Destressed Business sales

Discussion in 'Current Affairs' started by OneDay, May 10, 2020.

  1. OneDay

    OneDay Active Member

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    Currently its possible to get a CBD Cafe for FREE or buy a pizza shop for $2 and the $2 is even negotiable.

    Want some thing cheaper? Airport Car Parking business with $5000 per week rent will even pay you to take over the business.

    Its weird to think this is just the beginning.
     
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  2. Jason1

    Jason1 Well-Known Member

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    this is why People can make allot of money during these times. If you have insight in running business this could be a good opportunity, especially if this includes equipment.
    Obviously this is to take over a lease, But you need tobe a savy person, not for those who dont have business experience as you could easily end up in a hole.

    I own my house outright because of buying a failing business for next to nothing and sold it 5 years later for enough to buy my house without a mortgage.Fucken hard work to build a business thats losing money to one making very good money to a point some one wants to pay good money for it. But its very doable
    This situation is slightly different, But Ive been on the lookout for the right chance again.
    But knowing the reason why a business is failing is very handy, So you would need to study the figures pre-virus very carefully So you know if it has potential or not.
    But if your a seeing a business with example $50k worth of equipment and assets being offloaded for $2k, thats a good start, lol
    Or if its a business for $2 with no assets eg all rented equipment, then thats not so good. things like that should be considered
     
    Last edited: May 10, 2020
  3. Roswell Crash Survivor

    Roswell Crash Survivor Well-Known Member Silver Stacker

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    Outstanding debts (ordinary creditors)
    Rent arrears
    Tax Liens
    Short-to-medium term Cash flow
     
    Last edited: May 11, 2020
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  4. Shaddam IV

    Shaddam IV Well-Known Member Silver Stacker

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    A café for free isn't such a great deal, if it was a thriving café they wouldn't be selling the goodwill that cheaply so it probably wasn't a very successful café before the shutdown.

    If you are buying the café they will want you to take over the lease.
    If it's full of nice equipment (freezers, fridges, coffee machines and so on) it's probable that they are all leased so you would have to take over those leases. It's possible that even the tables and chairs are under some kind of finance.

    If they have any full-time or permanent part time employees you are required under law to keep those staff and take on all obligations accrued such as sick leave, annual leave, long service leave and of course superannuation. If a staff member is has been there for years they will have pro-rata long service leave entitlement if they leave. basically as the new owner all staff entitlements fall on you and you cannot fire these staff simply because you want a fresh start.

    So it may or may not be a deal worth looking at, you would need a great deal of due diligence before you decide.
     
  5. Ag bullet

    Ag bullet Well-Known Member

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    sounds like they'd have to pay me to buy it.
     
  6. Jason1

    Jason1 Well-Known Member

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    there are ways around the staff thing though, especially in this environment where a business is toast the previous owner could let them go before you buy and justifiably and its their responsibility then, but you do need to consider the owners terms to find out if they would do that. but there are others ways around it also, Usually you dont want the staff of a failing business, often they are part of the problem, but in saying that if you knew there was a good staff member it maybe worth taking on all that stuff.

    Businesses selling cheap with good equipment is more common than people think, but as mentioned you need to make sure it is their equipment obviously because yes it is more common to see shitty businesses who lease their crap.
    So if there are failed businesses going cheap with Equipment there are opportunities for some one who is looking at starting a business also.

    In this environment It would be purely for them to have some one take over their lease so they can walk away with their bond back, there is no doubt about that
    Ive seen many occasions where People have sold up cheap because they failed and they couldnt afford to remove equipment and get the building back to empty and painted to get their bond back so they sacrifice their equipment and stem the bleed of the loss.
    especially when the other problem for them is the landlord locks the store up because they are behind on rent and they lose it.
    Failing businesses can some times have good potential, the trick is being able to Identify one that should be making money and what is wrong and where the person has gone wrong vs a business that has no potential what so ever.

    My first laundromat (my second Business) I bought was for $5k and shockingly had at a guess $70k worth equipment as secondhand value, to fit a shop out from new was well into the $200k price range.
    Now why did he sell it to me then? Well I virtually bailed the guy out.
    He put up a closed down sign on his shop window. I just happened tobe sitting out the back of my other shop having a smoke and thought I should go over and ask him about it and confirm if he was closing down the business, and yes he was there and then. I asked him to look over his books, see what the assets were and it came clear very quickly where he was going wrong and what was good about the business, also what was bad about the business.
    And it might seem silly he sold it cheap But keep in mind he was going to lose that equipment to the landlord who was essentially shutting him down, and he
    He was being quoted $30k to renovate the shop back to stock condition as to his lease agreement.
    He jumped on my offer to pay what he owed on rent which was $5k, and he didnt have to clear the shop out and he walked away with his bond back also.
    For years It was clear the guy was failing badly and it was clear as to why, My shop was two doors up from this laundromat and I looked at that place every day and thought how much potential it had.
    When I sold the First business I had Ive kept this one as its such a great business and it pumps Money into my retirement.
    Anyway the point is a failing business can be a good business, But you need to look at it very closely. The same goes a great business can become a bad business when the wrong person takes over it.

