Financing the purchase of an existing business.

autocentre

Hi Boardsies,

Newbie here looking for some advice, will try keep it as short and not boring as possible

I have the opportunity to buy an existing business at the moment which is in the area of my expertise... I have 12 yrs experience in this particular product/service. The location of the business is absolutely perfect, it is smack bang in the middle of the main street of a large, very busy town with no competitors for a couple of miles outside the town.

It is within an area of the market in which, no matter what the "economic climate" , it is always required, on a daily basis.. and that will continue to be the case.

At present the business is turning a PROFIT of €3050 (On average) (no less, more often than not, more) per month after rent, wages, rates, stock, insurance, etc. And this figure has increased each year. The business has been operating for the past ten years in this location.

After a lot of negotiation I've managed to get the purchase price down to €35,000. This includes: the lease, equipment worth €22,000 (which I priced myself) , stock worth €5,000 and the current customer database and contacts.

I have really put a huge amount of time into putting together a forensic business plan, including absolutely all of the information I have and all of the research I've done including market research and competitor research.

The business at the moment has never done any advertising and I intend to build the business up even more by local advertising and web based advertising, it has so so much potential given it's location (directly opposite a shopping centre and next door to a national college).

I intend to create 2 more jobs within 2 years.

My problem is getting the finance to purchase!... Everyone's problem you say!:p

I've looked in to enterprise boards but they all seem to just be for start up, they don't seem to facilitate purchase of an existing business. I've looked into venture capitalists but the same as above plus they seem to look for "big" projects with a quick, large return. I don't hold much hope for banks given their current stance.... so has anybody got any ideas??!!

It's not a massive amount of money really and as I'm currently unemployed (due to redundancy), when you look at in in that context, it would be paid back with 3 years social welfare payments! ... Which would lead one to believe that some govt. body would be willing to help out in some way... existing business, track record etc etc!!!

Any advice would be greatly appreciated... thanks guys

(Also... The reason current owner is selling is due to moving abroad to family and I have checked there are no rent arrears, judgments etc against the company or owner and there isn't. It's a genuine opportunity I've been given through being in the right place at the right time

markymark21

Have you gone to the bank yet? You never know what they'll say unless you approach them.. worst they can say is no! You seen to have an in-depth understanding of what running this business will entail so they might take a punt with you.

or, what about running as a PLC and finding potential shareholders in or around the town itself? As you said the business is turning profit (even without any promotional work) so maybe you could find potential investors seeing as the business looks like a pretty good prospect!

LiamACA

autocentre wrote: »

Hi Boardsies,

Newbie here looking for some advice, will try keep it as short and not boring as possible

I have the opportunity to buy an existing business at the moment which is in the area of my expertise... I have 12 yrs experience in this particular product/service. The location of the business is absolutely perfect, it is smack bang in the middle of the main street of a large, very busy town with no competitors for a couple of miles outside the town.

It is within an area of the market in which, no matter what the "economic climate" , it is always required, on a daily basis.. and that will continue to be the case.

At present the business is turning a PROFIT of €3050 (On average) (no less, more often than not, more) per month after rent, wages, rates, stock, insurance, etc. And this figure has increased each year. The business has been operating for the past ten years in this location.

After a lot of negotiation I've managed to get the purchase price down to €35,000. This includes: the lease, equipment worth €22,000 (which I priced myself) , stock worth €5,000 and the current customer database and contacts.

I have really put a huge amount of time into putting together a forensic business plan, including absolutely all of the information I have and all of the research I've done including market research and competitor research.

The business at the moment has never done any advertising and I intend to build the business up even more by local advertising and web based advertising, it has so so much potential given it's location (directly opposite a shopping centre and next door to a national college).

I intend to create 2 more jobs within 2 years.

My problem is getting the finance to purchase!... Everyone's problem you say!:p

I've looked in to enterprise boards but they all seem to just be for start up, they don't seem to facilitate purchase of an existing business. I've looked into venture capitalists but the same as above plus they seem to look for "big" projects with a quick, large return. I don't hold much hope for banks given their current stance.... so has anybody got any ideas??!!

It's not a massive amount of money really and as I'm currently unemployed (due to redundancy), when you look at in in that context, it would be paid back with 3 years social welfare payments! ... Which would lead one to believe that some govt. body would be willing to help out in some way... existing business, track record etc etc!!!

Any advice would be greatly appreciated... thanks guys

(Also... The reason current owner is selling is due to moving abroad to family and I have checked there are no rent arrears, judgments etc against the company or owner and there isn't. It's a genuine opportunity I've been given through being in the right place at the right time

Have you approached the bank? It seems to me that if you have audited accounts, heads of agreement and your detailed business plan, cash flow predictions and your enthusiasm it will be a no brainer for the bank Your earnings are greater than the purchase price of the business which to be honest doesn't make a huge amount of sense. Normally the purchase price is a multiple of earnings depending on a variety of criteria. Also you have assets (granted they have been valued by you) of €27K plus a lease which must have been capitalised and the business has been a going concern for 10 years.

modmuffin

autocentre wrote: »

My problem is getting the finance to purchase!... Everyone's problem you say!:p

Sent you a private message there autocentre

autocentre

Thanks for the replies guys. Will approach bank next week and see what happens there! Also does anyone know do enterprise boards only help start ups or do they assist in the purchase of an existing business? (Less risk etc etc!)

miju

I've not seen many grants for buying an existing business. Plenty for expansion , equipment etc