Business Buying Negotiation Advice

[Jprandss]

Hi,

I have an ice cream company (retail) that we are expanding.

There is an ice cream shop in a great location in a town near us, which is very profitable and up for sale.

It makes £160k profit a year (pre tax), and is for sale for £325k. Fine multiple for retail. Problem is that the owner does 8am to 11pm, 7 days a week (yes honestly), and so this profit isn't really real. I've calculated that it could make £105k managed with employees. This is a far less attractive multiple.
It has been on the market for over two years, nearer three, we have offered £280 and been turned down, they said they wont negotiate on price, although did recently drop £25k off the price, it was at £350.
There is likely 20k in equipment at used prices.

I want to try to negotiate again as this shop has an unbeatable location, and I believe I can make it busier, but I cant justify the price in my head. I can get hold of the money, the bank is relatively keen to lend, but I would need to invest money to renovate and rebrand.


Does anyone have bright ideas/experience on how to negotiate with a stubborn seller? I am interested in asking for vendor finance, but would need to 'offer' this idea in the right way. I imagine they have quite a lot of cash in the bank and may be temped in a lower tax way of selling, the husband has a large income also and I imagine they pay a lot of tax already.

Any ideas welcome!

 

[Mark T Jones]

Make a very public display of looking for premises nearby.

 

[WaveJumper]

Have you actually seen his full accounts or is this a figure the seller throw out to you, In my book its worth nothing until you do some proper due-diligence, does the price include the freehold or is there a lease in place, if so how long left on the lease

 

[Paul Kelly ICHYB]

so this profit isn't really real.

What does that mean? Have they lied to you about the £160k?

 

[BusterBloodvessel]

What's so absolutely world beating and un-replicable (I know that's not a word!) about this shop and it's location?! Especially when you're saying you would rebrand it anyway?

I'm sure you could open across the road and throw, literally, 10's of thousands of pounds at marketing and still come nowhere near an outlay of £325k.

Or as mentioned above, at the very least make a show that that's what you're about to do...

 

[pentel]

It makes £160k profit a year (pre tax), and is for sale for £325k. Fine multiple for retail. Problem is that the owner does 8am to 11pm, 7 days a week (yes honestly), and so this profit isn't really real

To cover 8am to 11pm 7 days a week you will need a minimum of 3 employees, allowing for holiday, and sickness cover. At £15 an hour that will cost around £110,000 p.a. including company NI and pension. so £50k profit.

 

[Newchodge]

What, exactly, are you supposed to get for £325,000. £20,000 of used equipment sounds over-valued. What else?

 

[Chris Ashdown]

What's so absolutely world beating and un-replicable (I know that's not a word!) about this shop and it's location?! Especially when you're saying you would rebrand it anyway?

I'm sure you could open across the road and throw, literally, 10's of thousands of pounds at marketing and still come nowhere near an outlay of £325k.

Or as mentioned above, at the very least make a show that that's what you're about to do...

You mean competition as the other owner may just stay open to hurt you. would there be enough trade for two shops of the same type. Also Marks idea makes sense

 

[safecav51]

Hi,

I have an ice cream company (retail) that we are expanding.

There is an ice cream shop in a great location in a town near us, which is very profitable and up for sale.

It makes £160k profit a year (pre tax), and is for sale for £325k. Fine multiple for retail. Problem is that the owner does 8am to 11pm, 7 days a week (yes honestly), and so this profit isn't really real. I've calculated that it could make £105k managed with employees. This is a far less attractive multiple.
It has been on the market for over two years, nearer three, we have offered £280 and been turned down, they said they wont negotiate on price, although did recently drop £25k off the price, it was at £350.
There is likely 20k in equipment at used prices.

I want to try to negotiate again as this shop has an unbeatable location, and I believe I can make it busier, but I cant justify the price in my head. I can get hold of the money, the bank is relatively keen to lend, but I would need to invest money to renovate and rebrand.


Does anyone have bright ideas/experience on how to negotiate with a stubborn seller? I am interested in asking for vendor finance, but would need to 'offer' this idea in the right way. I imagine they have quite a lot of cash in the bank and may be temped in a lower tax way of selling, the husband has a large income also and I imagine they pay a lot of tax already.

Any ideas welcome!

Consider proposing vendor finance to ease the seller’s tax burden and make the deal more appealing. Highlight your plans for renovation and rebranding to show how you can enhance profitability.

