Loan to buy a business

[TMNT]

These calculations of Y x Z = X are all nonsense.

its not nonsense, its just about the most important formula you start off with,

clearly you dont have much of an idea

also turnover depends on industry, $500k turnover in consulting services or property BA is far better then, $600k in low margin computer parts

 

[ok180]

its not nonsense, its just about the most important formula you start off with,

You have to stop listening to the business brokers your dealing with.

clearly you dont have much of an idea

I've been running two businesses succesfully for 10 years and just started a 3rd. How long have you been in business TMNT?

also turnover depends on industry, $500k turnover in consulting services or property BA is far better then, $600k in low margin computer parts

Of course, but OP stated what kind of business it is. It's not a service style business. They sell a product. They have 125k-150k worth of fashion stock on hand, they are saying they turn over 500-600k and make 200k profit clear. Big figures..

 

[TMNT]

You have to stop listening to the business brokers your dealing with.

i dont

I've been running two businesses succesfully for 10 years and just started a 3rd. How long have you been in business TMNT?

let me say, MORE then you and LONGER then you, however I wont use that against you

and it makes me laugh at people who say "ive been in business for X years" so??? i know people who have been doing things for 30 years, and still they are either crap or are no better then someone been doing it for 5 years

Of course, but OP stated what kind of business it is. It's not a service style business. They sell a product. They have 125k-150k worth of fashion stock on hand, they are saying they turn over 500-600k and make 200k profit clear. Big figures..

you do know that hte mark ups on fashion can be 300-400% even 1000% depending on their target market and supply chain costs?

$125k of fashion stock doesnt indicate anything? they could be drop shipping (not very likely) or they could be wholesalers to retail shops, or they could be complete online retail, regardless of which, a stock level indicates simply "a stock level of $125k" it could be dead stock, it could be loss leaders, it could be they have gone for economies of scale and bought heaps or even entering a new market,

im not discounting your questions of "how long has the profit been going for" type questions, tehy are just as valid, but its the multiples of profit that you look at first , and then teh rest, unless you are looking at a startup business or something that is about to boom or is possibly a license/Intellectual property type of business/industry

 

[ok180]

Judging a business on multiples of profit is like assuming all businesses are at the same stage in maturity. Ive run businesses for years showing little or no profit because i was throwing everything back in growing in. If you saw a p/l you would think its worth nothing but go back and look at the 80% - 100% growth year on year and it paints a very different picture. On the othe hand you could build it up then milk the profits for a year or two to make it look good before you sell it. Then it depends again what industry it is in.

Thats why basing a business worth on multiples of profit is bunk. Whats stoping me from buying a couple of hundred thousand worth of product from my own business to make the profit look nice and juicy? Nothing, buyer beware.

 

[TMNT]

Judging a business on multiples of profit is like assuming all businesses are at the same stage in maturity. Ive run businesses for years showing little or no profit because i was throwing everything back in growing in. If you saw a p/l you would think its worth nothing but go back and look at the 80% - 100% growth year on year and it paints a very different picture. On the othe hand you could build it up then milk the profits for a year or two to make it look good before you sell it. Then it depends again what industry it is in.

Thats why basing a business worth on multiples of profit is bunk. Whats stoping me from buying a couple of hundred thousand worth of product from my own business to make the profit look nice and juicy? Nothing, buyer beware.

I never said MOE and thats all you look at ,

when people sell their businesses, they aer going to put the best possible story or books forward, so you always have to start deducting whatever you find off the total,

and yes, if you bought heaps of stock off yourself in order to pump up the sales, then it would be a mssive differenec to your previous year, and if you had been doing it for several years in a row, that means you would be paying tax on them, and any beneits you get in the sale would have been eaten up in teh process, and anyone with a keen eye would have picked up on that, just like a hosptiality business all of a sudden doing heaps of catering, catering usually is used to pump up the books

and yes, you obviously need to look at whether its a declining market or at the end of the product life cycle or cycle its in, that is defnitely,

however, if I see a business with no signfiicant potential that ISNT run really poorly, thats profiting zero or $20k for example, Im obviously not going to pay any extra unless there is something that I know that the vendor doesnt know,

I agree, defninitely a case by case scenario, but like Isaid, I always look at profit as a first

 

[Ace in the Hole]

I have a few questions about this online business.
Since we have built an online business over the last 6 years and are looking to sell soon, maybe some of our situation is relevant here.

Are your suppliers reliable.
Do you have supply agreements?
Can new competitors come in and flood your market, even if you have branded products?
How many staff do you need, as no business can run completely automatically all the time.
Where is the stock held and dispatched.
Who receives incoming stock.
What happens with returns?
An online business can die instantly ifnot maintained constantly.
Rules can change which can cause major logistic problems.
Software can fail.
Purchase prices can rise dramatically, AUD fluctuates.
The market constantly evolves and you need to implement strategies to stay ahead of your competitors.
Are there systems in place for this business?
Can anybody run and operate this business?
What plans are in place for future growth?
Can the business expand?
Could you start a similar business from scratch?
Have you researched all your competitors?
Is the industry growing?
What has the growth of the business looked like from the start?

Online biz can grow fast, we net almost a mil annually after a few years start up from scratch.
But I also see that you can crash just as fast if you are not constantly on the ball.
Or, you can grow bigger and bigger with the right structure.

Saying this and having been through it, I would never buy an online business, knowing how fast the market moves.
You can start from scratch with almost zero risk.

 

[Rolf Latham]

id consider the following

1.Pull the max amount of equity from your property that u can, without the lender getting silly nervous.

2. Get an equity partner to fund the balance.


The chances of a cashflow or stock secured facility for that amount of cash is slim

ta
rolf