Buying Going Concern / Goodwill

[turner]

Can anyone help please? I am buying a business and agreed a price to include fixtures and fittings, goodwill etc.

I am at the stage of the contract being ammended on the finer details and have found out today the the vendor has closed the business.

Does the price we agreed still stand? If for any reason the fixtures and fittings had been removed i wouldn't expect to pay the same price but does the same apply to there effectivley being no going concern / goodwill anymore?

Thanks in advance

 

[solopreneur]

Can anyone help please? I am buying a business and agreed a price to include fixtures and fittings, goodwill etc.

I am at the stage of the contract being ammended on the finer details and have found out today the the vendor has closed the business.

Does the price we agreed still stand? If for any reason the fixtures and fittings had been removed i wouldn't expect to pay the same price but does the same apply to there effectivley being no going concern / goodwill anymore?

Thanks in advance

I think that it is certainly a point for further nogotiating- if the value of the goodwill is reducing by the business not being open, then the price you offer should do likewise. If you are going to reopen within a week or so, then dont expect a great reduction though.

 

[QuickHomeBuyers]

Can anyone help please? I am buying a business and agreed a price to include fixtures and fittings, goodwill etc.

I am at the stage of the contract being ammended on the finer details and have found out today the the vendor has closed the business.

Does the price we agreed still stand? If for any reason the fixtures and fittings had been removed i wouldn't expect to pay the same price but does the same apply to there effectivley being no going concern / goodwill anymore?

Thanks in advance

Just a tip, start with 50% of the agreed price. Fix the deal in around 50-55% of the initial price.

If you can give us the total and breakdown we can further ideas/hints.

 

[turner]

Thank you both for your replies.

In response to Batra Ventures reply the total is 31k with 22k being fixture and fittings and 9k being goodwill.

Stock is included in the price and there is no value in the lease as the vendor didn't have one therefore i am taking a new lease (at his expense), i was told there was a remaining lease term at the start of the sale which turned out untrue.

 

[vvaannmmaann]

Forget the "goodwill" bit.No such thing.

 

[bry123]

If the business is not trading and has no lease, it sounds as if the seller intends to leave anyway, whether or not you go ahead with the purchase.

How much would it cost you to fit out the premises yourself and sign a new lease directly with the landlord? I would think this should be close to the maximum price you should pay to the seller of the business, especially in this economic climate.

Have there been many others interested in taking over the premises? If not, this puts you in a very good position for negotiating further.

 

[QuickHomeBuyers]

Remove the goodwill.

£22k fixtures will get you a nearly brand new 1000sqft shop. Drop this to £10k and then make your offer of £10k.

Now that he has closed it anyway, he would be happy with whatever he can get.

 

[turner]

Thank you all your help everyone. Definetely going to drop my price. I thought the hardest bit is running the business but buying it seems to be more hassle than i ever thought! My last premises was just on a rental basis so 1st time i have gone through this....never again!!

 

[bry123]

Good luck and do keep us updated!

 

[WaterCoolersDirect]

I would be very more nervous about buying a business that has been closed down because of the obvious negative impacts:

My questions before signing would include but not be limited to:

How long has it been not running
Why was it closed down
What areas of the goodwill are likely to be effected by the shutting of the doors, (so to speak)

Good luck

 

[turner]

I think my other massive hurdle in the negotiating is the fact that an agent is dealing with it and i'm guessing that the less it sells for the less commission he gets?

Never sold anything through an agent so not sure if they get a percentage or flat fee?

 

I would guess that he is on a percentage fee.

Your advantage is that you are presenting closure today, whereas a closed business miht not sell at all, so he will get no fee..

 

[Alan R Price]

If it has stopped trading you might well be better off waiting for it to go into liquidation then picking the assets up cheaply from the liquidator. As a rule of thumb, stock often goes for 10-20% of cost; machinery and equipment about the same. Computers are normally about £50 each if less than a year old and virtually nothing if older.

You will not have to pay anything for the goodwill although there may be a customer list/work-in-progress/future orders which you will have to pay for. There may be a website/telephone numbers/continuing prepaid advertising which could bring you in business. These could all have a value. Remember though that the longer the time since trading ceased, the less the value of these assets and the more the damage to the business itself.

 

[Deliberator]

The guy is relying on you buying the business but he has now closed the doors - I would personally expect the price ( if you don't uncover any more lies that is ) to be lowered massively or I walk away - how's he going to sell a closed business then?

Think very carefully about your next move as it's crucial!!!

 

[jim_price]

Rule 1 of selling a business is not to allow the sale process itself destroy the value you can realise on exit. I would say closing this store falls into this category and that would make me nervous.

I would definitely go directly to the landlord and carve out a lease yourself.

 

[bry123]

Another way of looking at it...

Since he has now closed the business, if you did not go ahead and buy it, he would most likely have to give notice to the landlord to leave (and carry on paying rent for this period), and would potentially have to remove all his fixtures and fittings and possibly carry out repair/redecoration works to put the shop back into a good condition.

Therefore, in theory, he would be better off time and money-wise giving it to you for free! So do take advantage of the fact that you are in a very strong bargaining position.

 

[turner]

An update as requested!

I spoke to the landlord today who said that the tennant left 3wks ago (he thought i knew what was going on) but has paid rent up to date. He thinks if i pull out of the deal the tennant will hand back the keys and then he's quite happy to do a deal with me.

The agent is saying he's not aware of anything but i'm not sure if he's being convieniently stupid or just stupid (no offence to agents out there other than this one) and still can't see a problem with my paying the agreed amount. Playing him at his own game now and said i'll think about it overnight, although i have no intention of handing money over for nothing.

All i need to do now is find out just exactly does own all the fixtures and fittings. Are they really the tennants or is that another anomaly is this who sorry saga...who knows!!!

Thanks for all your replies, it really did help with where i am going with this.

 

Can anyone help please? I am buying a business and agreed a price to include fixtures and fittings, goodwill etc.

I am at the stage of the contract being ammended on the finer details and have found out today the the vendor has closed the business.

Does the price we agreed still stand? If for any reason the fixtures and fittings had been removed i wouldn't expect to pay the same price but does the same apply to there effectivley being no going concern / goodwill anymore?

Thanks in advance

what type of business is it.?

Earl

 

[turner]

Its a restaurant.

 

[QuickHomeBuyers]

Its a restaurant.

I would think the previous tenant to leave the odd fixtures in there as used fixtures arnt a great deal of money. However you may want to speak to landlord and ask all questions straight away.

Regards