What to ask/look for? I was offered to buy a sandwich bar.

[Germanoff]

Hello everyone,

I am still looking to buy a small hospitality business and I was offered a Sandwich bar in the centre of Portsmouth. I do not usualy trust businesses that are for sale... you know if it is going well, why would you sell it... So I need some help and ideas about the questions to ask and the things I should look for to make sure the asked price is realistic.

I was also wondering if it is a common practice to ask the seller if I could stay and work with him during one or two weeks just to feel how is the business doing?

Please guys any fresh ideas would be apreciated!!!

 

[Deleted member 138423]

If you are looking to purchase this business then the seller should agree to that request. If they don't, walk away! You also can request their financials and peruse them. Again, any refusal means you should walk away!

 

[mpen]

I have a sandwich shop/bakery, I'm always looking at other businesses, I tend not to put great store on the figures I'm told and indeed books from years gone by, as it doesn't take much time for an establishment to lose its reputation.

The best way I find is ask to look at his purchases, most sandwich shops use teacakes (barms) or batons get hold of his last couple of months bread bills, spend a week or two in the business, have a good poke about before you part with any cash, we have dozens of butty shops for sale up here at the moment, they are dropping like flies.

 

[10032012]

Hello everyone,

I am still looking to buy a small hospitality business and I was offered a Sandwich bar in the centre of Portsmouth. I do not usualy trust businesses that are for sale... you know if it is going well, why would you sell it... So I need some help and ideas about the questions to ask and the things I should look for to make sure the asked price is realistic.

I was also wondering if it is a common practice to ask the seller if I could stay and work with him during one or two weeks just to feel how is the business doing?

Please guys any fresh ideas would be apreciated!!!

You have the money. They want the sell. be confident and assertive... ask for the world. review the reason for any refusal to any request. they are in their rights to say no. if you feel its reasonable (i.e. them being unreasonable) you need to consider what they have to hide.

If you know genuinely its a good business etc. then you don't want to risk losing the sale; if you have doubts of any kind and done little due diligence then don't be afraid to demand (be nice) the information etc. you need.

Sandwich bars are always for sale.

What we can determine is that the sandwich bar isn't doing that well... hence the sale. You need to work out:-
a) the value of the business
b) the effort and expense required to change that around
c) whats hindering the business going forward (bad reputation perhaps, competition etc)
d) is it all worth it

I would say be wary of a potential quick sale... yes, no one wants to hang around trying to sell anything... but this would suggest the business is time-limited and the owner expects it to collapse shortly (i.e. sales decreasing week by week).

As a bare minimum:-
1) management accounts (last 2 years, to date)
2) projected turnover (at least to end of tax year)
3) details relating to lease (i.e. is it expiring in 6 months without chance of renewal)
4) be a mystery shopper... sample the food... if its nothing special or worse, be afraid
5) survey the business at various times throughout the week, both at peak and off peak times... how much custom?
6) staffing - are they all paid up, willing to continue working etc
...

Is it a sole trader or limited company?

 

[Talay]

Recent figures are more important than accounts filed 10 months ago, for a period 19 to 31 months previously !

As someone mentioned about last week's bread order, get the cash books, bank deposits if they will show them, running accounts / cashflow etc. are the only things which show the current state of affairs.

 

[mpen]

I would take all previous figures with a pinch of salt, I'm looking at a shop at the moment thats been established for over 20 years, a good little butty shop, it was taking 6k a week last year, at the moment its doing 2.5k, its dropped that turnover since last November and its still dropping.

Wrong owner, wrong type of food, someones going to lose a bundle at sale time, unless he finds a dreamer with little or no experience with food.