Just wondering if anyone on this forum has purchased a business before on this forum and if so what their experience was like.
How did the financials stack up after purchasing and would you do it again?
Anyone Ever Purchase a Business before?
mychips on 25/03/2019 - 11:13
Comments
Have you ever eaten a piece of bread with a filling inside? What did you think? Would you do it again?
"Person eats a piece of bread, you won't believe what happens next!"
Why is that in quotation marks?
I think he wants to know if your due diligence of buying a business actually stacked up once the keys were handed over to you. Extremely often this isn't the case in a cold sale of a business. However if you have bought a business that you have personally worked in for instance, you have a much better idea of what you are getting yourself into and how you can improve things over the current owners etc.
I think OP just wants any opinions/stories, but yeah, would be nice if more detail information was given so we could help OP out if they are considering a business.
Yeah, I was kind of after real life stories of success/failures. Apologies for the vagueness but I'm just curious about the option of buying/starting a business as I don't want to work 9-5 for life.
What industry? Me and my parents started a pub kitchen 9 years ago, we moved from a pub to a resturant with fish/chips burgers and all the pub style stuff.
If you pm maybe i could give you some ideas ect.
When you say that you don't want to work 9-5 for life, I hope you realise that most business owners work a lot more hours every day, with almost no days off and almost no chance of taking a holiday for at least the first 5 years.
@GG57: I understand that, its more a figure of speech than me saying I don't want to work. I don't mind hard work, I just don't enjoy being micromanaged.
You're wanting a "small fast food type shop" and don't want to work 9-5 for life. Definitely no chance of that in that industry. You'll be working 14 hour days 6 days a week!
@mychips: You'll be working 14 hour days 6 days a week micromanaging yourself. Every task you perform yourself saves you money. Every task you delegate costs you wages.
just read Quora for these stories. More worldwide stories rather than anything local.
What are you doing to work towards this goal? What are you reading everyday to get you there. Stories are one thing, but understanding business terms and requirements will get you there faster. In your own business you'll be working more than 9-5. You'll be learning constantly, from the most immediate needs. Other people's stories are far from what you need to know.
If you're good at business, you wont share your secrets for success. That's one of the reasons why there is always vague advice. People with the gall to go into business at any stage don't want to say why they fail either.
This will definitely stop you working 9-5 for life! Instead, you'll be doing 100-120hrs a week for around the same money you can get wotking a decent paid job!
As noted above, the question as posed is so open ended as to be practically unanswerable.
Here's a tip though, don't fall for the line of "yeah, that's what's on the tax returns, but there's heaps of cash business". Cafes, restaurants, etc. use this one all the time.
It goes like this … the prospective buyer has been given all the financials and then observes the takings of the business over a (say) four week period and may even be effectively working in the business during that time.
While this is going on, the seller of the business is "ringing up" cash sales out of their own pocket to prove to the buyer that all this "cash business" comes in around the sides and is not in the financials.
The buyer then thinks "you beauty", buys the business and … surprise, surprise … all this "cash business" vaporises and then the buyer realises they've been sold a pup. Any redress would be limited in any event, but is scuttled because the takings according to the tax returns are probably more or less holding up.
I've heard of this happening a few times, very scummy
Don't use a standard solicitor to do a biz agreement. Use someone who is a specialist (web search, etc).
This post is so vague it's hard to even answer.
Get your lawyer and accountant to do your due diligence. Not a web forum. If you can't, won't, don't then I question whether you've got the funds and the know how to purchase and run a business.
Just remember that 90% of business sales usually fall into 2 categories.
1- Owner is going broke, business is a turd and\or wants out of a Lease they can't afford anymore; and
2- Owner has a successful business and wants to cash out whilst the going is good.Up to you and your accountant to work out where this business falls. Don't buy a turd.
Lol no option for owner that wants to retire from their industry?
Category 2.
Get your lawyer and accountant to do your due diligence
Ah the good old abdicate responsibility to someone else. Guess what usually happens?
Guess what usually happens?
They provide comprehensive legal and financial advice tailored for your personal and financial situation, taking into account your available resources, so you can make an intelligent and informed decision.
Lol
@Seedy seed: Better to spend some cash and get proper advice than going in blind, business failing and flushing 50k down the toilet.
Super vague post. Without more information I say go ahead and do it. Best case you succeed and make millions, worst case it fails and provides us with some humorous Ozbargain posts in the future.
