Taking over a business help!
Discussion
Hi everyone.
I have the opportunity to take over a already running small takeaway business. I've never been in the game of running a business, I've worked a normal job since my teenage years, but I've always had the ambition to run my own takeaway (pizza shop), even though I know the hours needed to put in, and the stress involved!.
Now the basic rundown of the acquisition, and the questions I've asked so far are as follows....
How much is it to buy the business? £35k
What is the rent? £800pm
How long is remaining on the lease? 12 years
Do I get all the equipment currently in the shop to carry on with the business? - Yes
What other cost are involved? as follows...
Insurance - £200 annually
Business rate? (said it's free, due to the location of the shop?)
Gas/electricity - £120
Phone/Internet - £48
Machinery maintenance (?)
He's said there's no cost to take over lease
He's said he'd stay on for 2 weeks once I've taken over to keep things flowing, make sure things run ok.
Could I get some help on what I need to do, if there's anything important I missed that I need to consider before taking it seriously, or ask before thinking about taking the next step?
ANY other advice would be greatly appreciated. I'm nervous even thinking about the prospect
I have the opportunity to take over a already running small takeaway business. I've never been in the game of running a business, I've worked a normal job since my teenage years, but I've always had the ambition to run my own takeaway (pizza shop), even though I know the hours needed to put in, and the stress involved!.
Now the basic rundown of the acquisition, and the questions I've asked so far are as follows....
How much is it to buy the business? £35k
What is the rent? £800pm
How long is remaining on the lease? 12 years
Do I get all the equipment currently in the shop to carry on with the business? - Yes
What other cost are involved? as follows...
Insurance - £200 annually
Business rate? (said it's free, due to the location of the shop?)
Gas/electricity - £120
Phone/Internet - £48
Machinery maintenance (?)
He's said there's no cost to take over lease
He's said he'd stay on for 2 weeks once I've taken over to keep things flowing, make sure things run ok.
Could I get some help on what I need to do, if there's anything important I missed that I need to consider before taking it seriously, or ask before thinking about taking the next step?
ANY other advice would be greatly appreciated. I'm nervous even thinking about the prospect
Edited by Lannister902 on Wednesday 11th August 03:05
How much does he take a week, how much is profit?
Are there any staff in the shop who are staying on to work for you? If there are, what are they like, are they reliable?
Is there any stock that he is selling with the shop? Who are his suppliers, are his debts paid off to them?
Do they deliver/have staff to do deliveries/work with deliveroo or ubereats etc?
How much competition is nearby?
Are there any staff in the shop who are staying on to work for you? If there are, what are they like, are they reliable?
Is there any stock that he is selling with the shop? Who are his suppliers, are his debts paid off to them?
Do they deliver/have staff to do deliveries/work with deliveroo or ubereats etc?
How much competition is nearby?
Make sure it’s debt free
Add ££££ for solicitors & accountants
Has the owner took a wage
What’s its hygiene rating
On just eat etc - what % ?
Where do the customers come from
Online reputation ?
Lease conditions
Staff - obligations ? Look up Tupe
Contracts with anyone - check
That’s for starters, if all kosher (pun) you can really scale up with other food products - good luck.
Add ££££ for solicitors & accountants
Has the owner took a wage
What’s its hygiene rating
On just eat etc - what % ?
Where do the customers come from
Online reputation ?
Lease conditions
Staff - obligations ? Look up Tupe
Contracts with anyone - check
That’s for starters, if all kosher (pun) you can really scale up with other food products - good luck.
Hi,
He has one reliable/good worker that comes on Fri/Sat when things get a little busier, he'll be happy to stay in place.
How much are solicitor fees for full takeover?
Just eat and uber are both setup and running. It seems the majority of his ordered are via just eat (that's 20% profits there!), and he has 2 drivers on call.
He's said he'll provide me with all the suppliers he uses.
I need to find out about his debt, and them being paid off...
He's hygiene rating is only 3 stars, but looking around the shop its VERY clean. That's something that needs improving.
His review on just eat are good, the only bad one's he gets is late delivery, which I'll make sure I get sorted.
He's said EVERYTHING that's in the shop will remain, but I double check.
There is some nearby competition, a shops within a mile of it. That's a concern.
What lease conditions is there I need to check?
Thank you for your replies so far
He has one reliable/good worker that comes on Fri/Sat when things get a little busier, he'll be happy to stay in place.
