Buying a Business - Page 2

jetliner · 09-04-2007, 01:59 PM

You will need both a trustworthy attorney, who understands this type of business and an accountant also good at acquisitions. Not cheap but worth the money in the long run.

Business valuation takes many forms and will differ based on the contract used to buy the business( straight sale, owner financed, etc...) again good help is necessary. If this is too expensive I suggest you take your money to Belmont where at least you'll know the odds. Good luck

New York Mick · 09-04-2007, 02:03 PM

Quote:

Originally Posted by Mean Bro Green

I'm looking through transworld which is supposed to be one of the bigger brokerages

www.tworld.com

I just drove through pompano the other day, kinda crappy in parts no?

Pompano and Ft Lauderdale both have real nice areas (East of US1) really bad areas (US1 to Powerline) and normal areas (west of Powerline). I think most of S Florida is like this but Pompano is noted for being a high crime area. I worked here for most of the last 13 years so I'm use to it. I was in Miami for almost a year and it was the same down there, real nice or real bad. For some reason I keep getting stuck in the ****ty areas.

When you're buying a bar it's almost impossible to get a loan so you need to find a partner with money.

Mean Bro Green · 09-04-2007, 02:04 PM

Quote:

Originally Posted by New York Mick

Pompano and Ft Lauderdale both have real nice areas (East of US1) really bad areas (US1 to Powerline) and normal areas (west of Powerline). I think most of S Florida is like this but Pompano is noted for being a high crime area. I worked here for most of the last 13 years so I'm use to it. I was in Miami for almost a year and it was the same down there, real nice or real bad. For some reason I keep getting stuck in the ****ty areas.

yeah, i drove past the BSO where the Booby Trap is, way crappy, I guess by teh water would be nicer never been there though

you staying in your adult industry or going for a straight bar?

New York Mick · 09-04-2007, 02:15 PM

Quote:

Originally Posted by Mean Bro Green

yeah, i drove past the BSO where the Booby Trap is, way crappy, I guess by teh water would be nicer never been there though

you staying in your adult industry or going for a straight bar?

It would cost over a million dollars to get into the adult biz unless it was a really crappy topless place that is going to be closed down in the next few years.

Thanks I live just south of Booby Trap, not the best place in the world but I have lived in worse.

I'm not going to get a gay bar if that's what you are asking.

I'm just trying to find a sports bar with a full kitchen. I have a great idea for it just need to get the right place, location and money (investors suck).

jets5ever · 09-04-2007, 02:19 PM

MBG -

Ask ten finance experts to come up with a value for a firm and you'll get 20 different answers. If you really can't afford to due a proper due diligence, perhaps you can't afford to buy the business. I don't want to sound harsh, but you should really get as much information as possible before doing something like this. People can talk all about postive NPV projects and that's great and all for a classroom, but a bit different when it's your skin in the game. These formulas are HIGHLY sensitive to even small variations in the inputs (discount rates, time horizon, non-diversifiable risk levels, sales growth, etc). What is the EBITDA yield? How reliable are those numbers? How much of a multiple over EBIDTA is the asking price? How stable or volatile are the sales and earnings over the past 3, 5, 10 years? Are the sales highly cyclical throughout any individual year? Why? Why not?

You also, like someone else said, need to consider the breakeven point, as well as whether the cashflows you generate in the early parts of the project will be enough to keep you in operation, or, if you'll need to kick in extra capital to keep things going and whether or not you have access to such capital. You also need to figure out exactly how much debt/leverage you can handle. In other words, you can make a negative NPV project a positive one if you extend the time horizon from 5 to say 10 years. Let's say you estimate that cashflows will be slow in the early years and increase from years 4 through 10. That means that for the first several YEARS of this investment, you'll be losing money. Can you afford that? The longer the horizon is, the less meaningful your estimate of a discount rate is for cashflows and the less accurate your cashflow estimates are.

Certainly there is a degree of risk (and potential reward) involved in anything like this. I just cannot stress enough the need to gather as much information as possible and to come up with SEVERAL different valuations, using several different methods and several different outlooks for sales growth and cashflow generation. Also, are you going to keep this bar "as is" or are you going to re-do the place and create a new name and aesthetic? If so, your upfront costs are higher and your cashflow growth assumptions may be less reliable initially.

Mean Bro Green · 09-04-2007, 02:26 PM

Quote:

Originally Posted by New York Mick

It would cost over a million dollars to get into the adult biz unless it was a really crappy topless place that is going to be closed down in the next few years.

Thanks I live just south of Booby Trap, not the best place in the world but I have lived in worse.

I'm not going to get a gay bar if that's what you are asking.

I'm just trying to find a sports bar with a full kitchen. I have a great idea for it just need to get the right place, location and money (investors suck).