You might also suggest a contingency agreement based on future performance or present market data to justify your offer. This approach can make your proposal more attractive and reasonable. Good luck!

 

[Ozzy]

As has been mentioned here many times, a business is only worth what someone is prepared to pay for it. What the seller/owner thinks it is worth is almost always irrelevant.

Decide what your maximum price you are prepared to pay (which you may have already done), and put an offer forward with an expiry date when the offer will be withdraw (leaving a little wiggle room and negotiation room), and walk away leaving them to fester.
Then I also really like @Mark T Jones suggestion of be seen looking at other premises around the area, and you may find one that would be a good option.

Negotiating buying and selling is not much more than a game of Poker, and being confident.

This premises may be in the 'perfect' location, but I'm sure you could turn a good location into a perfect location for hundred grand.

 

[Ozzy]

Consider proposing vendor finance to ease the seller’s tax burden

Can you (or anyone else) expand on this a bit; as I'm personally not clued up on how this would work in a business acquisition scenario although I am prepared to be wrong which is fine.

 

[Socio South West]

.... I am interested in asking for vendor finance, but would need to 'offer' this idea in the right way. I imagine they have quite a lot of cash in the bank and may be temped in a lower tax way of selling, the husband has a large income also and I imagine they pay a lot of tax already.

'Imagine' is not the thing to to in this situation, In short you don't have a scooby doo about their situation or their finance: Concentrate on your situation

Vendor finance for a business of this size is such a rare beast it's not worth worrying about unless there is freehold property involved.

Its been on the market for nearly three years... simples... it's overpriced. If the Owner wishes to work themselves to an early grave, then that's up to them.... From what you say that looks like what they are trying to do,

As others have said, show interest in other properties nearby: You might even go as far as putting in a planning application for change of use on a place very near to them of which they should be notified - you don't have to hold a lease or own it to do this

 

[Ryan Paul]

Those figures can't be accurate.

 

[Baines Watson]

Hi,

I have an ice cream company (retail) that we are expanding.

There is an ice cream shop in a great location in a town near us, which is very profitable and up for sale.

It makes £160k profit a year (pre tax), and is for sale for £325k. Fine multiple for retail. Problem is that the owner does 8am to 11pm, 7 days a week (yes honestly), and so this profit isn't really real. I've calculated that it could make £105k managed with employees. This is a far less attractive multiple.
It has been on the market for over two years, nearer three, we have offered £280 and been turned down, they said they wont negotiate on price, although did recently drop £25k off the price, it was at £350.
There is likely 20k in equipment at used prices.

I want to try to negotiate again as this shop has an unbeatable location, and I believe I can make it busier, but I cant justify the price in my head. I can get hold of the money, the bank is relatively keen to lend, but I would need to invest money to renovate and rebrand.


Does anyone have bright ideas/experience on how to negotiate with a stubborn seller? I am interested in asking for vendor finance, but would need to 'offer' this idea in the right way. I imagine they have quite a lot of cash in the bank and may be temped in a lower tax way of selling, the husband has a large income also and I imagine they pay a lot of tax already.

Any ideas welcome!

You already own an ice cream company, so the key question is whether this existing shop currently sells your brand. If not, switching to your brand may alter its performance at this location. It seems the primary attraction for you is the location, not necessarily the current business model, which you intend to change by introducing your own brand.

Given that, why not consider opening your own outlet in the same or a nearby location instead of purchasing this business? If the location is truly the critical factor and the current product offering isn't aligned with your brand, establishing your own store could allow you to retain full control over the brand experience and potentially reduce costs. It’s worth evaluating whether the investment in purchasing the existing business is justified, especially when considering renovation and rebranding expenses on top of the initial purchase.

By leveraging your own brand's strength in a prime location, you might achieve similar success without the high acquisition cost, particularly when the owner is reluctant to negotiate.

 

[Jprandss]

Make a very public display of looking for premises nearby.

I like this idea, however the town is extremely difficult to find locations in, unless a shop comes up (which around one a year come available) then itll be hard to persuade that it could become reality.

 

[Jprandss]

Have you actually seen his full accounts or is this a figure the seller throw out to you, In my book its worth nothing until you do some proper due-diligence, does the price include the freehold or is there a lease in place, if so how long left on the lease

Yes I have seen the accounts and yes they do show this as profit.

