price hold up?
Seller profit figures often include add-backs: owner wages, one-off costs, personal expenses. Some are legitimate; some recur every year. We reconcile reported profit to BAS, bank statements and lodged tax returns, test each adjustment against evidence and arrive at an earnings figure you can price from.
2. What working capital comes with the deal, and what will you fund?
The price is rarely the whole cost, but it depends on the deal. Some going-concern sales include working capital, so stock and debtors transfer with the business. Others leave you to fund stock, debtors, deposits, loan repayments and the first quarter's wages, superannuation and GST from day one. We work out what is included in the sale and what you will need to fund on top, then model the month-by-month position so the funding is right from the start.
3. How should the purchase be structured?
Whether you buy the assets or the shares, and which entity should own them, affects GST (including whether the going-concern exemption is available), depreciation, land transfer duty where premises are included, motor vehicle duty on transferred vehicles, access to the small business CGT concessions on a later sale, and whether you inherit the seller's tax history. These decisions are difficult to unwind after contracts are signed, so we work through them with you and your lawyer before then.
4. What return do you get on the cash you invest?
The earnings can hold up and the deal can still be wrong for you if the cash you put in does not earn a fair return once the loan is serviced and you are paid a wage. We set out the funding and an estimated return early, so the price is tested against your position, not just the seller's.
BUYER'S FINANCIAL CHECKLIST
Due diligence checklist for buying a business: twelve financial questions
Before you agree a price, you should be able to answer each of these from evidence, not from the seller's summary.
- Can the reported earnings be reconciled to BAS, bank statements and lodged tax returns?
- What happens to profit once a market wage for the owner is deducted?
- Which add-backs are one-offs, and which recur every year?
- How concentrated is revenue across customers, contracts or referral sources?
- How much working capital transfers with the business, and how much will you need to fund?
- What stock is slow-moving or obsolete, and how is it valued in the price?
- What maintenance or equipment replacement has been deferred?
- What loans, leases and hire purchase obligations continue after settlement?
- What changes under the premises lease on transfer, renewal or rent review?
- What tax, GST, payroll tax or employee entitlement exposures could pass to you?
- How much of the business depends on the seller personally, and what is the handover?
- What evidence is still missing, and what should the contract require the seller to provide?
Our Initial Deal Review works through these questions on a specific target and tells you which ones need full due diligence.
HOW WE WORK
Defined scope, evidence-based findings, plain conclusions
- Scope agreed in writing. Entities, periods, procedures, materiality and exclusions are set out before we start, so you know what is and is not being tested.
- Findings you can act on. Each report closes with a clear position: proceed subject to specified matters, investigate further, or reconsider the terms.
- Built for your lawyer and financier. Evidence gaps, price adjustments and contract points are set out so your lawyer can act on them, and the earnings and cash flow outputs are in a form lenders recognise.
- Independent of the deal. You pay a fixed fee. We take no success fee, and we do not advise both sides of the same transaction.
WHO WE WORK WITH
Who this service suits
Our acquisition work suits established businesses with an asking price in the range of roughly $250,000 to $3 million. Typical clients include:
- Existing business owners buying a competitor, a client book or a second location
- Doctors, dentists and allied health practitioners and professional services principals buying a practice
- Experienced operators buying a service business, gym or studio
- First-time buyers with a defined budget and a specific target
We accept hospitality, e-commerce and technically complex businesses selectively, where the records and budget support a reliable engagement. We do not act on distressed purchases, passive-income schemes or cross-border transactions.
YOU MAY NEED TO KNOW
Due diligence when buying a business: questions we are asked
What is due diligence when buying a business?
Due diligence is the investigation a buyer carries out on a business before signing a binding contract to buy it. Financial due diligence checks that the profit the seller reports is supported by the records; tax due diligence checks for exposures you would inherit; commercial review looks at how much of the earnings depend on the owner, key staff or a few customers. It is separate from the legal due diligence your lawyer performs on the contract, lease and title.
Do I need an accountant when buying a business?
A lawyer handles the contract. An accountant tests whether the numbers behind the contract are right. Without a financial review you are relying on the seller's presentation of profit, and the price, your borrowing and your first year's cash position all flow from that figure. We recommend involving an accountant before you sign heads of agreement, not after.
What are the red flags when buying a business?
The ones we see most often are profit that cannot be reconciled to BAS, bank statements and tax returns; add-backs that recur every year but are presented as one-offs; earnings that depend on the owner working unpaid hours; one or two customers making up most of the revenue; stock that is old or overvalued; equipment that is due for replacement; and a lease that expires or reprices soon after settlement. None of these necessarily ends a deal, but each should change the price, the terms or the conditions in the contract.
What does financial due diligence on a small business involve?
