A longtime friend wants to sell me his local biz. 12 years in the running. 950k revenue last year, 325k net profit. 2024 was 75K more profit than 2023, which is great. IF I did the same numbers as him, I'd be around 200-225 net due to loan repayments (since I'd be financing the buyout). They have been on an upward trend, so it could be more. I would definitely work to grow the business, which they haven't really done much of that since the location is prime.
This is very tempting, as this is more money than I've ever made, and I love his business. They made it through covid with the PPP loan program. Their numbers even went up during the Biden admin.
With our guy running the show, I'm feeling even better about this. Though, it is scary... I have to personally guarantee the space lease, at 7K a month for a minimum of 5 years. I have to personally guarantee the SBA business loan, and put my house up as collateral. These are things that most business owners have to do. Scary stuff. But, odds are that I'm going to win. I'm not a gambler, but I am a calculated risk taker.
Would YOU do something like this? Or do you think the sh*t is going to hit the fan and we're going to have some rough times that are going to collapse businesses that survived covid?
Thanks for your feedback, Pedes!
I'd seriously investigate why a person knocking down a third of a million in profit would want to sell.
My personal philosophy no matter who I'm dealing with has always been, 'look for the knife'. Some close to me don't like that attitude, but that attitude has served me very well over the years.
That is the first thing I thought: if business is so good then why is he looking to get out now of all times?
Why would he sell? Maybe to retire. It doesn't matter how old if they have the money. With the reported net profit and the sale of the business that could certainly fund a decent early retirement.
Would you work if you didn't have to?
This, I should have stated it. He's in his 60's and wifey is pushing him to retire. He doesn't really want to sell it, LOL. They want to move to another state to be with the grandkids.
Probably because it’s ALOT of work for the owner!
My vote is go for it! You can’t succeed if you don’t take risks.
Thanks!! I've followed them in their business since inception. He has always he said he is there way more than he needs to be, he has nothing else to do! He told me I could be there maybe 4 hours per day if I wanted to cut down on some employee shifts, but more than that wouldn't make any sense. That's only if I want to shave down some employee costs and pocket that money. I'm sure the first few months I would be there several hours per day and would be monitoring the cameras from home. After that, it's likely going to be around 10 hours per week and as needed.
You, my friend, are wise. Ask me how I know, nevermind. Oy vey
I should have stated it. He's in his 60's and wifey is pushing him to retire. He doesn't really really want to sell. They want to move to another state to be with the grandkids.
Being self-employed going on 38 years, I can tell you self-employment is not for everyone. If this business is well-established and highly profitable, as you laid it out in your post and you are still experiencing great anxiety, then the experience may not be a good fit for you. This is obviously something only you can decide.
You have to function with the risk every day and you will have many employee and other business problems popping up all the freaking time. And don't get me started with all the government regulatory bullshit. You don't really work for yourself, you are employed by all your customers. Good luck with whatever you decide!
Thanks!! I'm not experiencing great anxiety. It's just... a big move. I've been self-employed for 26 years... but not in a local business with big overhead and risk like that.
I might have missed something, what type of business is it?
Yeah, that may be helpful...
It's not an ice cream shop but it is similar. Self-serve. Sorry, signed an NDA so I'm trying to be vague.
Honestly, I can understand why you want to be as vague as possible, but it's hard to answer without knowing what sort of business you mean. Some businesses would perhaps do well with Biden and not so much with Trump. And visa versa. It's hard to say.
Also, are you a family man with a wife and kids to support? Putting your house up as collateral is very concerning. What is the loan to value on it these days?
Overall, I think it could be a great time to build a business in America. Especially manufacturing here. But you would be taking on a lot of debt and risk. is your personality and comfort level up for that? What does your wife think? Do you have kids nearing college age? Not trying to discourage you, but it's a lot to take on. Personally, I'm very cautious about such steps. Maybe give Dave Ramsey a call and lay it all out for him and get his 2 cents. Of course, ultimately, it's your call and I wish you luck in making your decision and all the best whether you go forward or not.
NDA, that's why I'm being vague. It isn't an ice cream shop but it isn't too far off. Self-serve. I have about 200k equity in my house. My woman is all in on me doing it, in fact it was her idea. I told her my friend is thinking about getting out. She said... YOU BUY IT!!! "Huh????? Interesting..." Then it all clicked for me. I'm buying a business that is currently quite successful, with the ability to make a living from the first month... also closing just before their busiest months where the majority of revenue is - summer. There's always risk that things could get worse... but they could also get better! They did survive Biden, and covid with the PPP loan... so in the case of economic collapse there will probably be forgiveness / programs available.