Another thing to watch out for, is free internal labour. It might look like expenditure is low to inflate profits. What you don't see, is family helping out for free/cash.
If you 'buy into the books', you might find that you'd need to employ extra staff to make up for the free labour.
Depending on your business, you might also find that what they're buying goods for might not necessarily be the same for you. They may be getting discounts which aren't on contract.
How would you even look out for this? Camp outside and count how many workers there are?
Yes, and ask the question to the previous owner, other staff etc.
If there are existing staff, make sure you know what their job is, if it's in line with how much they're getting paid, how replaceable they are etc. You obviously don't want to replace them, but you might find they quit shortly after. You need to cover all bases.
This is correct and in the sale contract, draft some undertakings to address these questions specifically that they are true and correct at the time of signing. This way you might have some leg to stand on if you walk into the business and they have literally lied to your face about inventory/procurement/employment costs etc.
A family member bought a jims franchise, it failed in under a year.
A lot of franchise groups just care about selling new franchises and not how successful the franchise might be, of course some people are better running and marketing business than others.
I'm not surprised.
My aunt bought a Jims cleaning years ago and sold it within a year due to the money being substantially less than the discussed prior.
A huge proportion of franchises are just scams. Read into the latest inquiry. It actually BENEFITS a franchisor if you fail. They take back the tenancy, the lease, the fit out and sell it to another potential sucker for $$$ 6 figures. Rinse and repeat.
Rinse and repeat
Also known as churn and burn.
Exceptions include McDonalds franchises from long ago.
Purchasing a $250,000 business is vastly different from purchasing a $10,000,000 business. Need more info.
I'm not loaded by any means. I'm thinking of maybe buying a small business, maybe a small fast food type shop.
I got some savings and looking at getting something <$50k which is what seems possible on some of the business listing websites I've had a look on.
Have you ever worked in a small fast food type shop as an employee before?
Yeah, I worked in catering years ago for a bit and at Mcdonalds for like a year.
@mychips: Good to know. Cafe closest to me has had 4 owners in 6 years. First 3 owners were under a well known franchise. All first 3 owners failed within a year as they had NFI how to make a coffee let alone run a business. Current owners know how to run a cafe, run it well and turn a profit :)
Hope the same happens for you. Don't become part of the statistic of failed small businesses!
@Typical16-bitEnjoyer: Thanks mate, I appreciate your input. I will be doing lots of research in the next year or so before doing anything anyways because I don't want to be a statistic haha.
Those $50k lunch bars are probably not great. You will have to put in a lot of hours as paying people will be too expensive.
Have a look at the book called the E-Myth.
Self employment is a false dream imo. Did it for 11 years, it drains you. Much rather work for someone.
Worked for someone for 15 years, it's a false dream and it drains you. Much rather have my own business ;)
Depends on the job I guess, I now work for the government and it's cruisy af with good benefits and great pay.
Can I ask if that's state or federal? What grade and what job?
I know people that like to buy themselves a job so they can be the boss. That is a completely fine objective. But after the initial rush of getting it started and up and running, by about the end of year 2 or in year 3 (depending on their age to be honest) they tend to take their foot off the gas and just want to "their thing" in the business and not everything, so they let other things slide, or bring on too many employees for the business. They just don't want to prospect for new customers constantly or make bad decisions when they do promotions. It seems like a hard game being in the service/hospitality industry. The only business i'd want to get into would be a trade/builders business. Yeah they fail too, but at least if you are good, you can get a small crew going and do pretty well for yourself through word of mouth business (just can't have too many unhappy customers on the trot!)
The only business i'd want to get into would be a trade/builders business
Only the property market is booming. You don't want to get in at the top and have to let go 95% of your contractors when the slow down occurs.
Only the property market is booming. You don't want to get in at the top and have to let go 95% of your contractors when the slow down occurs.
IF you are doing 1 or 2 house builds at a time I think you can manage that through any cycle. If you are trying to be a big house builder business yeah, you will struggle.
Yes. Several QLD management rights businesses over the years. When I was 20 I used parent's borrowing ability to buy a $200k business and learnt the ropes there. Had a shitbox car and was poor AF during uni (passed on several holidays and countless smashed avo seshes) to make this happen. Was still driving a 90s econobox until after I left the "graduate" level of employment.
These days I put in 20-50% of the equity required and partner with other operators I've learnt to trust over the past decade whenever there's an opportunity to do so.
