Raising finance to buy a business.
Discussion
Ok folks, I know some of you run your own businesses so you might be able to help.
I have been working here for 7 years now, a small signwriting business (3 employees) specialising in commercial vehicles. The business has been established since 1975 and it is obviously profitable with a large customer base.
My boss who ive known for about 10 years is retiring in april (hopefully) and i have the opportunity to buy the business. I am involved in all parts of the business so i have no problems with being able to run it successfully.
The business has been valued at £200k including the premises. I am waiting for the accountant to give me a breakdown of the valuation but the building is worth roughly £80k leaving £120k for the business.
I plan to rent the property at first from my gaffer who owns the building for 2 reasons. Firstly it will reduce my initial outlay and means all the cash i already have can go towards buying the business and not the property. Secondly, i think that within a couple of years the business will need bigger premises. We are currently at our limits as far as space goes and at the minute we do absolutley no marketing. Marketing is one of the first things i am going to develop, this will attract more customers and mean we need more space for equipment and fitting areas.
The long and short of it is i have about £35k equity in my house which i am willing to use so will probably need to raise about another £110k so that i have some working capital in the bank.
I think the business will sell itself to any prospective lenders but i want to know if there are any other ways to raise the cash apart from going to the bank.
Advise on raising finance and any other aspects of buying/running a business will be most helpful. (so will £200k if youve got it).
Cheers all
Danny
I have been working here for 7 years now, a small signwriting business (3 employees) specialising in commercial vehicles. The business has been established since 1975 and it is obviously profitable with a large customer base.
My boss who ive known for about 10 years is retiring in april (hopefully) and i have the opportunity to buy the business. I am involved in all parts of the business so i have no problems with being able to run it successfully.
The business has been valued at £200k including the premises. I am waiting for the accountant to give me a breakdown of the valuation but the building is worth roughly £80k leaving £120k for the business.
I plan to rent the property at first from my gaffer who owns the building for 2 reasons. Firstly it will reduce my initial outlay and means all the cash i already have can go towards buying the business and not the property. Secondly, i think that within a couple of years the business will need bigger premises. We are currently at our limits as far as space goes and at the minute we do absolutley no marketing. Marketing is one of the first things i am going to develop, this will attract more customers and mean we need more space for equipment and fitting areas.
The long and short of it is i have about £35k equity in my house which i am willing to use so will probably need to raise about another £110k so that i have some working capital in the bank.
I think the business will sell itself to any prospective lenders but i want to know if there are any other ways to raise the cash apart from going to the bank.
Advise on raising finance and any other aspects of buying/running a business will be most helpful. (so will £200k if youve got it).
Cheers all
Danny
Friends, family are your only options. You can not ask for money generally in the public arena unless you have an approved prospectus which is not viable for your needs.
The other issue is why would anyone lend you the cash without wanting a return of 15%+ If I was investing in a business id want 20%+ and I suspect this would leave no profit for you.
Either you take on a partner or you will probably be best served going to a bank. Their rates will be far less than any investor
Good Luck
The other issue is why would anyone lend you the cash without wanting a return of 15%+ If I was investing in a business id want 20%+ and I suspect this would leave no profit for you.
Either you take on a partner or you will probably be best served going to a bank. Their rates will be far less than any investor
Good Luck
Look at Business Angels. Network of wealthy individuals who look to invest in business. However any external investor will primarily look at 2 things.
1. ROI
2. Exit strategy.
And of course you might need some sort of a business model to demonstrate/illustrate exaclty what (apart from that sports car you've always promised your self) you are going to spend the business angels money on. As you have a profitable business, customers, history etc it should not be 'too' difficult to rasie the money. (kiss of death)
1. ROI
2. Exit strategy.
And of course you might need some sort of a business model to demonstrate/illustrate exaclty what (apart from that sports car you've always promised your self) you are going to spend the business angels money on. As you have a profitable business, customers, history etc it should not be 'too' difficult to rasie the money. (kiss of death)
Another option is that you buy the business over a year or two, shove in what you can and then give the current owner a fistful of cash every month. He retains some ownership until the final payment. You will have to pay more and you will not get complete control until you finish paying but at least you are dealing with someone you know.
D
D
Do you think i will have any trouble getting the money from the bank.
200k obviously is alot of cash but if you consider the business turns over more than that annually with about 40k profit, it doesnt sound that much!
