Buy a business

joecranejoe

Pennywise wrote: »

That's turnover, not profit and it'll also be VAT inclusive and margins are low. One of my clients has a similar "open all hours" shop that has similar turnover, but the actual net profit after wages, overheads, costs of sales, etc is only about £26k per year, which is basically his wage! He's happy enough as he'd probably earn less than that out in a proper job (few qualifications, no experience etc), but it's hardly a gold mine and of little interest to an investor. (As an investor would have to pay for another full time job to cover the shifts the owner currently works) so "profit" would probably be half, say £13k p.a. - not much of a return!

Totally understand this is his turnover but he certainly returns more than £26k per year - I called him to ask and he said last year he did £106k profit after expenses.

What you need to remember is that he owns the shop outright, receives business rates relief and also spends a bit of time working there himself and only 1 member of staff needed at any one time.

With a convenience shop it's all about location and offering - he has plenty of parking, offers lottery/paypoint sells cigarettes etc and does newspaper deliveries/parcel drop off etc

trailingspouse

Smb3088 wrote: »

I have no idea how to run my own business. I’m no good at tax, the legislations. I actually have no interest to want to know about it. However I want to make money... and never taking risks is not going to achieve that. I have a big deposit to put towards investing or something.. my ultimate goal, is to make money and not do anything.

What are you actually expecting us to say to this??

MissPop

It sounds like you're expecting to make your millions while sitting at home scratching your doodads. If it was easy we'd all be millionaires

As others have said, hairdressing is not going to be for you - I have a family member who is a hairdresser who has worked in salons (and is now setting up her own) and you really do need a good knowledge/understanding of the industry. There's a reason why people are incredibly loyal to an excellent hairdresser - they are few and far between.

Depending on how much you have to invest, have you considered a buy-to-let? I have other family members who run a property management agency on behalf of landlords (one of whom is a landlady herself), and if you get a decent property manager you will have VERY little to do as a property owner, while receiving the rental income.

motorguy

Buying a business with no experience is a fantastic way to make a small fortune! Out of a large one!!

Dont do it. Theres no easy way to make money, and certainly the odds of buying a business and sitting back and it making money for you is very very slim.

scaredofdebt

I'd be asking them why they are selling.


That's a "net" profit of around £40k a year, figures don't add up, nobody would sell a business making that much money for just £30k.

The general rule of thumb (and it is very rough) is a business is valued at around double its net annual profit, obviously this varies depending on assets but based on the £30k valuation I suspect the business is making more like £15k net per annum.

It's possible business has been falling, it could be an important employee has recently left or is going to leave, could be the rates are going to go up etc.

Do the figures include the owner working in the salon as well, as this will reduce costs and you need to factor that in if you buy the business.

Personally I would only buy a business if I understood it at least to a moderate standard, the better you know the business, the better your chances of succeeding are.

motorguy

scaredofdebt wrote: »

I'd be asking them why they are selling.


That's a "net" profit of around £40k a year, figures don't add up, nobody would sell a business making that much money for just £30k.

The general rule of thumb (and it is very rough) is a business is valued at around double its net annual profit, obviously this varies depending on assets but based on the £30k valuation I suspect the business is making more like £15k net per annum.

It's possible business has been falling, it could be an important employee has recently left or is going to leave, could be the rates are going to go up etc.

Do the figures include the owner working in the salon as well, as this will reduce costs and you need to factor that in if you buy the business.

Personally I would only buy a business if I understood it at least to a moderate standard, the better you know the business, the better your chances of succeeding are.

Another thing i'd be checking are whats the renewal terms going to be for the lease? Does the seller know theres a big hike on the way? OR that its not going to be renewed?

Does the current business owner work in it?

If so, then a replacement for them would need to be budgetted for (further reducing profits).

scaredofdebt

I'd speak to the council regard the lease, can they give you any ideas if it will go up and if so an approximate amount.

Look at the books for the past few years, as many years as you can get, is there a trend with customers, ie are numbers falling?

Speak to the most senior members of staff, in private if you can, sound them out, what is morale like? Are people likely to be leaving or have they left recently? Is the staff able to "self manage" or not and if not can you get the most senior person to run the place for a pay-rise? The staff may have ideas about how to increase business and other ideas that will be useful.

How can you cover holidays?

You will need to get an accountant so factor that cost in, it's possible the current owner does the books themselves, not a huge cost but you do need to think about it.

droopsnoot

Smb3088 wrote: »

It’s advertised for £30000k

Presumably you don't really mean that? If it's actually selling for £30k, that sounds quite low based on the figures you've given, though I guess it depends on what you actually get for the money.

Lots of people ask things like "if the business is making that much, why are they selling", but of course there may be many legitimate reasons for that. Owner wanting to retire, owner has several other businesses that make more money for less effort, owner has lost interest. Sometimes there isn't anything sinister in people wanting to just move on.

mrsyardbroom

If you buy a business that you have no real interest in and don't want to learn then it's not an ideal starting point really is it? If you watch programmes like the Dragon's Den you'll notice how knowledgable they are about business in general and how very quick they are with figures. The people who make the most success generally put in the hard work and the hours to start with. They don't just let someone else do it. There's no money in that. Any self respecting hairdresser who can run a business, deal with the books and do the hiring and firing without ever asking a question or bothering you with details will most likely be running their own business. I think that if you want to own a business and make some money you need to think about doing a very long working week and learning about the nuts and bolts of running a business before you start.

Luckystepho

There are sites that will allow you to invest money in other peoples' businesses or property deals on a 'peer to peer' basis (Property Partner, Seedrs etc) so you stand to make a profit for no effort.


However there are risks involved as with all Peer to Peer lending, but could be an option for some of your funds if you spread risks with some shares too?