Buying a TURN KEY business need advice?

i am currently looking at purchasing an established sports bar %26amp; grill in my area. I have never owned my own business but have run my friends motorcycle shop and have plenty of experience in the day to day behind the scene issues that a small business encounters. My problem is that i have roughly a 675 credit score and will have to finance this venture through an sba loan. I do also have a co-signer but she also has roughly the same credit score that i have. The business i am looking at has roughly $650,000 a yr in sales and a net cash flow of $78,700, the asking price for the business with all fixtures and inventory is $255,000 obo and the reason the current owner is selling is because of a messy divorce. Does this idea sound like a feasible venture on my part?

Buying a TURN KEY business need advice?

Truthfully, NO! If you know nothing about a bar and grill, this would not be a wise venture. If it was a motorcycle shop, you might make it work.

Have you even checked into the licensing and permits that you have to have for a bar and grill? You'd be dealing with food and drink, Health laws and such. Do you know about that stuff?

Buying a TURN KEY business need advice?

Turnkey businesses dont get sold unles they are loosing money or someone dies. Those numbers if accurate look pretty bad. Thats alot of sales to maintain for very little profit. Now lets assume you have factored in all current expenses. And you can get alcohol permit. What kinda loan term are you getting. Your credit is ok but not great. so Even if you could finance for 30 years your looking at about 2500 a month which is 30,000 a year. Now you are down to 48,000 a year. for two people to live on while working 24/7. Honestly if both of you got mediocre jobs somewhere 24000 a piece isnt much for the amount of work you'll put into it. I would either pass get the price lowered or figure out a way to increase your profit margin.

Buying a TURN KEY business need advice?

As a FORMER owner of a Grill and Bar, I have some ideas for you to evaluate before purchase.

First off, the business is for sale with an O.B.O behind it. The $255k is a STARTING POINT from the seller's point of view. Negotiate up from your offer and go from there. Ok, more info.

There is a large probability that your insurance costs will quadruple over what the current owner has in place. This is due to the fact that even though the business has existed for a period of time, you are a NEW OWNER and have no past risk assessment for your policy. Your costs will be a LOT higher.

Secondly, when we purchased our Grill and Bar, we had an immediate increase in costs from almost every supplier. We found this out in hindsight so our COGS were significantly higher than the numbers we were presented.

Finally to find out the actual and true amount of sales, simply request the past 24 months sales tax reports/payments for liquor and retail/food tax etc. These reports won't lie about the top line revenue.

And last but not least (I know I said finally above) you need to know that you or your partner will be there EVERY HOUR IT IS OPEN! If you aren't, and try to run this as an absentee owner, you will have food, booze and free drinks flowing out the door before you can say %26quot;holy crap batman!%26quot;

Go into this venture with a very careful and thought out plan. As one other person said, make a business plan and PAY a professional to look over the books, your business plan and of course the sales tax and income tax returns.

I think an offer of around $175,000 to start with AFTER EVERYTHING ELSE HAS BEEN VERIFIED would be a fair starting point for your discussions.

Hope this helps!

Wes

Norsew Investments, LLC

Former Grill and Bar Owner

Rochester, MN

http://www.alternativefranchise.com

(much better than the bar biz!)

Buying a TURN KEY business need advice?

Before you jump head first into this venture ask yourself if this is something that you plan on doing for awhile, unless you will hire a manager to do the dirty work. Also instead of taking a loan ask the sellers if they are willing to do a seller finance deal, this way they are not completely out and they can put some money in their pockets on a monthly basis. You will be surprised what they do.

Make sure you look at their financials and consult a lawyer trust me you do not want to be stuck in something you will later regret. The biggest thing is ASK ASK ASK lots of Questions. Remember there are never dumb questions, they are only dumb if they are not asked. Good Luck!!!

THX!!!

Buying a TURN KEY business need advice?

Do some home work before taking any steps. Study some good books to get knowledge of financial side of business.