Sequence of events related question

[TotoMongo]

As some of you know I have been looking for a store for approximately 5 months. The store I have my sights on now is mostly a service store and very attractive to me.

My question (confusion?) stems from the general sequence of events between the seller and buyer from the time that they agree on a price.

1. Is a contract written that states that if the mat meets the seller's implied financial performance for the week and other materialities (condition of equipment and store, etc) the buyer must purchase the store, or

2. Is a binder taken from the buyer with funds held in escrow stating the buyer will scrutinize the sellers business for a stated period and if he is satified will enter a closing for the mat, or

3. Some melange of the two.

Would you enter into a contract such as the first situation if you were the buyer? Or the second if you were a seller? Help me with an ideal or anecdotal situation.

I have had sellers look me straight in the face and tell me that I must buy the store based on his verbal and written attestations (true story). Needless to say, I ended that conversation soon after.

Toto

[Ryano23_98]

If just buying the mat and no realest ... without a lawyer go to court house get a UCC file on the store to make sure everything is paid for .talk to the landlord about rent if everything in ok set a date to take over. get a bill of sale ,write check , work the day and make money the first day ... this is how my mat went ... 6 months later bought land .


with lawyer his does the UCC and writes up and a bill of sale or contrat .
you can walk anytime before you sign anything
(Indiana) Verbal agreement dont hold up in court

[Jim]

It is very easy to determine...

A contract is a binding agreement (key word here is "agreement") between two or more parties. ("binding" is not always true)

1) If you did not sign a contract you do not have to buy...

2) If you signed a contract you still do not have to buy...(here comes the if) if the business is not as it was represented. This is something that has to be proved.

If I am the buyer and the seller is saying I must buy his mat...a red flag starts going off....something is wrong if he is insisting that I have to buy.

If you have an escrow account, and it sounds like you do, then that is only used for the purpose that you originally stated in the beginning...
Ex..If all the terms are met and each party agrees then the escrow is handed over the seller.

[smellysocks]

do collections for a month before you buy it takes that long to get throught the legal; crap, get an attorney, too much at stake

[TotoMongo]

Ryan, I don't think I could do it without an attorney (is that me or my lawyer talking?) because of all the stipulations and clauses involved. You may have gotten lucky in your deal that the seller didn't rip you off.

Jim, do you own a mat? How did it go for you. Please describe.

Smelly, I agree: too much at stake. But, who in the world would let me sit in their store for a month counting the money with no assurance that I will buy the store?

I guess I am confused as to how much protect I should assign for myself and how much to relinquish.

Toto - Hating lawyers more and more!

[smellysocks]

no i am sorry, if you like the numbers and are serous give a deposit then collect for month, just to make sure then instead of losing say 300k you only lose a months time if the numbers arent right . I also have a bad taste for laywers but they are like my mother in law some days you love them most days yo dont

[TotoMongo]

Is that what you did Smellysocks?

[Jim]

To start, yes I own 2 mats presently...in the process of selling one. I just recently sold another about 2 months ago. I have owned 6 mats total.

I don't think counting the colections will help you at all, as I've stated on previous threads, it is too easy for a seller to pepper the coin boxes ("Peppering" is when a seller adds coins to the boxes before you come in to count and suddenly he's making $600. a collection instead of $300. per).

Each case is different and each case is the same....Do your due diligence...make sure the seller can prove everything...If he is being honest he should not be upset about showing you all bills, invoices, bank statements, and income tax returns. It also helps if he has a CPA doing his books. A CPA will audit his books to make sure everything is on the up & up, and provide a P & L statement.

Attorneys are not always needed....I have purchased and sold businesses with and without them. Whatever makes you feel comfortable. If the other party is using one you probably should too.

If your gut says something is wrong it probably is. Follow your head and not your heart in business. You may desperately want to own a mat but never rush...if the numbers don't add up...walk.

Just my two cents......

[Anonymous]

Agree with much of what Jim says, with the exceptions of tax returns and the CPA. Tax returns are of dubious value as the tend to maximize expenses and minimize income. A CPA for a small company rarely if ever audits books. The CPA will prepare the financials based on the numbers the customers provide - no audit function. Even for some large companies they do this and there is normally some sort of disclaimer that the books were prepared from the company provided records. A small business like a laundromat would rarely pay the huge fees for their accountant to audit the books, you are talking about a major cost item here that is only undertaken for public companies.

