Buying a small business

[natmarie73]

Hi all,

Apologies if this is in the wrong place.

Over the past month or so whilst between contracts, the idea has persisted in my mind that I would like to leave the employee world and look into buying a small business but of course I have no idea on how to go about it or what to expect of the process.

I have read a few small business forums, and most of these tend to focus on small business start-ups, which I am not interested in at this point in time.

Anyway, I was wondering if any Somersoftian business owners could provide some basic info on things such as what to look for when buying a small business (say cafe/food franchise type of business), how do business loans work, what sort of structure needs to be in place and other hints about the general process of going from employee to business owner or pitfalls to watch out for and anything else a small business owner needs to know.

Any info would be much appreciated!

Thanks in advance

Nat

 

[Aaron_C]

There's only one criteria and that is how much money does the business generate. Sit in the shop during the day and count the number of customers that come in - never believe the takings figures in the advertisement.

As for loans, you can get business loans to purchase franchises from the big banks like CBA. Much cheaper way (if you can afford it) is to get a cash-out from your properties' equity and use that to purchase the business.

 

[Aaron Sice]

also be careful not to end up buying yourself a job.

 

[Truly Exotic]

From someone who has been in and out of hospitality most of their working life,

If you are looking at a small cafe or food franchise, if you have the idea of you doing four hours per day , three days per week and walking in to pick up bundles of cash on your day off, whilst you jet in snd out of the bahamas, i would suggest you to force your boss to not let you resign,

That is unless, you have family or partner that is going to help you permanently and has experience, OR its a large enough operation that it can be completely fully managed or you are a partner in this large business

It's a really really tough gig, probably one of the toughest industries to get in to

If you do, good luck, we will support you!

 

[Macca]

I have had about 12 different small businesses, my strike rate gradually got better as I got more experience. I would suggest that you only buy into an industry that you already know a Lot about.

A small business is totally different than working for wages and in reality I would suggest that you expect to lose money for at least the first year.

Nothing is as easy as an experienced operator makes it look, there are always little things being done to keep it flowing.

I would suggest running a market stall part time or an online sales site from home to ease into all the legal side of it.

Most state govts have a small business agency with startup info packs, try in your state and start reading

 

[datto]

Why just the other day I was talking to the proprietor of a small takeaway in a small shopping strip on a busy road.

This fella is experienced. But when he bought the shop several years ago, I thought the busines wasn't going to last ( just a gut feeling).

He renovated the place. It looks nice and clean. His family helps out. Service is always with a smile. The food is OK. Some dishes aren't the best tasting but they are always with fresh ingredients and are OK.

In the half hour I was there about half dozen cutomers came and went. He is doing well and you can tell by his demeanor.

He tells me that before buying a takeaway always count the number of customers especially on the busy days ie Thursday, Friday and Sat. Sit outside the shop all day and count.

But he works long hours, every day of the week. No employees, just family.

You could probally do this for several years then get out before you burn out. And with heaps of jolly cash going into the till, I'm sure it doesn't all go through the books (thats your bonus when you sell the shop, for all your long hours !)

Oh, and another thing, accountants charge an arm and a leg to do the GST, BAS and tax returns - try and do them yourself and save a packet.

 

[RPI]

also be careful not to end up buying yourself a job.

A lot of small business owners don't just buy themselves a job, they buy a really poorly paid one.

Advantages to being a business owner can be huge, so can the hours and the stress.

Go in with your eyes wide open

 

[Ausprop]

typical one I saw recently.... NP was $150k which sound ok for $300k asking. got the financials and it was $30k NP... where was the rest? various add backs including $90k of salary. a small business on 10x earnings... a big ask. I'd offer as high as $100k.

 

[weg]

also be careful not to end up buying yourself a job.

+1

Buying what often is a 'round the clock' job can sometimes make working for the man attractive .

If you do, work out how much more it will make you hour per hour after all costs are taken into account, compared to what you're capable of earning as an employee.

 

[charttv]

I looked at buying a franchise fast food restaurant a few years ago. Worked in their training store for six weeks living and breathing it. Saw all the inner nuts and bolts of the business and decided not to go ahead.

Perhaps you could work in a business you were interested in part-time/casually after work/weekends, etc to get a feel for it and see how you go?

