Buying a business

[TedP]

I am looking to acquire a small internet café / IT retail business. I am in discussion with the owner, but as I have no previous experience in this regard, think it would be beneficial to enlist the services of a business consultant who can assist me with evaluating the OTP, valuating the business, and lastly help with due diligence.

Anyone know of someone in the Cape Town Northern Suburbs who can assist? Any ideas of what this type of assistance would cost (ballpark figures anyone?)

[BusFact]

Hi TedP

I don't have the answers to the questions you asked, but would like to throw some points into the mix.

- Watch out for the rental costs for a retail business. Remember you will most likely be promising to pay many years of rent ... even if your business fails. This is a serious commitment which you need to be cautious about.

- Without any personal experience, I have my doubts as to the profits in both the internet cafe and IT retail industry. Has the seller provided you with their tax returns for the past few years to prove their profitability? He's unlikley to exaggerate his taxable profit to SARS. His internal accounts might be less reliable.

Just being my usual sceptical self.

[adrianh]

but as I have no previous experience in this regard

This statement is very worrysome. The best way to loose your retrenchment package is to buy a business that you don't understand, do not know the value of, do not know how to run, and to top all of that off, have any small business skills.

Having spent many years bumping my head in small business the best advice I can give you is SLOW DOWN

If you are planning to run your small business for the rest of your life then you should take the time to learn as much about it as you can before diving in.

I don't know if you watch Survivor but the one guy James made a profound statement after one survivor did something that, well, wasn't in his best interest.

He said: "You jumped off the boat into the sea, took your lifejacket off and threw it to a person already sitting in the boat"

[AndyD]

I think one of the problems with valuing a small business is establishing if it will still be a business if or when the existing owner steps out and secondly be wary of paying for 'goodwill' which might not exist.

[TedP]

Guys, very valuable pointers, and thanks for that. I suppose I am falling into the trap that says "OMG what am I going to do once I am unemployed", and want to immediately satisfy the need to provide an income / salary. You bunch may view this as the norm, but for "Office Johnnys" such as myself the transition can be a very frightening and traumatic.
Maybe I do need to slow down and take stock, but easier said than done - it's not that easy out there judging from the comments that my friends offer, who are running their own enterprises.
Hence I wish to involve experts in the field, thereby acknowledging my lack of expertise, and at the same time need to respect their recommendations, and not become emotionally involved.

[AndyD]

I think professional help in acquiring the business would be the shrewd way to go but it won't prepare you for the culture shock of becoming a small business owner when you background is corporate. I don't want to put you off the idea but I would be more comfortable if you were more familiar in a small business environment.

I wish you luck and prosperity with your new ventures.

[IanF]

Ted
Have a look at a franchise, I started as a kwik kopy then they pulled out of SA. So I got the systems and training which helped a lot. Then speak to others in the same industry and listen. An example I was told not to print wedding invites etc. I didn't listen but have learnt. So it is only done for good customers and only with supplied artwork. You must see how people change their minds. Or take the contrary view and specialise in what others won't do.
I have always wondered if an internet cafe is viable, you charge R60 per hour only have a 25% of available time sold, plus you waste so much time teaching people how to surf. I don't have the patience.
Good luck

[adrianh]

As Douglas Adams said in The Hitchhikers guide to the galaxy "Don't PANIC"

it's not that easy out there judging from the comments that my friends offer, who are running their own enterprises.

All the more reason to:

Maybe I do need to slow down and take stock

Experts in the field - I don't think there are any.

Tell me more about yourself:
1. How old areyou?
2. Married, got kids?
3. Ball park income needed per month to stay afloat?
4. What skills do you have?
5. When do you leave the corporate world?
6. Do you have enough money to keep going for a while?
7. Are you able to cut your overheads?
8. Can you work from home? (to keep your overheads down)
9. What services can you offer?

These are just some basic questions that need to be answered. Listen, I know its tough, my wife and I have been at it for some time, but you have to look at the cold hard facts.

[eitai2001]

Just for a side note, if you have the cash up front ... a good investment is a good property that you can rent out and get rental income as well as value appreciation.

[Dave A]

Anyone know of someone in the Cape Town Northern Suburbs who can assist? Any ideas of what this type of assistance would cost (ballpark figures anyone?)

One of the sharpest cookies I know when it comes to buying and selling businesses is Mark Corke. He's in Jo'burg, though. But with modern communications available, he might still be an option if you don't find someone local.

[TedP]

Adrianh - PM sent

I'm meeting with the seller later, but based on the feedback received I am in the mindset now that I should let this one go.
Will post outcome later.

[wynn]

Dave A pipped me to the post, I was also going to recommend Mark Corke

[TedP]

Guys, thanks for the advice. Based on this I have decided not to pursue this avenue as yet, and will indeed SLOW DOWN.
I will however be posting a fair amount of questions so that I feel better prepared at a later stage.