Re: Advice Please
 

OK, thats a start. Now request the company books for the past 5 years. Or if they wont give that, at least the end of year tax returns. That will tell you about turnover, costs, profit and growth.

Now the most crucial thing is your knowledge of the industry, do you know what it takes to maintain these contacts and search for new contacts among the businesses in Madrid? If not, it is essential someone in the business does know this. Is someone employed as the marketing director for example? Do you have close contacts with the Madrid business associations? I can keep going....

In the language industry, your knowledge of the market/sector is everything and will ultimately decide whether the business will be a success or failure.

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You ask some very good questions Cricketman, and I assumed that the previous customers would stay with the company. I take it that this is not always the case.

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I'm afraid I've seen companies change their requirements overnight. In both directions! In fact I think it's very rare for business English class numbers to stay level over the course of a few months, still less a year! Sorry, but although there is money to be made in this field, I smell something not quite right with the seller's story.

Re: Advice Please
 

Client churn is a problem in any business. You should assume that you may lose between a third and half of business each year. And in many cases you cant do much about that e.g. budget cuts on language skills so the company dont have to make redundancies is a common thing at the moment. So you will need to replace all the clients you lose, just to stand still.

From my knowledge of the industry, about 50% of the course fee for a language course is spent on marketing and agents' commission. So this should tell you about the amount of work and knowledge needed in order to find clients.

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You will also need written undertakings from the sellers about not approaching your customers (as they have all the details) and about not starting a competing business in the same area

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Cooking calls but I thank you all for your help and please if you have any more then do leave a message. I will return after the washing up!

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I'd only add that as an ex businessman who was involved in the purchase of another company, we had teams of accountants and solicitors looking over the whole company before we went ahead, and also drawing up necessary legal agreements. You have to be sure. It's a lot of money you are dealing with, and you shouldn't let your heart rule your head. Once satisfied, you should also be making your offer through your legal representation and making sure therefore everything is identified and recorded

I ran businesses in the Uk for many years. It wasn't easy ... always many challenges. In Spain you are also dealing with unknown systems and Spanish bureaucracy. Don't under estimate the challenge in front of you

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From what I know the users of language schools are quite fickle, any change of ownership or teaching methods can give an excuse for contracts to be broken, citing changes in the school as the reason for breaking the contract.

As Cman said, promotion needs to be done on an ongoing basis as nobody attends language classes for all of their life, some drop out and others reach the level of proficiency they wanted, eoither way a fee is lost and must be replaced just to keep the status quo.

So when making your offer, bear in mind that a full order book does not mean that the customers will be loyal to the new owners.

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Only you can decide on how much you want to pay, and at the moment it is a buyers market, because AFAIK the banks are quite tight at the moment on lending to small bussiness for working capital, let alone to people who want to buy a bussiness.

So I would expect that most likely it would go to a cash buyer, and the people with the readies are very aware of the risks at the moment.

Taking into consideration the economic climate, and remembering that the rent that the sellers paid and comparing it to the increased rent that the new buyer would have to pay, could make or break the business.

What you are actually buying, is the hope that the present clients will still use your services , and the obligation to pay rent on a premises for X number of years.
So let your offer reflect this.

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Do you live in Spain already? What are your current jobs/ experience? I have also worked in the language business, mainly business English (including residential), and you will be in for a lot of work dealing with staff, local bureaucracy, early mornings, late nights. And how is your level of Spanish? Most students don't speak much English yet!

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No, at the moment we live in England, I'm an English Teacher and Dave is a Civil Servant. My Spanish is rusty but will be up to scratch by the summer. Having had two children late nights and early mornings have no fears for us. We're unafraid of not currently having the skills or experience as we both have confidence that these will arrive, once we've worked for a while.
We expect to make mistakes, many mistakes but it's this unpredictable side to a new life that excites us. Doing the same thing until retirement, however much we've enjoyed it, will see us both bored into an early grave! The kids have flown and now it's our time.

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Good luck to you then
What about the comments about your lack of business experience, and the challenge of dealing with Spanish bureaucracy

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Having read through this thread and operated many different companies, large and small over the years I would say 'don't do it'.

If you have to come on here just to ask how much to offer for a business... you have no experience and are wearing those 'rose tinted glasses', step away now...something is not right.

best regards

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My feelings as well, but go for it, prove all us doubters wrong! :thumbup:

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Will the same manager and teachers continue? If there is already a (trusted) manager in place, that person may help you through the initial teething troubles. I am usually very positive about people's plans on here, but this sounds like a recipe for a nightmare! But exciting, granted!