The buyer's guide
Buying a business in Australia.
Six stages, the mistake that costs buyers the most at each one, and where independent analysis fits. Written for buyers of businesses between $500k and $10m.
The six stages
1. Search and shortlist
Most buyers look for six to eighteen months before signing anything. The discipline at this stage is knowing your box: industry, size, geography and the price range your equity and borrowing capacity actually support. Buyers who know their borrowing capacity early waste far less time on deals they can never fund.
The expensive mistake: Falling in love with a business before knowing whether the numbers can ever support the price.
2. First look at the numbers
The vendor provides an information memorandum and summary financials. Treat them as the vendor's opening argument, not evidence. This is the point for a fast, cheap sanity check: does the adjusted earnings figure survive first contact with the BAS lodgements and bank deposits?
The expensive mistake: Negotiating price off an adjusted earnings number nobody has tested.
3. Price and terms
Offers at this end of the market are usually a multiple of adjusted earnings. Every dollar of add-back you accept without evidence moves the price by the multiple. Get the offer conditional: subject to finance and subject to due diligence, with enough time in both conditions to actually do the work.
The expensive mistake: Signing a contract with a seven-day due diligence window, which is barely enough time to receive the documents.
4. Due diligence
Now the earnings picture gets rebuilt from source documents: revenue reconciled to BAS and bank, wages to payroll and super, the balance sheet to reality. Findings become price adjustments, contract protections, or a decision to walk. This is where a few thousand dollars of analysis routinely moves the deal by six figures.
The expensive mistake: Having a compliance accountant cast an eye over the vendor's own paperwork and calling that diligence.
5. Finance
The lender rebuilds serviceability from its own view of the earnings and tests it at a stressed rate. A submission built to that standard, with the model, the funding request and a 12-month cashflow forecast, gets approved faster and with fewer questions. The application itself is finance broking, handled by our broking partner The Lending Lab Pty Ltd.
The expensive mistake: Sending the bank a pile of vendor documents and hoping the assessor assembles the case for you.
6. Settlement and handover
Working capital adjustments, entitlement transfers, lease assignments and the first ninety days of trading. The due diligence report doubles as a handover checklist: every finding is something to fix, monitor or renegotiate before completion.
The expensive mistake: Discovering after settlement what a completion adjustment mechanism would have caught before it.
The arithmetic
What skipping the work actually costs
Due diligence looks expensive until you price the alternative. Typical figures for a $2m acquisition, drawn from the patterns we see in real engagements.
| Scenario | Typical cost |
|---|---|
| Level 2 due diligence on a $2m purchase | $7,000 |
| Accepting one unevidenced $50,000 add-back at a 3x multiple | $150,000 |
| Buying at peak trading with rent about to reset (margin loss, year one) | $40,000+ |
| No working capital adjustment at completion | $50,000 to $150,000 |
| A declined finance application discovered mid-contract | The deal, plus the deposit at risk |
Level 2 due diligence on a $2m purchase
- Typical cost
- $7,000
Accepting one unevidenced $50,000 add-back at a 3x multiple
- Typical cost
- $150,000
Buying at peak trading with rent about to reset (margin loss, year one)
- Typical cost
- $40,000+
No working capital adjustment at completion
- Typical cost
- $50,000 to $150,000
A declined finance application discovered mid-contract
- Typical cost
- The deal, plus the deposit at risk
Illustrative figures. Every deal is different; the direction of the arithmetic is not.
Where we fit
Two products, both built for buyers
Stage 4: Financial due diligence
- Earnings rebuilt from BAS, bank and ledger
- Every add-back evidenced or rejected
- Working capital and completion adjustments
- Fixed fees from $2,500, published
Stage 5: Lender submission packs
- Serviceability model with covenant testing
- Funding request written for a credit assessor
- 12-month lender cashflow forecast
- Flat fees from $1,850, published
Common questions
From first serious look to settlement, three to six months is typical. Due diligence itself runs from under a week for a fast verification to three to five weeks for a full earnings analysis, and finance approval typically takes four to eight weeks when the submission is built properly.
Lenders typically fund 50% to 80% of the purchase price, less where the price is mostly goodwill, so expect to contribute 20% to 50% in equity plus working capital, stamp duty where it applies, and professional costs. Knowing your real capacity before you search saves months.
Before an offer: that the adjusted earnings survive a fast reconciliation against BAS lodgements and bank deposits, and that the asking multiple is sane for the industry. The deeper work, from add-backs to working capital to entitlements, belongs inside a due diligence condition after the price is agreed.
Yes. Legal due diligence on the contract, the lease and the entitlements is your solicitor's work, and taxation structuring belongs to a registered tax agent. Our financial due diligence report lists exactly which questions need each of them.
Fixed published fees from $2,500, priced by transaction value and service level. The full matrix is on our pricing page, and the fee is confirmed in writing within two business days of us seeing the financials.
Want a straight read on your deal?
Book a free call with Nicholas. Bring the numbers you have, and we will tell you the right service level and the fixed fee. No obligation.