[smellysocks]

Yes i bought and sold a mat that way, yes they can still pepper, but at least you have some idea what the truth is. You really have to look at can you improve this business and by how much. My first mat i knew i could do better it was absentee owner. I increases business about 80 % the first six months, by only improving customer service and adding cable tv. Sold it for twice what i paid in three years. Now i am building new mat with the money

[Ryano23_98]

i guess we got lucky but here laundry owners are a little close when they need helpwith something we go over and help ,they need a part today and we got it we sell it to them .. my dad has his laundry for 20+ years and laundries for sell stay for sell for years here and for years we look in to them and come up with a low bid and get them . my family has one each right now (4) after its paid for its self we look for another we have had 7 i'm 25 now with running my 2 stores and my bother 19 with 1 and mom and pa with 2 no lawyers just time and good deals

[Jim]

Originally posted by kirby
Agree with much of what Jim says, with the exceptions of tax returns and the CPA. Tax returns are of dubious value as the tend to maximize expenses and minimize income.
A CPA for a small company rarely if ever audits books. The CPA will prepare the financials based on the numbers the customers provide - no audit function.

The reason I mention Tax returns is...
If a seller tells you he made an income of 100K and on his tax return he lists income of only 80K, what are you going to believe, and what are you going to use when you figure what the mat is worth to you ? His record keeping is going to show 80K also because that is what he reported. If he tells you he takes 20K off the books are you going to believe him? ...I wouldn't ...not unless he can some how prove it to you that 20K exist.

I use a CPA and he audits my books twice a year... I feel the cost is minimal.. I pay $30. a month for his services for each business.
If I where to sell any of my business, anyone interested can do their due diligence in minutes not weeks....I have everything listed and filed in notebooks....(pretty :eek::eek::eek::eek: huh?).

now I'm up to four cents worth....

[Anonymous]

I'd be curious to understand what the CPA does for $30 a month that you are calling an audit. Please be as specific as possible. Thanks.

[pete f]

what ever happened to water, gas bills and due dilligence?

If you like the numbers, make an offer, after accpetance of price it is contingent on you having "x" days ( 15 business days should be plenty) to do more due dilligence and verify everthing.
After that, you buy it.

[Jim]

Originally posted by kirby
I'd be curious to understand what the CPA does for $30 a month that you are calling an audit. Please be as specific as possible. Thanks.

Kirby,

What he does is comes in to my office..and has access to the files pertaining to whichever business he is auditing. I have 4 (2 Mats, 1 computer, 1 realstate) I never really watched him but I guess he then checks the books with the bills and the bank statements, etc, etc...to make sure everything is in order..
I never know when he is coming, his visits are always unanounced. If I'm not there my secretary is..

[Anonymous]

Jim, I would not really call that an audit. An audit would involve verifying income, not expenses as they are assessed by a third party (whoever is sending them). In a retail establishment an audit would include counting inventory and verifying sales receipts against purchases. To do so in our industry would entail verifying turns per day or someother method of proving income.

[Jim]

Kirby... he does verify income...he see's all monies coming in...trust me..it's an audit...he is usually there all day.

[Anonymous]

Jim, is this CPA your brother, cousin or other relative? I ask because you said you paid $30 a month for what you just said is a full day. No CPA I know of will work a full day for $30. Something just does not come out in the wash here. A complete audit would definitely take the time you are stating but there is no way anyone would do it for only $30.

[Jim]

Oh, I didn't realize you were questioning the price ..sorry.
I'll check my books but I believe I pay $30 a month per company. He may be giving me a discount since we have been friends are whole lives....We grew up together, he lived one house away from me.

[Anonymous]

Sounds like he is reconciling your bank statement.

[Jim]

for the last time...he audits my books.....period. It's really not that big a deal...really... most companies do it.

[TotoMongo]

Originally posted by pete f
what ever happened to water, gas bills and due dilligence?

If you like the numbers, make an offer, after accpetance of price it is contingent on you having "x" days ( 15 business days should be plenty) to do more due dilligence and verify everthing.
After that, you buy it.

