Buying a leasehold business

Baker2602

Hi all,
I'm looking into buying a business. It will be my first time and I basically need as many tips and as much info as I can get.
The business in mind is a leasehold gymnasium, they are asking for £65,000 to buy the business (which for the size, equipment included, memberships and area is very competitive!).
They have currently in excess of £60,000pa in memberships, and £4,000pa in a secondary rental income.
The rent for the actual property is only £155 a week.

Is there any sort of loans/funding I can apply for to buy the business?
If so, what sort of deposit would I need?
What fees do I have to pay for the process of buying?
Is there anything you think I need to know?
All hell is welcome!

Baker2602

All help is welcome**

paddyrg

What aren't they telling you? What about costs? If no costs, they can make that £65k in a year whilst keeping the business

lincroft1710

As the rent of £650 pcm is only equivalent to that of a 1 or 2 bed flat and they receive more than half of that as "secondary rent", what exactly would you be renting? How long is the lease?

You will need a solicitor for purchasing the lease, preferably one well-versed in commercial property law. An accountant will need to look at the books.

How many staff are employed? Overheads - electricity, heating, water, cleaning, commercial refuse collection, insurances, you may be exempt from paying business rates.

Loans - max would be 50% of purchase price and you need to show you have your own funds to make up the remainder and produce a viable business plan to persuade your would be lender he won't be losing his investment.

Baker2602

Well their main cost is paying the staffs wages, they have 5 full time employees and a part time cleaner.
The rent is for the first floor of an old mill, and the secondary income is a part of the first floor which is rented out to a beauticians salon.

paddyrg

5 FTE's must be earning beans - perhaps the vendor is selling ahead of the National Living Wage adding another few grand (plus increased employers NI, etc) which could make those thin margins unviable?

Carer

So they have approx £64k income.

Outgoings are likely to be:

5 full time (35hrs) staff on minimum wage is £65,520, plus their NI contibutions is going to cost you another £8k ish. Then add the part time employees costs.
Then add all the other costs per year:
Rent : £8060
Rates: probably exempt
Insurance: Probably need building as well as PLI and employer insurance. Likely cost is over £100 month.
Rubbish removal: For our small business cost is £350 year.
Telephone/Broadband: Ours is around £500 year
Gas/Electric: I would imagine over £200 month for heating and powering the machines.
Water: Ours is around £150 year.

Plus you will need machinery hire and/or maintenance contract. Money put aside for repairs and improvements. Consumables (toilet paper,soap etc)

I make this somewhere around £78k and you still need to find out the part time employee costs and the other stuff.

I can see why they are selling. They must be making a big loss.