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Thinking about buying a business

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Tommyh
Tommyh Posts: 112 Forumite
edited 11 April 2014 at 9:09AM in Small biz MoneySaving
Hi all.
I have been bored with my work for a long time, and recently started looking for businesses to buy. I have found a local Sandwich shop that is for sale, at a reasonable price.
My question is this; do I risk my stable and reasonable income - when I say risk, I don't mean I'll quit. I'll either take a career break for a few months and see how it goes, or work part time! - and buy this shop. It has a lot of potential, and obviously the harder I work, the more successful it will be. My wife is worried we'll lose everything etc. It's not something I'd ever take lightly and without careful consideration, but what things will I need and expect before starting up something like this?
Any advice, help and suggestions are welcome.
Many thanks
Tom
2014 wins:
4 x Pairs Ted Baker shoes. An Outdoors Project After School Club for my son.
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Comments

  • motorguy
    motorguy Posts: 22,611 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    edited 11 April 2014 at 10:24AM
    Tommyh wrote: »
    Hi all.
    I have been bored with my work for a long time, and recently started looking for businesses to buy. I have found a local Sandwich shop that is for sale, at a reasonable price.
    My question is this; do I risk my stable and reasonable income - when I say risk, I don't mean I'll quit. I'll either take a career break for a few months and see how it goes, or work part time! - and buy this shop. It has a lot of potential, and obviously the harder I work, the more successful it will be. My wife is worried we'll lose everything etc. It's not something I'd ever take lightly and without careful consideration, but what things will I need and expect before starting up something like this?
    Any advice, help and suggestions are welcome.
    Many thanks
    Tom

    Buying your own business with no experience is a fantastic way to make a small fortune - out of a large one!

    Your wife is right to be worried.

    "and obviously the harder I work, the more successful it will be" - no. You can burst your balls in a business like this and not even be making minimum wage and be doing an 80 hour week, or worse still working an 80 hour week and losing money.

    You have a massive mountain to climb here in terms of doing your due diligence.

    Firstly, i'd be contacting the selling agent and get to view and see any figures you can relating to turnover and profit.

    I'd also be asking why the current owner is selling and how long they have it. My rule of thumb is that if they've owned it for more than five years they must have been making a living income otherwise they'd have closed up. If they've owned it less than two, chances are they know something you dont - usually that its not making money.

    Find out how many staff work there. Try to get an indication of rates, rent, electric, staffing costs, etc. If you can find or guesstimate a profit margin, work out how many sandwiches you'd need to sell to break even, and how many for you to draw a living wage? And how much to match your current salary - that might be a lot bigger turnover than you think.

    Find out how long the lease is remaining - you will be responsible for paying it even if the business isnt making money or closes.

    Have you sat across the road and watched it for a day? Is it a thriving business? Are there queues out the door at lunchtime? If not - what makes you think you can make it fly when the current owners cant?

    How much are the current owners asking for the business? Whats to stop you opening one down the road instead?

    Whats to stop a sandwich chain opening next door?

    Whats to stop a sandwich van stopping daily down the road?

    Whats your competition like in the town? Is there competition? If not why not?

    A business like this could easily lose £1,000 a month and it might take you two years to realise that its a pup. By that stage you're £25,000 in debt and no job. :eek:

    Be extremely careful - your own desire to run your own business and getting out of a boring job could be tainting your view of the reality of the situation.

    Sorry to be negative, but i'd rather be a pessimist proved wrong than an optimist proved wrong, when you're talking about such a massive risk as this.
  • Tommyh wrote: »
    It has a lot of potential, and obviously the harder I work, the more successful it will be.

    How does it have a lot of potential?

    How are you going to sell more sandwiches than the shop already does?

    Why is the business for sale?

    What is its customer base and are they likely to disappear? A sandwich shop can have a bumper 18 months if there's a big building site nearby, but when the site is completed the builders go. Likewise factories and offices can close.

    What competitors are there?

    Etc.
    A kind word lasts a minute, a skelped erse is sair for a day.
  • BakerBoy
    BakerBoy Posts: 186 Forumite
    Tenth Anniversary Combo Breaker
    The volume of people locally and thier affluence is also a massive factor. Even people who love quality food have a price ceiling for thier takeaway lunch. Could be £5 in a country town, £7.50 in the City of London - to include sandwich, drinks, crisps or chocolate.