I am curious Pete. What was the process you went through in purchasing your store(s)?

Toto

[JBTcajun]

I audit annually. It usually takes about 500 per company. Helps to get things straight and suers up the numbers for taxes witch he does. I am sure alot of what he does in the audit is preperation for taxes and that charge is lower than the first. Helps keep money coming from and going to the right places.

[CharlieS]

I added a contingency clause to my purchase agreement that gave me time to perform due diligence on verification of the income, and the ability to cancel the contract if I was unsatisfied with the results.

[Gary C]

I don't understand why anyone thinks the tax returns are not worth much. As far as I can tell I just picked up 60 to 80k in value in the mat I just bought above what I paid. Here is how it works

He claims 80k in sales But really does 100k. on his numbers I pay based on his net of 30k but really nets 50k

I am only going to make an offer based on reported #s. I think tax returns are great when buying

At 4 times net I am looking pretty good.

Trying to verify coin counts won't do much unless you are going to be there 24 hrs a day for the test period. I could change the count so easy.

check utilities ver income and it should put you in the ball park. Then either get in on it or get out of it.

Gary

[Anonymous]

In todays market there are many more buyers then sellers. Some sellers do not even release their tax returns and have no problem selling. I have purchased mats in the past with out ever seeing tax returns. I do look at utility bills.

[Anonymous]

Since most buyers want to buy the assets not the corporation I would never consider letting them see the tax returns. If they want to buy the corporation (and any potential liabilities) then and only then are they entitled to see the returns. If they don't like it, too bad - there are plenty more buyers in the sea!

[Gary C]

Kirby, My guess is you will have a hard time selling when your ready to. I would not buy with out looking at the tax returns.
Have you been succesfull selling without giving up the returns?

Gary

[Anonymous]

Sorry Gary, but any one that wants to buy assets does not get to look at a tax return as there is no tax return associated with assets. A tax return only applies to someone looking to buy the corporation. A buyer cannot have his cake and eat it too.

[Gary C]

Kirby, I ask again, How many businesses have you bought or sold without looking at or giving a tax return? You are unrealistic in your point of view in my eyes. You may very well be buying assets not the corp so as to avoid any legal complications but you know as well as I that you are still buying a business. The only way I see you as right in this is if you are truly buying assets pulling them out and moving them to another location. In many other businesses you have to depend on the tax returns because there is no way to verify. I sold a carpet cleaning business a couple years ago no way to verify what I was telling the buyer other than tax returns, it just wasn't happening.

Gary

[Anonymous]

Gary, if you want tax returns then their are lots of laundromats that you would be very interested in that are located in a certain part on NY. The tax returns and utility bills all show huge revenues and huge utility bills, but the laundromats are almost totally void of people. Point is there is a group of a certain type of people of a specific ethnic persuation that use these mats to convert illegal money into legal money by running water and over reporting income. Tax returns would lead you into a living hell. The way to buy a business is to truely understand all aspects of it and not dwell on any one item.

Most if not all small businesses are lifestyle business. This is true of laundromats, dentists, pizza places, etc... Much money is not reported and many questionable expenses are reported on tax returns. If you insist on tax returns you will miss out on many good business opportunities.

Even if everything is 100% accurate on a tax return, what do you plan to do with one that has several mats or other businesses all lumped on one tax return. Its not a perfect world.

[pete f]

I agree with Kirby, tax returns are not very usefull. My first business I bought was the whole "C" corporation. I did see that tax returns, had a loss of about 23,000 for that year ending, and not due to depreciation. Of course I had no clue how to read it, so I bought the company anyway, and did very well in the years to come. If I was to sell a mat right now, NO way I will give tax returns, for one thing I have several mats all on one K-1.
If you have an owner with one single business then maybe they are somewhat useful to look at the utilities.

