The thought of embarking on a business venture is exciting and intimidating all at once. However, with the right amount of planning, you’ll be able to step into your new business with confidence and reassurance.
Thorough research is the key to a successful foundation for your next business venture. Instead of allowing your decisions to be influenced solely by your wants, take a realistic and informed approach. This is especially crucial when figuring out how much you can afford to invest. Doing so is the best way to avoid an unwanted situation that could be difficult to get out of.
A question that will pop up early in the process is: how much is the business that you’re interested in worth? In the business industry, market value can be subjective. Ensuring that professionals are involved from the get-go is one of the safest roads you can take.
The process of determining the worth of a business is not as straightforward as simply looking at what has been invested into it. Lawyers, accountants and business brokers understand this. They can give you invaluable advice and accurate data to guarantee that you don’t over-invest. They’re here to help make your life easier!
Additionally, it’s important to recognise that the value of a business may fluctuate depending on how much it means to you. If you are set on one specific business, be prepared to invest more due to this.
So, how much can you really afford to invest? Ultimately, the amount you’ll be able to invest will be a combination of cash that you have readily available, combined with the amount that can be successfully loaned to you from a bank or other lender.
At face value, it may appear that the amount you will need is the amount that the business is advertised for. However, there are plenty of hidden costs associated with business purchase, such as transfer and set-up costs, interest payments and contingency reserve. It may also be worthwhile to consider how much you will need on a personal and professional front to keep your business up and running until it breaks even.
Essentially, there’s a simple equation to work by when figuring out the top purchase price that you can afford. It will add up to the total amount of money available to you, minus costs to keep the business up and running. Once you work this out, you’ll be in a solid position to know how much you can afford to invest.
Now is the perfect time to assess how much you can reasonably afford to invest in your future. As long as you’re prioritising planning and engaging with trusted professionals, there’s no reason why you can’t seriously consider purchasing a business.
If you’re unsure about how much you can borrow, get in touch with our in-house business loans & finance team. Call Spring Loans on 09 600 33 34 or email them at hello@springloans.co.nz.
