# Buying a business



## daveysue (Nov 14, 2010)

We are complete novices and never owned a business before but we have found a business property in Spain which we love and wish to buy the lease. The sellers want 75,000 Euros and paid 28,000 for it 6 years ago. What would be a suitable offer from us that you think would be credible? 

We don't want to lose this opportunity so offering a ridiculously low amount would endanger our chances but we want to pay a sensible price. Is there a precedent for this kind of bartering?

Thanks
Sue


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## Pesky Wesky (May 10, 2009)

daveysue said:


> We are complete novices and never owned a business before but we have found a business property in Spain which we love and wish to buy the lease. The sellers want 75,000 Euros and paid 28,000 for it 6 years ago. What would be a suitable offer from us that you think would be credible?
> 
> We don't want to lose this opportunity so offering a ridiculously low amount would endanger our chances but we want to pay a sensible price. Is there a precedent for this kind of bartering?
> 
> ...


Sorry, but impossible to answer without knowing at least the basics of the business involved. What kind of business is it? Where? Condition of premises? Portfolio?
Apart from that I would be very cautious about buying a business in a foreign country if you've never had a business before. Even with business experience it would be difficult as obviously every country and even every area has it's own laws, custom and ways of doing things. There is some information in the sticky (Forms to download and other information) at the top of the page about starting a business in Spain posts #40 and 52.
Do you speak Spanish??


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## gus-lopez (Jan 4, 2010)

Plus you want the books checked by an independent accountant. I wouldn't worry to much about losing it as in the present climate , unless they are selling something that no one else has, they're unlikely to be deluged with buyers.


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## Alcalaina (Aug 6, 2010)

daveysue said:


> We are complete novices and never owned a business before but we have found a business property in Spain which we love and wish to buy the lease. The sellers want 75,000 Euros and paid 28,000 for it 6 years ago. What would be a suitable offer from us that you think would be credible?
> 
> We don't want to lose this opportunity so offering a ridiculously low amount would endanger our chances but we want to pay a sensible price. Is there a precedent for this kind of bartering?
> 
> ...


Six years ago Spain was at the peak of its property boom and prices have fallen since then. So unless the owners have added €47,000 worth of value (which only a very good look at the books can give you) they are whistling in the wind. 


If and when you are convinced it is a viable proposition, put in a very low offer, hold your nerve in the negotiatons and don´t look too interested! It´s a buyers´market at the moment so you can afford to take your time. How long has it been on the market?


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## daveysue (Nov 14, 2010)

*Advice Please*



Alcalaina said:


> Six years ago Spain was at the peak of its property boom and prices have fallen since then. So unless the owners have added €47,000 worth of value (which only a very good look at the books can give you) they are whistling in the wind.
> 
> 
> If and when you are convinced it is a viable proposition, put in a very low offer, hold your nerve in the negotiatons and don´t look too interested! It´s a buyers´market at the moment so you can afford to take your time. How long has it been on the market?


It's been on the market for 6 or 7 months. The owners say that they have other interested parties but I'm not convinced. They say that they have had an offer which they've rejected as being too low. 
Thanks for your help.


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## jojo (Sep 20, 2007)

Offer a ridiculously low offer, but hint that you'd be prepared to "negotiate. If he's desperate (and he will almost definitely be) then he'll stay interested! 

Personally before offering anything, I'd wanna know why he's selling (if its successful he'd put a manager in wouldnt he?), I'd wanna know excactly what I was getting, even down to the fixtures, fittings, toilet paper......I'd wanna see his books, get someone independent and professional to look over them and if its a bar or an air con company I'd run a mile!! 

That said, I wouldnt buy any business in Spain (or anywhere else for that matter) cos I've never run a business and wouldnt know enough to risk spending my money, especially in a recession of this magnitude

Jo xxx


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## Stravinsky (Aug 12, 2007)

daveysue said:


> It's been on the market for 6 or 7 months. The owners say that they have other interested parties but I'm not convinced. They say that they have had an offer which they've rejected as being too low.
> Thanks for your help.


People will tell you anything to get you to buy a business here. People selling bars hire people to fill the seats when you go to view. Books dont tell you everything.

Most important to help ..... what line of business is it


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## Pesky Wesky (May 10, 2009)

Still not a lot of information to go on here, so people can only give general advice. Get the books looked at, think about *why* they are selling the business the most probable reason being that it's not profitable enough (but not necessarily so of course). 
Don't forget unemployment is far higher here than in the UK, and in Andalucia it's much higher than other areas of Spain - and that effects spending power.


