Accountant Small Business HELP PLEASE!

MrandMrsT_2

Hello

I am new here so please be kind with me!

I am seriously considering/would love to buy a small ironing business I have been offered for sale but have the following accounts query and would love it if there is an accountant on here who could advise me which is the correct figures:-

Example 1 - what has been provided to me)

Ironing income for one month £500
Fuel cost - £50
Power cost - £20
Therefore Profit for one month is £430

Example 2 - what I believe it should be)

Ironing income for one month £500
Fuel cost - £50
Power cost - £20
Phone cost - £10
Ironing would take approximately 55 hours to complete at a minimum wage cost of £6.08/hour - £334.40
Wear and Tear on equipment -£15.50 *

Profit £70.10

*based on a new steam generating iron (say £150, steam press say £100, ironing board say £50, 12 metallic ironing board covers £48, 6 normal ironing board covers £24 every 24 months

Prior to giving up work to have children 5 years ago I worked in accounts departments and was under the impression that no matter what the work/service etc being completed there needed to be a figure included for completing the work? Am I correct in this instance or would it all be as example 1 the current business owner has provided to me showing a very large profit?

My other little query is, the business has been running for two years at the end of this month. It has 3 weekly customers, six fortnightly customers and approximately six customers who have their ironing done every six weeks or so. On the above figures of profit etc does any accountant out there have an idea of what they would believe the business to be worth? Bearing in mind the current owner is keeping all the equipment so I would only be purchasing a client list - 15 names and addresses - people who have never met me - so may not actually want a new person doing their ironing and may leave as soon as new ownership occurs. I live in a different area and would need to change the phone numbers. But the business does include a very nice website and listings to google places etc all of which I would be given the passwords etc to so I could change to new phone numbers etc.

I would really appreciate any help out there as I need to come to a decision very shortly and am at a loss with my two above questions.

Thanking all in advance for replies!

steve1980

Steer clear IMO.

The company are selling their client list only. There is absolutely no guarantee the existing clients will transfer over.

You'd be better starting up from stratch.

coldstar

Dont pay anything for the existing business, there is no guarantee any of the customers would come over to you. I would value it a nothing to be honest. Some of the cost items missing are: Insurance (in case you damage or lose items), admin costs, delivery/collection costs, credit control costs (ie cost of making sure you get paid and to cover situations where a customer doesnt pay!), bank charges, etc

You should start your own service from scratch, you can create your own website and design your own leaflets which can be commercially printed for distribution to local potential customers. Then go out and do some face to face SELLING of your new service. This is by far the best way to get going on this sort of business. None of this is difficult nor should it cost more than £100 to £200 in total (assuming you own a computer and are prepared to do a bit of new skills learning )!

You can make money doing this but it wont be a lot (probably minimum wage or near enough). If you decide you want to start making serious money you will have to grow the business, concentrate on sales and marketing and eventually start hiring staff to do the ironing for you.

PlutoinCapricorn

Is the business that is for sale a limited company? If so, the full accounts should show the amount spent on wages. If not, which I suspect is the case, you can't buy a business as such from a sole trader as the person IS the business. So as another poster has said, you are just buying a client list and there is no guarantee that these clients would move over to you and everything would just carry on as usual.

pleasedelete

But if a limited company you would pay yourself the personal tax limit for 2012 and the rest as a dividend. But with this turnover there would be no profit above that level. You would be earning somewhere very roughly 4k a year.

Mistral001

If it is a one-man/woman business without a ltd company the Example 1 would be correct. If Ltd them Example 2 would be correct.

It all depends on whether it is a Ltd company that you are buying. It would appear from the accounts that it is not as |Example 1 are the accounts for a self-employed sole trader it would appear.

They might call themselves "Handy Ironing" or something, but that will not be a protected name almost certainly if it is not a Ltd company. However, the name has value in that you cannot set up and call yourself by that name operating in the same area as you could be accused of passing yourself off as that business and I think they could sue you in that case for any loss of business they might have as a result.

As others have said you are buying a client list really and perhaps the use of an established name in the area. Might be better just to build up your own clients even though it might take a while as well as costinng for advertising etc.

If it is a Ltd Company then the same goes really, though you might need some legal and good accountant's advice. In fact you might need it in any case.

Annisele

I agree with the people suggesting you steer clear. It sounds as though you're not really buying a business, just a client list.

I'd value that list at zero. Apart from the fact that you've got no idea whether the clients would transfer over, you'd probably also need legal advice to try to ensure your contract was as watertight as possible - and prevented, for example, the seller selling that list to half a dozen people, or continuing to trade themselves in competition with you. By the time you've paid for accountants and lawyers to look over the books, IMO you might as well have just set up on your own.

You don't have to answer this - but out of curiosity, how much are they asking for the list?

MrandMrsT_2

The current owner is saying she could easily get £5,000 for the business. It appears, although I have only been given very rough accounts to have a turnover in 2011/2012 of approximately £5,700.

It is just a normal small business and not a Limited Company.

I have offered £1,600 - for the client list of approximately 15 names and addresses and for the business name and website.

I am waiting for an answer.

I do not work elsewhere and would do all the ironing myself and would have no employees.

Thank you to everyone for their very helpful advice!

nickj_2

i would have thought you could easily build up your own customer base - if you advetise in local shops etc , people you know , you will soon get customers , once you've got customers they will, if you do a good job and are reasonable reccomend you to their friends , once you have your "round " then you're laughing

Annisele

MrandMrsT wrote: »

I have offered £1,600 - for the client list of approximately 15 names and addresses and for the business name and website.

Hmm. Do you actually need a website for an ironing business? I'd suggest not. Even if you do, a website that has managed to attract 15 clients in two years may not be worth paying for.

So, you're suggesting that you pay about £100 per name and address, with no guarantee that those people will actually want to use your services.

If you were to spend money on advertising a completely new business, how much do you think you'd have to spend to get one new client? If that's less than £100, do that instead!

DELLBOY_2

a customer list is worth nothing
try offering her a % of the first 2 years (or similar ) and her reaction will say it all .....
also whats stopping her competing with you ....