Buying/Helping to buy an established business.....questions!

Hold on, they're turning over up to 90k annually and the business is only valued at 70k? Something not right there!
 
GreenMint said:
They won't do that, they want to sell the business, use the money to clear some debts they've had for ages (and want to convert their garage to an "air B&b..." which to me screams crazy!) also they are not home owners, so couldn't do the guarantor method (Partner's parents own the house).
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If the parents lease them the business. The initial lease is worth money. Should be enough to cover their debts.

They would then have rental income for life. It seems stupid to sell to convert garage into an air bnb. Surely they would make more in rent from the commercial property? The busines is worth far more than £70K if it's making £5K a month in profit.

If so then a lease for 25 years would be around £30K plus around I would say £10K per year in rent if they are clearing £5K a month in profit.

The guy who owns this business doesn't have a clue it sounds like.
 
Psycho Sonny said:
No it's not. I could show you 2 business's with the same turnover but one valued at nothing and the other billions.

But I agree with you it's valued a lot more than £70K if it's clearing £5K a month in profit.
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OK, to be clear it's a contributory factor.
 
Psycho Sonny said:
No it's not. I could show you 2 business's with the same turnover but one valued at nothing and the other billions.

But I agree with you it's valued a lot more than £70K if it's clearing £5K a month in profit.
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I'd be surprised at £5k a month profit given annual turnover of £95k, especially a shop based venture.

Edit: to be clear it is possible, just not a "normal" style coffee shop.
 
Pudney said:
I'd be surprised at £5k a month profit given annual turnover of £95k, especially a shop based venture.

Edit: to be clear it is possible, just not a "normal" style coffee shop.
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They're the figures we've been given though!
 
Pudney said:
I'd be surprised at £5k a month profit given annual turnover of £95k, especially a shop based venture.

Edit: to be clear it is possible, just not a "normal" style coffee shop.
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If the OP is right and that the dad doesn't own the house, it doesn't sound like they own the property the business is in either so there is going to be rent to pay.

With the sister going into the business with the husband, and frankly neither has experience running a business. Helping out isn't running it, does she knows all the buying, sourcing, bills etc? It is going to be a hard lesson to learn especially at the beginning and with the business lacking assets and also liquidity should there is a downturn in profits to keep it afloat, I can't imagine it being successful. Not with a £40,000 loan to be repaid over 5 years. The dad doesn't have to pay that, she does.
 
Psycho Sonny said:
They are putting in no money.

He is going to be the security for the £40K loan.

Without his security they get nothing. Zilch. No business.

His wife also works there so he was suggesting 25% would be their combined cut with the brother getting 75% I assume.

This sounds like a bad deal personally. I would say I am putting up all the money I could get my wife to run the place and take 100%. I don't need you guys at all.

Therefore as you can see 25% is nothing.

If I am putting up all the money I would want that money repaid with interest and a share in the business. I would say 20%. I would also want my wife taking home a decent wage on top if she is giving up her job to help them. Certainly a wage increase from her current job.
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Partially correct on the fundamentals:

Currently Fiancee's Dad & his partner own & run it, employing HIS son, HIS daughter (Who would quit her job to work there) (So fiancee's brother & sister) they want to buy the Coffee Shop, can't get the mortgage as neither are home owners, the idea was based around my Fiancee and I getting in on the loan with them to allow them to get it and to take only 25% as we would not be working in the shop, they would be doing that.


To also clarify, these are monthly figures I've been told very briefly right now, I'm wanting to find out more and see FULL records at the weekend, I know this kind of business will obviously have some flat points throughout the year, hence the varied turnover, but I'm just bouncing it off you guys based on the info I have to hand right now.
 
GreenMint said:
Partially correct on the fundamentals:

Currently Fiancee's Dad & his partner own & run it, employing HIS son, HIS daughter (Who would quit her job to work there) (So fiancee's brother & sister) they want to buy the Coffee Shop, can't get the mortgage as neither are home owners, the idea was based around my Fiancee and I getting in on the loan with them to allow them to get it and to take only 25% as we would not be working in the shop, they would be doing that.


To also clarify, these are monthly figures I've been told very briefly right now, I'm wanting to find out more and see FULL records at the weekend, I know this kind of business will obviously have some flat points throughout the year, hence the varied turnover, but I'm just bouncing it off you guys based on the info I have to hand right now.
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Simple math is Profit has to be larger than all outgoings + loan + interest.

I would do a worst case scenario and base your maths on that, look at the last 24 months, pick the worst month, use that to see if they can survive if it happens. Seeing the business has no slush fund, it will go pop pretty quickly.
 
Raymond Lin said:
Simple math is Profit has to be larger than all outgoings + loan + interest.

I would do a worst case scenario and base your maths on that, look at the last 24 months, pick the worst month, use that to see if they can survive if it happens. Seeing the business has no slush fund, it will go pop pretty quickly.
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Yep, makes sense, the property rental is already counted in the figures (As you would) I'm just going to look at it with an open mind and see if it'll work out for my family to be a good thing or not, if not then we'll mosey on into the sunset, if they hold a grudge over us walking away if its not viable that is their problem!
 
Raymond Lin said:
Simple math is Profit has to be larger than all outgoings + loan + interest.

I would do a worst case scenario and base your maths on that, look at the last 24 months, pick the worst month, use that to see if they can survive if it happens. Seeing the business has no slush fund, it will go pop pretty quickly.
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Revenue has to be higher than all outgoings + loan payments?

Profit is what will be left over after that :D
 
GreenMint said:
Partially correct on the fundamentals:

Currently Fiancee's Dad & his partner own & run it, employing HIS son, HIS daughter (Who would quit her job to work there) (So fiancee's brother & sister) they want to buy the Coffee Shop, can't get the mortgage as neither are home owners, the idea was based around my Fiancee and I getting in on the loan with them to allow them to get it and to take only 25% as we would not be working in the shop, they would be doing that.


To also clarify, these are monthly figures I've been told very briefly right now, I'm wanting to find out more and see FULL records at the weekend, I know this kind of business will obviously have some flat points throughout the year, hence the varied turnover, but I'm just bouncing it off you guys based on the info I have to hand right now.
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If that's the case you buy the business for £40k lease it to them for £30k which you agree to delay for 5 years and £10k per year
 
Pudney said:
I'd be surprised at £5k a month profit given annual turnover of £95k, especially a shop based venture.

Edit: to be clear it is possible, just not a "normal" style coffee shop.
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Seems fair to me. Coffee costs like 10p a cup and you sell for £3.

They have zero staff costs as all run by family.

Coffee shops are extremely lucrative its why I have around 30 of them within 5 minutes walking distance
 
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