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Cid2006 | Buying a small coffee shop business, please advise? |
Someone in a shopping mall is selling his small coffee shop business for $90,000 (includes all equipment) now I know a little bit about the business but I can learn that part, what I'm more concern is what I should be concerned about before investing that much money such as what questions I should ask the seller etc. One thing that worries me is that he bought this business only a year ago and now he is selling it because he can't take care of it (?) Thanks to all the enterprenuer and investment experts for your fedback. |
 |
 
Goose&Tonic
 |
Well, for starters, you'll want to know what his gross and net was for the last year. You'll also want to see the records from before he bought the business... you sure as hell don't want to buy a business that won't be profitable in the next few years and you can tell this by the books of the last few years!!! |
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William P
 |
FIRST RULE OF INVESTING: Only invest what you can afford to LOSE.
I've owned and run food concessions, research firms and more, and being self-employed is fantastic. However, success takes hard work.
Look at his books, tax returns, and accounting ledgers. He'll naturally want a nondisclosure/privacy agreement so that you do not reveal this data elsewhere, but that is reasonable.
Are you purchasing his business name? Does it come with liabilities? Find out if from the county and city health departments if there are outstanding fines or violations against hiim and his firm. Will these attach to you? Are the business taxes paid up and current? Is he generating enough income to pay for rent, annual licenses, permits, employee costs, utilities, taxes, stock supplies, inspections, etc...? Have you run the numbers in this regard?
Why can't he take care of the business? Is it personal (illness, family, drugs...) or professional (not enough income for the business to be viable)? Have you looked into the personal assets of the owner at the county records (does he have liens against his home, does he have a criminal record, are there lawsuits pending or settled against him or his firm?).
Talk with the mall manager to find out if rent is stable, if it will increase due to new ownership, and if any changes are pending. Is the mall slated for renovation? What do other business owners in the mall say about the mall management? Is his business behind in rent that you'll inherit the obligation to pay up to date?
Selling a business for a good profit after just a year might be a smart investment move. He gets his investment back, plus some profit and moves on to bigger and better things. Maybe you'll have the opportunity to continue to grow the regular client base of the shop and sell out in a few years yourself with good profit. |
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givenrhythm
 |
try and look at his records if he wont show than dont buy. also location is the most important |
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Life after 45
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I wouldn't buy it, all considered. If he is selling already, rent/lease cost, and/or insurance is killing him. Do a google search for "coffee stands" and research actual franchise start-ups and related NEW coffee business opportunities! |
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tuisson
|
Your major concern is cash flow - can you meet your expenses plus make a profit?
Ask him for his cash flow statements showing income and expenses for the period of time he owned it. He should also have the same information provided by his seller. Income tax records will do, although they are often, how to say this, inaccurate. This should state things like space lease costs, labor, raw product, etc.
Put together your own plan based on this. How many cups of coffee do you have to sell in a year to make it? Is this realistic?
Investigate the value of the equipment at websites such as this one: http://www.restaurantequipment.net/ Then you can see how much you are paying for equipment and how much for "blue sky" and "goodwill."
Good luck! |
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Figato
|
BAD.
It is a very tough business. VERY hard to make money in it.
In all likelyhood he's selling a dud.
Will he open the books? show you register receipts, sales tax returns, income tax returns etc.
If he won't and/or they don't add up he's hiding his losses.
He might try to imply that he made a lot of money but hid it from the government. That's usually BS.
If you think you can run a good business in that location, coffee or otherwise, offer him an amount equal to the cost of his USED equipment - probably 10k will do.
If he won't take it, wait until he closes shop and lease the space and start all over.
It's his job to convince you that it will work. Ask if you can work there for free for a while before you decide. That may give you some insight.
In general, I would
A) stay away from the coffee business and
B) stay away from suspicious deals like this. |
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MJ
|
Lots of good answers here to start. But a couple of things you need to ask yourself......do you have the experience and desire to stick this business out through thick and thin? Business fluctuates and you need to make sure that you not only have the purchase capital, but working capital to make it through the rough times. I think a minimum is 90 days; six months is even better. Working capital is the amount of cash that you have to allow the business to grow, prosper and keep it cash flowing until it generates enough on it's own to make a profit for you. And....to make sure you can live until the business pays you enough to live.
Also, you might check what the ratio of income to purchase price might be in similar industries. Unless this place grosses at least 3-4 times your $90k purchase price annually, sounds like it's overpriced to me. |
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