[Kitty]

Geez, the world may shake at this, but I have to also agree that tax returns are not really necessary. A return can reduce the reality of the true "profitability' of the business in question. I may look at the return, but it would not be the ultimate number of which I assessed the deal. It would have merit, but not the sole indicator of the worth of the business. Alot more has to be considered, mainly because it can. A carpet cleaning business or restaurant must rely on annual returns as how to determine how much business is done. Those interested in laundromats has the advantage of the specs to calculate average income per month based on expenses of utilities

[Gary C]

I agree they are only part of the equasion. However an inportant part. I have two places and they will have seperate records. If an owner selling a place can not show me tax records I would not buy it. You guys still don't get the point they are great negoseating tools. As far as what you are saying Kirby about the places in NY I belive it happens but a short time at the location will tell alot. I would not buy a place on returns alone but as I said not without them either.

Kirby, Again I ask have you Bought or sold without returns to look at.

Also I have never seen a business listed through a broker that tax returns are not avaliable and I have looked at alot of them. and bought and sold a number of them. I am sure there are smarter people than us out there that are selling and buying why are they asking for returns?

Kitty, If you look at them right they don't reduce profitability at all unless the owner is lying and that can be in the buyers benifit.

Gary

[Jim]

I have to agree with Gary on this one...I've said it many times over in other threads that I would ask to see the tax returns...and as he said "they are only part of the equasion" .

If their is a discrepency in the numbers between the tax return and what a owner is claiming he made, then he must prove it.

No one here is going to count money off the books when buying a biz.

[Anonymous]

Gary to answer your question "YES" with no problems.

Jim, if you don't count money that is not on the books then you are potentially missing some VERY good business opportunities. One example is the pizza business. Since the IRS in all their wisdom has figured out that you can audit a pizza place by counting the number of pizza boxes they buy many an owner has a fix for this. They buy say perhaps 70% of their boxes from one supplier and the other 30% off the books with cash from another supplier that is not listed as an expense. Now they only report 70% of the sales. Sure you could decide the business does not make money, but in actuallity it could be making a killing and the owner could prove it to you. Do you avoid buying it and miss out on that?

[Jim]

Originally posted by kirby
Sure you could decide the business does not make money, but in actuallity it could be making a killing and the owner could prove it to you. Do you avoid buying it and miss out on that?

Like I just said before your post "If their is a discrepency in the numbers between the tax return and what a owner is claiming he made, then he must prove it."

If he dosn't prove it, then yes, I am going to walk...
Remember, I could also be "missing out" as you say, on a huge loser of a business too.

When buying...Due Diligence, Due Diligence, Due Diligence...period.

[Anonymous]

Gary, when you buy a business how do you get a copy of the tax return - do you just ask the owner to provide a copy or do you do it someother way?

[RAM]

Kirby is 100% correct,

Tax return is good as owner,tax returns mean nothing in business,i have purchase three different type business and all there tax returns are bogus,i have purchase two laundromat and took there tax returns for bank loan only.and bank will only loan you money if your tax returns show profit to cover there loan payment.
If any business owner report real income and real expenses on there tax returns are not real business man,we are all in business to make some extra money,we all pay our other expenses like car payment,cell phone,auto insurance etc....
when come to buying laundromat only thing you need is last THREE years water bills.Gas and electric do not tell you anything
If you are looking to buy Laundromat in NJ Buy looking there Tax returns you will never ever find any laundromat tax returns shows any profit,and yes people are waiting on line to buy laundromat in my area without tax return

Income minus expenses is your net
Expenses
Rent
Re-tax/cam
Gas
Electric
Water
Sewer
Insurance
Telephone
Alarm
Trash
Part
Repair
Bank charge
Accounting
Payroll
Payroll taxes

For expenses ask for original bill from vendors to verifies there expenses(gas,electric,water,sewer,tel,cable,insura nce,lease,repair and parts invoices etc..)

Laundromat sold in my area are between 2 to 8 times nets without looking tax returns

[Jim]

Originally posted by RAM
Kirby is 100% correct, -----WRONG !!

Tax return is good as owner,tax returns mean nothing in business,i have purchase three different type business and all there tax returns are bogus,i have purchase two laundromat and took there tax returns for bank loan only.and bank will only loan you money if your tax returns show profit to cover there loan payment.

Of course the bank is not going to loan money to you if the business is losing money.....no brainer...would you if you where the bank...of course not.

