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    2 Replies Latest reply on Jan 5, 2010 6:49 PM by phanio

    Financial Tips needed for buying an exsisting business

    kelleyk Newbie
      First, let me introduce myself. I am 41 years old and have a home based business for over 8 years. It was starting to grow, becoming profitable, untill the economy went into the dumpster. I did traditional arts and sold hand-painted figurines. Over the past 3 years I did take on a part-time job working at the local small town grocery store, for which, I still work for today. I worked hard with my husband for 20 years and we do own our current home on 7 acres. Since my arts and crafts sales slumped to point to no sales or request for services I seeked another out of the home job. I first recieved a job as a resturant hostess and then got an offer to work as a waitress for my small farming communities cafe/resturant. This cafe is up for sale and I love it and the customers.

      About the Cafe: It is located in the heart of my small town, and has been in operation for nearly 40 years by its current owner. It does have competition, there is a Dairy King (open for lunch and dinner), Pizza Hut (open for lunch and dinner) and then a steak house type of resturant that is open for dinner only. The cafe offering several different things that the others do not. 1) A gathering type of atmosphere, 2) No competition for its breakfast menu and 3) Competitive food pricing (they are roughly 5% below other resturants within a 25 miles radius). At this time its customer base is elderly, business and working individuals within the towns limits, and the farmers. At one point in time it was the only place to dine out in the community yet it has held strong over all these years. It has the compacity to seat around 100 persons.

      The Purchase: The purchase of the business would include the building, equipment, remaining food inventory, and pretty much everything inside the resturant to make it still operational.

      Things I see that need improvement:

      1. First since they do not have breakfast competition the cafe should be focusing on providing a wide range of items on the menu, they currently only offer the traditional eggs, toast, meat, hashbrowns, pancakes and french toast. I would introduce the breakfast sandwich and wrap for those who need to get to work but desire something better then a doughnut. Also to introduce omelets, fresh fruit bowl and breakfast platter specials. I would also like to add additional coffee like drinks - cappicino, latte, and flavored coffee. Some of the drinks would be offered without caffine.

      2. To become more competitive to drive more customers to the cafe for lunch, offer a 10% to 20% off everything on the lunch menu on a certain day of the week (the slowest day(s)). And again introduce some healthier choices... such as low fat deli sandwiches and a small salad bar (which they do not currently have).

      3. The cafe currently keeps their menu prices around 5% below other resturants in the area since they desire to keep their prices low for the returning elderly persons. I would raise the prices yet give senior citizens a 10% discount.

      4. Is they do no or little marketing or advertising. I would implement the use of our local newspaper to create advertisements of current specials and possible offer cut out coupons for dinning in.

      5. Building improvements: They just had the roof redone so that is okay, yet it could use new wall paper and add in a waterproof backing in the dishwashing area. Other then these two things the inspector was just there and all was okay.

      My NICHE: I would change the name to "The Art's Cafe". The wall around customer seating would be turned into an art gallery (since I am an artist it only makes sense to do something like this). Local artist works can be presented on the wall and be for sale. The cafe would ask a 20% commision of each sale. This also would keep customers busy while they wait for there service and food. I was also thinking about creating home made hamburger buns that bare a smiley face.

      I have a few other ideas too... this is just the beginning :)-

      So now that you know what I desire to purchase and how to improve upon something allready working. How would or what can you advice me on for getting financing to purchase this business?

      My mother, who is also a self employeed business woman, suggest I give the owners an X amount of money then give them a percent of the net for an X amount of year. Not sure if the owners would go for this since they both are allready in the mid 70s.

      Thanks for you suggestions and the time to read this.
      Kelley
        • Re: Financial Tips needed for buying an exsisting business
          Bridge Navigator
          I applaud you in your choice to consider buying a business. But, let me restate some of your facts:

          1) They have been in business for 40 years.
          2) You want to buy them, change the name, and how they operate?

          Wow! It is great to bring fresh ideas and they may be able to improve the performance of the business. Then again, maybe not.

          You are buying a business becasue of its successful 40 year track record.

          I would also suggest that before you start changing the business, you spend more time analyzing it to see if it is a good fit for you, is the buisnesses financially sound, gettnig financing in place to purchase it, conducting a proper due diligence, and tsructuring a transcation that make sense for both the buyer and the seller.

          If you have no experience in buying and selling businesses, you may want to hire a professional. Getting experience on your first transaction can be a costly learning curve!

          I would be happy to spend a few moments on the phone with you to help point you in the right direction.

          Best of luck,

          Greg Dupuis
          Bridge Ventures, LLC
          www.bridgeventuresllc.com
          813-343-2214
          • Re: Financial Tips needed for buying an exsisting business
            phanio Pioneer
            Kelley,

            First - it is ok to make changes that you think will improve and bring in more customers. My only problem is this. If your customers are elderly and famers - would they eat in an art gallery? Think about your customers and what they want before you decide for them based on what YOU want.

            This is a tough financing market. To get a loan for all of that (building, business, equipment, etc) you will have to come up with 10% to 20% down in your own equity. Then face all the fees and requirement from a lender - even from a SBA loan.

            I like your mother's idea - come up with and amount to be put down with the current ower and let them carry the rest of the note. Let's say you can come up with 10% down - then amortize the remaining over 25 years with a balloon in say 5 years. This way you tell the current owners that in 5 years - you will seek and be better qualified for a loan to pay them off entirely.

            To get the 10% - think about some assets that you can sale off - I suggest you don't use them as collateral for a loan as you don't need additional debt - or think about asking friends and family or even finding a partner in your community.

            If you really wnat this to work - you have to get out there and work at it.

            Business Money Today