need advice on business, thats for sale

[jag]

hello, there's a business that im interested in and thinking of buying. Its a cafe that runs from 9am-5pm 6 days a week. Its not not a greasy cafe. its all been refurbed. the sale is £1200 a week and after all costs i'll be walking away with £250. thats if i dont work in there. If i work there i will make a profit of £350. I feel there is a lot of potential as i could open it in the evenings as a indain buffet . i would have to apply for a licence , but other then that there is every thing there i need to open in the evenings. the guys asking 30k im quite conifident that he will except 20k. do you think its worth it.?

[JustOneUK]

absolutely.

the figures look good, but catering can be long hours. Have you any experience in catering?

[jag]

no, i havnt got experiance, but im going to do a few weeks there before taken it on, and i have a sheff for the evening.

[Jayne]

Hi,

Takings seem a little low to me, for that many hours a week.

When you worked out how much would be left, did you allow for tax and things breaking down. Catering equipment is very expensive to have repaired and serviced, because it's classed as commercial, even if it's a domestic appliance. You need to allow a little for that to.

Jayne :D

[jag]

havnt allowed for tax, how would i do that? what % would i have to take off?
i know the staffs tax is payed.

[Pebble Communications]

It doesn't sound too great to me. Don't forget that those hours are just the cafe opening hours;add on your admin time (ordering, dealing with invoices, bookkeeping, going to the bank with takings, cleaning the cafe, etc etc).

Costs: how can you only be making £100 addtional profit if you work there? Minimum wage is £4.25 so a full time member of staff is earning £170.
As Jayne said, what about maintainance, cost of redecorating every 5 years or so to keep it looking clean, cost of cleaning (don't forget your kitchen needs special attention to keep within the law), replacement of broken chairs and other equipment, building and contents insurance, third party liability insurance, cost of marketing - especially if you start opening in the evenings, and tax on profits.

Take a hard look and get some advice. This could be a good opportunity but it will be extremely hard work. I doubt you will be able to just sit back at home and watch £250 a week rolling in (and could you live on that anyway?)

[Steve Roberts]

It's about the right price for the profit. Have you checked the lease arrangements?

Other than that, it's your call.

[jag]

yes, lease is re newable after five years, 250 is after all cost including insurance. i would like to bring the sale up by opening in the evenings

[winton50]

Jaq - there's not enough information in your post for anyone to make an informed decision. You need to get the guy's accounts and get a good accountant to go through them with you.

you need to critically evaluate every aspect of the business, as jayne said think about replacing broken stuff ( she should know she is in this line)

You need to get a solicitor to look at the lease terms - sometimes they look good but contain hidden expenses and also the staff issues - what terms and conditions will you be expected to take on?

you need to do a proper business plan including a cash flow forecast if you don't know what one of these is talk to your accountant

you need to take off the enthusiasm goggles. I know as much as anyone that when you are looking at buying a business you see only the good things and put the bad things to the backof your mind so you need to get a good dose of reality.

You need to get sensible independent advice - don't ask your friends and family they are just as likely to tell you that everything is lovely- find an experienced businessperson and ask them

most of all you need to do all of the above. it's sod's law that if you skip a step then that is the one that will trip you up

Good luck - you're doing the right thing by asking advice


Oh yeah and then Haggle and haggle hard. if you think the guy will accept £20k then offer him £10k

[jag]

ive asked the seller for accounts and he told me he does not show profits. But he will give me them to look at.

[Jayne]

I'm not sure of the exact amount you have to earn to pay VAT, but these takings would be pretty close I guess. Is this weekly taking they told you after the VAT has been paid? All food sold in the cafe will have to have VAT added on too.

You need to book an appointment with business link, they will help with all this kind of things and get an accountant to check over the books, they have to show you them and they should show a profit! If they don't show a profit, don't buy it! There's 100's of food shops for sale, but I will warn you, it's not as easy as people think. It's long hours and hard work to reach a good profit in the food industry.

Jayne :D

[winton50]

I'm confused then,

how would you have £250-£350 for yourself if the business doesn't show a profit?

[Jayne]

Sounds like it's an Asda price biz to me :lol:

[jag]

he does'nt show the tax man profits so that he does'nt have to pay to much tax.

[Jayne]

lol... He can go to prison for that, it's Tax dodging :lol:

[Pebble Communications]

Yeah he is basically telling you that his books are a work of fiction, so

Are you willing to just take it on trust about turnover and profit as he can't actually prove anything?

Are you buying the whole actual business or taking over the premises and starting again? If it is the business, how do you know the taxman hasn't already got his eye on it and won't be swooping for an audit at some point. You could with a big 'owed tax' bill.

Why don't you just start your own cafe afresh or negotiate for the property only if it is a great location?

