buying a cafe/takeaway

Mike and Jo,

it is impossible to say if £100k is affair or not from your brief summary, there is no indication of actual costs (ie staff, other running costs) or an indication of growth/decline capital assets included, local competition etc etc etc.

If this is the asking price, then the answer must immediately be no, expect to haggle down a lot regardless.

You need to have a proper financial review or "due diligence" undertaken of the business to discover how the real numbers stack up. Ie a proper go through the accounts for this year, and the last few, together with a thorough look at the companies assets and liabilities you are taking on and the market trends. This is generally a combination of your accountant and solicitor and should provide a “level head” to enable you to effectively negotiate on price and confidence to walk away if things aren’t what they seem. Often as buyers you can get very emotionally involved and get sucked to paying well over the odds for a business. Your advisors will also help you structure for the best tax advantage etc and should pay for themselves many times over.

It’s the equivalent of having a house surveyed before you buy it, and you can have different levels of work completed.

Immediately the claim that rates+heat+light is only £5k whilst rent is £21k suggests very iffy numbers. Rates are normally approx 40% of rental income.

Regards,

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James Smith
Chartered Accountant
www.jamesesmith.co.uk
01235 536 773

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Your indispensable guide to Small Business Bookkeeping, Self-Assessment & VAT

thanks for that James,

we will check it out more thoroughly on our return to the uk.

another thing that you may be able to help us with is in regards to finance.

we have the money to buy a business of this type outright but would prefer to borrow as much as possible so to leave our funds avalible to purchase a property in the uk. we have no assets apart from approx 150,000pounds how feasible is it to obtain a loan from a bank in this situation.

thanks again

Mike

Mike,

You should be able to borrow around 50% of the asking price without too much trouble, although you will inevitably need quite a fair amount of cash as working capital just to run a business of this size. So say a £50k down, £50k borrowed £25k kept as cash would leave you a £75k deposit for a house.

The main issue will probably be your credit history if you have been out of the UK for a while.

Regards,

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James Smith
Chartered Accountant
www.jamesesmith.co.uk
01235 536 773

---------------------------
Your indispensable guide to Small Business Bookkeeping, Self-Assessment & VAT