Lfs for sale

A good business that was making money that goes up for sale would be listed with a realtor, CL business listing adds means most of the time they're making no profit or losing money. $80k seems very high for the type of store those pictures provide. I wish the owner good luck though, it's always stressful trying to make a life change.
 
Speaking of life change, the thought is running through my mind to look into this. Just looking for opinions on the idea of owning a buisness and the thought of owning a pet store. Negitives? Positives? Don't sugar coat it, let me hear your opinion.
Negitives would be no ins if me and wife went all in and left our current jobs.
Negitives have 2 young girls would at times be struggle.
Positive have my wife run mostly with me still working current job and there when I'm awake.
Positive still having ins while staying at job.
Lots of thoughts.
 
If you're considering this, I'd ask the current owner these questions:
What's the current average customer per day?
What is the total EBIT currently?
What is the total liability of the shop (meaning debt, mortgage, etc.)

Gross sales don't mean jack. If they sell $140,000 but it cost them $130,000 to buy everything, well, you can do that math.

Check out the last 10 years of tax statements, see what they're writing off, see what all is going on.

If the store isn't pulling in more than its paying out, then this isn't probably the best option unless he's looking to retire.

If they aren't seeing a lot of customers actually paying money, I'd say the same thing.

It could be a great deal and an awesome opportunity, but pets aren't a staple. They're technically a luxury because we don't need them to survive.
 
Or, we could all buy it together, and just use it for wholesale fish prices :)(: Who's with me on that one???
 
I wouldn't think Hessville would be a good spot for something like this either, but if you were interested, those are at least some of the questions I'd ask. And I'd take an investment banker with you.
 
The generic "rule of thumb" when you buy/sell a business is that you generally buy/sell for approximately 2-3x the annual NET sales. The seller doesn't mention their net sales only their EBITA (gross reveneue) in their add, so don't be misled by their "best year" earnings of $198k and "worst year" earnings of $138k.

If you consider that the seller was originally asking $120k and has now dropped the price to $80, I would infer that this place will net you $40k per year. ($120k would be 3x and now $80k would be 2x)


HOWEVER...Paying 2 or three times cash flow is really a bit of a myth and old-school thinking. There are certainly businesses/industries that justify paying such multiples of cash flow (perhaps even more). The reality is, every industry is different and each business performs differently in comparison to its industry.

Take a simple example: a Quizno's makes $50,000 and may sell for $50k-75k. A Subway makes $50,000 and may sell for $75k-150k.
Why? same bottom line.
Answer: depends on lease term, remodel, competition, rent, financing, cash flow, area.........and so on


Working with an appraiser and/or buiness analyst that understands and can value the specific business may cost a few dollars but, if you are purchasing a business the savings can be in the thousands. My assumption is that you would be a 1st-time business owner so my advice, from a purely financial perspective, would be to hire a business analyst to go over their books (if you decide you are serious.) You might find that gross receipts of $150k per year only net you $40k in your pocket. Who knows, maybe it would be $80k.

Bottom line...you cannot make a determination about how much effort and personal/family sacrifice you are willing to put forth until you know , well....your bottom line.

One more thing, both you and your wife CANNOT quit your day jobs. Only one of you can. If you both do and then pay for your own health insurance you could easily pay $1000 per month...per person. This means that your $40k business will put $16,000 cash in your pocket each year for rent/mortgage, food, etc.....get my point? (If you add kids to the insurance then it could be more.)
 
Thanks for all the convo on this. And Eric, a big thanks for all that. I did go with my wife to talk to the owners and it's not something for us right now. One of the main reasons is they are wanting to be out by the end of the month and if I were wanting to pursue it I would want time to talk with financial people and look at numbers and have time to mull it over. To bad cause I was kinda wanting to take this on but it's not my time
 
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