We've just been presented what looks like a good cashflow business.
Its a Backpackers business right in the middle of the CBD.
We've got their profit/loss statements for the past 5-6yrs and each financial year the average Gross profit is $275K or Net profit of $120K. Agent tells me that these figures in their profit/loss statement are actually significantly less than what they actually get in because alot of their business runs on a 'cash' basis.
Asking price is $340-$360K and the deal is contract must be signed Jul 2010 next year for tax purposes (thats what they've requested). This is the price of the business, they don't own the building (leased).
From the looks of things, it seems like a really good buy but this is the first real commercial deal we've looked at and am not too sure whether its a reasonable buy or not?
Is there a rule of thumb for commercial buys? I'm guessing the thing thats thrown me a little is we're not buying the building + business....its just the business only.
Please help!
Its a Backpackers business right in the middle of the CBD.
We've got their profit/loss statements for the past 5-6yrs and each financial year the average Gross profit is $275K or Net profit of $120K. Agent tells me that these figures in their profit/loss statement are actually significantly less than what they actually get in because alot of their business runs on a 'cash' basis.
Asking price is $340-$360K and the deal is contract must be signed Jul 2010 next year for tax purposes (thats what they've requested). This is the price of the business, they don't own the building (leased).
From the looks of things, it seems like a really good buy but this is the first real commercial deal we've looked at and am not too sure whether its a reasonable buy or not?
Is there a rule of thumb for commercial buys? I'm guessing the thing thats thrown me a little is we're not buying the building + business....its just the business only.
Please help!