    It isn't that much per customer, so your margins need to be high, staff costs low, wastage minimal. And you won't be able to spread those customers out, 80% of the trade will be between 11.45 & 2.00.

    I had a fairly large delicatessen in a small country town. I opened a sandwich bar in it and closed it after two years. Most of the trade is fickle - if they see a queue they'll be off to your nearest competitor.
  • DKLS
    DKLS Posts: 13,461 Forumite
    Part of the Furniture 10,000 Posts Combo Breaker
    Due diligence and more due diligence is required, as eloquently put above, this kind of business is quite capable of stripping you of any money, sanity and possible health. Tread carefully good money can be made with the right catering model but an awful lot fall by the wayside.
  • motorguy
    motorguy Posts: 22,611 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    How does it have a lot of potential?

    Etc.

    Just to elaborate on that - presuming the "potential" is other people in the town who are currently buying sandwiches elsewhere, O/P, whats your winning formula for getting those customers to walk to your sandwich bar instead?

    Lower price? What if the other place then drops theirs?

    Better quality meats? Reduces your margins.

    Better offers? Impacts margins, competitors then do same offers.
  • londonTiger
    londonTiger Posts: 4,903 Forumite
    It's a very low barriers to entry business, that dsoesn't typicaslly take much money. Forget part timing it - you'll have to run it yourself or hire expensive managers to manage it for you.

    I think these type of outlets only work as a chain/franchise model with brand recognition. The owners can skim off a small amount of profit from each outlet and live quite well. But on a small scale you're basically stepping down from a stable job to going back to minimum wage retail operations.
  • Old thread, but worth a read through:

    https://forums.moneysavingexpert.com/discussion/1605841
    Who having known the diamond will concern himself with glass?

    Rudyard Kipling


  • motorguy
    motorguy Posts: 22,611 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    It's a very low barriers to entry business, that dsoesn't typicaslly take much money. Forget part timing it - you'll have to run it yourself or hire expensive managers to manage it for you.

    I think these type of outlets only work as a chain/franchise model with brand recognition. The owners can skim off a small amount of profit from each outlet and live quite well. But on a small scale you're basically stepping down from a stable job to going back to minimum wage retail operations.

    +1

    Small indys are under pressure from all sides - large chains, franchises, right through to at the other end with your likes of tescos local doing a sandwich deal. I even see Poundland are doing a sandwich now for £1 - i got a chicken, stuffing and mayo yesterday one yesterday and it was very passable.
  • trailingspouse
    trailingspouse Posts: 4,042 Forumite
    Part of the Furniture 1,000 Posts
    Why sandwiches? Just because you happen to have seen a sandwich shop for sale? You've eaten a sandwich in the past, so it feels like it's within your comfort zone?

    Do you have any catering experience? Do you have any experience of shop work? Do you know the rules and regs surrounding hygiene and food handling? Are you prepared to open at 7am to catch the people passing by on their way to work?

    I'm not saying it's impossible, I'm just saying that there's more to it than meets the eye.

    If another shop - say a book shop, or a tea room, or children's toy shop - had come on the market, would you be thinking about going in that direction?

    I think you would be better off deciding what YOU want to do, rather than buying someone else's broken dream and trying to make a go of it.
    No longer a spouse, or trailing, but MSE won't allow me to change my username...
  • paddyrg
    paddyrg Posts: 13,543 Forumite
    You're bored of your job and want a change, that's understandable. Been there, done that more than once myself. Problem is your focus can't be running away from something (your energy is focused behind you, in front is dissipated), it has to be towards something specific (distinct draw and drive to an outcome).

    Find something you *really* want to do, and forge a plan around that. It may take 3 years for a business to become profitable, so you'd better make sure it's doing something you enjoy doing and don't resent doing for free whilst you build it up! If you 'quite like' sandwiches, is that enough to keep you enthusiastic for 3 years of early mornings? Better set up as (say) a glamour photographer and enjoy your day whilst you build up a business!
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