Would you buy someone elses business?
Discussion
Hi All,
My soon to be wife has been redundant now for quite a while and has 3 yrs experience in nursery's of the child/baby kind........
We have looked around the UK and are considering relocating, and at the same time purchasing a relatively small nursery with a view to the other half running it whilst I continue in my current job. We would be looking to finance with a deposit and bank loan, with a view to purchasing the business for her to work in and run.
We have found a number of small ish nurseries around the UK that look interesting, and at face value have reasonable turnover, fully staffed and could be picked up and improved apon.
At the moment it looks great, however I have a real nagging issue in my head wondering why would anyone sell a profitable small business?
Would you consider it and what would you look for?
(we have access to balance sheet/profit & loss etc, as well as visting the premesis, and I also intend to research the local areas for population size/age etc)
Thanks
Chris
My soon to be wife has been redundant now for quite a while and has 3 yrs experience in nursery's of the child/baby kind........
We have looked around the UK and are considering relocating, and at the same time purchasing a relatively small nursery with a view to the other half running it whilst I continue in my current job. We would be looking to finance with a deposit and bank loan, with a view to purchasing the business for her to work in and run.
We have found a number of small ish nurseries around the UK that look interesting, and at face value have reasonable turnover, fully staffed and could be picked up and improved apon.
At the moment it looks great, however I have a real nagging issue in my head wondering why would anyone sell a profitable small business?
Would you consider it and what would you look for?
(we have access to balance sheet/profit & loss etc, as well as visting the premesis, and I also intend to research the local areas for population size/age etc)
Thanks
Chris
Why would someone sell? Don't want to do the hours? They want to try something else? Ill health?
At the end of the day if you get the full accounts for the last three years and I suppose in the case of a nursery this year's bookings then you'll know if it is about to go under or not.. An accountant can tell you what a fair price is and away you go?
At the end of the day if you get the full accounts for the last three years and I suppose in the case of a nursery this year's bookings then you'll know if it is about to go under or not.. An accountant can tell you what a fair price is and away you go?
Yes in simple terms, however we have identified one of particular interest however it has only been running for around 18 months and accounts showing a break even 6 months ago. I also beleive it is overpriced, however the big corporate surveying firms are looking at 1k plus just to value the business, are there cheaper, more accurate ways to value businesses?
elster said:
Some people just like starting businesses up.
I know that is my mums pastime. She is on about business No 12.
She starts them up, turns a profit, runs for a while, then sells on to do something else.
Yep. I know someone who buys s***e businesses then turns them profitable. Then sells them, and goes and finds another challenge.... I think it's safe to say they don't need the money, or the stress etc.. of it, but still they carry on......I know that is my mums pastime. She is on about business No 12.
She starts them up, turns a profit, runs for a while, then sells on to do something else.
OP, I'd speak to a local accountant and ask them how much they would charge to value a business.. Make sure they have Professional Indemnity Insurance just to be on the safe side.
Taking a year to break even isn't bad, IIRC (and it's been ages since I've studied any business of any type) plenty of businesses take 2-3 years to start making a profit.
If they have enough kids "booked in" for the rest of the year as well then you know that is a safe bet? Well, as safe a bet as possible.
I did see on the news though that day care prices are going right up and they expect more people to withdraw from nurseries....... I guess your wife will have already thought that bit through.
One other thing, I assume you will set this up and run it as a Ltd company.
grumbledoak said:
There aren't many good reasons to sell a profitable business, so you are right to be cautious.
Yes there are:1) Owner may just enjoy setting up business's then selling them on, they make their money on the sale
2) They need the money to finance something else
3) They realise they hate the Nursery industry after 18months in it
4) Their partner is relocating so they are going somewhere else in the country
5) I remember reading of chain of about 10 nurseries set up by someone, but they sold off the original nursery as she had too much emotional attachment to it, but it was very profitable.
6) Maybe they didn't like any of the nursery's in the location for their child, so they started their own, now that child has moved on to primary school so they are selling the nrsery.
I'm sure other people could come up with more.
You should be cautious when purchasing yes, but just because that's sensible not because it's making a profit.