[Anonymous]

I would not, but banks do it every day. Ever heard of a company floating on the brink of bankruptcy (Trump) - banks lend these big guys money. I forget who it was that said it, but it goes something like this - if owe the bank money and are big enough they will keep lending you money for if they stop you go under and they loose. If you are small enough, they won't loan you a red cent unless you don't need it or can't use it.

[Jim]

Cool....I never really associated us with the Trumps of the world...

[pete f]

This argument gets interesting.

Gary: Did your accountant files seperate tax returns for each laundromat? Mine piles all the info on one retrun for all my mats and business I do under my corporate name. This is the reason why tax returns can't work under many circumstances. And trust me, I am not looking to pay all the taxes I can. Now, I am not saying you don't want a close look at the owners' books for a particular mat he owns. My first mat the guy owned 4 of them, I got his numbers off his computer for the particular mat I wanted to buy.

Jim: I had a bank loan me money on that first business mentioned earlier, no problem. It had posted a loss that last year, the last couple years before that were shaky. Of course I put close to 50% down and in this case there was real estate invloved, though the value was close to 100% of ther loan amount. Much of my money went for inventory and some a/r
I wrote up a 2 page pro-forma on what I thought the sales and expenses would be, the bank loaned the money. Small town, small town bank.

[Jim]

Originally posted by pete f
This argument gets interesting.

Jim: I had a bank loan me money on that first business mentioned earlier, no problem. It had posted a loss that last year, the last couple years before that were shaky. Of course I put close to 50% down and in this case there was real estate invloved, though the value was close to 100% of ther loan amount. Much of my money went for inventory and some a/r
I wrote up a 2 page pro-forma on what I thought the sales and expenses would be, the bank loaned the money. Small town, small town bank.

Yes but this is because of 3 things,
1) 50% down
2) Banks consider if you have previous experience in the busines that you are purchasing, in this case a mat.
3) Realestate, this gives the bank colateral

As far as Tax returns in your case they would not help...in mine they would...All 4 of my businesses are seperate companies, so they are not combined.

[Gary C]

Kirby I just get them by asking for them. So far I have never been refused. Now this is after it's under contract subject to tax return review.

Pete, Up to this year I have been a D/B/A and everything has been on seperate schedule C's I have just went to LLC's this year so I don't know yet. I will however ask for them to still be seperate if they can be. Because of that I will get more money for them when I sell. More proof to a buyer. Less gray area for a buyer to question. My LLC does business as 2 differant mats with differant names so I think they will continue to be filed seperate.

As far as the pizza senario The fact that he is not reporting 30% I would be making an offer on it based on the 70%. I am telling you I can make books look any way you want.
What if he was throwing away the extra boxes for a year? Then what good is his proof he bought them.

I am with jim you could also loose big time. Gotta be carefull

Trust and gut feeling over ride it all. If I don't trust the guy I am out of there. I don't care what his books or tax returns say.


Gary

[Anonymous]

Originally posted by Gary C
Trust and gut feeling over ride it all. If I don't trust the guy I am out of there. I don't care what his books or tax returns say.



Gary, you hit the nail on the head with the above - that is what is key.

As far as my question on how you got copies of the tax return, it was a leading question as I was looking for the answer you provided. The come back is why do you trust that the tax return is valid - if the guy wants to pull a fast one it is very easy to give you a copy of a fictitious return - it can even look very official off a nice computer program. You have no way of knowing that the information on the return is valid as you don't know if it really was filed with the IRS - it is just another scrap of paper.

[Gary C]

They must be signed returns and if they are lying they have just opened a can of snakes they really don't want. If I found them to be false I would go from there to the IRS and my lawyer. I dare say I might even have to salt my deposits to show they where covering income it would become very painful. one good turn deservies another. I don't like being screwed. I would recover my money somehow. Either in cash or the joy of watching him suffer.

We are lucky in this biz it is pretty easy to see if someone is lying about the numbers.

Gary

[Kitty]

Tax returns can be very evasive if the owner of the business has business practices that are inefficient by todays standard.

Any business person that learns the formula of determining the revenue of a business that will supercede tax returns will be much more compensated in the end.

What they declare to to the IRS is irrevelant to me. It would make it easier to assess a deal without a tax return, most returns are not accurate and I would never assume so. It is most beneficial to understand the calculations of the income and expenses for any business under consideration not their taxable amount. What you expense may differ.