    But to any one thinking Business is easy and with out any experience walk in and take over a shit business and make a million bucks over night, Is kidding them selves, Its allot of hard work and will require additional money and you may take a loss for some time. To be able to sell a business for a good profit you need to show real Profit, good figures for a substantial amount of time and good assets in the business.
    Some people have a knack for it and a majority dont.
     
    Last edited: May 11, 2020
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  7. Shaddam IV

    Shaddam IV Well-Known Member Silver Stacker

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    Great post Jason1.
     
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  8. Jason1

    Jason1 Well-Known Member

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    Cheers mate. I have a big soft spot for people going out and having ago, taking the risk and doing the work.
    I had good advice from people who did well on business, and worked for small Businesses 99% of my life, it really helped seeing how things were run.
    And I got given some very good advice in regards to not looking past failing businesses and also what to look for and what to walk away from.
    My first business which I mentioned in my first post, was failing,
    So thought I should add a post from Experience, as to why a failing business can be a good purchase.

    I bought it because I didnt have the money to start a business from scratch It was more economical for me to Buy a business with assets than it was to start from scratch.
    The business had good backbones It had been around for 25 years and knew it had made profit in the past, It was very clear as to the reasons it was failing, ( that is one of the most important things IMO) knowing the reasons why its failing.
    To start a competing shop, the fit out alone would have cost substantially above the money I had at the time, So It was far more economical for me to buy the failing business, plus the shops location was fantastic so buying the business and getting that lease was also a factor.
    so things like that should be taken into account. I know of big businesses that buy businesses just to close them down to get hold of that lease. that cant be overlooked either.

    I was in My Mid- late 20's, A bank refused to give me a home loan as that was post GFC era and banks weren't loaning, I always wanted a business so I opted to risk my money I had saved for deposit and put it on a business.
    It was a allot of work, It was 15 hour days 7 days a week for both me and my Missuses for 5 years building the bastard up.Worked so much I couldnt even spend my wage so we Had a crazy amount of money saved. at the end some one came along and made an offer on it, and I bought my house outright. had no money left after that lol but think buying my house with the proceeds was smartish move I think.
    I did buy that laundromat during that time of owning the first shop which was by far the cheapest and smartest move I ever made as mentioned that pumps money into my retirement fund. I cant see my self selling that place for along time.

    So Ive been keeping a good eye out for the right chance again, Hopefully I find something, I Havent as yet. But these times are usually the best for finding these sorts of opportunities.
    I will say for me personally It wont be food related like last time though lol, the work required in that industry is insane. But Its a good place to start for some one who is keen.
    Anyway I hope this gives people something to think about.
    Look for the right opportunity, take the risk and put in the work.
     
  9. mmm....shiney!

    mmm....shiney! Well-Known Member Silver Stacker

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    Don't get into an independent food business if you don't know anything about food.

    If you're buying a going concern/distressed business, as well as the due diligence regarding legal and financials, get a qualified commercial equipment tradie to check all the big ticket items like fryers, commercial refrigeration, coffee machine and cooktops/ovens etc. Don't worry about any domestic appliances, the tradie will cost you more than their replacement value. If it costs you a grand or so, it may save you many $1000's in the long term when your cold room shits itself at the beginning of next summer - as they always do. :p
     
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  10. slavaja

    slavaja Well-Known Member Silver Stacker

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    I don't think food will be a good idea even if it's for free. There are too many cafes and restaurants and many weren't profitable even before the covid 19.

    The golden age for cafes is long gone. I remember I use to have to travel and stand in long lines to get into trendy cafes now they many just around the corner.

    If want to do food I think food trucks are the way to go. Cheap and cheerful and no rent to pay.
     
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  11. OneDay

    OneDay Active Member

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    Suprised you guys are actually seriously considering the pros of buying these toasted businesses.

    I'm just saying the economy is cooked and this is going to be a domino effect.
     
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  12. Jason1

    Jason1 Well-Known Member

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    "be fearful when others are greedy, and be greedy when others are fearful."
     
  13. OneDay

    OneDay Active Member

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    By that logic we should just go hug a brown snake or pig out on the Bright Red Mushrooms in the field.

    The saying you mentioned is a Rhyming Fallacy. Its easy to remeber because it Rhymes, things that are easy to remeber seem more true. Even if they are not.
     
  14. Jason1

    Jason1 Well-Known Member

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    the Guy who said that made allot of money, on buying stocks with failing businesses during the GFC

    but you can stick to low hanging fruit.
     
  15. OneDay

    OneDay Active Member

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    The guy that said that probably helped cause the GFC

    He's also best of buddies with our famous selfless vaccine Bill.
     
  16. Jason1

    Jason1 Well-Known Member

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    So?? he got richer you didnt lol

    which proves exactly what he said, "be fearful when others are greedy"
    and then guys like you became fearful when it collapsed, which meant you never made any money from the scary times, which proves the second verse "and be greedy when others are fearful"

    No risk no gain.

    Obviously you need tobe smart about it, which is what is being discussed
     
    Last edited: May 11, 2020
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  17. willrocks

    willrocks Well-Known Member Silver Stacker

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    I didn't think it said "be stupid when others are fearful".
     
    Last edited: May 11, 2020
  18. Ag bullet

    Ag bullet Well-Known Member

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    old man used to tell me- "run when others are walking so you can walk when others are running"
     
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