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FirefighterB said: "Any of you guys have experience with this that you'd like to talk about?
I've found a couple businesses of interest here in NYC, but I'm always hesitant to pull the trigger. Although my degree was all about starting/buying a small business, I'm still not feeling confident enough to do it.
My biggest question is: Where do you start? Getting the lawyer, getting the CPA, talking to the current owner, working on getting the financing?"
AlfredSokol said: "The main question is: are you planning on working the business or will you become the full-time manager?"
FirefighterB said: "Very true. The one I'm mostly interested in is a small cafe in Manhattan. I love coffee shops and have spent quite a bit of time in them. For me, it's a way to get out of the house to read, get on the internet, or just hang out, yet still feel like I'm sitting at home.
Sooo, being that it's in Manhattan, I'm guessing it's a pretty small business (size and employee-wise). I think it would be possible to manage and run the business without one interfering with the other too much. Plus, I'm sure I would be spending as much time there as possible, regardless of being the owner or manager."
AlfredSokol said: "You can talk to a business broker without any obligation, so I might consider doing that.
Set up a consultation and see if its worth paying them. They sometimes charge a high fee but it might be worth it, especially for a first timer.
You can always do the deal yourself but there are "gotchas" to look out for."
FirefighterB said: "Hmmm, I'm going to look into that."
Heather said: "One of my hobbies is to analyze business models and here are some things that I would consider before buying into a food service business.
1. Employees. A business needs enough employees to run smoothly. If someone calls off or quits, you'll be responsible for filling in. How many hours are you willing to devote to make the business successful?
2. Location. (I've never been to Manhattan, so if this sounds silly, please forgive.) As the saying goes, location is everything! How many direct competitors do you have in a 1/2 mile radius? Is there plenty of foot traffic/parking?
3. Prices for raw goods. I know that [URL="http://www.superiorinvestor.net/blog/2007/07/24/starbucks-raising-prices-to-offset-raising-dairy-prices/"]Starbucks recently announced they were raising their prices[/URL] to help offset raising costs of dairy products, so following trends in other like businesses could give you some insights into what's going on in the industry as a whole.
4. Other costs. You say that you enjoy the internet while you're spending time there but someone has to pay for the hotspot. Rent, taxes and other expenses should be accounted for, too.. and don't forget about advertising!
I's suggest just having your eyes wide open and looking at all the aspects before diving in.. Just a little food for thought.. Let us know what you decide to do!"
Kloewer said: "Sounds ambitious. I've occassionally thought about buying a coffee shop and catering to investors--WiFi, CNBC, a big stock ticker on the wall, etc. I dont think there's enough demand for that here in Omaha, but in NYC it may be an angle to consider.
I think your first set of questions should be to the owner. He may tell you something that turns you off to the idea, and you won't have spent any money yet on a retainer.
You may also consider reading "Grande Expectations," by Karen Blumenthal. It's a multi-dimensional look at the business of running Starbucks (with an emphasis on the company's stock). It was very interesting, and may shed some light into the coffee house business."
FirefighterB said: "Heather - How do you get ahold of business models to look at? I would like to do that, as well. Hell, I did for about 3 semesters when I was in college, as my degree is in Entrepreneurship. (I think I have a good idea how to do this stuff, I'm just bad when it comes to questioning my own skills)
1. Employees - unfortunately, I see it as a small operation, with 3-8 employees, both part and full time. So, I'm pretty sure, that if someone calls off, I'll have to be there. Of course, I plan on being there and, depending on the business load, working/mingling with the employees and customers. At this point, I'm not working anywhere else, so that'll be it for me.
2. Location: You're right. But, in most areas of Manhattan, foot traffic isn't a problem, parking is almost non-existent, and competition is always close by.
3. Margins: That's definitely something I've gotta look at more. If I'm buying a business that's already functioning, I should be able to get a pretty good idea about where those things stand. But, if i go out on my own, it'll be a bit tougher.
4. Costs: I'll have to check out Time Warner to see if I HAVE to get a different type of service than personal. The place I liked in TX didn't have any fees and, honestly, I think it was just a personal wireless service. Also, I'd like to offer laptops for customer use so everyone doesn't have to lug their laptops down every time...with a small fee, of course.
Kloewer - Great idea on that. I'll have to take a day and run around down in the Wall Street area, as well as uptown by Bloomberg/Nasdaq/Bear Stearns and see if there is something like that. Perhaps if I could have it themed for the stock market during the day, but not too far that it can switch over in the evening.
I've still got a lot to look at and don't plan on rushing into it just yet, but I've got the wheels turning.
Thank you for your help, tips, and thought-provoking questions."
Corey said: "Hate to plug my own blog, but I wrote this article a while ago on my thoughts on buying a small business...
[QUOTE]Near where I live there was a small store on sale. It includes a “historic” building (read: chained by building permits) and gas pumps. All for the low, low price of $750,000.
Come again?
Let’s take a quick journey down the common sense rabbit hole. With that $750,000, you could buy 10-Year Treasury Notes and get a guaranteed $37,500 every year. Only issue? The money is pretty locked up. So, what if we put it in stocks and get the historic ‘8%’ a year. You would get $60,000 the first year, $64,800 the next … and so on (the beauty of compounding values). Pretty painless. Obviously, not that easy, but you get it.
So, let’s make the ‘mandatory’ return $37,500.
Okay, now let’s think about the store. So we pay $750,000 for the business, which means the money is absolutely locked up — and we don’t have any more capital to work with. That means every expense must come from our investment returns. So say, for this store, we pay five people, full time at $10/hr. 5 people * 40 hours / week * 10$ / hour * 52 weeks = $104,000. That is pretty minimum too. Now, you, as manager, probably want a salary of at least $50,000 for your work, right? And then, on top of that, you have your mandatory safe return of $37,500. Total it? $191,500. Yikes! That is a 25% return!
Now, with historic average annual land value gains at 2% … well, it just doesn’t strike home. Yes, this certain area will probably grow at more than 2% a year — but all in all, for the work, the investment just isn’t there.
Buying a small business? Don’t even think about it.[/QUOTE]"
Heather said: "[QUOTE]Heather - How do you get ahold of business models to look at? I would like to do that, as well. Hell, I did for about 3 semesters when I was in college, as my degree is in Entrepreneurship. (I think I have a good idea how to do this stuff, I'm just bad when it comes to questioning my own skills)[/QUOTE]
I usually don't really get a hold of them - I just observe the businesses that are out there and analyze them. I think about what it takes to make them operationally profitable, what expenses might be associated with them and what the pro's and con's are. Nothing too complicated. Just an exercise of the brain if nothing else.
Food places have always seemed to be very competitive and I often wonder how smaller mom and pops places do it, but I suppose they have a following of loyal customers for whatever reason. Franchises seem equally as tough since the franchisee has to have a significant amount of net worth to even get it up and running - and then they are left with having to deal with the suppliers. A few years back there were a number of popular franchised places that closed down and just went and put locks on the franchisee's doors without even notifying them. I thought that was a crappy deal for the people that put their life on the linejust to have them fold. (They were called "The Ground Round" and "Cooker's, BTW.)"
lil dickie said: "I do find the occasional business model online. Most grant applications are private, but some are [url=http://www.niaid.nih.gov/ncn/sbir/app/default.htm]posted online[/url]
It takes a serious business model to land a grant, so you know these types can get funded."