Buying a Coffee Shop Business price now reduced further

Rossie_Cheeks

Hi everyone

I am being made redundant at work and am trying to decide what to do for the future.

I have seen a business for sale that I am interested in which is an existing coffee shop on on local high street.

The cost of busines is £35K Turnover 200K Net Profit 100K.

Coffee shop sale now reduced to £20K

Includes everything, with full training and support.

I will arrange to meet the owner at the weeekend but can you give me some ideas of what I need to find out.

Some questions I know will be

How long lease is for
3 years of accounts
1 full time employee, do I need to keep that person
Equipment
their suppliers
clients
business lunches/parties
Pricing

I know that there is a new shopping centre being built not far from this coffee shop, but I guess I need to find out what retails outlets will be in shopping centre so I know the competition. There is a Costas already at opposite end of shopping area.

I am just at the investigation level at the moment, but I do feel quite excited about doing something like this, and my husband would contribute to the running of the business etc.

thanks

Rossie_Cheeks

Thanks for your input and the web link. I am visiting the owner on Saturday so will add this to the list of questions.

mj12_2

35k for a business earning 100k a year seems very cheap, i would investigate this thoroughly, normally (in my experience) businesses are valued on multiples of their NP not fractions....

somethingcorporate

Smells very fishy, why would anyone sell a business generating £8k+ per month profit for only 4 months worth?

I would expect a business generating that level of income to be worth 2-3-4-5 times it's net profit depending on who you ask.

Why are they selling?

What do you get for your £35k?

paddyrg

There is something else going on here - £35k is waaaaaaaaaaay cheap, so the vendor is having a fire sale for some reason they are not being upfront about. They could refinance the business with any lender against 4 months profit, indeed with a business this viable with such a low value, they really should be franchising branches out at turbo speed. Hey, if there is nothing under the bed, I'll finance you the £35k - but there is *something* I'm certain!

Rossie_Cheeks

Thanks guys for all your input, I agree that it does sound cheap for the turnover.

I spoke with the guy this morning, he has had the business for 1 Year, had a Manager running it who left, he says that due to family circumstances he is moving to Florida and that is only reason that he is selling up.

gibbyni

£35k for a £100k profit per year !!! something not rite there. £100K profit would cost you around £200-£400K at last.
Also £100k profit for £200k turnover looks very high aswell, im not in that sector but would have thought 20 - 40 % profit.

I would look very carefuly at it and get professional advice on it.

david39

Are you sure that the Net Profit figure is not the Gross Profit figure and that all the business expenses do not have to come out of that?

Without wishing to appear rude, it would seem from the nature of your original query that you are inexperienced in retail business.

In view of previous replies, all of which I agree with, I would suggest that you get an opinion and advice from someone well versed in this type of business before you progress much further - something does sound very wrong here.

Savvy_Sue

david39 wrote: »

Without wishing to appear rude, it would seem from the nature of your original query that you are inexperienced in retail business.

And my gut feeling is that if you have no experience of working in a coffee shop (preferably running one as a manager rather than just the odd shift) then it's going to be a long and steep learning curve!

dseventy

Rossie_Cheeks wrote: »

The cost of busines is £35K Turnover 200K Net Profit 100K.

This belongs on dragons den!

Please do your research.

Why would someone sell something for 35K when it makes 100K a year?

Please be careful.

D70

motorguy

That has to be a gross profit figure, not a net profit one.