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Borrowing for a Business Purchase – Financial Analysis

At Invest Blue we get referred a lot of clients looking to buy a small business. We obviously have to get a lot of information to complete formal assessment. Part of this is around Financial Analysis. This can be achieved for borrowing purposes by Comparative analysis which we use to compare (if available) the last 3 years trading performance of the business. We would pose questions like:- Are sales growing, What is happening with GP margin in relation to sales and in turn what is the trend of NP. Basic ratios can test management of key assets like stock & debtors.

Overlaid with the comparative analysis is industry analysis. There are various sources of information like specialist IBIS research reports, ATO benchmarks and industry associations. Each of these provides guidelines for areas like GP margin, the percentage of turnover paid in rent by like sized similar businesses.

Click here to be redirected to the ATO site which lists information for over 100 industries from air conditioning to Watch Retailing.