Rent, rates, insurance, electricity, water, machinery, maintenance, cleaning, taxes, staff costs (kids are staff) etc.
Like I say, it is entirely possible. At first glance it just seems a high profit margin.
Buying/Helping to buy an established business.....questions!
- Thread starter GreenMint
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Rent, rates, insurance, electricity, water, machinery, maintenance, cleaning, taxes, staff costs (kids are staff) etc.
Like I say, it is entirely possible. At first glance it just seems a high profit margin.
Caporegime
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Does he not own the property?
The mark up is ridiculous so I can see how from £90k a year £10k goes on stock.
£20k for overheads. Machinary will be leased or bought second hand in cheap. If it breaks buy another.
Leaving £60k for all 3 of their wages which is £5k per month.
No, but "property rental is already included in the figures".
Realistically rent and rates are the biggest reason I'd question those numbers. But it could be one of the tiny shops where you literally buy a takeaway coffee and no seating etc. Or £95k may be after rent for some reason. Again, it's entirely possible the £5k monthly profit is correct.
Like I say, the figures I have to hand are scrawled and may be "generous" but I'm just going on that until I see things properly!
Not gonna lie curious, and kinda confused..go on...
Not gonna lie curious, and kinda confused..go on...
Caporegime
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I don't know exact figures but one of our shops makes £25K a year rent. the Lease was sold for 25 years for £75K up front. I know it makes around £5K per week profit to the guy who is leasing it from us. it's worth around 300-400K (the building). we own the property.
owning the property is the valuable thing here i was thinking the £40K figure was you buying the property and the business and it was a tiny property.
if not then i would stay away here. you want to invest in the property not the business itself unless the business owns the property.
Got me there Kermit, I have to say.
No, it doesn't equal that, not close.
Sonny, fair point, I think buying the property would be the "right" way to do it, but not sure we could afford that, the location where it is may dictate a very high price.
No, it doesn't equal that, not close.
Sonny, fair point, I think buying the property would be the "right" way to do it, but not sure we could afford that, the location where it is may dictate a very high price.
Caporegime
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i wouldn't invest then. no way. the property is where the real money is to be made. sit back at home watching tv making 4 figures per month doing whatever you like.
whereas running the business and having to pay all the costs is stressful but with the right business can be rewarding.
i wouldn't be interested in the proposition at all. tell them sorry you aren't interested.
Soldato
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Small businesses like this are notoriously difficult to value, and very difficult to sell. They often sell for a fraction of the advertised price as they are difficult to offload. If it’s been “valued” at £70k by an agent, £40k may well be the limit of what it can achieve.
Used catering equipment is worth very little in cash terms, so most of the value is in the goodwill - but that’s intangible.
What’s the USP? What’s to stop somebody opening another coffee shop next door causing the turnover to halve overnight?
I would strongly advise you not to get involved. I think even if you had £40k in the bank doing nothing you still shouldn’t get involved. The numbers don’t look right for a start. This sort of business would normally see a GP of around 60-70% and a net profit of 20% would be fantastic.
Why can’t they do an earn out from their Dad - he sells them the business for a nominal £40k but repaid back to him over 5 years from the profits of the business.
Why can’t they get a £10k personal loan each?
There’s too many people involved chasing a slice of a relatively small pie.
Used catering equipment is worth very little in cash terms, so most of the value is in the goodwill - but that’s intangible.
What’s the USP? What’s to stop somebody opening another coffee shop next door causing the turnover to halve overnight?
I would strongly advise you not to get involved. I think even if you had £40k in the bank doing nothing you still shouldn’t get involved. The numbers don’t look right for a start. This sort of business would normally see a GP of around 60-70% and a net profit of 20% would be fantastic.
Why can’t they do an earn out from their Dad - he sells them the business for a nominal £40k but repaid back to him over 5 years from the profits of the business.
Why can’t they get a £10k personal loan each?
There’s too many people involved chasing a slice of a relatively small pie.
As others have said, very few independent businesses have any real value at sale as they are built around the owner (not a business that runs itself).
A family member had the same, agents valued the business at a silly number and took payment to advertise. They had no interest as in reality there was nothing stopping someone from taking on the lease and starting the same type of business under a new name.
This is family so it's going to get messy but I doubt the business is worth more than the equipment inside it. Personally I'd stay out of it and tell them to go down the route of the parents taking a % but I know you said they want a big sum payment.
A family member had the same, agents valued the business at a silly number and took payment to advertise. They had no interest as in reality there was nothing stopping someone from taking on the lease and starting the same type of business under a new name.
This is family so it's going to get messy but I doubt the business is worth more than the equipment inside it. Personally I'd stay out of it and tell them to go down the route of the parents taking a % but I know you said they want a big sum payment.
Where have they gone for the lending?
I recently used Funding Circle for a business loan to purchase another business and the process was fairly painless.
I would suggest the dad be the guarantor. He has a vested interested in making the sale work.
I recently used Funding Circle for a business loan to purchase another business and the process was fairly painless.
I would suggest the dad be the guarantor. He has a vested interested in making the sale work.
As above, where are you looking because i've known people take out business loans without being homeowners/having a guarantor.
Or even just take out an unsecured loan rather than a business loan. If the dad only wants to convert his garage i'm sure an initial purchase price of 20k would enable him to do that (which would be much easier to get) with the remaining 20k offset.
Or even just take out an unsecured loan rather than a business loan. If the dad only wants to convert his garage i'm sure an initial purchase price of 20k would enable him to do that (which would be much easier to get) with the remaining 20k offset.
They said they tried funding circle and had "problems" not accentuated on that yet, but definately touching it on it at the weekend, could be down to income, the sister has moved jobs a fair bit of late and the son currently only works in the cafe a few days a week.
The Dad can't be a guaruntor as he's not a homeowner, otherwise I'm sure he would be.
As above, not sure where they're at now, but I'm going to put all that to them about half & half, its "nice" that they're saying if we can do the guarantor thing they'll pay off our mortgage per month min to us, but right now i'm more concerned about the 40k hole if something smelly hits a large revolving metal item!
Having owned a 96 cover cafe for 20 odd years, to me those margins are way, way out.
I don't work in ours, unless there are issues to sort out, which obviously makes it less profitable.
It's an increasingly harder market to be in & one in a few years I'll be looking to get out of.
I don't work in ours, unless there are issues to sort out, which obviously makes it less profitable.
It's an increasingly harder market to be in & one in a few years I'll be looking to get out of.
Deleted member 651465
Deleted member 651465
Run a mile.
When things get hard (and they will) you'd be liable and they'd just as quickly turn on you if it all goes Pete Tong.
That's not to say family businesses aren't a great idea but buying in to a family business? Sounds like all risk and no reward.
Also, reading the thread... this came to mind
When things get hard (and they will) you'd be liable and they'd just as quickly turn on you if it all goes Pete Tong.
That's not to say family businesses aren't a great idea but buying in to a family business? Sounds like all risk and no reward.
Also, reading the thread... this came to mind
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If they're only turning over £95K, how much profit are they making? Do they have any employees? What are they paying to rent the ite?
Are you able to guarantee only part of the loan? Could you guarantee only (say) £10K?
Your fiancee's brother should get some proper legal advice about inheritance tax. There may be special rules about passing on a business, and the taxman may look askance if the business is being sold at a significant discount to family.