Ok great, I will approach an accountant asap - my other concern is a very simple one - what if the figures are 'massaged', I am concerned that as some parents may pay cash that this does not get represented.
Edit - I am also concerned about the limited life span of each child in terms of the business - I am not aware of significant waiting lists so there is an inherant risk that when the pre-schoolers move on that there is no guarantee they will be replaced....
Edit - I am also concerned about the limited life span of each child in terms of the business - I am not aware of significant waiting lists so there is an inherant risk that when the pre-schoolers move on that there is no guarantee they will be replaced....
Edited by Chr1sch on Wednesday 17th February 18:47
Chr1sch said:
...are there cheaper, more accurate ways to value businesses?
Yes.Contact them, prove you are a serious buyer, and make an offer.
How much a business is 'worth' has little to do with a very small businesses accounts, as a 'true' position can be somewhat different.
Indeed, even if you could get someone to come up with a random(ish) figure there are plenty more factors such as how much the owners want to sell, and therefore what they would accept.
If you have assets I would seriously consider just starting up yourself.
Chr1sch said:
Ok great, I will approach an accountant asap - my other concern is a very simple one - what if the figures are 'massaged', I am concerned that as some parents may pay cash that this does not get represented.
WTF! It's a Nursery! not a multi national conglomerate!If the accounts stack up and are certified and checked by your accountant (presuming he/she is not a double agent
)Then it might be wise to actually "ask" them why they are selling
Chr1sch said:
Ok great, I will approach an accountant asap - my other concern is a very simple one - what if the figures are 'massaged', I am concerned that as some parents may pay cash that this does not get represented.
Er, have you seen nursery fees? Running one on cash? You'd need professional advice from drug dealers on how to launder it all!Get an accountant you trust to give it a serious look. Don't just look at the window dressing.
Chr1sch said:
Being honest we dont have the capital to start from scratch when considering start up costs, some of the businesses for sale almost sound to good to be true, i.e, Reasonable t/o, fully staffed etc
Well the cost of a successful, established business is always going to be more than the start up cost for your own!?When you buy a business you are paying for the start up costs plus the fact that it makes X a year profit which means it is more valuable than starting up yourself.
grumbledoak said:
Chr1sch said:
Ok great, I will approach an accountant asap - my other concern is a very simple one - what if the figures are 'massaged', I am concerned that as some parents may pay cash that this does not get represented.
Er, have you seen nursery fees? Running one on cash? You'd need professional advice from drug dealers on how to launder it all!Get an accountant you trust to give it a serious look. Don't just look at the window dressing.
Before you buy 'sit in' for a week.
Make a private note of the number of staff working and the number of kids - then see if the figures cohere to what is claimed in the books.
We have a good knowledge of the area and have looked around the other rival nurseries as prospective parents. IMO the current business is under charging, however, it is 1.5 miles away from the main road and I worry this may reflect the lack of waiting list and lower price.
They also have an excellent ofsted report compared with the competition, it seems to good to sell if that makes sense.
I would certainly look to get the wife to become ltd as I would not want the house being at risk etc.
They also have an excellent ofsted report compared with the competition, it seems to good to sell if that makes sense.
I would certainly look to get the wife to become ltd as I would not want the house being at risk etc.
anonymous said:
[redacted]
That was my first thought as well..... The business will be taking in more money than the accounts show therefore all is well?You can still run cash payments through the books in future and that will ensure you are not cooking the books and dodging tax/vat etc..
AS for kids leaving, surely that is something your wife would deal with by way of advertising etc.. and attempting to get some form of waiting list? I assume your wife's current employer has some system in place, therefore it that works, replicate it..
Until you have a valuation you can't really make an offer? Have they invited you to provide the books to your accountant?
grumbledoak said:
Chr1sch said:
Ok great, I will approach an accountant asap - my other concern is a very simple one - what if the figures are 'massaged', I am concerned that as some parents may pay cash that this does not get represented.
Er, have you seen nursery fees? Running one on cash? You'd need professional advice from drug dealers on how to launder it all!Get an accountant you trust to give it a serious look. Don't just look at the window dressing.
I may be being blissfully ignorant here.....
Gassing Station | Business | Top of Page | What's New | My Stuff