The only thing thats not in my favour is that almost all of the work is goodwill. We dont have contracts with anyone so the only firm orders are the ones in the 'to do' tray. This is the case with most companies of a similar size within the industry.
200k obviously is alot of cash but if you consider the business turns over more than that annually with about 40k profit, it doesnt sound that much!
The only thing thats not in my favour is that almost all of the work is goodwill. We dont have contracts with anyone so the only firm orders are the ones in the 'to do' tray. This is the case with most companies of a similar size within the industry.
go to the bank that the company currently banks with - they will know the trading history better than anyone and should make you jump through less hoops (providing the company's trading history is what you think) the money isn't vast by any means and if the company is profitable it should be straight forward.
by the way.. buy the premises. the bank should be willing to invest in it - theres more security for them.
good luck
Gareth
by the way.. buy the premises. the bank should be willing to invest in it - theres more security for them.
good luck
Gareth
The business is only worth what someone will pay for it.
persume you/they have done the 3x£40k to get to the £120 +building.
Starting out, I would not buy a building. lot of money tied up, you said you may move anyway as it a bit small, get the business sucessful then look at buying a freehold. Lots of commercial wearhouses/rooms/etc at good prices.
The business itself is all goodwill ie no fixed contracts just some tools of the trade hence I would not pay 3x profit for just goodwill.
It soulds ripe for you to start your own business in cometition. £120 will go a fair way to start up, advertise and get in the business and goodwill. You may not need that much.
Remember thats a lot of money to trade under someone elses name/logo.
persume you/they have done the 3x£40k to get to the £120 +building.
Starting out, I would not buy a building. lot of money tied up, you said you may move anyway as it a bit small, get the business sucessful then look at buying a freehold. Lots of commercial wearhouses/rooms/etc at good prices.
The business itself is all goodwill ie no fixed contracts just some tools of the trade hence I would not pay 3x profit for just goodwill.
It soulds ripe for you to start your own business in cometition. £120 will go a fair way to start up, advertise and get in the business and goodwill. You may not need that much.
Remember thats a lot of money to trade under someone elses name/logo.
superlightr said:
The business is only worth what someone will pay for it.
persume you/they have done the 3x£40k to get to the £120 +building.
Starting out, I would not buy a building. lot of money tied up, you said you may move anyway as it a bit small, get the business sucessful then look at buying a freehold. Lots of commercial wearhouses/rooms/etc at good prices.
The business itself is all goodwill ie no fixed contracts just some tools of the trade hence I would not pay 3x profit for just goodwill.
It soulds ripe for you to start your own business in cometition. £120 will go a fair way to start up, advertise and get in the business and goodwill. You may not need that much.
Remember thats a lot of money to trade under someone elses name/logo.
Or on the flipside it's not that much money to walk into a profitable business that jsut needs tweaking.
I'd buy it in your shoes. The bank will loan you the money.
still disagree. 3x profit for just goodwill sounds high. Is this a partnership? Sole trade, Limited co?
Have you seen the accounts for the last 3-4 years?
200k turnover : 40K Profit so take home drawings £30k ish
So £160 on overheads. 2 x staff about 40k for both including taxes + boss taking home drawing of £40k
leaving about £80k on overheads? for sign writing materials, cars ?
Qurious about the finances now !
how are the splits made up. Before committing you can get the accounts checked over by an accountant/business adviser
Still be more tempted to start up on your own.
Have you seen the accounts for the last 3-4 years?
200k turnover : 40K Profit so take home drawings £30k ish
So £160 on overheads. 2 x staff about 40k for both including taxes + boss taking home drawing of £40k
leaving about £80k on overheads? for sign writing materials, cars ?
Qurious about the finances now !
how are the splits made up. Before committing you can get the accounts checked over by an accountant/business adviser Still be more tempted to start up on your own.
casiodan said:
Do you think i will have any trouble getting the money from the bank.
200k obviously is alot of cash but if you consider the business turns over more than that annually with about 40k profit, it doesnt sound that much!
The only thing thats not in my favour is that almost all of the work is goodwill. We dont have contracts with anyone so the only firm orders are the ones in the 'to do' tray. This is the case with most companies of a similar size within the industry.
If the company currently owns the property, presumably the company pays no rent. If the current owner retains the property, you could be paying, say, (circa) 20k pa rent - halving your profit. To pay 120k for goodwill for a company making 20k seems high. Secondly, from my experience (a deal a week) check thoroughly to see what the current owner is taking out the business - you'd be amazed to see what goes through some books!
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