No freehold, but landlord will give a new 10 year lease upon sale.

 

[Jprandss]

What does that mean? Have they lied to you about the £160k?

There are nearly two people's wages not shown on the profit, as the owner works these hours herself.

If her hours were shown on the accounts as wages, then the profit would be at least £40k less.

 

[Jprandss]

What's so absolutely world beating and un-replicable (I know that's not a word!) about this shop and it's location?! Especially when you're saying you would rebrand it anyway?

I'm sure you could open across the road and throw, literally, 10's of thousands of pounds at marketing and still come nowhere near an outlay of £325k.

Or as mentioned above, at the very least make a show that that's what you're about to do...

Yes as replied above, its a town that is almost impossible to get a retail unit it.

This shop is in an extremely good location on the harbourside, and there are only one or two shops in as good a location, which are not available and are highly unlikely to become available in the near future.

Also if we were able to take one of those other sites then we would be competing with this shop, so we would likely take less each year than if we owned it. Sometimes it makes sense to buy the competitor and not need to compete with them!

Their business is absolutely replicable, but hard to compete with without their location...

 

[Jprandss]

To cover 8am to 11pm 7 days a week you will need a minimum of 3 employees, allowing for holiday, and sickness cover. At £15 an hour that will cost around £110,000 p.a. including company NI and pension. so £50k profit.

Sorry, I omitted that it opens 8 months a year. They open those extended hours for around 2-3 months.

What, exactly, are you supposed to get for £325,000. £20,000 of used equipment sounds over-valued. What else?

Goodwill! Not having to compete with them. A relatively guaranteed profit each year.

You mean competition as the other owner may just stay open to hurt you. would there be enough trade for two shops of the same type. Also Marks idea makes sense

There would definitely be enough trade to take a unit and compete, but I want to be having the best units in each town, rather than secondary locations. This is the best unit in the town in my opinion.

Consider proposing vendor finance to ease the seller’s tax burden and make the deal more appealing. Highlight your plans for renovation and rebranding to show how you can enhance profitability.

You might also suggest a contingency agreement based on future performance or present market data to justify your offer. This approach can make your proposal more attractive and reasonable. Good luck!

Yes I think I need to look into the tax saving that vendor finance could give him, and put that as a proposal.

As has been mentioned here many times, a business is only worth what someone is prepared to pay for it. What the seller/owner thinks it is worth is almost always irrelevant.

Decide what your maximum price you are prepared to pay (which you may have already done), and put an offer forward with an expiry date when the offer will be withdraw (leaving a little wiggle room and negotiation room), and walk away leaving them to fester.
Then I also really like @Mark T Jones suggestion of be seen looking at other premises around the area, and you may find one that would be a good option.

Negotiating buying and selling is not much more than a game of Poker, and being confident.

This premises may be in the 'perfect' location, but I'm sure you could turn a good location into a perfect location for hundred grand.

I did this last year, and they turned the offer down (offered £280K) and said they weren't taking offers below the asking price. He certainly knows how to play hard ball.

The problem is that there aren't other units available. it is a town where you can pay (and people have recently) paid over £120k just as an ingoing or 'key money' to be able to rent a unit there.

'Imagine' is not the thing to to in this situation, In short you don't have a scooby doo about their situation or their finance: Concentrate on your situation

Vendor finance for a business of this size is such a rare beast it's not worth worrying about unless there is freehold property involved.

Its been on the market for nearly three years... simples... it's overpriced. If the Owner wishes to work themselves to an early grave, then that's up to them.... From what you say that looks like what they are trying to do,

As others have said, show interest in other properties nearby: You might even go as far as putting in a planning application for change of use on a place very near to them of which they should be notified - you don't have to hold a lease or own it to do this

Putting in for planning is an interesting idea!!

Those figures can't be accurate.

I'm not sure which aren't accurate, but I know that the profit and turnover is. And I know the asking price.

You already own an ice cream company, so the key question is whether this existing shop currently sells your brand. If not, switching to your brand may alter its performance at this location. It seems the primary attraction for you is the location, not necessarily the current business model, which you intend to change by introducing your own brand.