[bwglaw]

Minimum wage is £4.25 so a full time member of staff is earning £170.

National Minimum Wage is now £5.05 for adults over the age of 22.

[bwglaw]

havnt allowed for tax, how would i do that? what % would i have to take off?
i know the staffs tax is payed.

How do you know the staff PAYE is up to date? Have you actually thoroughly checked all the documents to look for anything that is suspicious?

[Jayne]

Oh another thing! Check the equipment is owned and paid for by them, also get a list of equipment included in the sale. Many businesses lease their equipment and don't own it, you must always check this or you could end up taking on someone else's debt or loose the equipment.

Jayne :D

[bwglaw]

I'm not sure of the exact amount you have to earn to pay VAT,

Its £60,000. £1200 per week is likely to exceed the VAT threshold

[winton50]

Good thinking Jayne - I have been involved with a person who bought a business and then had the equipment repossessed as it was on hire and not part of the assets owned!

Seriously if the guy is telling you straight up that he habitually defrauds the tax man then is this the sort of business you want to buy? Ask yourself why he is REALLY getting out and what else is hiddent hat he DOESN'T want to tell you!

as others have said why not invest the £20k in buying your own kit and opening your own shop I am sure if you position it right it wouldn't take too long to get to £12k pw.

[Ian J]

How do you know the staff PAYE is up to date? Have you actually thoroughly checked all the documents to look for anything that is suspicious?

I doubt whether the Paye being up to date is relevant as in all likelihood it will be the vendor's problem as I doubt whether he will be taking on the liabilities.

The costs are fairly easy to budget for but it's the turnover that you will have to check carefully. The vendor says that the sales are £1,200 per week but in the next breath tells you that the accounts will show less so that he doesn't have to pay tax.

Twenty years I also bought a restaurant as a going concern and I spent many days keeping an eye on the place and it's customers to see whether the quoted sales figures were borne out by a constant flow of customers.

Catering is a hard life for someone with no experience. It's all well and good taking on a chef for the evening but they have a habit of not turning up. I had a head waiter who's father died - three times, and always on a Friday night

[Cornish Steve]

absolutely.

the figures look good, but catering can be long hours. Have you any experience in catering?
If you have no experience, why not spend a few months working at another restaurant during evenings and weekends? You'll learn a whole new perspective about the business, understand what's really important, and determine whether you really like this kind of work.

[bwglaw]

How do you know the staff PAYE is up to date? Have you actually thoroughly checked all the documents to look for anything that is suspicious?

I doubt whether the Paye being up to date is relevant as in all likelihood it will be the vendor's problem as I doubt whether he will be taking on the liabilities.

Only on the assumption that Jay is not taking on the liabilities. Little do we know, but it was a good point of advice in the event he does take on the liabilities. It may also matter if he keeps existing staff. I tend not to assume the facts but give as much pointers as possible.

[jag]

i'm going to see the owner today. i'm going to ask him if i can work a couple of weeks , so that i can check the weekly sales and also see if i could improve the business.

im not taking on liabilities.

there some good idea's that ive read. thanks alot guys. i will keep you posted .

[jag]

How do you know the staff PAYE is up to date? Have you actually thoroughly checked all the documents to look for anything that is suspicious?

I doubt whether the Paye being up to date is relevant as in all likelihood it will be the vendor's problem as I doubt whether he will be taking on the liabilities.

The costs are fairly easy to budget for but it's the turnover that you will have to check carefully. The vendor says that the sales are £1,200 per week but in the next breath tells you that the accounts will show less so that he doesn't have to pay tax.

Twenty years I also bought a restaurant as a going concern and I spent many days keeping an eye on the place and it's customers to see whether the quoted sales figures were borne out by a constant flow of customers.

Catering is a hard life for someone with no experience. It's all well and good taking on a chef for the evening but they have a habit of not turning up. I had a head waiter who's father died - three times, and always on a Friday night

[JustOneUK]

There are 101 ways to improve sales and profit margins in the catering business,from adding on simple services like office delivery sandwich rounds to pushing icecream at everyone that walks by in the summer, as you say you could even open in the evenings.

Check out as many facts as you can so you don't get stung...if you are feeling unnerved at all about anything , get it clarified..or else walk away

good luck
James

[jag]

Ian J how well did your restaurant do?

[Ian J]

Ian J how well did your restaurant do?

Not as well as I expected as I made a big mistake when I bought it by not doing enough homework. It was in a city that I didn't know well as I had only moved there six months earlier. The restaurant did a roaring trade in the early evening as it was close to the Theatre and loads went there for a pre theatre meal.

Unfortunately a few weeks after I had taken over, the theatre closed for renovations for a year and our sales took a tumble. I got a reasonable living for a couple of years then got out of the business.