Looking to buy my employers business, help!

bestfuzz

I currently manage a café, and have done for 11 years. The owner is looking to retire, and has offered to sell me the business. I'm very interested, but don't know where to start. Any advice at all would be gratefully received 

jonesMUFCforever

Do they own the building or is it leased?
Have you seen the 'official' books ie the ones that have been sent to HMRC?
Does the business make a profit>?
Do you have any funds to put towards the purchase?
If you were successful in getting a loan for the business could you afford the repayments together with taking an income and employing members of staff? etc etc

Pennywise

Good advice from poster above.  Once you have more information, i.e. the accounts for the last 3 years and details of the lease, you need to get some advice from both an accountant and solicitor, who will review the information you have already and tell you what else you need from the current owners.  You also need to know how much they want for the business, equipment, stock etc and how they want to be paid for that, i.e. whether they want a lump sum, or instalments, etc.

bris

You start by knowing how much you need to pay for it and how you are going to raise the money.

You also need to know who owns the property the cafe is in, is it leased, will the owner lease it to you, will you have to sublet from the current owner.

Some basic information is needed because you haven't given any one much to go on.

lincroft1710

As a manager you surely must have some idea of how busy (or otherwise) the cafe is and whether it seems profitable. You may not be aware of all the outgoings but you should know about some of them to judge whether it could be worth buying.

Savvy_Sue

Bear in mind that if there are other members of staff (ie not just you) then you may need to continue employing them under TUPE. Sometimes people get caught out thinking that they can take over a business and run it more profitably with fewer staff, then find they would have to make existing staff redundant. 

as a manager, are you on top of employment legislation? If the owner currently takes care of this, you'll need a crash course ... 

One thing I'd be checking at the moment is not just how profitable it is 'normally' but whether it functions well doing takeaway only. We all hope that 'these unprecedented times' are temporary, and goodness knows I'm doing my best to keep local independents running while servicing my caffeine and cake fix, but I'd be very wary of taking on something which didn't work for both eat-in and takeaway. 

But on a more encouraging note, it could be worth thinking about how you could MAKE it work better for both EI and TA. For example, the cafe near work used to do mostly panini and cake during the day, with a small amount of eat-in space. Since re-opening, they've been serving pizza in the evening. It means staying open later, but it must have increased their footfall slightly. 

some other daytime cafes I know sometimes do a Supper Club, and one is doing a TakeAway Supper Club - three courses, only choice is to make it Veggie / Vegan. That place also offers a range of baking ingredients (I think it always has) and will do next day delivery for £1 locally and £2 slightly further afield. 

Grumpy_chap

The OP should establish whether they are buying a business or buying a job.

Valuing transactions like this are always very difficult:

• The vendor will try to use some established basis such as EBITDA or a multiple of income / profits.    Is the performance based upon past records, or adjusted down for COVID-impacts and uncertainty?
• The purchaser will be minded to pay for equipment, stock plus a notional amount for goodwill.  
• Alternatively, cost-to-enter the market from scratch.

In the current climate, how likely is it there will be multiple bidders?

If there are no bidders, what does the current owner do? 
Retire, release zero return but recover a small amount for second-hand value of kitchen equipment and cafe furniture?
Is the current owner obligated to do anything to the premises to end the lease?  Redecorate?

What are the lease terms?
What liabilities are transferred with the business?

DCFC79

Are you sure buying a business is a good thing to do in the current climate? 

[Deleted User]

@bestfuzz what are your thoughts on these points ?

Grumpy_chap

Another consideration is the remaining lease.  Say, it was a 15 year lease with 5 years remaining, but the owner now wishes to retire.  What costs would the owner be liable for over the remaining 5 years, that would now be taken on by the OP?

bestfuzz

thanks everyone so far. to answer some questions, her lease ends in March but the landlord is looking to sign 3 or 5 year leases with incentives. shes offered it to me for substantially less than it's being advertised for, and I know how much the landlord requires in deposits etc. two other full time staff are to be tupe'd along with me. I have a good idea of all the incomes and outgoings, and it could survive during covid with the government assistance, and i most certainly could make it profitable after, I've plans for evening events etc. I think I would want a business loan for 20-25k, but the banks I've spoken to so far aren't lending, covid bounce back loans for current business customers only.