creative financing

[linda]

I feel like a needle in a haystack here. I can't believe this business is so large (and inviting). Having said that, I'm delighted. I, like so many, are looking to get in. I, too, am looking to purchase an existing mat, (or store, which is what the current owner calls it). What I need, is some advice on creative finanancing. There's a note on the 3 yr old equipment, which I hope to assume. (1st problem, my credit is tarnished) Second, the down is more cash than I have on hand. I know I need to ask some questions to the owner as to whether they need cash all at once, etc, but once that's established, are there any "normal type" terms that are used in the business?

[JBTcajun]

I don't know about you but I figure value before talking price witch is before talking finance. Once value and price can be worked out try for owner financing. Be sure that you have enough capitol to do this as the number 1 reason for business failure is lack of funds.

[linda]

Thanks. The owner has only shared numbers verbally with me so far. I expect the financials shortly. Since this is my first venture, I think I should seek out an accountant to review the numbers. I guess thinking about it now, they can probably tell me what the business will and won't support.

[pete f]

I would offer the owner 50% down and try to get a 5 year note from him. That should give you some cash flow and be able to make the payments OK.

[linda]

Thanks. The owner has only shared numbers verbally with me so far. I expect the financials shortly. Since this is my first venture, I think I should seek out an accountant to review the numbers. I guess thinking about it now, they can probably tell me what the business will and won't support.

[CharlieS]

Lack of cash is always a problem. Your question highlights an important issue.

Creditworthiness is a crucial component of your ability to access the funding to start a business. Little things, such as being late on credit card payments, suddenly have a major impact.

Clearing your credit, and maintaining an immaculate credit record, are crucial to success with high leverage. It requires constant vigilance and attention.

While review from an accountant may help, there is no substitute for understanding the numbers yourself. Be careful of the tendency when planning a business to "puff" the income, and to underestimate the expenses. A 10% error in both directions becomes an unacceptable loss in reality. Trend to conservative income and high expenses, in your analysis. If the numbers still work, you might have a winner.

Charlie

[Pete_tx]

Linda,

You don't want to hear this but you are not ready to do this deal.

You need to patch up your credit and save up some cash.

You should have cash or credit to cover at least 3-6 months worth of expenses.

As soon as you sign giving up all your available cash, machines will break, utilities will go up, plumbing will bust, a/c-heat will go out, water heater will fail and the city will decide to tear up the road in front of your store.

None of this is a big deal if you have the resources to get past it.

Just my thoughts,

pete

[mike]

Pete_tx is right, unfortunatly,

I didn't want to say anything, (sort of like saying "there is no santa claus")
(if there are any kids reading, I was just kidding about that !!)

[linda]

I appreciate your comments. So, let me ask a few more questions. The equipment: that was suppose to be the beauty of it being 3 yrs old. Is it naive to think equipment only 3 yrs old will be troublesome? a/c and heat: is any of that the responsibility of the landlord? This mat is in a strip center? Utilities: Is it likely the water department will tell me when an increase is coming, and how much? Not much I could do about road construction, but could inquire. Keep that advice coming, I am listening.

[mike]

Linda, You were right when you thought about seeking out the advice of an accountant.

Most of us here are "small business" owners.

We pursued a dream (for some a nightmare)

As with most things in life, we plan for the best scenario, and are hopefull.

Kitty, as you will see, if you read some of the back posts, has lots of experience running 3 mats.

She has learned a lot here too, but she realizes that you must have a great deal of luck, (and usually lots of money) to make a deal work.

She's biding her time until she can buy us all out !
She's smart, learn from her !

Most prospective buyers want to have their own business so much that they can taste it !

It's only natural, we all went through it !

But don't put yourself into endless debt (some unforeseen, you will find out)

until you have a "margin of error" (lot's of extra cash)

Be patient, we'll wait for you !

[linda]

I appreciate your comments. So, let me ask a few more questions. The equipment: that was suppose to be the beauty of it being 3 yrs old. Is it naive to think equipment only 3 yrs old will be troublesome? a/c and heat: is any of that the responsibility of the landlord? This mat is in a strip center? Utilities: Is it likely the water department will tell me when an increase is coming, and how much? Not much I could do about road construction, but could inquire. Keep that advice coming, I am listening.

[MSKLAUNDRY.]

The age of the equipment had nothing to do with the likelihood of having problems that can eat into your bottom line. Having serviced countless laundries of various ages, some which are 15 years old+, I can tell you that I have seen cases where machines that are a less that a year old have more issues that machines that are 15+ years old. So age in itself has little to do with service expenses. Factors that affect equipment repair expenses are....(in no particular order of importance)

1- Age
2- Installation
3- Usage
4- Customer type, Area that machine are, IE abuse.
5- Make / Model

among others

If you are capable of doing service yourself then you will save a lot of money. If not then I would say that you could expect to pay about $250 a month if you have equipment in relatively good condition. While some month you may spend very little or nothing and some more. I would take this figure as a good place to start.

[linda]

Thanks. I was in the store yesterday, but it was so busy, I couldn't do much. But, I did note the name Huebsch.
Is it naive to think the maintenance costs will be hidden on the owners' financials? They keep insisting the equipment is new and in great shape. There was warranty on the equipment, but that expired in May. Is there such a thing as extended warranties on these machines, and is it worth investigating?

[pete f]

The chances of having to do major repairs, like bearing job, are less likley with newer equipment. Coin jams, door lock problems, water valve problems, dryer ignition, lint buildup, are all problems found on new and old machines. Most are easly fixed, most parts involved not to expensive. You can have a service contract as Marc said, it eats into your bottom line, but will keep you at a closer fixed rate for repair. As for A/C you have to read the lease.
Realize we are "renting" machines to sell utility, and machines, like cars, do break down. So deal with it, it is part of the business.

[linda]

Great stuff.
Are there self-taught books out there on what I would call the "easy stuff" to fix. Such as things you mentioned
Coin jams, door lock problems, water valve problems, dryer ignition, lint buildup. I have no problem "digging in". Is it really that hi-tech to fix a coin jam?

[brucefla]

Linda if you have a good mechanic they will let you look over their shoulder and even teach you about proper maintenance.

I have learned tons, doesnt mean I do it LOL but I have learned.

[Anonymous]

Linda,

I suggest you learn as much as possible about machine repair. That way, you can save money and have simple reapirs done in a timely manner. Ask the owner TO SEE all the service and maintenance manuals which he will be leaving to you, then start reading. Check your local distributor - does he offer servcie schools?
I have been hit hard with items which are my responsibility by terms of the lease, ie heating, air conditioning and bathroom fixtures. After 20 years, a lot of these things need majuor dollars. When was the heat and AC installed?
What condition is the water heater?

Good luck