I'm going to buy a small business for 12k. I need advice.?
Jul 30, 2010 in
Business FAQs
I know how to run the business because I have been working there for four years. I just don’t know anything about finances or what I need to do to get started. I will have a partner and we are splitting the costs 50/50. It’s a kiosk at a mall but it brings in a lot of money. Any tips or advice. We are going to pay the owner off in a period of 3 months 4k a month. The rent is 2,050 and we pay on commission. I want to do everything right and by the book.
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3 comments
bryanzcrnr on July 30, 2010 at 6:20 pm
Paper work, Paper work, Paper work. I can’t stress that enough. First make sure your purchase is in writing, legal and notarized. It wouldn’t hurt to have a lawyer involved. Make sure you check with the mall, you don’t want the lease to expire after your transaction and have to sign a new one at a higher price. You should be keeping every receipt you get. It is all write off, from product to gas to meals. Go to a accountant and they will tell you everything you need to know. Good luck.
sillyshac on July 30, 2010 at 6:20 pm
Retain a consultant – it is very inexpensive and you can call them with specific questions or problems as they arise. I am a consultant so to avoid me sounding bias I will suggest finding one on the internet – a small firm that makes you feel comfortable with a direct line to a consultant. You shouldn’t expect to pay more than a $500 retainer and your billable hours will be deducted from that at $30 hr. (=80 ten minute phone conversations) Its a way to get a professional in your corner
Leo F on July 30, 2010 at 6:20 pm
First, malls do not have gross leases that would that would be stupid on their part. Your going to find your lease will be $2050 per month and a percent of your gross and if it’s a franchise you will also be paying franchise fees every month. I think your better look into this a little better. You need to look at the NOI (net operating income) of the business and the operating income statement that the owner filed with his taxes. Don’t forget losses (stuff that gets stolen) power bill, insurance, employee taxes, even if they get paid by commission, employee theft. The list goes on. And you don’t know how to run the business, you just know how to sell and ring up the items. Do you know how to handle payroll? Working at a business does not qualify you to own a business. You said it brings in alot of money. Gross income means nothing in business.
A business can bring in a $1,000,000 a month but it may spend a $1,000,001 to operate, so it’s loosing money. At the price you are paying your not going to get a hole lot of return on you investment. Who owns the racks and shelves in this store. Is the inventory included in the sales price? The seller is not going to give you every thing is the store for 12K. What is the term of the lease you will be taking over? Who is going to pay the accounts payable thats owe now? You really need to know what your are doing and it does not sound like you do. If this is a good money making business why are you getting it so cheep? Think about it!!! Don’t let someone make their problem your problems. Something is not right with this hole thing, a retail store in a mall for $12K being paid out of the profit over time from what the store makes. Why is the owner selling and not just hire a in store manager to run it. really think about it, your getting the store and inventory for free. You have no out of pocket money invested. A business with a NOI of $10,000 and a cap rate of 8% is worth $125,000.