Buying a small grocery business and doing some consultancy work

allaboutroots

Looking for some advice on structures please. I have recently (December 24) left my full time job. During January I began exploring possible leads for consultancy work. A number of these look like they may come off. I aim to be charging £400/day and aiming to work approximately 0.5 FTE. However, at the same time a good friend of mine has offered to sell me their grocery business. Its current turnover is £380k a year and makes c10% net profit after tax. It as 5 years of successful trading history and audited accounts. The director pays himself a salary of 14k and takes some of the profit as a directors dividend. He is asking £45k for the business. Myself and my partner can put in c£30k ourselves but need to raise a further £20k to complete the purchase and for some small initial working capital. If the sale proceeds I will need to postpone initial work on the consultancy plan perhaps for three months but thereafter I would like to run both simultaneously by employing one or two members of staff to run the grocery business.

so my questions are:

• Should I set up a limited company?
• Should I just register as self employed and run as a sole trader?
• What is the best advice for raising the remaining 20K? (Business loan/personal loan (as the business has 5 years trading accounts but I have no direct personal experience of running a food business)

 

tacpot12

If you are serious about buying the business, find an accountant to discuss it with. You will need them regardless of your structure. They can advise you about the best structure

The consultancy services you want to offer might force you start a Ltd business for them. Many potential employers will require this. Make sure the articles of incorporation allow you to undertake either sort of work if the accountant advises using a Ltd. company for the store. 

Check that the store owner has all the insurances you would expect them to have or need, so that you can factor in anything that isn't in place. 

Best way to raise the £20k is to do consultancy work! If you could do consultancy work full time for three months, you could raise most of this, and your partner might also be able to contribute some more, given time. Your friend will probalby be able to wait three months or so. It's best not to borrow money unless you really have to. 

Does the retail business make sense for your partner? Can you both get enough out of the business to live? Your partner would expect interest in their money was (nice and safe) in a bank somewhere, so you need to be able to match what they would receive in interest as it is more risky to enter into a trade together, especially if one or both of you has no experience in the trade. 

Savvy_Sue

The BEST advice for you at this stage is to have his accounts examined by an independent accountant, appointed by you, who can help you work out whether the business is worth what he's asking for it. 

And then there are some questions: 

• why is your friend selling? 
• why now?
• where does he get his stock from?
• and how? (eg is he at the market at 4 am every day for fresh produce, where's the Cash and Carry he uses, does he get deliveries?)
• are there any potential changes in the shop's footfall - does he know something you don't? (eg is a pedestrianised zone proposed, changes to parking arrangements etc)
• what's the local competition? 
• what are his opening hours, and could you sustain them initially without staff? what effect might it have if you increased / reduced those hours?
• Does it have a USP? (eg coffee machine where no-one else nearby has one, no cafes either)

I know I tend to the overcautious side, but buying a business from a friend can be fraught with problems, and especially as you have no experience in this area. Do you at least have a passion for grocery? Running a shop, the key thing is that it needs to open when it should - you might have flu / the cat may be dying / your partner may be in hospital, but the shop needs to be open, or people go elsewhere and don't necessarily come back. 

If it's licensed for alcohol and / or a newsagent and / or a Post Office, there are even more questions. 

Tucosalamanca

£380k is very low turnover for a retail business to sustain itself in 2025.

Is that gross or net turnover?

Are you buying freehold or a lease?

Are there any unique selling points or barriers to entry?

2-3 workers is a life sentence for someone. It could be torturous being in the the shop for hours/months/years on end.

The shop is turning over £7,300 per week. How many hours is it open?

9-5 Monday to Friday 40hrs
9-4 Saturdays 7hrs
Closed Sundays.

You have 47 trading hours

£7,300 / 47 = £155 per hour, or just over £2.50 per minute (Visualise it, you're selling one large weekly family shop per hour)

If the shop is open for longer, this figure drops even lower.

The shop has low footfall, it will be like watching paint dry.

If you haven't run a grocery shop before, please think long and hard before committing.

Speaking as someone who was formerly a very successful retailer with an abundance of experience, I wouldn't wish that business on anyone... sorry.