Buying an existing business?
Discussion
Hi all,
With the redundancy bullets being sprayed around our economy I've been wondering what I'd do if it affected me personally. So, apart from making sure my CV's up to date and refreshing contacts, I've looked at buying a going concern (as well as starting a business from scratch, but that's for another thread).
One I've seen is a school clothes shop. Should be largely recession-proof, seems to have good exclusive supply contracts and a good location. I can see opportunities for expanding too.
However, I can't see how anyone can make a living at this. Turnover is 180K, gross profit is 90K, net profit is 80K. It employs 3 full time (including the owner) and two part time.
How? Unless their take-home is miniscule. Can someone enlighten me?
With the redundancy bullets being sprayed around our economy I've been wondering what I'd do if it affected me personally. So, apart from making sure my CV's up to date and refreshing contacts, I've looked at buying a going concern (as well as starting a business from scratch, but that's for another thread).
One I've seen is a school clothes shop. Should be largely recession-proof, seems to have good exclusive supply contracts and a good location. I can see opportunities for expanding too.
However, I can't see how anyone can make a living at this. Turnover is 180K, gross profit is 90K, net profit is 80K. It employs 3 full time (including the owner) and two part time.
How? Unless their take-home is miniscule. Can someone enlighten me?
mr_spock said:
Should be largely recession-proof
Not sure about your logic for this statement? I'm guessing you're talking about somewhere that supplies specific uniform for specific schools but have you seen how cheap the supermarkets are banging out uniform? Plus as the middle class tighten their belts you can bet they'll be selling on little Johnny and Jenny's uniform and buying second hand as well.
Edited by Piglet on Sunday 16th November 19:08
Tread very carefully.....
I have been in the Sports and schoolwear supply business for over thirty years....
Any retail business turning over only £180,000 pa, and employing three staff, with normal rent, rates, power, accountants fees etc, would hardly leave anything left for the owner....
Obvious pitfalls and questions......
Are the premises Feehold or leasehold?
If leasehold what is the rent and how long is left on the lease.....
Schools are very fickle, how watertight is the "contract"?
Why is the business being sold?
Competition is fierce now the big supermarket chains have entered this sector in a big way..
It is very seasonal, busiest times are obviously in the run up to September, the rest of the time could be quiet.
Stock levels are likely to be very high.
I remember many years ago, one very well known long established family run shop in North west England nearly went bankruft when one private school closed down due to falling pupil numbers, and two other very large schools on a whim decided to completely change the colour of their blazers leaving the shop with umpteen thousands of pounds worth of blazers in the wrong colour with school badges attached.....
Good luck, but certainly look before you leap........
I have been in the Sports and schoolwear supply business for over thirty years....
Any retail business turning over only £180,000 pa, and employing three staff, with normal rent, rates, power, accountants fees etc, would hardly leave anything left for the owner....
Obvious pitfalls and questions......
Are the premises Feehold or leasehold?
If leasehold what is the rent and how long is left on the lease.....
Schools are very fickle, how watertight is the "contract"?
Why is the business being sold?
Competition is fierce now the big supermarket chains have entered this sector in a big way..
It is very seasonal, busiest times are obviously in the run up to September, the rest of the time could be quiet.
Stock levels are likely to be very high.
I remember many years ago, one very well known long established family run shop in North west England nearly went bankruft when one private school closed down due to falling pupil numbers, and two other very large schools on a whim decided to completely change the colour of their blazers leaving the shop with umpteen thousands of pounds worth of blazers in the wrong colour with school badges attached.....
Good luck, but certainly look before you leap........
Oh, I'm hugely sceptical. I've only seen figures in the initial advert, and it didn't add up for me, hence the posting.
AFAIK, the current owners have the freehold (they value at 230K ish, or will sell a new lease at 100K), 45K stock which sounds like it equates to 3 months' sales, and that's all I know.
I think the avenues for improving t/o are Sunday opening, secondhand clothes sales (from our experience at out kids' school they always need repair, major cleaning and so on), online sales, additional related items (stationery, bags, basic sports kit) and possibly mobile sales. Again, all drawing on personal experience of being busy parents.
I will send off for the detailed breakdown and see what that tells me.
AFAIK, the current owners have the freehold (they value at 230K ish, or will sell a new lease at 100K), 45K stock which sounds like it equates to 3 months' sales, and that's all I know.
