Doesthis look like a good investment?

Paddles

Just wondering if anyonecan help, DH has been asked if he wantsto buy into a business and as he has been unemployed for a while he is interested. However I have had a look at the free company check website and it states...

The latest Annual Accounts submitted to Companies House for the year up to 30/04/2012 reported 'cash at bank' of £2,001, 'liabilities' worth £40,032, 'net worth' of £-14,005 and 'assets' worth £7018

I said I didn't think that looked too healthy and wasn't keen, but I wonder if I misunderstanding liabilities and I'm being nagged to bits by a three year old so finding it hard to digest anything I'm reading.

Any advice would be great, it's a cafe bookshop and leases it's premises,

Thanks so much for reading :-)

paddyrg

Why are they seeking investors/buy-ins? If it is for a specific expansion/piece of kit then *maybe*, if it is to bankroll 'business as usual' then it's losing money hand over fist, run a mile.

Paddles

Thanks , that's what I thought, but I didn't want to dishearten DH and am having a woolly headed day... will put it to him that the isn't the right opportunity yet x

Suarez

Are there Turnover,Gross Profit and Net Profit figures?

Paddles

Hi Suaurez

Unfortunately not, that's the most information I could get. That and they made approx 90k in their first year of trading - which was a couple of years ago.

Xx

Dorset82

None of the information you've provided is really relevant at all (companies manipulate all of those figures at their will when 'window dressing' for tax purposes).

What you really need to know is turnover, and most importantly gross profit and post tax profit amounts....

Additionally I'd ask why the share of the business is up for sale? If it was such a good thing the existing owner would want to keep it.
Why do they want to sell part of it?

Lots to ask before I'd part with any money.

Dorset82

Of course that is just standard due diligence, you shouldn't be seeking advice here really - approach an accountant/business adviser if needs be : )

paddyrg

Also - is your OH really just buying his own job? Sometimes if a company is struggling with cashflow they could offer a partnership to employees on the basis that the employee will effectively hop off the payroll! Lots of unknowns here - need a lot more detail to know for sure. But the fact the offer is being made at all suggests the owner is in a distressed position.

Savvy_Sue

And some more questions ...

Does your DH have any experience of managing either a bookshop or a cafe? Has he worked in either (preferably both)?

If not, I'd say this wasn't the right opportunity, even if it looked too good to be true, which I'd say it doesn't. And of course, if it looks too good to be true ...

Can you afford to lose the cost of buying into this business? (And potentially a great deal more ...)

bris

Liabilities look high, ask what this is for. But most important is turnover in relation to outgoings, you need to see the latest accounts. You can pay a fee for the latest accounts from companies house, although they should make them available to you on asking, it's the law.

Paddles

Thank-you all so much for taking the time to answer. DH was approached by a friend who wanted to buy this business but couldn't afford it on his own -although it seems like neither of them should be buying it tbh. We couldn't afford to lose the money and neither could the friend, also DH and I don't have any real experience of running a business (can you tell? =D). I showed DH the thread and he's not keen any more, I think we both need to learn a bit more before we even think about it and certainly research anything we think about thoroughly!

Thanks again, we'll get there one day, but it might be when we're both getting more than a few hours sleep a night and can think straight