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## Alcalaina (Aug 6, 2010)

daveysue said:


> It's been on the market for 6 or 7 months. The owners say that they have other interested parties but I'm not convinced. They say that they have had an offer which they've rejected as being too low.
> Thanks for your help.


Well they would say that, wouldn't they!


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## daveysue (Nov 14, 2010)

Thanks to you all. We are considering buying a language school. The school we're interested in has been around for nearly 20 years and in my salad days I was a TEFL teacher so do have some rusty experience of working in the industry in Madrid. 
Anyone brave enough to volunteer a figure we should offer to open proceedings? My husband thinks 50,000 should be our opening figure but I feel that would be seen as insulting and we'd be seen as unrealistic potential buyers.
The language school currently gets 60% of its business from companies in the city with the remainder being students who visit the school. There is also a 2 week summer school where students are taken to London. This generates around 8,000 Euros profit. The current owner believes that there is potential for expansion of student numbers in the school and assures me that the contracts with the companies are binding and likely to last.


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## Stravinsky (Aug 12, 2007)

daveysue said:


> Thanks to you all. We are considering buying a language school. The school we're interested in has been around for nearly 20 years and in my salad days I was a TEFL teacher so do have some rusty experience of working in the industry in Madrid.
> Anyone brave enough to volunteer a figure we should offer to open proceedings? My husband thinks 50,000 should be our opening figure but I feel that would be seen as insulting and we'd be seen as unrealistic potential buyers.
> The language school currently gets 60% of its business from companies in the city with the remainder being students who visit the school. There is also a 2 week summer school where students are taken to London. This generates around 8,000 Euros profit. The current owner believes that there is potential for expansion of student numbers in the school and assures me that the contracts with the companies are binding and likely to last.


Well .... I think anyone on here would be stupid to suggest a price to you, because basically we have no idea if this is a going concern that has a future, or someone who is trying to get out because times are tough

It's your money. If you have taken the time to have accountants and solicitors look at the books and ascertain that this has been a viable business that has grown to such a huge extent (and will continue to do so) then the choice of offer is really yours.

Good luck


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## daveysue (Nov 14, 2010)

*Advice Please*

I understand what you're saying and we fully intend to have a solicitor and accountant look over the details of the business before we formally put anything in writing. What we were really after is to know whether there is a formula for making an offer e.g. their price - 25% as a starting point for negotiation, or something similar? I know this is sounding all a bit naive but we are!


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## jojo (Sep 20, 2007)

I know its not the same, but when I negotiate for a property (which I've been doing recently) I always start with how much I think the property is worth TO ME!! How much I like it, how much I want it!! If I like it but.... then I offer a really low and ridiculous amount ie they want 1500, I offer 900! However, if I really like it, I offer 1100 and make it clear that I maybe open to negotiation, altho It would have to be special to make me go to the asking price, out of principal!

So offer a figure that you think is fair BUT make it known that you are prepared to negotiate, then maybe meet in the middle!

Jo xxx


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## daveysue (Nov 14, 2010)

Good advice Jo. Thanks


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## Stravinsky (Aug 12, 2007)

daveysue said:


> I understand what you're saying and we fully intend to have a solicitor and accountant look over the details of the business before we formally put anything in writing. What we were really after is to know whether there is a formula for making an offer e.g. their price - 25% as a starting point for negotiation, or something similar? I know this is sounding all a bit naive but we are!


Errrrr .... please ..... don't say you are naive. Thats not a good basis to be going into a business deal with.

The fact that you are having to ask this question is, to some extent, worrying. If I were you, I would go to your professionals in Spain that will deal with it and discuss with them. They will, hopefully, have a better idea of the market and what the business is worth. Dont forget, you are trying to work out a percentage from their asking price. Their asking price might be completely in the wrong area.


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## jojo (Sep 20, 2007)

I guess you also need to look around at comparable businesses and see what they're going for!? So that you get a feel for the whole package and what adds the value

Jo xxx


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## xicoalc (Apr 20, 2010)

75,000€ for the trespasa on a bar is a lot of money, as others have said, if they bought it a few years ago for 28 then its probably worth abou 10 now!

Apart from very rare cases, you are buying little, or no goodwill. Books tell you nothing, remember many bars are on modular accounting (they pay a set amount) so they don't keep books. Generally I wouldn't feel in a hurry, every bar in Spain is for sale for the right price. A client of mine looked at a bar for 60,000 and we got them down to just over 20 with a bit of work... (and that bar wasn't a bad business)

Get an expert to look at the business, competition, trends etc. If a bar is busy it could be stooges, also remember though that many of the owners friends are the regulars - when they go so do the customers.