Given that, why not consider opening your own outlet in the same or a nearby location instead of purchasing this business? If the location is truly the critical factor and the current product offering isn't aligned with your brand, establishing your own store could allow you to retain full control over the brand experience and potentially reduce costs. It’s worth evaluating whether the investment in purchasing the existing business is justified, especially when considering renovation and rebranding expenses on top of the initial purchase.

By leveraging your own brand's strength in a prime location, you might achieve similar success without the high acquisition cost, particularly when the owner is reluctant to negotiate.

Yes well put. Problem is the severe lack of units that would work. The currrent shop does not sell our brand.

 

[Jprandss]

'Imagine' is not the thing to to in this situation, In short you don't have a scooby doo about their situation or their finance: Concentrate on your situation

Vendor finance for a business of this size is such a rare beast it's not worth worrying about unless there is freehold property involved.

Its been on the market for nearly three years... simples... it's overpriced. If the Owner wishes to work themselves to an early grave, then that's up to them.... From what you say that looks like what they are trying to do,

As others have said, show interest in other properties nearby: You might even go as far as putting in a planning application for change of use on a place very near to them of which they should be notified - you don't have to hold a lease or own it to do this

Just pondering this, if I put a planning application in on a building nearby, the landlord of that building would be notified of the application, and I imagine they would be confused and annoyed that I was making an application without being a tenant or intending to go through with it...

 

[Socio South West]

Just pondering this, if I put a planning application in on a building nearby, the landlord of that building would be notified of the application, and I imagine they would be confused and annoyed that I was making an application without being a tenant or intending to go through with it...

If you work through an agent and make anything discussed dependent on a Change of Use application

You have the time to withdraw the application, or indeed if the change of use is granted it should be before any deal becomes binding.
Who said anything about you not intending to go through with it? You could legitimately be setting up in opposition to the business you are looking to buy.

 

[Mattymoomoo]

Can you pay an employee to put an ice cream van or similar nearby most days? It should cover itself financially and drastically reduce his takings and desirability of the business. Also if he is thinking of selling it's because he has had enough. It may just tip him over the edge to negotiate.

 

[Paul Kelly ICHYB]

What, exactly, are you supposed to get for £325,000. £20,000 of used equipment sounds over-valued. What else?

Goodwill!


Goodwill? Taking your salary out of the figures, how many years to cover the cost of the goodwill?

 

[Jprandss]

Goodwill!


Goodwill? Taking your salary out of the figures, how many years to cover the cost of the goodwill?

Not fully understanding the question, but this would be a managed shop, my own involvement would be minimal.
Asking price £320k, 20k in equipment, so £300k goodwill. Profit approx £105k per year when managed, around three years to cover the purchase cost (if no corp tax is paid...).

 

[fisicx]

Profit approx £105k per year when managed...

Gross or net profit?

And you have already said the owner works for free and to deduct £40k. So the profit is down to £65k. which means at least 5 years to pay off.

And there will be tax to pay so quite likely a lot longer to cover the cost.

Goodwill is whatever you are prepared to pay. £300k sounds like a made up number.

And unless I've missed it, you haven't mentioned the lease. That could be another big chunk of cash.

 

[Jprandss]

Gross or net profit?

And you have already said the owner works for free and to deduct £40k. So the profit is down to £65k. which means at least 5 years to pay off.

And there will be tax to pay so quite likely a lot longer to cover the cost.

Goodwill is whatever you are prepared to pay. £300k sounds like a made up number.

And unless I've missed it, you haven't mentioned the lease. That could be another big chunk of cash.

Thanks for replying but I have given all numbers previously in the thread.

Net profit on last years accounts is £155,000. Deduct at least 40k for manager(s).

Comes with new 10 year lease, at same cost as being paid by the current owners.

 

[Porky]

I can’t believe that some here are suggesting using unethical practices to somehow try and frighten the seller into taking a cheap offer by wasting time pretending to be opening a similar business nearby. Tell you what if I was the seller and I caught onto that I would NEVER sell to you and also he only needs to ask who put the application in and if he knows the retailers nearby which is highly likely after many years trading there he will know if it’s legit or not. Also, he probably won’t give a toss anyhow, if he has prime location I doubt his business would be impacted that much, if it is an ice cream shop, it’s an impulse purchase, it’s not the sort of thing you travel down the road at the seaside to save 10p

For all we know, this guy likely has shed blood sweat and tears to establish this business. It’s not the price that YOU want to pay but it could be the price he needs to retire and at the end of the day he doesn’t have to sell as proven. So this is about you wanting a discount to satisfy your ego. After all if you can buy a similar business for less elsewhere you can go buy that one but, you don’t, you want his shop.