[Jim]

Kitty....

You hit the nail right on the head....but remember Gary and I are taking the side of the buyer, and as a buyer you have to go with the numbers that are presented and not count anything off the books. If its not accounted for it dosn't exist.

If the income he has in his books dosn't match the income he reports to the IRS then he has to prove anything above that. Obviously no one is going to claim more money than they actually take in on their taxes.

But again, tax returns are not the only part you have to consider....

[RAM]

If seller is going to sell his or her business on tax returns either he is reporting more money in his tax returns or he is desperate to sell his business,every business has two books,one for IRS and other for Buyer

[Gary C]

Kitty, Sorry but you are not getting it either. The tax returns are the best negotiating tools out there. I don't think I ever said they where acurate just that I needed to see them. I stand by give me tax returns and I will get a better deal than you on the same deal. Of course most lie on them that's why I want them.

Gary

[JBTcajun]

Guys if you are gonna base you're purchase price on ?x/net income why not look for the lowest way to come up with an offer that you can convince the seller to accept. If you're computations show a net of 50k and his returns show net of 30k you have a bargaining tool; and vice versa. That is all that is being said about tax returns isn't it?
One more thing if the seller is making a planed sale using x net don't you think he had his accountant raise net as much as he could stand? Being planed couldn't this be done over the "traditional" 3 year request that comes from buyers and banks?
This is why everyone says do you're homework? It is just one more chapter to study in you're purchase.

[Anonymous]

Sorry Gary, you are not the IRS and to give you a phony tax return with a signature is not breaking any laws. Now if the person signs something certifying them as true and then something goes bad you might have a very weak leg to stand on. You have no way of getting the true return from the IRS due to privacy laws unless the person agrees to it.

Jim, read my early post about people over reporting to the IRS to make illegal money legal - laundromats are a great way to do that.

Bottom line - look at all data and don't assume any one item is valid.

I could sell you my mat without tax returns very easy as I have a card system and can show you revenue for every single day since I owned the place. I would think any prospective buying would value that much more than a tax return.

[JAG]

I feel sorry for TotoMongo, because this thread has veered way of course. This guy needs our advice about how to structure the purchase of a laundromat and perform due diligence and all we can talk about is Soprano-like incidents of shady business dealings (like leaving the water running and buying pizza boxes from separate vendors).

TotoMongo-- You really need to look at as much information as the seller will provide. I would want a copy of the tax return no matter what. I would want three years of all utility bills. I would want any and all receipts or documentation for parts, repairs, vending, supplies, etc. for the past two years. I would want a list of all current and past employees. I would want receipts for wash, dry and fold over the last year.

I would then sit down and review all of the seller's information. Are the revenues consistent with the utility bills? The tax return (if the seller lies to the IRS, they will lie to you without blinking)?
Watch the store for a week or two at various times. Write down which machines are being used and when. Do your own wash their a couple of times.

After all the analysis and due diligence is done, offer the seller a fair price (if the information the seller gives you is shoddy, offer low enough so you will still get your desired return based on the amount YOU think the laundromat really makes).

Finally, the purchase contract should always include a signed seller's disclosure. The seller's disclosure includes last years income statement (revenues less expenses) and a year to date income statement (again with revenues and expenses detailed out). I also like the seller to include last month's income statement. This way you have all of the seller's disclosures in the body of the sale contract (or as an appendix).

Once you close on the deal, it is very unlikely you will be successful in recouping any money from the previous seller. Do all of your homework up front and follow your gut. Don't over analyze the obvious and realize that hard work and some smarts will provide solution to any problem. Good luck and go buy the laundromat.

[Anonymous]

While it indeed may give you comfort to get YTD income statements from the seller they are actually worth almost nothing should things not pan out. You would have a very hard time proving they were false. The seller can claim, and most courts would side with him, that market factors caused the change. He could claim that a large part of the customer base were his friends and when he left they went elsewhere. What if competition changed, i.e. a new store or a change in some business practice at an existing store. There are no guarantees, that is why their is risk and reward in any business. By all means you should do what you think to be comfortable, but you can have all the legal papers you want and things may not work.

