Stake out a top business buy Butcher Darren Ewert. Picture: Tim Carrafa Source: National Features SACKING the boss and buying your own business is a dream for many, but if you don't ask the right questions it could easily be a nightmare. Hayes Knight director Vito Interlandi warns potential buyers need to be clear what they are seeking to achieve before owning a business. "They need to ask themselves whether they are buying a business to get a salary, a lifestyle or do they want to build up a business," he says. While passion is a great starting point, it is just one part of the puzzle. Interlandi says there are more failures than successes, largely because people don't do their homework. He cites the man who bought a licensed liquor outlet without enough capital, the newsagency buyer who had no idea about the hours he needed to put in and the friends running a successful security outfit that was so thirsty and hungry for working capital they could not cope. Some of these problems will show up in a first glance at the business's records. Are sales falling because new competition has appeared? Is the business consistently showing a cash shortage because the owner is drawing too much, too much is being paid to suppliers or receipts from customers falling behind? These will also show up on the business's balance sheet - look for growing accounts payable and ask how much of those debts can be collected and get expert accounting advice. CPA Australia business policy adviser Gavan Ord says it is easy to get carried away with the romance of running your own business but prospective buyers need to take immediate action and walk away from the deal if the current owner is not forthcoming with information on the business. "The current owner might say 'Look, I know the financials say this, but here is the real figure'," he says. Choosing a business is like investing. Only buy businesses you understand. Other warning signs to watch out for include if there is a "significant legal action pending against the business's." "If the current owner cannot or will not answer your questions, such as why are sales down 20 per cent in the last 6 months, you should be worried," he says. Interlandi says all the figures need to be crunched and every cost - from buying in to refurbishing, to salaries and leases - needs to be covered. Almost as important to making a decision about buying is knowing exactly what your exit strategy is. Interlandi says if you fork out $200,000 for a cafe and then have to spruce it up, you need to have an idea of how long you plan to be in it to get a return before you sell it. Interlandi says as part of a business plan prospective buyers need to be clear about who their customers are. If the entity is a bricks and mortar business, then location and convenience are going to be key considerations. Understanding the myriad of legislation requirements relating to health, food handling, leasing, licensing, employment and taxation are essential. He says anyone buying into a business, especially a food outlet such as a hotel, needs to understand they will have to re-invent it every 18 months. WHEN they started their search for a business to buy, entrepreneurs Jason Gabriel and Darren Moncrieff were keen on a hotel. "We looked around and then we started to think about going two rungs back and buying a butcher's shop," Moncrieff says.Finally, they settled on an old-fashioned butcher's shop in an inner-city suburb that had been around since 1870 - and they kept the vendor's son, Darren Ewart, as head butcher. Moncrieff believes his experience running sports stores and growing up on a hereford cattle farm, and Gabriel's family background running hotels, will help them turn the shop into a dynamic business. But the decision to go free range and organic meant prices rose and some customers left. Among the checklist was a good lease, reasonable rent and a big shop. Moncrieff says the customer is changing, and inspired by the foodie reality shows, comes armed with lists of meat cuts they want. A chef is due to start at the shop and take-home meals will soon be on sale. "We got people in at Christmas and many are now coming back," he says.