taking over exsisting business

cleoh23

I've just got the oppertunity to run my own salon. buying its contents and taking on the lease.
its currently owned by a lady who needs to move back to england because of her husbands work situation.
She has run it for two years and has built up a large clientelle.

Its a small salon, just two sections and one basin. so i would be only employing an assistant on minimum wage. no more money needs to be put into it bar a few uncostly changes.

She is asking for €8,000 for 'the salon'. which is a bit much in my view. there is another lady interested so I need to give her a good offer as i dont want to let this oppertunity pass. the salon is close to my home and i know many people in the area.I know it would be quiet after christmass but even if i made 150 a day id have enough for all the outgoings.

the following is the main outgoings per month.
rent 400
Shop unsurance 67
reve 100
water 53
rates 30
products 300
eircom 40
esb 45

should i invest?? what questions should i ask be asking first?? can i ask her accountant for a copy of her profit and loss??
am i entitled to any dole if i become unemployed if it fails??
i really need some advice as im young and its all new to me .

Well if your costs are about 1000 a month and then you'll employ someone on minimum wage, say 80 a day thats another say 1700 a month, and then theres your salary which is say 2000 a month, so your looking at requiring a turnover of 4700 a month.
You'll need to take in 1200 a week, probably more then that as theres always more costs.

Maybe what you could do is go in and ask to see her appointments book. Ask her whats the average treatment cost per client and then just add it up from her appointment book and you'll soon see is she making a profit. If shes not covering those costs you need above, stay away because you'll probably lose a couple of customers in the changeover....

blue4ever

Get the VAT returns! They have to be filed every 2/4 months. You'll get a "good" indication there and use it as a base. If they cant provide them - RUN.

cleoh23

how can i gat the vat returns? will i ask her for her accountants details,will he give them to me?

i will only be employing the girl 2-3 days per week so the wages wouldnt cost that much. i would only pay myself 300 to start with anyway. just to make sure i've enough to cover bills.
she said i would need to make 270 per week to cover the bills i wrote up there.
She showed me her appointment book and it was full.( it was genuine)
I asked people around the area and they told me they would have to book 2-3 weeks in advance for an appointment so this indicates the salon does good business.

thanks in advance

buzz11

If you are buying her business then you are taking on the business as a separate entity, therefore when you become the owner, you will be responsible for all the past activities of the business. This is really important cos something may come out of the woodwork 6 months after you buy and then it becomes your problem.

Have you an accountant working on your behalf? this would be money well spent cos they do this type of stuff all the time. Ask your friend/family if they could recommend one.

The business seller should be providing accounts going back the last 3-5 years so that you can see "how good it really is", if they are reluctant in giving you these, then something is wrong.
Also ask for;
-copy of tax clearance cert
-letter from insurance company/broker that there are not outstanding claims or actions
-copy of the lease.

If you don't get these, then ask why and back away.
Think of it this way, when you buy a second-hand car, you check all the paperwork and documentation, the same applies here.

dbran

buzz11 wrote: »

If you are buying her business then you are taking on the business as a separate entity, therefore when you become the owner, you will be responsible for all the past activities of the business. This is really important cos something may come out of the woodwork 6 months after you buy and then it becomes your problem.

Have you an accountant working on your behalf? this would be money well spent cos they do this type of stuff all the time. Ask your friend/family if they could recommend one.

The business seller should be providing accounts going back the last 3-5 years so that you can see "how good it really is", if they are reluctant in giving you these, then something is wrong.
Also ask for;
-copy of tax clearance cert
-letter from insurance company/broker that there are not outstanding claims or actions
-copy of the lease.

If you don't get these, then ask why and back away.
Think of it this way, when you buy a second-hand car, you check all the paperwork and documentation, the same applies here.

+1

You should never purchase the seller's company unless you are absolutly sure of what you are getting into or there is a specific reason to.

You set up a new company and buy/take over the business with Newco Ltd. That way you will not have a legal obligation for the debts of the business before you took over.

dbran

cleoh23

cleoh23 wrote: »

how can i gat the vat returns? will i ask her for her accountants details,will he give them to me?

i will only be employing the girl 2-3 days per week so the wages wouldnt cost that much. i would only pay myself 300 to start with anyway. just to make sure i've enough to cover bills.
she said i would need to make 270 per week to cover the bills i wrote up there.
She showed me her appointment book and it was full.( it was genuine)
I asked people around the area and they told me they would have to book 2-3 weeks in advance for an appointment so this indicates the salon does good business.

thanks in advance

For such a small business, she probably never had an accountant and was just filling out the Sole Trader forms and same for the VAT returns. You would need to ask her personally for them I reckon. Just tell her that you were advised by a family lawyer to check that there was no debt attached to the business. You might find however she has been clever with her books and VAT returns, they might not give you the info your looking for, although if theres a big debt attached to the company it should be in the books.

It sounds like its doing pretty well and might be good for you, theres not that many businesses in ireland at the moment you have to make appointments 2-3 weeks in advance aside from the fancy doctors!!

What I would advise is for you to draw up a simple enough contract -

In that contract you need a clause - "The Vendor agrees to sell the lease, stocks and customer base free from all debts, liens and encumbrances, and the Buyer shall be in no way responsible for any previous personal or commercial debts built up from the Vendor"
Make sure she signs every page of the contract, attaches her passport and gives her residential address/contact numbers.