Did I Just Screw Up Big Time?

[TotoMongo]

The store I am interested in has the owner and his wife as the only employess. They work 7am-9pm everyday.

I did not take this into account when evaluating the price of the store. If I bought the store I would immediately need 2 employees as I do not plan on being in the store. Unless they would work for free, I miscalculated the bottom line.

Based on this fact, would you now renegotiate a purchase price? Even if you liked the store in terms of location, goodwill, etc?

Toto

[Anonymous]

If you have a contract you are screwed! Yes you have to re-evaluate unless the owner and his wife will continue working for you for free.

[TotoMongo]

Originally posted by kirby
If you have a contract you are screwed!

No contract yet! Thanks for the quick response.

Toto - Is this as obvious an answer as I think it will be?

[Anonymous]

Sure, you are probably looking at somewhere around $30-$35K (or more) a year in added expenses.

[Gary C]

Yes renegotiate or change your offer to reflect what works for you. Was there any numbers in the info you got on the biz that reflected wages? Always remember that there needs to be something there for wages weather for you or an employee. The place needs to be cared for.

Gary

[smellysocks]

if the store is in NYC why are you not 24 hours at least on the weekends, i cant see how it would change the price. It is not the sellers fault you have to hire employees, i would not come down in price. It is the value of the store you are buying, the biggest question you must ask yourself is how can i increase this business and how am i going to do it? Is it at full revenue or room for growth or maybe new store coming in area. Take into how much it would be to build a new store in the same area. Look at how much it would cost to expand or replace old equipment. I bought my first store from i guy who was retireing, he didnt spend much time there at all. I took over and almost double the business in six months. I did this only by improving service and cleaning up the store, with plants magazines, fish tank, books, more lights in lot, expanded hours, cable Tv and air conditioner. So take a good luck on how much you can improve when you take over. You should do collections for couple weeks after deposit, it will take that long with the lawyers anyway

[MSKLAUNDRY.]

Although many do open 24 hours it is against the law to be open 24 hours in NYC.

http://www.ci.nyc.ny.us/html/dca/pdf/servi2b.pdf

Look under "what laundries need to know"

[MSKLAUNDRY.]

Smelly, the whole point is what would be reasonable and customary. And in an attended mat it is reasonable to expect at least 2 employees to be working throughout the week. Weather they pay themselves or pay others it still a salary and should be counted as an expense. Would you say that if an owner didn't have any insurance that when he sells the place he can say "well I don't have insurance so I make 4k more per year. Same thing with permits. If the City requires different permits and inspections should I reward you in the form of a higher asking price if you say "well I don't do any of that stuff so I make a few more k per year".

Pay a price on what it cost to run that business legitimately not what is cost to cut corners. I am not going to pay a premium on someone else's scamming, are you?

Everyones time has a value, some more than others. If you have to sit there all day and run the place then you are locked in and cannot do anything else to earn income. So why would you want to pay a premium to get a job? When was the last time you paid someone a fee to get a job? Why not pick up the job section of the paper and call an employer up and say I pay you x amount if you give me a job. Sounds ridiculous, right. It the same thing here. If you are going to pay a premium just so you can work the place,why not just get a JOB. Makes more sense to me.

The fact is good mats are hard to come by at a fair and decent price. A mat making 40k to 50 k net (asking 150k) with the owner working 7 days sounds good but when you add the cost of employees then the same mat is a dog at the same asking price.
A good mat is one that provide a decent net profit with employees and allows you do do something else with your time to earn income, unfortunately those don't run cheap.

[Jim]

I would definately rework the numbers and come up with a new offer...They may not accept but you have to look out for yourself.

Another thing to consider if you have employees is workers comp insurance and payroll taxes, not to mention the hassle, and I do mean hassle of putting up with employees. I have found that one good employee is worth 20 bad.

Questions:

1) Can you go unattended?
2) Can you go attended part time and if the biz picks up go full time?

[Gary C]

MSK and Jim are right on the money. No more needs to be said.

Gary

[TotoMongo]

Thanks all for the great advice.I cant believe I didnt realize this. I actually placed a call with the sellers broker to discuss it.

Jim, I cant go unattended. Its primarily a service store.

Toto

[Gary C]

Then just figure out if it works and if not pass on it or make an offer that works for you. If they refuse the offer tell the broker to hold on to the offer and let the owner know you will be there if they change their minds if you have not found anything else. Don't come across desprite. You will be in the drivers seat remember you are the one with the money.

Gary

[TotoMongo]

Originally posted by Gary C
You will be in the drivers seat remember you are the one with the money.
Gary

Ah, the driver's seat. I remember that seat. Its been a while but I have a vague recollection.

Toto

[Gary C]

Then get hold of the wheel and step on it.

Gary

[RAM]

I never ask owner for payroll expenses,
For example:
if store opens 105 hours/wk X 52 weeks X$7.50/hr=$40950/yr payroll +Payroll taxes= your new payroll expenses/yr

I do not worry about his payroll but what will be mine after i take over store.

do not matter who works at store,you,your wife,your girls Friend,ex wife,brother,sister,neighbor etc......

PAYROLL IS PART OF BUSINESS EXPENSES

[pete f]

If you don't plan to work the store than I would guess you plan on having a much smaller return. I have talked about this before. If you can ratio 7-1 not working at the store than it may be a good deal. You can't expect to own a business, not work it, and still make a 20% return. read the bottom line... mine!