Cafe Purchase / Setup
Discussion
Mrs2100 is looking at purchasing a Cafe that is local that is available for a cheap price.
Having not ventured into Business owning / running myself I do not know what we need to do, apart from give the guy the asking price and take the keys.
I assume on top of the rent / Electric / Gas / Phone, there will be Staff NI contributions and tax, but what other overheads will there be?
Will I need to setup a company? If so would I then need to pay business rates, what are they and how much?
As you can guess I am a complete novice and haven't got a clue at the moment.
Cheers
Tim.
Having not ventured into Business owning / running myself I do not know what we need to do, apart from give the guy the asking price and take the keys.
I assume on top of the rent / Electric / Gas / Phone, there will be Staff NI contributions and tax, but what other overheads will there be?
Will I need to setup a company? If so would I then need to pay business rates, what are they and how much?
As you can guess I am a complete novice and haven't got a clue at the moment.
Cheers
Tim.
It needs to cover not just the business overheads (including staff costs) but the owner's personal "Drawings" (i.e. living expenses).
Have you seen accounts for the business over the past three years (at least)?
Is there any inkling that major changes to the cost structure of the business are iminent - such as renewal of lease terms (I presume the premises it uses is rented rather than owned).
Does your wife need to borrow to finance the purchase and if so, has she factored in the finance costs - which will be different to those shown in the previous owner's accounts?
Will the new business need to invest in new capital equipmment.
I would strongly advise that you get an accountant to at least review the accounts of the business as he/she should be able to spot any obvious problems.
Have you seen accounts for the business over the past three years (at least)?
Is there any inkling that major changes to the cost structure of the business are iminent - such as renewal of lease terms (I presume the premises it uses is rented rather than owned).
Does your wife need to borrow to finance the purchase and if so, has she factored in the finance costs - which will be different to those shown in the previous owner's accounts?
Will the new business need to invest in new capital equipmment.
I would strongly advise that you get an accountant to at least review the accounts of the business as he/she should be able to spot any obvious problems.
Thanks Eric, Will go through one by one -
Cheers
Tim.
Eric Mc said:
It needs to cover not just the business overheads (including staff costs) but the owner's personal "Drawings" (i.e. living expenses).
She will still be working her existing Job, Her mother will be running it during the week, and we run it on weekend. The only drawings we will need primarily will be to cover the finance.Eric Mc said:
Have you seen accounts for the business over the past three years (at least)?
No - I will ask to have a lookEric Mc said:
Is there any inkling that major changes to the cost structure of the business are iminent - such as renewal of lease terms (I presume the premises it uses is rented rather than owned).
The Premises is leased by the Business Park. The lease is in place for another 3 years. No changes expectedEric Mc said:
Does your wife need to borrow to finance the purchase and if so, has she factored in the finance costs - which will be different to those shown in the previous owner's accounts?
Yes we have factered in these costs, currently I think it will be making a £200pcm loss with the finance however the cafe is not selling much food at the moment due to not been clean plus service is crap. Current owners have defaulted on the payments and are doing just enough to keep in running.Eric Mc said:
Will the new business need to invest in new capital equipmment.
No most of the equipment has been changed recently, May need to invest in some small low costs equipment.Eric Mc said:
I would strongly advise that you get an accountant to at least review the accounts of the business as he/she should be able to spot any obvious problems.
I will do, As I don;t currently have an accountant what is the best way to get in touch with one? IS it just out of yellow pages?Cheers
Tim.
Always a valid question.
Regarding accountants - there are a few on here
Alternatively, like any profession/trade, personal recommendations are usually better than sticking a pin in your local Yellow Pages.
It's usually best to try and pick an accountant who is registered with one of the recognised accounting bodies (ACA/ACCA).
Regarding accountants - there are a few on here
Alternatively, like any profession/trade, personal recommendations are usually better than sticking a pin in your local Yellow Pages.
It's usually best to try and pick an accountant who is registered with one of the recognised accounting bodies (ACA/ACCA).
Good advice here as usual.
You need to do a little more work on the lease, you say it's got three years left to run, what happens then? Do you have a right to renew it ("inside" the Landlord and tenant act) or will you just have to take a brand new lease (if the landlord is willing). Make sure you've factored in these costs (c.£2k for a new lease, more like £4k for a lease renewal if it's complicated and the landlord is a pain).
Check that the new equipment has been bought and not just leased.
Check whether the Local Authority have been around the place lately, a contact of mine took over the tenancy of a hotel, the LA then turned up and condemed his kitchen!! Not just because it was unclean but they considered it was unsafe. Not only did it cost him a fortune to fix but he couldn't trade whilst he was sorting it.
You can't make any decisions though without seeing the accounts for the last 3 years. They may be running it into the ground now but presumably they were keen once? Is that reflected in the books?
Good luck!
You need to do a little more work on the lease, you say it's got three years left to run, what happens then? Do you have a right to renew it ("inside" the Landlord and tenant act) or will you just have to take a brand new lease (if the landlord is willing). Make sure you've factored in these costs (c.£2k for a new lease, more like £4k for a lease renewal if it's complicated and the landlord is a pain).
Check that the new equipment has been bought and not just leased.
Check whether the Local Authority have been around the place lately, a contact of mine took over the tenancy of a hotel, the LA then turned up and condemed his kitchen!! Not just because it was unclean but they considered it was unsafe. Not only did it cost him a fortune to fix but he couldn't trade whilst he was sorting it.
You can't make any decisions though without seeing the accounts for the last 3 years. They may be running it into the ground now but presumably they were keen once? Is that reflected in the books?
Good luck!
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