daveysue

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

Mitzyboy

Hi Sue

You are really asking a question that is impossible for anyone here to answer accurately. All I can say is that there is "a crisis" in Spain at the moment allegedly and businesses are closing everywhere. Unemployment is high. Compared to how things were 6 years ago it is not good.

Dont know what kind of premises it is either, how long the lease is for, or where it's situated

jimenato

Also, are the premises currently owned by Spanish or British? In my experience (at least in the domestic housing market) the Brits are prepared to listen to offers, the Spanish are not. The Spanish would prefer to wait until they get what they perceive it to be worth and won't sell for less.

daveysue

Current owners are British and feel that business has improved sufficiently to warrant the price increase.

Dick Dasterdly

I think you need to tread very carefully.
Very few business properties have increased their value at all in the last six years.
However you are being asked to pay an almost threefold increase, which at first sight seems somewhat excessive to say the very least, even with the increased business and good will, which may or may not necessarily continue.
It's also possible that the seller may know something that you don't, regarding future prospects in this particular location.
As previously mentioned no one on here is in a position to advise you exactly without knowing the finer details., so as they say, let the buyer beware.

bil

So what they are saying is that despite the crisis, the business has improved so much that it is worth three times what they paid for it 6 years ago when things were good. If that is true, then it is indeed a goldmine.

My advice would be to look at the books very, very carefully. Has the PROFIT, PROFIT, PROFIT, I repeat, PROFIT tripled since then?

IMO, it matters not if the turnover has tripled, if the profit hasn't.

There's a figure for buyng a franchise, I think, something about it being only worth 3x the year's profit, or whatever. So, do the sums. It matters not what you want or think if the money isn't going to be coming in. Also, down here in Andalucia, businesses are saying it's still getting worse, so were I in your shoes I'd need to budget for that.

Better you lose this chance to someone reckless than you over pay and end up with an albatross round the neck.

Lotsa luck.

Mitzyboy

OK, well as people say, tread carefully.
What kind of business is it?

poolboy

I would do what the Spanish would do, & absolutely no offence to my host countrymen.

Have a good look at the current offering, get an accountant to look at the books, look at the business day, night etc. Work out why the sellers are selling.

If it is a sound proposition, set up something similar next door!

daveysue

Mmm.... that one doesn't sit well with my conscience but thanks.

Mitzyboy

So .... whats the business?

poolboy

Maybe not but Spain's unemploment is c 20% & rising. If the business really is worth 75k & most are not worth a penny, then if yours is a success it won't be long before someone does it to you.

For a couple of hundred euros a good accountant will advise you.

Even the spanish families I know who have been running their businesses for years are moaning business is tough. I can't see it improving for a year or 2.

Is this thread going to morph into the bar one with the couple from the UK who got loads of advice & tried to charge 2e a coffee in the mountains.

Mitzyboy

I doubt it, as the OP doesnt seem to want to tell us what line the business is in!

bil

OK, so don't do that, but by god make sure you follow the rest of his advice to the letter.

jimenato

If it is such a goer, why is the current owner selling it? The reason could of course be genuine.

JLFS

Working blind as we have no information, you need to be carefull that is the first thing.

Take the books with a pinch of salt as the seller can have different sets of accounts to be used as and when needed.

One set showing smallish profits for the taxman, and another showing a big profit to show the potential buyers.

Ask to see the VAT returns, see how much is being paid each quarter, the bigger the amount that is being paid in vat is usually a guide to the difference between the take and the expenses.

For any business to be worth that amount of money I would say (without knowing the details) that they shoudl be paying a couple of grand a quarter, if not more for VAT.

If there are any staff, look to see if they are on contract, if they are working full time with a Mickey Mouse contract of a couple of hours BEWARE.

That is a sure sign that they dont make enough to legalise the business fully and if you have an inspection and have to comply fully with the employment laws as regards employees, you will be in trouble.

Also check that the records of employees past and present, any business can claim to be making big bucks, but if the staff have been reduced in numbers over a few years, then it is not a good sign.

It means that they have been adjusting the staffing to the work coming in, which would show there is a downward turn in production or whatever.

Check staff turnover, the longer the staff have been there, shows stability.

If they claim that the business is better than 6 years ago, there should be an increse in the number employed, or they should be able to show heavy investment in machinery that has increased production and profitability. If that cannot be demonstrated. BEWARE.

Check to see that the SS payments have been paid up to date for staff.

If it is a bar or catering place, why not sit and take note of the customers at different times of the day and night, try to work out an average spend for each one, if possible.
Ask the woners if you couod work for a weeks trial with them so they can show you the ropes, then you will know every aspect of the business before you buy, if they refuse, BEWARE.

Look at the electricy and gas bills, a small spend on those usually means small profits.

WHATEVER YOU DECIDE, THE BEST OF LUCK TO YOU

cheers.