 

[natmarie73]

Thanks for all your well thought out responses everyone. I know it is a huge step to take, and I'm not 100% sure I will take it yet. I definately don't want to buy myself a job, especially not a low paid one with long hours! I definately won't be jumping in with my eyes closed to reality either.

I was thinking mostly along the lines of a lunch bar/deli in an industrial area which caters to the workers in the nearby businesses. I worked in such an establishment many years ago in Sydney which was very successful and run by two related couples who were doing very well out of it. 5 day trading and close up shop at 3.00pm

 

[Corey Batt]

I was thinking mostly along the lines of a lunch bar/deli in an industrial area which caters to the workers in the nearby businesses. I worked in such an establishment many years ago in Sydney which was very successful and run by two related couples who were doing very well out of it. 5 day trading and close up shop at 3.00pm

And opening at 5am.

 

[pinkboy]

And opening at 5am.

..............then cleaning up until 5pm, then hitting the books after dinner until midnight..............

.............rinse and repeat!


pinkboy

 

[alexlee]

I was thinking mostly along the lines of a lunch bar/deli in an industrial area which caters to the workers in the nearby businesses. I worked in such an establishment many years ago in Sydney which was very successful and run by two related couples who were doing very well out of it.

How do you know they were doing well? Did you see the books?

 

[natmarie73]

No didn't see the books but they employed me and 3 other staff, each had top of the line late model 4WDs and lived in nice houses in Seaforth. I figure they were either doing very well out of the lunch bar or had won lotto. Of course, appearances can be deceiving.

It was always very busy from early morning to after lunch when my shift finished though so what more could you want. They seemed very successful or they were good at faking it.

 

[Jen_PFR]

My parents ran a very successful strata management business for around 30 years. My dad started off doing it in the 70s and it ended up being a business that employed up to two people full time (depending on the time of year).

Pros: my mum could do the majority of the work from home (she ended up taking it over from my dad - he ended up just doing the financials, as he was an accountant). The income was excellent. My parents were dedicated and made sure that everything they did was compliant with the strata titles act, and were up to date with any changes that occurred.

Cons: you will never, ever work as hard as you do when you run your own business. Nor will you ever be under the same level of stress.

Growing up and watching my parents run their business, both my brother and I learned very quickly in life that there is a hell of a lot to be said for being an employee. You work your 40+ hours a week.... then you go home at night and don't have to worry. You can take annual and sick leave. You can relax when you're not at the office. You have much better job security, and the financial risks are far lower.

Seriously, running a number of fully furnished properties on short term leases is a complete doddle compared to the worry and stress of running a business. I personally would never do it.

 

[sanj]

Growing up and watching my parents run their business, both my brother and I learned very quickly in life that there is a hell of a lot to be said for being an employee. You work your 40+ hours a week.... then you go home at night and don't have to worry. You can take annual and sick leave. You can relax when you're not at the office. You have much better job security, and the financial risks are far lower.

.

That's odd, my father started his own business when I was 10 and brother was 4. I have worked in family business since 2004, owned 2 of my own businesses and would NEVER work for anyone else. My younger brother (24) has owned 3 businesses (2 at the moment) and I would be amazed if he ever works for anyone else again.

Owning your own business of course has downsides but I wouldn't have it any other way.

 

[Aaron_C]

My parents were self employed ever since I was born so I never got the PAYG thing. Tried it out for a few years but didn't like it but I can see how it appeals to some.

 

[Truly Exotic]

That's odd, my father started his own business when I was 10 and brother was 4. I have worked in family business since 2004, owned 2 of my own businesses and would NEVER work for anyone else. My younger brother (24) has owned 3 businesses (2 at the moment) and I would be amazed if he ever works for anyone else again.

Owning your own business of course has downsides but I wouldn't have it any other way.

Sounds like your family is in a field where you really know your stuff,

You are truly a rare type, not many people succeed in one business, let alone and to be able to replicate it multiple times, across generations

For every one of you there may be 500 people as described a few posts up

Well done!

 

[natmarie73]

Great discussion, thanks for all the contributions from everyone and definately food for thought!

I enjoy my "job" when I have one, and it pays very well so I can save while I work in order to not have to worry during the times I am in between contracts when I can take a few months off if necessary.

I think I am probably more sick of having to deal with *******s at work, incompetent bosses, office politics and the general bitchyness that goes on than actually wanting not to work.

I would love to work for myself though and not have to deal with idiots day in and day out.