Selling a business..

hassleham

6 months ago I decided to start my own business and i've been looking for suitable premises since then. Before this idea came along I had no interest in business and no knowledge whatsoever in how to go about starting one etc.

Since I began searching for premises and learning more about things, I've noticed that nearly half the business in my hometown are listed for sale online, and some of them with ridiculous prices. The most surprising ones are businesses that have been around for less than 12 months (particularly bars) and are already up for sale for a five figure sum.

Do people just list their business for sale for a silly price on the off chance that someone desperate comes along and agrees to pay it?

And a second question: If you do buy a business from someone, how is the money paid to the seller? Surely not many people can afford to pay up front for a whole business? Is a payment schedule agreed between buyer and seller or do you have to get a loan and pay the full cost up front?

Thanks for any info

SteveRobinson

No idea sorry but I do know that if you own a business you often get cold callers asking if you want to sell.

Fretwired

hassleham said:

6 months ago I decided to start my own business and i've been looking for suitable premises since then. Before this idea came along I had no interest in business and no knowledge whatsoever in how to go about starting one etc.

Since I began searching for premises and learning more about things, I've noticed that nearly half the business in my hometown are listed for sale online, and some of them with ridiculous prices. The most surprising ones are businesses that have been around for less than 12 months (particularly bars) and are already up for sale for a five figure sum.

Do people just list their business for sale for a silly price on the off chance that someone desperate comes along and agrees to pay it?

And a second question: If you do buy a business from someone, how is the money paid to the seller? Surely not many people can afford to pay up front for a whole business? Is a payment schedule agreed between buyer and seller or do you have to get a loan and pay the full cost up front?

Thanks for any info

Do people just list their business for sale for a silly price on the off chance that someone desperate comes along and agrees to pay it?

Yes sometimes - there are also people who start up a business and then sell it on and move onto something else. This is common with bars and clubs and beauty salons.


How is money paid to the seller?

Depends who is buying. Interest rates are low so there's plenty of cash to buy sound businesses or invest in businesses. My son owns a finance company and he funds the purchase of businesses. If the numbers stack up and the price is right it's easy to get finance so the seller can be paid in full after due diligence has been completed. Lots of wealthy people looking to make more money.

jpfamps

A lot of the "value" of these type of business is the premium on the lease not the business itself, ie if you have a say 20 year lease inside the Landlord and Tenant Act then that is of value and you would pay a "premium" for taking over the lease.

The fact that a lot of bars are up for sale may suggest that they aren't making any money.

interstellar

as above   the vast majority of bars will be leasehold, people will have paid a premium for the right to the leasehold interest..the bar trade/pub/restaurant attracts an enormous amount of "amateurs" as the barriers to entry are effectivelt nil (money excluded)  people jump in find out how difficult it is to make money in the hospitality game,realise the huge effort required just to do the basics well, get fucked off or run out of money and put in on the market, normally at an inflated value.

Personally and with years of experience a lot of people could offer next to nothing for these leases and probably get them, most of the sitting tennants just want out and to off load the liabilty of a Fully insuring and repairing lease

Sporky

SteveRobinson said:

No idea sorry but I do know that if you own a business you often get cold callers asking if you want to sell.

I don't own a business and I get cold callers (well, mostly emails) asking if I want to sell.

I've considered it, but I have a feeling I might get caught.

scrumhalf

hassleham said:

Do people just list their business for sale for a silly price on the off chance that someone desperate comes along and agrees to pay it?

Oh yes. When looking at the financials for many businesses over the years on behalf of employers/cllients it's clear that you are more often than not oin the realm of "Marlin Slammer for sale, £500".

midlifecrisis

I use to have a business on the high street and would often get calls offering a free valuation on the business. always suspected a scam somewhere along the line. but eventually i invited one in and they asked a lot of questions, mainly about the lease and then they came back with a very high valuation offering to sell it for us, heres the rub, they wanted a fee upfront so told them to forget it. 
There are formulas for working out business valuations, based on turnover , profit, assets, liabilities but ultimately like any valuation its what someone will pay.

richardhomer

SteveRobinson said:

No idea sorry but I do know that if you own a business you often get cold callers asking if you want to sell.

Not only that - but speciastist business agents usually charge a large upfront fee for listing the business for sale - and massively over-value it to (effectively) con the seller into paying the fee. Like Purplebricks in the residential market - they make their income from gaining instructions, rather than being paid for success with a fee at the end....

JamesAshworth

Ditto what @richardhomer has said. A lot of business agents just tell the seller what they want to hear. I work in property auctions and see a lot of small business owners with shattered dreams as to the value of their business. I’d be very wary about paying anything for goodwill, just look at the fundamental value of the assets.

richardhomer

JamesAshworth said:

Ditto what @richardhomer has said. A lot of business agents just tell the seller what they want to hear. I work in property auctions and see a lot of small business owners with shattered dreams as to the value of their business. I’d be very wary about paying anything for goodwill, just look at the fundamental value of the assets.

I’d sugggest it’s much more sinister than ‘telling the seller what they want to hear’. They ‘remodel’ accounts in a manner which hugely exaggerates the business’s true profitability - then apply a multiplier to the ‘adjusted’ net profit which no buyer will pay - and which no lender would finance. They ‘sell’ an outcome which is wholly unrealistic, simply to take an upfront fee from the seller. It’s wholly immoral....

57Deluxe

post an Ad on Craigslist! Seems is loads of businesses for sale there...