I think the avenues for improving t/o are Sunday opening, secondhand clothes sales (from our experience at out kids' school they always need repair, major cleaning and so on), online sales, additional related items (stationery, bags, basic sports kit) and possibly mobile sales. Again, all drawing on personal experience of being busy parents.
I will send off for the detailed breakdown and see what that tells me.
mr_spock said:
Oh, I'm hugely sceptical. I've only seen figures in the initial advert, and it didn't add up for me, hence the posting.
AFAIK, the current owners have the freehold (they value at 230K ish, or will sell a new lease at 100K), 45K stock which sounds like it equates to 3 months' sales, and that's all I know.
I think the avenues for improving t/o are Sunday opening, secondhand clothes sales (from our experience at out kids' school they always need repair, major cleaning and so on), online sales, additional related items (stationery, bags, basic sports kit) and possibly mobile sales. Again, all drawing on personal experience of being busy parents.
I will send off for the detailed breakdown and see what that tells me.
Anyone who pays £100,000 for a shop lease wants their head examining.....vendors may ask these kind of silly figures but in many cases leases are not worth even £10,000, unless the rent was fixed at £20pw for the next twenty years.......AFAIK, the current owners have the freehold (they value at 230K ish, or will sell a new lease at 100K), 45K stock which sounds like it equates to 3 months' sales, and that's all I know.
I think the avenues for improving t/o are Sunday opening, secondhand clothes sales (from our experience at out kids' school they always need repair, major cleaning and so on), online sales, additional related items (stationery, bags, basic sports kit) and possibly mobile sales. Again, all drawing on personal experience of being busy parents.
I will send off for the detailed breakdown and see what that tells me.
Always worth thinking about getting a fair independent valuation and buying the freehold with a commercial long term mortgage...I bought my freehhold in 1987 for £18,500 and it is now worth in excess of £450,000.....renting is always dead money.......Also, sometimes the mortgage can work out cheaper than the rent.
WR.
mr_spock said:
If I understand the (badly written) ad correctly, it's 100K for the business with a lease or 230K with the freehold. Which makes no sense to me either.
That will be correct I expect,.....They will want to "sell" you a new lease at X amount rent, or sell the property for "their" valuation of £230k, (which may or may not be worth it, depending on size, location etc).....Just use your common sense and ask yourself does all this add up....
If in any doubt walk away, I have often seen people lose their live savings on dodgy business ventures where the heart has ruled the head.........
Also don't get over excited about "online" sales....what could this business offer that hundreds of other online competing retailers can't......To be cheaper??...Any fool can give their profit margin away.........
Sorry to sound a doubting Thomas, but I always look at potential pitfalls and snags.......I would hate you to "buy a pup".....
Thanks, it's not an active plan by any means. Right now I'm in a senior IT management role earning very good money, but in the current climate that could stop fairly quickly. If it does I should get a reasonable pay off, so I'm thinking ahead of time what I could do. Clearly one option is to look for another IT job, the market seems OK if not exactly buoyant, or interim/contract. Second option is to start/buy a business. I've had a bunch of ideas, many of which have come up on here in the past and been shot down.
I feel (yes, feel - need to add info to get further) that if I can buy a biz in a downturn and keep it going or improve towards an upturn I'll be in good shape. It will take a lot though to make the kind of money I do in IT.
I feel (yes, feel - need to add info to get further) that if I can buy a biz in a downturn and keep it going or improve towards an upturn I'll be in good shape. It will take a lot though to make the kind of money I do in IT.
I thought I'd follow up on this thread and perhaps get some more advice (please!).
The axe has fallen, I'll be redundant at the end of December. While I'm looking for another job (I'd quite like to do Interim management), opportunities at my management level are a bit thin on the ground.
So, my wife and I are still looking to buy or start a business. We're looking at a mobility equipment business, since my wife and son are both disabled in different ways, and we think we can see a gap in the market.
There is one on offer not far from us in North London. The owner seems to be skimming lots of cash off the top as he only shows 7K n/p, but wants £170K plus £40K stock. Ha ha ha, frankly. Assuming there is really a business there, I guess £100K might take it.
