Buying a business questions
 

As above I've seen a small business for sale which I have quite a bit of experience in the industry. What I don't understand are some of the terms regarding what clear profit it makes, and if its a good deal. It's on a leasehold £1000pcm, 12 year lease. The turn over is £96000 and the gross profit is criteria £60000. The business is on offer at £30000 furniture and fixtures included.
Am I right in thinking the £60k per year is what is left to pay overheads and staff etc? I'm not looking to make millions from it, just a comfortable income.

Cheers in advance. :)

in simple terms

Gross profit = what you sell less what it cost you to directly make / buy the product.

Netprofit = Gross Profit less all other costs.

Gross profit is not important.

Net Profit is.

Also how much debt the company owes (financing, supplier invoices, VAT, Corp Tax. payroll, rent, rates)

How much assets (both in terms of machinery & outstanding customer invoices)

Cheers BlkKnight that clears things up. :thumb:

In general you buy an assets and property - based on a valuation.
Then, you buy the "goodwill" which is the reputation / order books etc of the business.

This can range from next to nothing - a few grand upto 5x turnover or more.

You need to look at that breakdown. If there is a very low sum on good will then you know they dont value the business in terms of growth and name etc.

Your best bet is to talk to a good accountant who can look over the books for you and also put a few feelers out and talk to suppliers / customers and get a feel for where its going.

Do as much digging as you can, and make sure you are not buying any debts or bad history... you MUST make sure they are upto date with everything. Only an accountant can really do this correctly.

PM me the name of the company if you want and I will look on CH for you. HTH!

£60000 Gross profit on £96000 turnover is really very good..............is it the same sort of business you had here in Cumbria?

Shaun

Find out why it is being sold?

Owner may be retiring or he may be planning to set up a couple of miles away and take all his customers with him.

Try and chat to someone in the same business and see what he/she thinks.

Note furniture and fittings are worth bugger all these days. And don't forget there is a recession on :)

dl

yeah, i thought that too, not a bad ratio

but as someone has pointed out, it is the net profit that is important - saying that alot could be offset against tax etc

Turnover for show...
Profit for dough...!
;)

Hi Shaun it's totally different from the post office, where the gross profit was approximately £52k when we sold up. :)

It's behind sold due to ill health(bad back) though I'm told from a friend that goes in that that it can't be too bad judging by the work he's doing.

Could you gave us an idea of the nature of the Buisness
Eg fast food
Shop selling ?
Dress repairs
Repairs of components


Then you might get a few more offering guidenence
Location isn't important incase your worried someone will jump in and buy it !

Hope it's not mobile dog grooming......

Shaun

John I'd rather not divulge too much as its just something I came across and is of some interest. I need to look into money side of things, plus my wife is expecting our first baby in 8 weeks, so it may be bad timing looking to start a new business at the same time. :eek: :lol1:

Shaun it nothing to do with mobile dog grooming :D

Hi Mike

You do know that only 4% of births happen on the EDD........best of luck :)

Unless you think it's the opportunity of a lifetime and can't be missed I'd stick with what you have and look after the family to come :)

Your life will be turned upside down believe me, you will have start to have memories of having a good nights sleep and wonder why something that weighs as much as a big bag of sugar has changed your life so much :)

Shaun