How much are solicitor fees for full takeover?
Just eat and uber are both setup and running. It seems the majority of his ordered are via just eat (that's 20% profits there!), and he has 2 drivers on call.
He's said he'll provide me with all the suppliers he uses.
I need to find out about his debt, and them being paid off...
He's hygiene rating is only 3 stars, but looking around the shop its VERY clean. That's something that needs improving.
His review on just eat are good, the only bad one's he gets is late delivery, which I'll make sure I get sorted.
He's said EVERYTHING that's in the shop will remain, but I double check.
There is some nearby competition, a shops within a mile of it. That's a concern.
What lease conditions is there I need to check?
Thank you for your replies so far
DSLiverpool said:
Make sure it’s debt free
I can't stress this enough. Bounce Backs, overdrafts, HMRC, that chip supplier his business still owes £20k to from before Covid but hasn't told you about etc etc.All the shopfittings - ovens, fryers etc. These are all owned by the existing business and not leased etc are they? You know this do you? Because he told you? Can he prove it? What happens if it turns out he doesn't after you've bought the business and the real owner comes to collect them and you're left with an empty shop etc?
Sorry I'm inventing an extreme position to the make a point that you really need to do your due diligence on the boring stuff because it can come back and bite you. There's a difference between the business plan/model that you're currently looking at vs the risks of taking over somebody else's existing business and any come back that you've got (or most likely not). You need to consider both.
Absolutely have a crack at the business of that's what you fancy doing, but I would strongly recommend you do so with your own shiny new clean company.
I'm sure accountants on here will advise the costs/benefits of a ongoing concern vs start up (as I'm not an accountant), but assuming you can 'simply' assign the property lease from the current company to your new one without penalty or the Landlord being silly, then you can mitigate all the other risks.
Separately if he's valuing his business at £35k that may be cheap when you're looking to buy it (I have no idea) but it doesn't exactly shout money spinner to me?? I could be wrong though as I know nothing about this type of business.
Edited by ben5575 on Wednesday 11th August 05:30
You really need to look at the profit. A £35k asking price would theoretically suggest this to be no more than £7k a year at most. OK, you'd be drawing a salary before the profit is calculated but at this level, you'd be more 'owning a job' than 'owning a business' but with all obligations and risks attached to the latter. So you need to consider if a) you're happy with this or b) there' the ability to scale up.
£7k is very lean and leaves little headroom for the unexpected. If an oven goes pop or something else needs replacing, you may not be able to fund this from cashflow so would you / the business be able to get finance to cover the cost?
I would echo what others have said about insurance. £200 a month is likely but I can't see this being anywhere near the annual figure.
And I would recommend appointing an Accountant to undertake a proper due diligence.
£7k is very lean and leaves little headroom for the unexpected. If an oven goes pop or something else needs replacing, you may not be able to fund this from cashflow so would you / the business be able to get finance to cover the cost?
I would echo what others have said about insurance. £200 a month is likely but I can't see this being anywhere near the annual figure.
And I would recommend appointing an Accountant to undertake a proper due diligence.
You should take advice from both an accountant and a solicitor. Unfortunately that will cost you money and they may discover issues that mean you decide not to proceed, but that’s what you need to do.
With regard to the lease obligations, if it is a Full Repairing lease (which it is likely to be) then there may be a great deal of work that you would have to carry out to the property when the lease expires that you would not be expecting. This is due to the ‘dilapidations’ provisions in such leases and you need to take legal advice regarding this before taking on the lease.
With regard to the lease obligations, if it is a Full Repairing lease (which it is likely to be) then there may be a great deal of work that you would have to carry out to the property when the lease expires that you would not be expecting. This is due to the ‘dilapidations’ provisions in such leases and you need to take legal advice regarding this before taking on the lease.
You need his full accounts, £120 for electricity for a pizza takeaway which should have an oven on (deep fat fryer too?) constantly for example, doesn't sound even vaguely right.
Are you buying the trade, assets and liabilities into your own shiny new company or are you buying the shares of his limited company? Does he have a limited company or is he a sole trader?
Who owns the brand? Him personally or the limited co? Do you get the brand in the sale? Is the brand important?
1 man being the only worker except Fri/Sat when he has an employee doesn't sound like a very busy Pizza shop. Is that likely to be peak demand for the area? Do you think there is significant untapped demand?