This industry has a very clear profit ceiling and floor in most cases, which is why I continue to invest in it.
Furthest the net profit after purchase has been out by from my feasos has been around 5%.
I will do it again, though I have a career in an unrelated industry that comes first.
Mgt Right! One of the favourites here.
But wont think owing several in the past years would yield much return for you and your parents? I always thought this is a long-haul business because of the low/steady income. Each transaction of buying/selling cost lots of money: lawyers, stamp duty, agents……
Sorry mate never got your reply on the notification bell.
Best case scenario is you purchase one within your price range, and it has no issues and you can happily run it for practically forever (topping up to full contract length at every suitable chance).
I started with a small budget and as income increased, partnered with others and purchased others. Not profit optimal but I am limited by bank balance and borrowing ability. Note that selling also has a decent cost in legal fees and commission.
Yep. Partner and I didn't like the look of our career paths and wanted to make our own decisions so bought a small retail business. Financials matched up after taking over but there wasn't a lot of "cash only" stuff anyway. We put in a lot of time and effort to build the business up and take it in a new direction. Didn't mind the long hours or lack of holidays as we enjoyed what we were doing and working together and didn't have kids. We're burned out now and keen to get out.
Its always a risk. We were happy to take the risk and if it failed miserably we'd go back to regular jobs and have an extra debt to pay off.
If you don't have experience then having an accountant you can talk with who can explain things well is a big help.
Would we do it again? Right now, no. But maybe down the track we'll have another go.
If you are "buying myself a job" (or franchise etc.) please let your government members know this and if you would , like millions of others , prefer to have a proper "real" job .
Hi @chiplover, Johny come lately here.
Your last post say a "fast food type shop". To me that is a labor-intensive job. You either do it yourself, or hire people.If you do it yourself, every hour/minute is money. So the time you take out for "fun", is what you lost in money. And vice-versa.
I know people who migrated here and run a fish & chip shop. Makes loads of money by getting-up early to the markets to buy fresh fish, and turned into fish & chips. But it's short-lived because the hours are horrendous and lack of support from spouses and children. On paper it looked good because the margin is high (Cost Minus Sale) but quality of life is a different story.If you choose to hire people, be aware the labor cost is very high. Especially now Labor said they will increase the minimum wage (again).
To me, food industry is almost a hand-to-mouth job. The moment you stop working money would stop coming. Might be good as a first business due to the high yield.
So true, and people never do their due diligence! When your look at their actual hourly rate it's a pittance.
Yeah, I've thought about that as well. I make a decent income at the moment working so it has to be worth my while.
Watch kitchen nightmares to get an idea of why so many business' fail.
I love it, I get it - most people go in without any experience. I don't want to suffer the same pitfalls and end up in one of those shows!
Stop.. and step away from the franchise!
A lot of small business owners I meet are doing it because they are trying to buy a decent wage. If I had a particular skill or trade I'd consider it, otherwise I can do better working.
Recently purchased a business, been in it for 6 months, financials stacked up good. Business lawyer was all over everything, accountant was all over everything. Financial side of things was set up by the accountant a few months before takeover.
Paid cash, am in a franchise. Worked in the business for 6 months prior to taking it over.
What questions you got?
Also father had a fish and chip shop/mixed business milkbar for 30 years. If that's what you're thinking as above, don't. Unless you're unique in some way when you leave the business is only really worth the equipment in it, nothing more. Too hard to sell when it's too easy to open your own.
What type of franchise is it? Was the transition process quite easy?
Did you begin working there with the intention to purchase or was it something that happened organically?
Transition from what I was doing to what I am doing was extremely easy. Doing retail for so many years using so many different systems and tools over the years it was actually probably too easy. I had a lot of 'what am I missing' moments. But they pretty much all come from a corporate culture being engrained into me.
And I started working with the intention of buying once my finances were sorted.
Hardest part was getting the money from the bank. So I gave up on that idea.
Online businesses are the way to go, or service based businesses. If you're looking to sell products best to steer clear of a physical retail store…a lot more unnecessary risk & time involvement.
Best to speak to a lawyer who specialises in business contracts, can always include clauses regarding financial performance of the business etc so it reduces your risk when purchasing.
Also, take your time in reviewing businesses, go through multiple to get an idea and familiarise yourself with whatever industry you're looking into.
So much more rewarding and satisfying than a job, good luck :)
Maybe be a bit more specific? There is an extremely large range of types of businesses? Good? Services?