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Buying a business

wiggy · 16 · 3655

wiggy

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on: May 02, 2014, 02:53 PM
Hi PMT,

I was given the opportunity to bid/offer to buy an established business and will be meeting with the owner in a week. I still can't divulge the type of business but I am doing my fair share of research regarding the business (Permits, Requirements, Licenses, minimum set-up to start the business etc.).

However I would like to ask your opinions on this? What other aspects should I look or watch out for?
What important questions should I ask besides the (Permits, Price, Staff, etc.) Currently I think I would need help in reading/balancing their invoices or books (I have a feeling that their books now are incomplete or not up to date), auditing if everything checks out.

These are the details:

* Single Proprietorship - current owner is the second transfer owner of the business
* 1st owner reason for selling: going abroad
* 2nd owner reason for selling: I'm reading mismanagement or insufficient capital to sustain the business (this business was doing a 10-15k/day sales before but under the new owner it went down to 5k/day)
* Insider said the owner have personal debts to pay
* In operation for more than 8 years
* Renting a corner commercial space
* Staff will remain
* All supplies, shelves and gamit etc.
* Products/Services related
* A modest main street business - not a corporation :D
« Last Edit: May 05, 2014, 09:00 AM by wiggy »


george88

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Reply #1 on: May 02, 2014, 03:16 PM
If you will divulge the business you are buying maybe someone will share an enlightment


wiggy

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Reply #2 on: May 03, 2014, 10:21 AM
Right. It's a drugstore. :)


Market_Market

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Reply #3 on: May 03, 2014, 01:00 PM
20k-30k then down to 5k???
Either me bagong tayong generic drugstore sa tabi or nagnanakaw yung staff.


bauer

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Reply #4 on: May 03, 2014, 08:44 PM
Right. It's a drugstore. :)

Have you check any tax issues?

Have you check if there is any violation with FDA rules?

Have you check all suppliers if the credit standing is good?

5k gross sales per day is insufficient to sustain its operation.


vicces

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Reply #5 on: May 04, 2014, 11:59 AM
gross sales P5k per day? di yata worth it, considering the cost and overhead to run and maintain a drugstore.. samantala ung stall ng "Bibingkinitan" ba yun, P10k daw ang sales kung ok ang location... at magkano lng capital nun, very simple and easy to manage.. #justsayin baka may iba kang biz ops n mahanap with bigger potential..

P5k, tsupit lng yun ni mikoangelo on a bad day... ;)
« Last Edit: May 04, 2014, 12:10 PM by vicces »


wiggy

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Reply #6 on: May 05, 2014, 09:00 AM
I have looked at some of their books, it was actually 10-15k/day average but now its 4-5k/day. Stocks are almost depleted, no wonder they only make that much now. New owner had some misfortune in her finances, that's when her debts piled up. She wants to sell, her husband doesn't. We'll see.


Prospera

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Reply #7 on: May 05, 2014, 09:29 AM
^Wasn't there someone here who was asking for advice about how to turn her drugstore around? I remember that  s/he was suspecting her cashier/s were less than honest. Is this the same business?

Maybe you could do a bit more research about why the sales suffered (e.g., changed conditions in the immediate vicinity) so you could 1) decide if the business will be worth buying; 2) pinpoint the areas needing improvement; 3) plan how you could make the business profitable again.

Best of  luck!
« Last Edit: May 05, 2014, 09:30 AM by Prospera »


wiggy

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Reply #8 on: May 05, 2014, 02:00 PM
Have you check any tax issues?

BIR permit was recently updated but still checking.

Have you check if there is any violation with FDA rules?

None so far, basic requirements in terms of space facilities are there.

Have you check all suppliers if the credit standing is good?

Not good. Not part of our negotiation na babayaran ng new owner ito.

gross sales P5k per day? di yata worth it, considering the cost and overhead to run and maintain a drugstore.. samantala ung stall ng "Bibingkinitan" ba yun, P10k daw ang sales kung ok ang location... at magkano lng capital nun, very simple and easy to manage.. #justsayin baka may iba kang biz ops n mahanap with bigger potential..

Yup, wouldn't want a 5k/day sales either. though currently a reason is that their current stocks are depleted. They can't replenish stocks pa, finance issues. Though I believe its located in a very good location and has competitive prices (kung may stock :D).

^Wasn't there someone here who was asking for advice about how to turn her drugstore around? I remember that  s/he was suspecting her cashier/s were less than honest. Is this the same business?