We reconcile the seller's profit figures to the underlying records (BAS, bank statements, payroll and tax returns), test the add-backs the seller has made, review working capital and liabilities, and assess how much of the earnings depends on the current owner, key staff or a small number of customers. The result is a findings report with an earnings bridge, an issue register and a clear recommendation. The exact procedures are agreed with you in advance.
How much does due diligence cost when buying a business?
Due diligence is priced by workstream, so you engage only the parts you need: the dealbreaker review, earnings and working capital, tax, or structure and cash flow. Within each workstream the fee depends on the number of entities, the periods reviewed and the quality of the seller's records. We quote a fixed fee before any work begins and stage the engagement so you can stop after an Initial Deal Review if the target does not stack up. Where an Initial Deal Review leads into full due diligence on the same target, the second quote shows a credit for work already done.
How long does due diligence take?
An Initial Deal Review is ordinarily delivered within 3 to 5 business days of receiving the information pack. Financial and tax due diligence ordinarily takes 10 to 15 business days once complete information is received. The timetable pauses while information is outstanding, and we will tell you promptly if the seller's records are not adequate for the work.
Should I buy the business assets or the company's shares?
It depends on the business, the seller's tax position and yours. An asset purchase generally lets you choose which assets and liabilities you take on and resets the depreciation base, but GST (including whether the sale qualifies as a GST-free supply of a going concern), land transfer duty on any premises and motor vehicle duty on any vehicles need to be worked through. A share purchase brings the company's history with it, including its tax and employee liabilities, but may suit the seller and preserve contracts, licences and supplier terms. We set out the tax consequences of each for your situation and work with your lawyer on the legal side. We do not recommend one structure as a rule.
Can I borrow to buy a business, and what will the lender want to see?
Lenders do fund business purchases, usually with a deposit and often with security over property. They lend against cash flow, not the profit in the advertisement: they will want to see the seller's financials, your forecast for the business under your ownership and evidence that cash flow covers the repayments with a buffer, after tax, capital spending and working capital. The earnings bridge and 24-month cash flow forecast we prepare are in the form lenders expect. We do not arrange finance; we work alongside your broker or bank.
Is this the same as a business valuation?
No. Due diligence tests the evidence behind the seller's numbers and identifies the risks. A valuation gives an opinion of what the business is worth. Our Initial Deal Review will identify pricing assumptions and gaps; if you need a formal opinion of value, we provide that through our separately scoped business valuation service, with the purpose and reliance agreed in advance.
Do you find businesses for sale or negotiate on my behalf?
No. This service is financial and tax advice on an opportunity you have identified. Sourcing businesses, representing a buyer in negotiations and acting as a buyer's advocate are separate activities that are regulated differently in Victoria, and we do not offer them. We are happy to work alongside your broker, lawyer and finance adviser.
FEES
Fixed fees, agreed before we start
Every stage is quoted as a fixed fee before work begins, based on the scope, the number of entities, the periods reviewed and the state of the records.
- Due diligence is priced by workstream. You engage the workstreams you need (the dealbreaker review, earnings and working capital, tax, or structure and cash flow) and pay only for those
- Strategy Session and Initial Deal Review fees are payable upfront
- Due diligence and structuring engagements are invoiced 50% on acceptance and 50% before the final report is released
- Changes in scope (additional entities, reconstruction of records, urgent deadlines) are agreed as a fee variation before the work is done
- No success fee and no commission on the transaction
Contact us for a quote on your target.
SCOPE AND RELIANCE
What this service is, and what it is not
Our acquisition advisory services are provided by 42 Advisory, a CPA practice and Registered Tax Agent (RAN 26303651), and are performed in accordance with applicable professional and ethical standards.
Important notice
- Our work is financial and tax due diligence, deal structure and cash flow advice on a business you have identified. It does not include sourcing, negotiation or buyer representation, legal advice, employment law review or the arranging of finance.
- We work from the seller's records, management information and interviews. We do not carry out a physical inspection of premises, plant, stock or assets, or verify their existence and condition.
- Due diligence is performed on agreed procedures. It is not an audit and does not provide assurance that the business is free of fraud or misstatement.
- The indicative funding position and estimated return is a high-level estimate based on assumptions and the funding terms available to you. It is not a forecast, a valuation or financial product advice.
- Where a purchase involves acquiring shares in a company, our advice is limited to the taxation and accounting consequences. It is not financial product advice, and 42 Advisory does not hold an Australian Financial Services Licence.
- Reports are based on information provided by the seller and the client at a point in time. Actual outcomes may differ.
Unless expressly agreed in writing, our reports are prepared for the client's use only and should not be distributed to or relied upon by third parties.
GET STARTED
Planning an acquisition? Start with a 30-minute introductory meeting.
Tell us about the target and where you are in the process. We will tell you which stage fits and what it will cost.