Once you've got it running smoothly, seems like it wouldn't be too hard to get 2 good employees to run it while you start expanding i.e work on the business not in the business. i.e. you shouldn't be making the pizzas once you've understood and done all the jobs for a bit.
What type of location is it in? Rural village with no chance of ever having a Domino's/Papa Johns etc muscling in on your territory?
Are you buying the trade, assets and liabilities into your own shiny new company or are you buying the shares of his limited company? Does he have a limited company or is he a sole trader?
Who owns the brand? Him personally or the limited co? Do you get the brand in the sale? Is the brand important?
1 man being the only worker except Fri/Sat when he has an employee doesn't sound like a very busy Pizza shop. Is that likely to be peak demand for the area? Do you think there is significant untapped demand?
Once you've got it running smoothly, seems like it wouldn't be too hard to get 2 good employees to run it while you start expanding i.e work on the business not in the business. i.e. you shouldn't be making the pizzas once you've understood and done all the jobs for a bit.
What type of location is it in? Rural village with no chance of ever having a Domino's/Papa Johns etc muscling in on your territory?
If you do proceed with this, I would suggest to you to buy the assets and goodwill of the business, and for the lease to be novated rather than buying the limited company. It's possible the landlord might not let the lease be novated to a new company, but it means you are definitely not saddled with any debt from the previous business.
Why don't you work there for a couple of weeks - for free even - and see how it goes?
Why don't you work there for a couple of weeks - for free even - and see how it goes?
My gut feeling is this may not work out well for you as you have never been in business before.
Something with a low cost of entry like a takeaway I would seriously consider setting up your own unless this one offers very specific advantages like location or very high end equipment and a good quality kitchen.
Stuff like food hygiene you will really need to go on a course to ensure you get 5 star rating you might need a consultant who will supply the paperwork you need to keep up to date.
The council will inspect you fairly often (my wife used to be an EHO) and you need to know your stuff - saying you dont know is no excuse.
The current 3 star rating means the current place meets the basic hygiene requirements but lacks proper reporting systems and checks plus does not have trained staff. Most likely any way. So you will need to start keeping better records and have everyone trained to get 4 or 5.
For example you will need to be doing temp checks and keeping logs that kind of stuff.
Something with a low cost of entry like a takeaway I would seriously consider setting up your own unless this one offers very specific advantages like location or very high end equipment and a good quality kitchen.
Stuff like food hygiene you will really need to go on a course to ensure you get 5 star rating you might need a consultant who will supply the paperwork you need to keep up to date.
The council will inspect you fairly often (my wife used to be an EHO) and you need to know your stuff - saying you dont know is no excuse.
The current 3 star rating means the current place meets the basic hygiene requirements but lacks proper reporting systems and checks plus does not have trained staff. Most likely any way. So you will need to start keeping better records and have everyone trained to get 4 or 5.
For example you will need to be doing temp checks and keeping logs that kind of stuff.
How do you know this guy?
Why is he selling?
What profit has he made in the last 12, 24 and 36 months? (this will factor Covid)
What debt is there?
Does he own everything in the shop?
Talk to his existing suppliers - find out what their opinion of the place is - they'll soon tell you if he isn't paying on time or owes them money.
I wouldn't worry about competing businesses within a mile too much - unless you're in the arse end of nowhere, there's always a couple of takeaways nearby.
If you've never even worked in a takeaway, let alone ran one, this is a big risk of £35k.
But, few people have gained success without risk....
I would employ some advice in person, even if that is just someone you know who runs a small business who can take a look at it for you (preferably something similar, but it doesn't have to be a takeaway, the basic principles still apply in another industry)
Why is he selling?
What profit has he made in the last 12, 24 and 36 months? (this will factor Covid)
What debt is there?
Does he own everything in the shop?
Talk to his existing suppliers - find out what their opinion of the place is - they'll soon tell you if he isn't paying on time or owes them money.
I wouldn't worry about competing businesses within a mile too much - unless you're in the arse end of nowhere, there's always a couple of takeaways nearby.
If you've never even worked in a takeaway, let alone ran one, this is a big risk of £35k.
But, few people have gained success without risk....
I would employ some advice in person, even if that is just someone you know who runs a small business who can take a look at it for you (preferably something similar, but it doesn't have to be a takeaway, the basic principles still apply in another industry)
Edited by Muzzer79 on Wednesday 11th August 15:21
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