Weary of buying an e-commerce business

[Adam678]

I’m currently looking at an e-commerce business that’s advertised for sale. It sells motorcycle accessories as it’s main trade. It’s been established for around 15 years with its primary avenues being eBay and Amazon. The figures given are - asking price £349k, annual turnover 1.6m, adjusted net profit of around 200k. It operates with a general manager and 2 full time staff in a warehouse environment. The asking price is for the goodwill, know how, and fixed assets which comprise of some computers and shelving units. There is stock of around 100k which is separate to the 349k asking price.

In theory and on paper it sounds like a great online business for the price? I just thought the asking price seemed a little low for the adjusted net profit figure?

Any thoughts would be much appreciated. Thanks all.

Wary*

 

[Graham Tyers]

Is there an obvious and believable reason for sale?

 

[Mr D]

Has amazon permission been granted for the sale of the amazon part?

Is the goodwill, fixed assets and know how worth that much?
Could you use the money instead to set up and get that size business eventually? Perhaps without the size of warehouse or the staffing costs?

Too little detail for us strangers to know much. I would have assumed that a business whose purpose is selling stock would be including stock in its sale price. Would seem strange to buy a stock selling business minus the stock.

 

[Clinton]

Wary*

Then pay and get good professional advice. There's tons more to know than you could possibly shake a stick at ...and you won't get even half of it in a forum thread.

 

[Pish_Pash]

How come they've only got £100k of stock if they're turning over £1.6M per annum?! (that seems rather low to me). Also, how sellable is the stock? (can they tell you for example how many days stock they hold for each sellable stock item)

 

[dan19900]

Maybe their sales are declining? Should be easy to check though.

 

[Adam678]

Reason for sale is supposedly retirement. What I cannot understand though is why the vendor wouldn’t bring in a manager to run the operation for say 40k salary max and then be looking at 160k passive income? Or am I missing something there?

 

[Mr D]

Reason for sale is supposedly retirement. What I cannot understand though is why the vendor wouldn’t bring in a manager to run the operation for say 40k salary max and then be looking at 160k passive income? Or am I missing something there?

No, probably not missing anything. Though managers have to be managed.

 

[Mark T Jones]

Reason for sale is supposedly retirement. What I cannot understand though is why the vendor wouldn’t bring in a manager to run the operation for say 40k salary max and then be looking at 160k passive income? Or am I missing something there?

What you are missing is a lot of detailed historical and current information against which to make a considered decision

The big question on my mind would be why isn’t the manager buying it?

 

[Adam678]

Definitely a few questions that need to be asked. What would your top 5 be?

 

[dan19900]

What you are missing is a lot of detailed historical and current information against which to make a considered decision

The big question on my mind would be why isn’t the manager buying it?

Most 'general managers' don't have 450k laying around to be fair.

 

[Mr D]

Most 'general managers' don't have 450k laying around to be fair.

Ah the cash purchase option.
Can be done of course - but there are other ways of purchasing.

 

[Opinion87]

Ah the cash purchase option.
Can be done of course - but there are other ways of purchasing.

Most "general managers" don't have £450k laying around, or have the knowledge of other ways of purchasing. I doubt researching MBO's is at the top of his reading list.

 

[Mark T Jones]

Most "general managers" don't have £450k laying around, or have the knowledge of other ways of purchasing. I doubt researching MBO's is at the top of his reading list.

I don’t know the stats of what most general managers have in the way of savings and or assets.

But I would say that if they have faith in the business and a bit of ambition they would almost definitely have done some asking around about how to fund it

 

[Mr D]

Most "general managers" don't have £450k laying around, or have the knowledge of other ways of purchasing. I doubt researching MBO's is at the top of his reading list.

General managers with no interest in buying may be unaware of other ways of purchasing.
How about buyers? Perhaps the general managers who want to buy a business will take the time to research 'how'.
It's not that uncommon for someone who works for a company to later buy the owner out.

 

[Mark T Jones]

Definitely a few questions that need to be asked. What would your top 5 be?

1. Why are you selling?
2. Why are you really selling?
3. Why is the GM not interested?
4. Why is the GM really not interested?
5. Please may I have 3 years filed accounts (in full), up to date managements, aged debtors/creditors, and 6 months bank statements?

 

[John Muir]

If the business is on Amazon and eBay the seller will need written approval from each of them to sell the business account on their marketplace. If they don’t have this and the business is sold, Amazon and eBay can shutdown the selling account at any time without warning.