Maybe you could do a bit more research about why the sales suffered (e.g., changed conditions in the immediate vicinity) so you could 1) decide if the business will be worth buying; 2) pinpoint the areas needing improvement; 3) plan how you could make the business profitable again.

Best of  luck!

Haven't saw that thread. All points noted, thank you!
« Last Edit: May 05, 2014, 02:04 PM by wiggy »


Prospera

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Reply #9 on: May 05, 2014, 08:41 PM
^Here, found the thread I was referring to above--

http://www.pinoymoneytalk.com/forum/index.php?topic=45834.0


vicces

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Reply #10 on: May 05, 2014, 09:38 PM
BIR permit was recently updated but still checking.

None so far, basic requirements in terms of space facilities are there.

Not good. Not part of our negotiation na babayaran ng new owner ito.

Yup, wouldn't want a 5k/day sales either. though currently a reason is that their current stocks are depleted. They can't replenish stocks pa, finance issues. Though I believe its located in a very good location and has competitive prices (kung may stock :D).

Haven't saw that thread. All points noted, thank you!
Maybe u should also ask yourself.. What is it about u that could turn this fledgling business back in the black/profitable again? U have more cash to replenish the stocks/invty, u can devote more time (makakabantay) than the 2 previous mgt, u understand/have previous exposure in this business, connections, or whatever other reason to believe u will succeed on something that the previous owners tried to do but failed?

Because if we hold all other things equal (same location, staff, costs, risks, personal problems, etc) you are the only variable here. Ikaw ang X factor kumbaga. What do u have that the other previous owners didnt have, that could possibly spell success for you?

Pero mukhang pinag aaralan mo namang maigi bago pasukin kaya Goodluck sayo wiggy!


wiggy

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Reply #11 on: May 06, 2014, 01:40 PM
@Prospera - thanks for the link! This is not the same business but the thread is really helpful. Thanks!

@vicces - good points. Made me think on the points you said. So far I think can cover the financial needs and ave thought of marketing strategies. We'll see, I have to evaluate further and hopefully everything checks out.

Thanks for the feed backs. I knew starting this thread would be helpful for me (I hope for others as well). Cheers!


wiggy

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Reply #12 on: Jun 16, 2014, 02:13 PM
Follow-up questions:

So I'm planning to buy this business with updated permits, licenses, taxes etc. The current owner said I can use all the licenses, permits etc. until end of year but ownership will be turned over to me.

1. If ownership is transferred to me and I still keep the current business name; for next year will it be just like renewing the permits, licenses etc? Or a change of ownership will be like filing for new permits, licenses? (which I doubt since I might be keeping the same business name)

2. If ownership is transferred to me and I choose to rename the business name, if I renew the permits, licenses, will it be treated as a new business filing for new permits, licenses?

Thanks PMT!

*I might need to talk to a lawyer too.


wiggy

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Reply #13 on: Sep 24, 2014, 09:42 AM
So the business is now in operation for almost 4 months now. I can say that operations is now stable and we managed to boost sales to 5x from our first month of operation.

Some thoughts in buying a business:

PROS:
1. Convenience in starting and operating an ongoing business
 - materials
 - people
 - suppliers
 - customers
 - existing reputation of the business (this can be your disadvantage as well)

CONS:
1. Convenience comes with a premium - which will/can reflect on the selling price
   - this is valuation price, is subjective on how valuable the business is to the seller and how you think the business is worth and its potential for growth
  - learn the art of haggling


PREREQUISITE:

1. Be very meticulous in the business' legality and ownership, a lot of things need to be considered.

a. Permits, licenses, taxes, Mayor's permit, BIR, LTO, etc.
b. The seller is really the owner of the business
c. Terms and transfer of ownership
d. The business space will pass standards
e. Lease - if you are renting, be sure you're in good terms with the property owner
f.  The "real" reason of the owner for selling the business
g. Evaluate the location
h. If the business has potential or opportunity for growth
i.  Debts

The only time I hired a lawyer's services is for notarization of documents. But if you are buying a business I suggest that you hire a good lawyer and accountant, else you do the labor and leg work.

To God be the glory! :)
« Last Edit: Sep 24, 2014, 09:45 AM by wiggy »


ph1l1p

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Reply #14 on: Oct 03, 2014, 01:52 PM
so walang outstanding utang nakapangalan sa store?


 


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