Buying Business - How to trust the seller or broker ?

[PropertInvestor]

G'Day !

I am thinking to buy existing or new food(domino's/subway/pizza hut) franchise business. Would like to know few things regarding buying existing business as following -

1. How to go about buying existing business ?

2. How to trust the seller or broker ? How many of them show last 3 year's tax return. Are the earning shown real ?

3. Are there any business buyers agent who work 100% in buyer's interest as we do have in real estate.

 

[Rolf Latham]

Hope u have a fair slab of cash................or equity

LVR of 50 to 70 arent uncommon for the major frans as mentioned BUT, the loans arent like you Property loans. Often PI and geared to the length of the remaining lease.

Generally, when we do the finance side, the DD is pretty well done, or the buyer doesnt get the finance.

Always worth to spend a week or 2 within the business to see what it actually does

ta
rolf

 

[Intrinsic_Value]

G'Day !

I am thinking to buy existing or new food(domino's/subway/pizza hut) franchise business. Would like to know few things regarding buying existing business as following -

1. How to go about buying existing business ?

2. How to trust the seller or broker ? How many of them show last 3 year's tax return. Are the earning shown real ?

3. Are there any business buyers agent who work 100% in buyer's interest as we do have in real estate.

Easy,
You DO NOT TRUST THE BROKER NOR THE SELLER, they are not acting in a manner that is in your best interest. The seller wants to sell, and the broker wants his commission (no sale no commission).

I flogged off one of my businesses a few years ago, good lawyers, good business broker, good cash in my hand(unconditional purchase), apparently the 'new' owner went bankrupt over the next 12 months, not my problem, my lawyer had everything sticked up nicely in the contract of sale.

What to do if you are serious?
(a) you look at the bass returns and tax returns;
(b) you look at the industry
(c) you stick your noise around the business, get relatives to busy body, whats the 'real' business like
(d) CAN YOU PERSONALLY MAKE THIS BUSINESS WORK,this is the most important factor in my opinion, unless you are looking at buying a business with a value over several million, whereby you can 'afford' to hire a good manager on a good salary (but you still need to oversee things)

 

[Intrinsic_Value]

3. Are there any business buyers agent who work 100% in buyer's interest as we do have in real estate.

oh please dont make me laugh, the business talked about above was financed through some gullable property owner, leveraging his property to get into business (probably because he had been to some investment turbo charge forum about mixing business and property).

Bank was quite happy as well because they got to refinance the properties.

 

[jezza]

Property Investor

I will be interested to see how you go with this!

Before you get oo entrenched in the finance side, I would be speaking to as many people (current and past owners) to see how it all really works. The tough thing about the smallis franchises ( those under 500k) like the ones you mention is they are very very hands on and you are not working the hours that are mentioned on the door, you are doing 16+ hour days 7 days a week. Make sure before you jump in you do as much and even more more DD before you look at finance.

By the way the buyers agent is not looking after you 100% he is looking after himself ( and most the time 2nd & 3rd tier people) before he gets to you

Good luck with it!

Jezza

 

[Rolf Latham]

nce.

By the way the buyers agent is not looking after you 100% he is looking after himself ( and most the time 2nd & 3rd tier people) before he gets to you

Huh ?

Im a little confused........please exand

ta
rolf

 

[Amadio]

oh please dont make me laugh,

Why is this laughable? It would be interesting to know if there are BA's who work just for buyers of franchises.

If there are not, maybe it's because most of the time they will be saying, NO, don't buy this you bunny.

 

[Macca]

Hi,

Talk to Geoff, he has two Subways in Canberra.

You will find the hours are usually at least 50% on top of what you are open to the public for. When starting and for the first few years you can expect 80 hour weeks for an average wage.

Due Diligence is completely different than anything else, owning your own business is VERY hard for most and quite simple for a few, depends on the person.

We sold our last business in 1990s, the industry $$$ in Australia are now 15 times larger than when we were in it yet the guy who bought it closed in a couple of years.

Some businesses rely heavily on the personality of the owners, others on a special skill, all rely heavily on the owner doing whatever it takes to make it work and having the necessary versatility to do a good job of everything.

If you have no experience in the exact industry or managing a small business then you are in for a shock, believe me.

The vast majority fail and lose big dollars, including houses used as security. Many subsist until the lease expires and then quietly fade away after working 5 years for half a wage.

Every now and then one survives and the owners get a comfortable living and even rarer is the "goer" when the person does very well, thank you very much

 

[wylie]

oh please dont make me laugh, the business talked about above was financed through some gullable property owner, leveraging his property to get into business (probably because he had been to some investment turbo charge forum about mixing business and property).

....or perhaps someone on this forum who was bashed about the ears by a certain few who convinced them that their little residential IP returns were so pathetic as to be worthless and to stop pandering to the great ressy unwashed and mix it up with "proper" and "serious" investment vehicles like commercial properties

Because you never see empty commercial stuff, do you?