Buying a business

pooky73

I am about to inherit a sum of money but instead of wasting it I'd like to buy a business, my boss is about to retire and sell his very successful restaurant and has agreed subject to funding to sell it to me!

I would need to take out a commercial mortgage but I am a little confused as the whole business is valued at £170k and I've been informed that I can only take out the mortgage for the property but not for the internal business workings. How do I calculate this and who can I consult at this stage without it costing me money as it will still me a good few months before this happens.

In the meantime I'm off to college to brush up on my management skills

Also any other advice regarding where to go for said loan would be great ie is it best to use a high street bank or other lender

gingerdad

Would talk to an accountant get an independent valuation done of the business.

Guessing it's either very successful or a large part property. Guessing the loan for the property is the easy bit as is secured against the asset.

You need professional advice.

Savvy_Sue

Agree with the above, keep a hard head on your shoulders. At least you've got some restaurant experience, and you're prepared to learn.

the key thing to remember is that what your boss thinks 'the business' is worth is not necessarily what it IS worth. You've already learned that you'll only get a mortgage for the premises, not for the rest of what makes up 'the business'. But the premises are only worth what someone's prepared to pay for them. Yes, you presumably know that that location is good, but if the roof's about to blow off or the whole place needs repainting or the windows could do with replacing, then that all needs to be taken into consideration.

As for the 'goodwill' in the business, that's not usually worth that much. All the equipment, probably not worth as much as your boss would like to think, and YOU need to think about which bits are on their last legs or not as good as YOU would like.

You may have seen 'the books' in the course of your work, but you need an accountant to go through them and work out what the profit REALLY is.

I'd say be prepared to walk away from this deal if necessary, don't just go for this because it's familiar.

But one other suggestion which is sometimes made, would the owner consider a phased buyout?