Wed 23 Jun, 2004 11:09 am
The following is a "business for sale" listing I found. I don't know what "F F & E" means. Can anyone help me out?
Also if anybody knows how to evaluate a worthwhile business, I'd appreciate your input. Thanks.
Detail : Dist-Coffee
Price : $10,000
County : Miami-Dade
Down : $10,000
State/Prov. : Florida
Adj Net : $43,000
Country : USA
Sales : $60,000
SBA Pre-Qualified: N
Accounts Rec 0 N*
Real Estate 0 N*
Inventory $2,000 N*
F F & E $45,000 Y*
Total Assets $45,000 Y*
Leasehold 0 N*
furniture, fixtures & equipment
Aah, thanks, Heeven. Now what do you think of that as a business venture?
by god I think your right heeven! Nice to see you have your pants on today kickycan......
What is it? A coffee sales agent selling off his region?
Thanks for stopping by Canucme. Yeah, I have to wear them for work. Dammit.
Heeven, that would be my guess, but I'm not totally sure.
kickycan- If I were you, I would check it out very carefully, before I would invest. It might be a good idea to have an accountant look over the books!
Phoenix, thanks. I'm not even close to the point where I am ready to invest though. Just looking to see what's out there, and trying to figure out how this whole "buying a business" thing works.
For this business you might need a contract with the coffee company (whoever that might be) as he is not offering the inventory for sale, only the list of his customers for 10K and some FF&E. The customers - well I wonder how recent the list is, like when they last purchased from him and how much. Are there other agents working this area? Could they have, in the meantime, poached some of these customers (if he hasn't been servicing them recently)? How easy would it be for you to get an agency deal with the coffee company he is currently selling?
He has no real estate to offer so no office to work out of - meaning would you be working from your home/car? If so, what could the FF&E be?
Wow, those are great questions. Have you bought a business before?
Nope. I'm a fabulously smart Emu - no sticking head in sand here, boyo!
Oh and that SBA pre-qualified thingie refers to a Small Business Administration loan.
What is it? A coffee sales agent selling off his region?
thought i heard my name...
Region, is that your line of business? Tell me more, please! Is it a tough business? Is it total sales stuff? I don't know if I'd like sales too much. I mean, I could handle a little bit of marketing, but cold-calling and shmoozing, I don't know...
i'm just your average run-of-the-mill morning talk show host, occasional game show host, and full-time man about town...
When buying a business, you must first know a bit about business, or you will be taken for a ride.
The general public seems to view business owners as wealthy bad guys like the railroad Robber Barons from the 18-1900s.
The truth is, most businesses run on shoestring profits, and most businesses will not sell for what the owner believes the business to be worth (this is especially true for entrepreneurial businesses--as they were built with heart and soul).
An independent sales rep may be "self-employed" but not really know much about the "business of business."
A service company will be worth much less on the block than a retail shop.
When buying a business, you're buying its assets.
All businesses have hard (physical, capital) assets, and Goodwill.
It is easy to place a value on tangibles. Store inventory, fixtures, computers, cash registers, building, grounds, vehicles, etc. When buying a business, you should get a list of assets and their respective values (not new values, but fair market values).
It is difficult, nay, impossible, to set a price on Goodwill.
Goodwill is a big mishmash of intangibles including, what the people in the community think of the business. How much recognition the company name or logo has (e.g. Coca-cola has a ton of goodwill) in the community, and things even down to how customers feel about the employees and staff or owners of the business.
The value of goodwill will therefore vary greatly. For example, a McDonald's franchise is one of the most expensive franchises in the USA. However, the Golden Arches have so much goodwill that it is almost impossible to fail at operating a McDonald's restaurant.
In contrast, my plumber's name and logo has very little recognition in the community. This does not mean the plumber is lousy or dishonest. His company has lots of goodwill--thousands of customers over 30 years!
But if I were to buy his company, it would be foolish to place much money on his goodwill. You see, as the new owner, I have NO GUARANTEE that this goodwill will continue once I take over.
His loyal customers are loyal only to him--not me. So to buy his company, let's make up some numbers:
Plumber Mike's Plumbing
"We're plumb crazy"
Gross annual income: $150,000
Years in business: 30
Avg. Growth per year, last five yrs: 1%
Hard assets & real estate: $65,000 (Today's FMV)
How much would I pay for this business (keep in mind this is not accurate because it's GREATLY simplified)?
I would pay $65,000 + maybe $1,000-2,000 for the good will.
In this example, I am accepting the risk of losing perhaps 90% of his customers when I take over. Not because I'm a bad plumber, but because customers may not like the change, and may just seek out someone else.
The businessman must assess the value of his intended purchase according to risk. Goodwill is usually a large risk when dealing with small companies; especially owner/operators.
That's all for now.
Man, I am just getting so much good info tonight! General Tsao, that was incredibly helpful. Thank you very much.
Furniture, Fixtures and Equipment: I helped set up a hotel last Summer and learned that these companies are responsible for bringing in and setting up furniture, hanging the artwork, mirrors and headboards, assembling and setting beds...finishing touches...on new or remodeled hotels, condos, restaurants, etc. (hopefully AFTER the punch list has been completed and signed off on!)