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Tax returns?
Profits vs losses?
Lease amounts?
Rental amounts of any equimpent (think some is owned and some is rented).
Contracts between employees and owners?
This is for a med-spa that has been around for at least 5 years. Owner is in her 60's and wants to retire and travel with husband.
Be careful with any business that relies on a list of potential clients. What happens if 2-3 of the employees decide to start their own spa and take their clients with them? I was looking into buying a printing business and after looking at everything, the only thing worth money was the client list, the equipment was old, employees were close to retirement and the location was in a horrible spot. So in order to make sure that I was buying a profitable business I asked the current owner to stick around for a year as an independent contractor that I paid with a percentage of the profits.
I laid out a plan where I would have paid the old owner 30% of the profit every year for three years. But the owner balked and six months later he was out of business. He wanted to make me buy the equipment and I told him to sell it and keep the profit. The guy was looking for an easy way out and thought his business was worth a lot more than it really was. He stuck to his guns and rode the business down the toilet and did not make a thing.
Location: We_tside PNW (Columbia Gorge) / CO / SA TX / Thailand
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1st do the above (Due Diligence)
get an appraisal of the business A Med-spa will have a significant value placed on staff / contracts / connections, and lenders will NOT trust that your NEW business will be equal to previous earnings.
BE SURE to get an appraisal of the market and growth potential (DO NOT trust seller to provide this).
Know your clients, market, skills, skill gaps, cash flow issues.
Get the full meal deal
COMPLETE audited set of books
Legal agreements with ANYONE (Hopefully employees have signed a non-compete contract, but YOU will need a fresh one)
Do a UCC report on equipment (Sec of State)
Check to verify all utilities and taxes have been paid current
Quiz the competition EXTENSIVELY
Be Careful and definitely don't rely on info given by seller. (I have seen many professional services sold under 'pressure' and then not perform anywhere near reported numbers). Detach from this emotionally and make a SOUND business decision. It WILL be your ONLY life for at least 5 yrs.
As a real estate guy I have seen a fair number of business owners try to sell a "main street office" or retail type business and the property. Rarely does this work well for both buyer and seller. The seller probably bought building at a time when real estate was less expensive, or at least was able to improve the place slowly over time, while new owner has to shoulder that cost along with all the overhead of new business.
Even when renting the tendency is for the landlord to try to get prices inline with the revenue of previous business at peak, too high compared to almost inevitable fall off in revenue during transition.
I too think it is smart to make a LARGE PART of the selling price payable to the owner through some kind of "percentage of sales / profit consultating fee" payable over year AND verified by an independent CPA with qualifications / legal limitations.
If the seller balks then they need to understand that "liquidation value" is far lower than that of an "on going concern" and if they want VALUE for business it has to be functional not a "build it yourself kit with then instructions missing"...
Decided to pass because
1. They made excuse after excuse for why I was not able to see the 2010 taxes/losses/profits
2. The numbers they did show me I realized were not accurate.
Trust is #1 and seeing as we have done a lot for them, yet they were dishonest in this transaction I chose to not having anything to do with them.
Decided to pass because
1. They made excuse after excuse for why I was not able to see the 2010 taxes/losses/profits
2. The numbers they did show me I realized were not accurate.
Trust is #1 and seeing as we have done a lot for them, yet they were dishonest in this transaction I chose to not having anything to do with them.
Well, nothing's keeping the 60 year old owner from retiring and traveling with her husband ...
But any business for sale that won't open all of it's recent books to a prospective purchaser isn't seriously for sale, only trolling for a sucker.
Good for you to have walked away from these folk.
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