buying a business

AHarvey

AHarvey

AHarvey

Soldato
Joined
6 Mar 2008
Posts
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Location
Stoke area
There is a cafe for sale in my local town, I haven't looked into the details yet but its a bargain price and its the only one in a busy market town.

However, before we really look in to it I was wondering if anyone has any advice or links I can read through about things to look at when thinking of buying or setting up a business/cafe?
 
Get a very good accountant to go through the books to make sure it actually makes a profit?, check the lease on the premises, there no point in buying a business if it only has a 6 month lease that will cost many thousands to extend?
 
Are there any staff or is it just the building and fittings, are you buying the name etc ? If there are staff beware of TUPE. Better also to take over the "good will" rather than buy a business as in some instances you can become liable for the old business debts.
 
The advert states "The Leasehold, fixtures, fittings and goodwill are offered for sale"

Any explanation of 'goodwill'? It's not a term i've heard in regards to business!

It does mention that the 2 owners run the place with the help of 2 casual staff members but mentions nothing about being required to take them on. There is a double bedroom and bathroom on the top floor, but the rest of the living space was converted in to a 1st and second floor restuarant and bar.

lease has 5 years remaining, rates of £1648 (small business rate relief means they pay only £1099) a year. rent is £14,100 pa with an turnover of 'around' £78k a year.

EDIT: also has drinks licence until 8:30pm
 
Last edited:
sidthesexist said:
Get a very good accountant to go through the books to make sure it actually makes a profit?
Click to expand...
Do this, and you will want to know how much the rent and business rate is. It may well be busy and turnover may well be very high but business rate and ridiculously high rent has been slaughtering small businesses for the last few years.
 
AHarvey said:
with an turnover of 'around' £78k a year.
Click to expand...

That's the turnover but you really need to check what the profit is? by the time you have removed 14k per year for rent 1k+ for rates, cost of stock + any extra staffing cost's water/gas/electric bills... that may not leave a great deal of profit?
 
My mother-in-law works at an accountants so we will get one of her friends there to look over the books.

I just really need to know what to look for and take into account and I've had some good answers so far :D thanks!
 
Summary

Asking price:
£29,950

Turnover:
£85,395

Net profit:
£67,263

Employees:
run by husband & wife team with casual assistants on Wednesday & Saturday
 
AHarvey said:
Summary

Asking price:
£29,950

Turnover:
£85,395

Net profit:
£67,263

Employees:
run by husband & wife team with casual assistants on Wednesday & Saturday
Click to expand...


that profit may need checking? if you remove the 14k rent 1k rates from the 85k turnover that takes it down to 70k and that's before you have taken into account the price of stock gas/electric/water/staff and the tax man. that profit they gave you looks a bit high to me?
 
Doesn't sound too bad.. but as others have said make sure you check the books before geting involved! You don't want to pay £30k for a business your going to loose money on every month!
 
AHarvey said:
Summary

Asking price:
£29,950

Turnover:
£85,395

Net profit:
£67,263

Employees:
run by husband & wife team with casual assistants on Wednesday & Saturday
Click to expand...

I assume the business structure is sole proprietor or partnership. Even still those figures don't add up. That looks like the gross profit. Obviously you can check the accounts though.

Are you going to work in it?
 
Until you talk to an accountant its not really going to go anywhere as would be silly to not have it checked out first.

Will be a lot of hard work and early days for this surely? Would you have contacts for suppliers and enough capital to run it, not just enough to buy it? Loans may be hard to come by at the moment!

Also factor in how much you need to stock everything thing up and any renovation work to make it nice and new, advertising to encourage awareness of your new business etc etc. It may look cheap, but may take too long and too much work to ever make the investment back.
 
Yep that profit figure looks alllll wrong to me. If you forget about staff you're basically saying they buy 3k worth of stock and sell it for £70k, which is over 2000% margin!
 
Last edited:
sidthesexist said:
that profit may need checking? if you remove the 14k rent 1k rates from the 85k turnover that takes it down to 70k and that's before you have taken into account the price of stock gas/electric/water/staff and the tax man. that profit they gave you looks a bit high to me?
Click to expand...
Business rate here is £11K PA for a medium sized shop according to a shop owner I was talking to, one of the highest in the country. Don't know where you are but £1K is pretty low. That figure was from ~2006 too.
 
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