But, here's the question - for £100K can I rent, fit out, stock and get a shop of my own running? I have NO idea about costs for signage, shop fittings, flooring/decoration and the like. Well, I can guess, but it would only be that. We've taken a cursory look at 2 premises, one of 1000sq ft and one of double that. Between 1K p/ and 2.5K p/m rent. The larger one wants a premium, but I'm not paying the £150K he thinks he wants!
So, thoughts?
Anyone in retail, especially in mobility/disabled kit prepared to swap a chat for beer, or spend a few mins on the phone?
Cheers all!
The axe has fallen, I'll be redundant at the end of December. While I'm looking for another job (I'd quite like to do Interim management), opportunities at my management level are a bit thin on the ground.
So, my wife and I are still looking to buy or start a business. We're looking at a mobility equipment business, since my wife and son are both disabled in different ways, and we think we can see a gap in the market.
There is one on offer not far from us in North London. The owner seems to be skimming lots of cash off the top as he only shows 7K n/p, but wants £170K plus £40K stock. Ha ha ha, frankly. Assuming there is really a business there, I guess £100K might take it.
But, here's the question - for £100K can I rent, fit out, stock and get a shop of my own running? I have NO idea about costs for signage, shop fittings, flooring/decoration and the like. Well, I can guess, but it would only be that. We've taken a cursory look at 2 premises, one of 1000sq ft and one of double that. Between 1K p/ and 2.5K p/m rent. The larger one wants a premium, but I'm not paying the £150K he thinks he wants!
So, thoughts?
Anyone in retail, especially in mobility/disabled kit prepared to swap a chat for beer, or spend a few mins on the phone?
Cheers all!
mr_spock said:
I thought I'd follow up on this thread and perhaps get some more advice (please!).
The axe has fallen, I'll be redundant at the end of December. While I'm looking for another job (I'd quite like to do Interim management), opportunities at my management level are a bit thin on the ground.
So, my wife and I are still looking to buy or start a business. We're looking at a mobility equipment business, since my wife and son are both disabled in different ways, and we think we can see a gap in the market.
There is one on offer not far from us in North London. The owner seems to be skimming lots of cash off the top as he only shows 7K n/p, but wants £170K plus £40K stock. Ha ha ha, frankly. Assuming there is really a business there, I guess £100K might take it.
But, here's the question - for £100K can I rent, fit out, stock and get a shop of my own running? I have NO idea about costs for signage, shop fittings, flooring/decoration and the like. Well, I can guess, but it would only be that. We've taken a cursory look at 2 premises, one of 1000sq ft and one of double that. Between 1K p/ and 2.5K p/m rent. The larger one wants a premium, but I'm not paying the £150K he thinks he wants!
So, thoughts?
Anyone in retail, especially in mobility/disabled kit prepared to swap a chat for beer, or spend a few mins on the phone?
Cheers all!
In all these situations, ask to see at least three year's worth of accounts - the more recent the better.The axe has fallen, I'll be redundant at the end of December. While I'm looking for another job (I'd quite like to do Interim management), opportunities at my management level are a bit thin on the ground.
So, my wife and I are still looking to buy or start a business. We're looking at a mobility equipment business, since my wife and son are both disabled in different ways, and we think we can see a gap in the market.
There is one on offer not far from us in North London. The owner seems to be skimming lots of cash off the top as he only shows 7K n/p, but wants £170K plus £40K stock. Ha ha ha, frankly. Assuming there is really a business there, I guess £100K might take it.
But, here's the question - for £100K can I rent, fit out, stock and get a shop of my own running? I have NO idea about costs for signage, shop fittings, flooring/decoration and the like. Well, I can guess, but it would only be that. We've taken a cursory look at 2 premises, one of 1000sq ft and one of double that. Between 1K p/ and 2.5K p/m rent. The larger one wants a premium, but I'm not paying the £150K he thinks he wants!
So, thoughts?
Anyone in retail, especially in mobility/disabled kit prepared to swap a chat for beer, or spend a few mins on the phone?
Cheers all!
If the owner claims they are artificially depressing their income (tax fraud - in other words) it indicates that they have a fundamental dishonest streak and they could very well be defrauding you as well as the tax man. If they make this claim, ask to see evidence that the income is higher than the official figures show.
I would also get a professional to review the figures with you and maybe meet the seller as well.
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