My view is you are talking £45k here difference. My suggestion is You could say to him: your concerns are if the shop would be as lucrative and profitable after he has left the business and many other buyers probably thinking same, if it would still make £160k a year after he’s gone, flatter his ego even. If you really want this business, I would suggest offering him the £325k he wants but say your offer would be to pay £280k on exchange and defer £45k to month 24 as earn out post sale pending those similar revenues over the next 24 months. That way if you don’t make the money he doesn’t get paid and if you do you have made twice that anyhow in the period.

Even if you claim you will only make £100k profit a year you will have paid for the business in three years so sounds like a sound deal to me. Probably why he is not in any hurry to sell it.

This is down to negotiation, to be blunt Park the ego and try and get a meeting with him but just like you don’t want to pay, he doesn’t have to accept either hence the stalemate. That’s how I see it anyhow.

Good look

 

[businesscon]

@Porky How can you approach a business negotiation respectfully while ensuring a fair deal for both parties, especially when the seller has invested years of hard work into their business?

 

[Newchodge]

How can you approach a business negotiation respectfully while ensuring a fair deal for both parties, especially when the seller has invested years of hard work into their business?

Just because someone has devoted years of hard work into their business, does not make the business worth anything to a purchaser.

 

[fisicx]

@Porky How can you approach a business negotiation respectfully while ensuring a fair deal for both parties, especially when the seller has invested years of hard work into their business?

Your years of hard work are worth zero. The only thing a buyer is interested in is the recent accounts.

 

[Jprandss]

Update-

We met with the agent to put forward our same offer again, 280k a year later (four years after first listing), and apparently someone has recently offered the full price and appears to be proceeding....

They will get back to us if this falls through.

Who knew?

It only takes one person to prove 'market value'...

 

[GERAI LTD]

Hi,

I have an ice cream company (retail) that we are expanding.

There is an ice cream shop in a great location in a town near us, which is very profitable and up for sale.

It makes £160k profit a year (pre-tax) and is for sale for £325k.multiple for retail. The problem is that the owner works 8am to 11pm, 7 days a week (yes, This is a fine honestly), and so this profit isn't really real. I've calculated that it could make £105k managed with employees. This is a far less attractive multiple.
It has been on the market for over two years, nearer three, we have offered £280 and been turned down, they said they wont negotiate on price, although did recently drop £25k off the price, it was at £350.
There is likely 20k in equipment at used prices.

I want to try to negotiate again as this shop has an unbeatable location, and I believe I can make it busier, but I cant justify the price in my head. I can get hold of the money, the bank is relatively keen to lend, but I would need to invest money to renovate and rebrand.


Does anyone have bright ideas/experience on how to negotiate with a stubborn seller? I am interested in asking for vendor finance, but would need to 'offer' this idea in the right way. I imagine they have quite a lot of cash in the bank and may be temped in a lower tax way of selling, the husband has a large income also and I imagine they pay a lot of tax already.

Any ideas welcome!

You need to hire a lawyer, who will protect your best interest and who will list main aspects of the deal that is essential for you, only after that you need to enter into an agreement with admissible terms and execute purchase.

 

[bftconsulting]

Hi there,

It sounds like you're in a tricky situation with this ice cream shop acquisition. The location and profitability potential are clear, but I completely understand your concerns about the inflated valuation based on the current owner's unsustainable work hours.

When dealing with a seller who’s firm on price, vendor finance can be a useful strategy. You could propose paying closer to their asking price, but with a portion deferred over a few years (e.g., a "vendor loan"). This might be attractive to them as it could lower their immediate tax liability while allowing them to get closer to the price they want. You could also emphasize that the business will benefit from renovations and rebranding under your ownership, helping to reassure them of your commitment and vision.

Additionally, you might propose a performance-based payout—where you agree to pay the remaining balance of their asking price if certain profit targets are met in the next 1-2 years. This could help bridge the gap in price expectations without increasing your upfront risk.

Stay firm but flexible, and continue to highlight the fact that the business has been on the market for nearly three years—this could help nudge them towards reconsideration.

Good luck with the negotiation!