As far as insisting on paperwork, that is fine for the truly risk adverse. Those that can do good due dillegence don't need paperwork and will find opportunities that others will avoid. Given enough paperwork and enough time anyone can talk themselfs out of buying something. You have to go with what you think is right.

[Gary C]

Kirby, You have talked into a complete circle. First you only need reports and paper work from the seller and no tax returns then agree they are part of the overall picture then in the last post paper work means little.

[ While it indeed may give you comfort to get YTD income statements from the seller they are actually worth almost nothing should things not pan out ]

I don't get it. It sounds like you feel that the numbers are errelivante just do your research and buy it if it looks good. I really don't think anyone does that for the numbers we are talking about in laundromats. In many other businesses it is very hard if not impossiable to see everything you need to make a dissicion.


Am I missing something?
Gary

[Anonymous]

Yes Gary I think you missed something and I don't think I talked in circles - but this thread has gone on so far that who knows. My Thesis remains that tax returns do little for you, as do owner provided income statements. The most valuable thing is utility bills, observations, discussion with customers, your understanding of the marketplace and perhaps discussions with owners of competing mats. Unless I knew the owner I would never trust papers they prepare or their written statements. If things are as good as they claim then why are they selling to you? Good mats usually get sold to friends, familiy or other people that are in the know.

[RAM]

TotoMongo,
If you ask everything what JAG had said in his post ,good luck finding laundromat ,keep looking to purchase laundromat for LONG,LONG,LONG TIME.........
JAG no offense to you but just thats the way it is hear in NY,NJ. Metropolitan area

[Kitty]

On tax returns for business what does it actually state? Taxable income or gross revenue?

[Anonymous]

Come on Kitty, you are kidding - aren't you???? Its the same concept as a personal return, you show gross income and take deductions for expenses plus credits, depreciation, amortization, etc....

[Kitty]

Ok stupid question.

I agree with both sides here. Tax returns would be wise and instrumental at getting the price down, if the numbers don't jive. But knowing how to assess a deal is the most important, the tax returns could help tweak the purchase price in benefit to the buyer.

[RAM]

Gross sales $..........(reported)
Cost of goods sold$.......

Total income$........

Deductions

Salaries and Wages$.......... (reported)
Repairs and maintenance$.........
Rents$....................
Interest paid$...........
Depreciation$............
Other deductions(attach schesdule)$......this includes all your utility and other bogus expenses

ORDINARY INCOME$.................(If you are S corp you can take this income or Loss to your personal income taxes

when you purchase your laundromat you have to file for your purchase price in to three category

1,equipment (you can depreciate for 5 years)
2,Goodwill (you can amortization for 15 years)
3,not to compete(i am not sure how long)

[RAM]

Purchase price for business is all up to buyer or seller to decide ,
How low seller want to sale his business and how high buyer willing to pay for it,
it is like real estate market,some of houses are selling way too high right now because buyer willing to pay whatever seller is asking,right now i have seen houses price was paid more than asking price to outbid offer on house they got

[Anonymous]

RAM - check an earlier thread where I explained it in detail, but non-compete clauses by IRS regs must be amortized over 15 years. It does not matter if you and seller agree to say a three year or a five year term - that only impacts them not the period of time that you write-off the item in.

[TotoMongo]

Guys, the education I received in this one thread is invaluable. I sorely need some opinions one my next thread as I think I almost made a big mistake.

Toto

[Jim]

I've learned something also....we never agree....lol

I guess it helps (or confuses) having several opinions.

[Gary C]

That's OK as long as we are all succesfull.
Different ideas is what makes us look at out own and hopefully makes us learn and tweak them.

What a great board. :)
Gary

[Anonymous]

That is the value of a board like this - diverse opinions. You pick and choose what you like from each and ignore what you don't like. There is almost never just one right answer.

[TotoMongo]

Similarly, it is the reason why something may work perfectly for Bill in Duluth and just so-so in Sacramento.

Toto

[Gary C]

O come on Kirby you know there is one right answer

Mine :)

Couldn't help myself, Sorry

Gary

[tkrocks]

LETS FACE IT NO ONE REPORTS ALL MONEY. THE IRS TAKES WAY TOO MUCH ANYWAY.