Well, that's interesting and encouraging. You make a good point, if they could survive covid, especially if it's some type of food related business, then they should be able to survive a great, "Trump" economy. Having your girl's encouragement means a lot. Personally, if I went for it, I'd want the owner to spend at least a month teaching me the ropes. I'd want to do exactly as he's done all this time before I even thought of putting my own spin on things. Apparently what he's been doing has worked well. It sounds good man. I'm not saying go for it or don't go for it. I guess I'm being ultra cautious, but it seems like you're doing your due diligence and things are looking good. I hope it works out for you. Oh, and not knowing your age, I'd say, if you're <35 and wind up taking a hit, you can probably recover. If you're 50+ and take a hit, that will be a lot tougher. So I'd consider that age factor as well. Could be a great move for you though. Whatever you decide, I hope you'll let us know. Good luck.
Really appreciate it! Well, I'm in my 40's so.. I'm in between! They are super excited to train me. I will be all trained up before the purchase closes. They aren't going anywhere. They will provide unlimited post-close support. These are good friends of mine. I've decided to push forward, working on qualifying for the loan. Indeed, I am planning to clone absolutely everything they do until I'm established... and then try for small improvements.
Sounds great. You've got a solid plan. Sounds like you're buying a good business from some good people. I wish you all the best.
Many thanks!
Ask yourself this: How much do I know about running a business?
Even a great business can be run into the ground if you don't know what you're doing. Also, are you willing to put in long hours to make it work?
I've been self employed for 26 years... but not ran a retail business with employees. My friend knew zero when he started it 12 years ago, and winged it the whole way... heheheh. That said, he and his wife are extremely excited about the idea. They already started training me, I had them slow down until I'm able to get a loan approved. They will literally hire me as store manager and have me running the store if needed. They are excited to teach me every nuance, everything they've learned over the last 12 years. I'm willing to put in 12 hours per day if needed... or whatever it takes. That said.. it already works. It's working now, it's been working. If I was starting something from scratch I probably wouldn't do it. It would be hard to run this into the ground, it isn't ice cream but it isn't far off.. and it is self-serve. Minimal employees. Pretty great thing they have going on.
Sounds like you're going about this the right way. Learn, learn, learn as much as you can from the current owners.
Self employed since 1986. No risk—no reward. Just be smart and know why the “friend” is selling in only 12 years. IF it is a good deal your friend should have full confidence that the buyer will prosper and may carry a portion of the purchase price until loan rates drop to a reasonable level. If not, then I would be concerned.
Big question is "do you trust your friend?" Probably a good idea to have an accountant and/or lawyer check everything out either way.
Why would he sell? Maybe to retire. It doesn't matter how old if they have the money. With the reported net profit and the sale of the business that could certainly fund a decent early retirement.
It depends what kind of a business it is. Trend/wants or....needs ...? What is your market? Mudd, realtors, homes, healthcare, photography....food....coffee? Bike shop? WTF?
Make sure he doesn't sell and then start a new competing business.
Good point. He's moving out of state. That said, I'll get it in my contract. =D
Timing looks scary to me. March 14 is important date for US gov’t shutdown and possible default on debt. Trump is being setup to be blamed, and Deep State is trying to crash the market and economy. There are massive S&P500 put positions for 3rd week of March and 3rd week of April. Somebody is betting on 1929-style wipeout. You might want to wait 60 days if possible.
Thanks! 60 days is the fastest it could possibly close, I can delay it as needed. =D I'd just want to make sure we closed by June, since summer is where the biggest money comes in.
What kind of business? If it is solar energy, NO! Kek
Have you ever heard of Exit Planning? Financial Advisors who have additional training in guiding the sale of business owners and have a designation of Certified Exit Planning Advisor (CEPA). Generally the business owner contacts the Advisor to determine the businesses worth, issues (red flags like is the owner what people are buying or is it a product, if a product is the business truly soluble, is the business efficiently run, etc.). This is a HUGE investment for you and risk. You must do your due diligence and get help. Here’s the CEPA website to find an advisor. https://comparisonadviser.com/financial-advisors/certified-exit-planning-advisor/ Again it’s geared towards the seller but I think you should find a reputable Financial Advisor who is a CEPA. They are throughout the country and they should be willing to talk to you for free to see if they can guide you. A lawyer can help BUT they don’t look at the business like a financial advisor will. THIS IS A HUGE INVESTMENT AND YOUR FRIEND SHOULD UNDERSTAND that you have to protect yourself and your family!!!!! Sounds good on paper but then a lot of things do.
I started a business in 2008; it was scary back then also, I looked in the mirror many mornings and ask myself,what the hell are you doing, dumbass, But this mess going on now is a new level of scary, who knows what the world will look like in 4 years
What is the business model?
Not ice cream, but not far off... self-serve.
If you're gonna take out a loan, no the interest rates are not ideal at the moment. If they fall below 5% i would have said yes. But I'm just a random An0n online. If you trust the guy go-ahead
SBA loan interest rates are variable, tied to the prime rate. Usually around prime + 2%.