LMAO, sorry bro, lol

I saw a nice pool hall, sports bar for sale that showed a pretty healthy net on that transworld site

chirorob · 09-04-2007, 02:26 PM

Quote:

Originally Posted by Mean Bro Green

Does anyone have experience with buying businesses?

If so how do you estimate the purchase value of the business, is there some sort of formula that you would use to estimate this?

Thanks.

I've sold 2 of them in the last 2 years.

Depends on the type of business, how old it is, the value of the equipment, how long have you been in 1 local, how long is the lease tied up for, is the lease at or below market rate. Have the earnings been increasing over the last few years, stayed the same, or decreased.

A real short answer is 40-60% of the gross, being altered for equipment value, profit margin, ect.

PM me if I can give anymore help.

Rubba · 10-23-2007, 03:48 PM

MBG..

All I'll say is don't trust the business brokers. They get paid if they sell you the business, and not based on your later success in it. It would be similar to the same mistake I made when I bought my first home: having the selling broker refer me to a home inspector. In retrospect I can't believe I was so stupid. Lesson learned.

Have a private firm do a workup on the existing company's returns and P&Ls. As said before, it'll cost ya, but this is your livelihood we're talking about, no? My other 2c will be to make sure you have more money than you'll think you need. The potential for losing years - especially in the early going - is high, so make sure you can carry the losses until your business catches it's stride.

Best of luck, brother.

09-04-2007, 01:59 PM	#21
jetliner as old as dirt, and now older than dirt and in Charlotte NC Veteran Join Date: Jul 2006 Posts: 1,261	Trusted outsource(s) You will need both a trustworthy attorney, who understands this type of business and an accountant also good at acquisitions. Not cheap but worth the money in the long run. Business valuation takes many forms and will differ based on the contract used to buy the business( straight sale, owner financed, etc...) again good help is necessary. If this is too expensive I suggest you take your money to Belmont where at least you'll know the odds. Good luck

09-04-2007, 02:19 PM	#25
jets5ever Hall Of Fame Join Date: Apr 2003 Location: Boston Posts: 11,692	MBG - Ask ten finance experts to come up with a value for a firm and you'll get 20 different answers. If you really can't afford to due a proper due diligence, perhaps you can't afford to buy the business. I don't want to sound harsh, but you should really get as much information as possible before doing something like this. People can talk all about postive NPV projects and that's great and all for a classroom, but a bit different when it's your skin in the game. These formulas are HIGHLY sensitive to even small variations in the inputs (discount rates, time horizon, non-diversifiable risk levels, sales growth, etc). What is the EBITDA yield? How reliable are those numbers? How much of a multiple over EBIDTA is the asking price? How stable or volatile are the sales and earnings over the past 3, 5, 10 years? Are the sales highly cyclical throughout any individual year? Why? Why not? You also, like someone else said, need to consider the breakeven point, as well as whether the cashflows you generate in the early parts of the project will be enough to keep you in operation, or, if you'll need to kick in extra capital to keep things going and whether or not you have access to such capital. You also need to figure out exactly how much debt/leverage you can handle. In other words, you can make a negative NPV project a positive one if you extend the time horizon from 5 to say 10 years. Let's say you estimate that cashflows will be slow in the early years and increase from years 4 through 10. That means that for the first several YEARS of this investment, you'll be losing money. Can you afford that? The longer the horizon is, the less meaningful your estimate of a discount rate is for cashflows and the less accurate your cashflow estimates are. Certainly there is a degree of risk (and potential reward) involved in anything like this. I just cannot stress enough the need to gather as much information as possible and to come up with SEVERAL different valuations, using several different methods and several different outlooks for sales growth and cashflow generation. Also, are you going to keep this bar "as is" or are you going to re-do the place and create a new name and aesthetic? If so, your upfront costs are higher and your cashflow growth assumptions may be less reliable initially. Last edited by jets5ever; 09-04-2007 at 02:26 PM.

10-23-2007, 03:48 PM	#28
Rubba Veteran Join Date: Aug 2003 Location: Jersey via Brooklyn Posts: 297	MBG.. All I'll say is don't trust the business brokers. They get paid if they sell you the business, and not based on your later success in it. It would be similar to the same mistake I made when I bought my first home: having the selling broker refer me to a home inspector. In retrospect I can't believe I was so stupid. Lesson learned. Have a private firm do a workup on the existing company's returns and P&Ls. As said before, it'll cost ya, but this is your livelihood we're talking about, no? My other 2c will be to make sure you have more money than you'll think you need. The potential for losing years - especially in the early going - is high, so make sure you can carry the losses until your business catches it's stride. Best of luck, brother.