To buy or not to buy

imgregrice

New member
Oct 2, 2006
14
0
Troy Missouri
Hi all I am currently looking into buying a local coffee shop. It has a GREAT location a very good staff and I think I could do some wonderful things to improve profit. I have always been interested in the coffee biz and have been working on a biz plan to start my own shop for quite some time. What things should I keep in mind when writing a biz plan to get funding to buy a shop? I have all of the cash flow sheets last years sales ( its been open exactly 1 year) and I should be getting a copy of the tax info as soon as its done. Can anyone give me any info I should try know or tips ... This would be my first company so I am new and ready to take on all advice I can get!!! if you all need more info please let me know I would be happy to share it!! The aprox price of the shop is 150k all the equipment is included in that price and is payed for ( via the loan) Also any thoughts on the best way to come up with financing would be helpful I plan on trying to pull about 20-30 from equity and the rest a possable silent investor OR trying to hit up the SBA for a small biz loan thanks agian I cannot WAIT to own a shop !!!!
 

ElPugDiablo

New member
Jul 16, 2004
991
0
Hartford and New Haven, CT
imgregrice said:
Hi all I am currently looking into buying a local coffee shop. It has a GREAT location a very good staff and I think I could do some wonderful things to improve profit. I have always been interested in the coffee biz and have been working on a biz plan to start my own shop for quite some time. What things should I keep in mind when writing a biz plan to get funding to buy a shop? I have all of the cash flow sheets last years sales ( its been open exactly 1 year) and I should be getting a copy of the tax info as soon as its done. Can anyone give me any info I should try know or tips ... This would be my first company so I am new and ready to take on all advice I can get!!! if you all need more info please let me know I would be happy to share it!! The aprox price of the shop is 150k all the equipment is included in that price and is payed for ( via the loan) Also any thoughts on the best way to come up with financing would be helpful I plan on trying to pull about 20-30 from equity and the rest a possable silent investor OR trying to hit up the SBA for a small biz loan thanks agian I cannot WAIT to own a shop !!!!
First thing first. Get your financial commitment before you sign the buy sell agreement, or the buy sell agreement needs to have a contingency clause base upon you get either investors or a loan.
Now, why are they selling after only one year? That would suggest to me all is not going well. Are they cash flow positive? If no, what are you buying? If yes, can the current cash flow satisfy your potential investors or the monthly SBA loan payment of about $1,930.00 a month, assuming 9% 7 year? Unless the current owners are totally incompetent you should not assume you can immediately make a impact on sales and profit.
 
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imgregrice

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Oct 2, 2006
14
0
Troy Missouri
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I can post the gross for this past year when I get home and have the documents in front of me. The current owner I know quite well and we have been friends for a few years now.

As far as why he is selling he and his wife both got offered VERY good jobs out of state. The shop didnt make alot of money in its first year but he didnt loose much either it nearly broke even I will post numbers this eve! thanks for the info!
 

dant

New member
Feb 13, 2006
25
0
Philadelphia, PA
What kind of lease does the shop come with? I would want a lease that would last as long as the financing.

Would the current owners consider financing a portion of the sale price?
 
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imgregrice

New member
Oct 2, 2006
14
0
Troy Missouri
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dant,

The lease has 4 years left. The shop just opened up last dec. I am going to speak to the owner asap to see if they would consider finaning a portion of the sale price thats a great idea
 
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imgregrice

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Oct 2, 2006
14
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Troy Missouri
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Just a quick update I was looking at some of the numbers and wanted to share them with you. About $650 daily average. Rent is 1494 payroll is about 3800 a month. with the example cash flow I was given he had an owners draw of 1000 which may be a bit low. With these numbers the coffee still took a lose but in the first year its expected. The cost of goods was 33% which could be lowered I belive a bit ( from my research It should be as close to 30% as possible to get max profit. I also belive I may be able to lower the labor costs as my wife will be working the shop durring the day and I will work the eve and weekends.
 

John P

New member
Jan 5, 2007
1,045
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Salt Lake City
Greg,

It's definitely great to 'look before you leap', not every potential owner has the sense to do that. IMHO, it sounds a little fishy.

Based on your numbers $650 per day @ 33% COGS should be giving you $435.50 daily to work with (roughly) $11300/month -6 day week, and $13000/month for a seven day week. (26 and 30 days, respectively)
Minus rent, payroll, and owner's (reported) draw you now have: approximately $5000 or $6700 available (respectively) for other expenses.

Off the top of my head "ballpark" would be:
Electric $400, Phone (and DSL) $70, WComp $100, Insurance $60, Gas $60, Linen $60, Water $125, Misc $200 is $1075 (*.15 for possible regional differences) totals at $1236 + $1930 loan payment gives you $3166 now lets add another 10 percent for "beyond mysterious costs" and we're at $3483. This leaves you a profit of $1500 - $3200, and you are saying the business is showing a loss.
Tips: ONLY count the information given on the taxes. Don't believe any "Well I'm really taking home..." Really. If they claim they are vastly under reporting their draw, what makes you think they couldn't just as well be lying to you or any potential buyer. As much as I hate getting reamed on taxes, be wary of business owners who annouce they cheat. Untrustworthy is untrustworthy IMHO.
And you definitely need more info, the math doesn't work out. Either they are extremely poor business owners who have created some ridiculously high costs for running their business, leased rather than bought equipment or they are in debt up the wazoo...
Since it SHOULD show a profit and is not, what gives? Either you can eliminate stupid and unnecesssary costs they have incurred which is Good or they are leaving out some really important info, which is Bad. Now your idea of eliminating a lot of labor cost by you and your wife working is excellent, so factor that in. But based ONLY on info given, it sounds suspect.
***As to them leaving after only one year: Unless they saw nothing but failure ahead of them as business owners, I can't grasp someone giving up and returning that quickly to work for someone else. It doesn't add up. I know you can see the business right in front of you, but be certain only to make decisions based on facts, don't lead with your heart.
my 2 cents.
 
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