There is a lot of work in valuing a business. History, takings, trends of takings, predictions, length of rental agreements, forthcoming expenses, etc. It is very hard to come onto a forum and ask what to offer. Where is the bar (what town)?

Remember though - its recession time - buyers market!

I have many friends who are agents, I saw one at the weekend and she said that all the bars are priced on the books at double what they will accept (and the rest I think). 

Research, think, research, think, haggle, if they dont haggle enough say no!


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## Stravinsky (Aug 12, 2007)

steve_in_spain said:


> 75,000€ for the trespasa on a bar is a lot of money, as others have said, if they bought it a few years ago for 28 then its probably worth abou 10 now!
> 
> Apart from very rare cases, you are buying little, or no goodwill. Books tell you nothing, remember many bars are on modular accounting (they pay a set amount) so they don't keep books. Generally I wouldn't feel in a hurry, every bar in Spain is for sale for the right price. A client of mine looked at a bar for 60,000 and we got them down to just over 20 with a bit of work... (and that bar wasn't a bad business)
> 
> ...


Have I missed something here ....... how have we gone from a language school to a bar?


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## xicoalc (Apr 20, 2010)

Stravinsky said:


> Have I missed something here ....... how have we gone from a language school to a bar?


Oh a language school - could have sworn I saw bar somewhere!!! Same things apply though , a business is a business!


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## Stravinsky (Aug 12, 2007)

steve_in_spain said:


> Oh a language school - could have sworn I saw bar somewhere!!! Same things apply though , a business is a business!


Yeah but the customers wont be getting drunk


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## daveysue (Nov 14, 2010)

*Advice Please*



Stravinsky said:


> Have I missed something here ....... how have we gone from a language school to a bar?


No, it's still a language school but we could install a bar if it would increase profitability!


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## jojo (Sep 20, 2007)

daveysue said:


> No, it's still a language school but we could install a bar if it would increase profitability!


Now theres a thought, you could run informal conversational spanish meetings too!!!

Seriously tho, I dont know if there are laws or regulations about opening a bar in a place of learning???? Knowing Spain - more than likely!!!!!

Jo xxx


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## Pesky Wesky (May 10, 2009)

jojo said:


> Now theres a thought, you could run informal conversational spanish meetings too!!!
> 
> Seriously tho, I dont know if there are laws or regulations about opening a bar in a place of learning???? Knowing Spain - more than likely!!!!!
> 
> Jo xxx


Some language schools do have a cafe open for a couple of hours in the evenings or mid morning depending on the influx of students. But of course you have to make sure it's manned,and they're not usually geared to making a profit in themselves; rather to create a sociable friendly atmopsphere to bring in more students. It's usually more profitable to use the space to make another classroom - or failing that to put in vending machines which can sometimes make a tidy profit!!


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## Alcalaina (Aug 6, 2010)

jojo said:


> Now theres a thought, you could run informal conversational spanish meetings too!!!
> 
> Seriously tho, I dont know if there are laws or regulations about opening a bar in a place of learning???? Knowing Spain - more than likely!!!!!
> 
> Jo xxx


It always amazes me that there are bars in DIY stores, hypermarkets, IKEA etc. So it wouldn´t surpirse me at all if you could have one in a langage school!

The one I went to had a students´kitchen with vending machines and I think there were cans of beer in them (though I didn´t indulge personally).


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## Pesky Wesky (May 10, 2009)

Alcalaina said:


> It always amazes me that there are bars in DIY stores, hypermarkets, IKEA etc. So it wouldn´t surpirse me at all if you could have one in a langage school!
> 
> The one I went to had a students´kitchen with vending machines and I think there were cans of beer in them (though I didn´t indulge personally).


There's a bar in every tiny weeney village in Spain. And in the UK there's a Café in every museum, garden centre, stately home, craft centr etc etc. I'm always surprised that the ideas don't fuse and there aren't more bars and cafés in places that the public visit here in Spain. An opening there possibly??


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## BMF Matt (Oct 27, 2010)

Hi Daveysue. Personally i think you really do need to take advice, there did used to be a rough guide in the uk for calculating a businesses worth from profit, and then you could add all the other factors, such as lease agreement, stock, fixtures and fittings, goodwill etc. Now though, everything is completely different, not only are you buying in the dodgiest market for decades, it is also in another country. The more i see, the more i think that at the moment people are just guessing the prices (nearly always too high), and as previously mentioned now is one of the worst times to be selling, so either they are being massively optimistic on the price, or they are desperate to get out. It seems like you have already made your mind up that your going to make an offer, if this is the case, then personally i would think that 50K is way too high, unless they can show some really good growth since they purchased it, and if they can show that growth to create that uplift in price in a bad market, then again i would really question why they are selling.


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