Business owners... how did you start? Financial questions...

ilikemy944 · 11-14-2005, 07:55 PM

I'm posting this because I'm not really sure what or who to ask.

I am kind of disappointed in where I am right now. I work my ass off for 60hrs a week for next to nothing. I would not mind this so much if it were not for somebody else.
I am looking into purchasing a small business (I have some specifics in mind). I'm thinking in the 90-100k purchase range... My question though, comes in the form of 'how to pull it off?'

Here is my current situation...
About 1700 a month income after taxes...
Just under 1500 a month in bills/bs.

Here is my dilemma.

I am almost debating on selling everything I own of decent value. (Note: I am 22 and live at home). I am thinking about parting with 2 cars (not the '51), my motorcycle, and a ton of computer crap that I have accumulated, and buying a cheap car. If I do this, I can alleviate most of my financial output, down to somewhere about 450-500 a month, as well as have a few K extra. Sounds like a splendid idea. I could go even farther, sell the 951, pay off another student loan/other stuff, lose another 100/mo there. However ;P

My problematic question is as follows:
How does a 22 year old with very little business management experience secure 100K?

Lets pick an example, one I was curious about.
Small absintee owner business.
Asking price is about 95k
Grossed about 135k last year
Cash flow about 40k

According to my perusing around on commerical loan calculators, it looks like I should be able to manage, financially anyway, a 100k loan... Although I may have some trouble coming up with that 20% that the lenders want. I'll figure that part out. My biggest curiosity is what happens since I will no longer have my current job (at least not full time) to be making what I do now. So based on this, it seems like a loan would be even harder.

I guess my posting this is questioning you guys for ideas. For those of you who started out small, what are the types of businesses I should be looking into, or what should I try to start? I am willing to look into an established business of almost any type, although if starting something from scratch, it would almost have to be in the automotive sector.

Ideas? Comments? Am I a loon?

If you want, email me instead.
BradN901CB@gmail.com

red-beard · red-beard's Garage

See the Gun threads

Seriously, getting 100K will not be easy without some collateral. Try to think smaller on the business with the ability to grow quickly.

Have you written a Business Plan?

gatotom · 11-15-2005, 10:04 AM

business plan is right on, banks love it. All small business are true salesman, sooooooooo, you need to sell yourself to the bank, period.

Have you looked into the government sponsored SBA, small business Association???

If the business owner wants out cuz of age or health, will he consider floating a loan for 5 yrs to you??He can be a second on a loan from a bank, bank being first.

23 yrs ago, I finished my schooling and had nothing but a pot to you know what in. Found the place I wanted to practice and went to the bank to buy it. I gave them a detailed analysis of what the practice would do in the next 5-10 yrs ( totally pie in the sky stuff) and the guy I talked too just liked me for my positive attitude and he gave me the loan. As they say the rest is history.

Good luck, it you really want it you will get it, hope this helps.

TerryBPP · 11-15-2005, 10:10 AM

I assume that you will be starting a business you are fimilar in? If not, I would research your proposed business to death. Its the small angles that you don't forsee that will kill you. Jumping into a $100k business head first is not a smart idea.

And sell everything you can and limit you monthly nut because the first year is going to suck.

Tishabet · 11-15-2005, 10:14 AM

What you need is an investor. Have any family or friends who might float you the cash? Check out http://www.circlelending.com/businessbuilder for some ideas on that angle.

ken_xman · 11-15-2005, 10:22 AM

A business is typically worth 3-5 years profit. The company you are looking at is smoking rod at 95k. With gross sales 135k, he would need to be making incredible profit spreads to clear that profit margin.

Jims5543 · 11-15-2005, 10:54 AM

2 years after starting my small 2 person land surveying company with my Visa Gold card, a surveyor I befriended and I subcontracted from died. Actually he was in a coma for 4 days while the family came to terms with what to do.

I ran his comapny and mine hoping he would pull through and be able to come back to his company in tact. After he died his wife offered to sell me the company. She wanted 475K for it I told her no way find someone else to buy it. I also told her I would run it for 2 more weeks then I was leaving.

She then offered to sell it to me for 125K. I went to my bank president and had a talk with him. He asked me a simple question.

What are you getting for 125K?

I replied, "His business"

He asked again being more specific. What is his business? Office equipment? Trucks? Field equipment?

Clients? What guarantee do you have they will stay with you once the business changes owners. People are quirky like that and in hindsight I lost 50% of the customers right off the bat.

She had sold pretty much everything and was selling me the client list and files.

He told me to offer 25K and THAT was a gift. She balked. I walked. She came back and accepted my offer. I told her I was no longer interested. She came back again and pleaded me to buy what was left and I did.

So I ask you.

What will you get for 95K??

Keep in mind the business I bought grossed 350K the first year and peaked out at 1.3 mil 2 years ago and now averages 500-700K a year.

Would it be cheaper for you to open a similar business across town?

TerryBPP · 11-15-2005, 11:16 AM

Quote:

Originally posted by Jim Cesiro
2 years after starting my small 2 person land surveying company with my Visa Gold card, a surveyor I befriended and I subcontracted from died. Actually he was in a coma for 4 days while the family came to terms with what to do.

I ran his comapny and mine hoping he would pull through and be able to come back to his company in tact. After he died his wife offered to sell me the company. She wanted 475K for it I told her no way find someone else to buy it. I also told her I would run it for 2 more weeks then I was leaving.

She then offered to sell it to me for 125K. I went to my bank president and had a talk with him. He asked me a simple question.

What are you getting for 125K?

I replied, "His business"

He asked again being more specific. What is his business? Office equipment? Trucks? Field equipment?

Clients? What guarantee do you have they will stay with you once the business changes owners. People are quirky like that and in hindsight I lost 50% of the customers right off the bat.

She had sold pretty much everything and was selling me the client list and files.

He told me to offer 25K and THAT was a gift. She balked. I walked. She came back and accepted my offer. I told her I was no longer interested. She came back again and pleaded me to buy what was left and I did.

So I ask you.

What will you get for 95K??

Keep in mind the business I bought grossed 350K the first year and peaked out at 1.3 mil 2 years ago and now averages 500-700K a year.

Would it be cheaper for you to open a similar business across town?

$500k from a land surveying company! I knew you bastards over charge

. Seriously, what are you guys charging for a full site permit survey? Want a new partner, lol.

Jims5543 · 11-15-2005, 11:25 AM

Quote:

Originally posted by TerryBPP
$500k from a land surveying company! I knew you bastards over charge . Seriously, what are you guys charging for a full site permit survey? Want a new partner, lol.

Over charge?

If I make 1 mistake it will cost me a min of 100K

I was just at a meeting this morning with a land clearer. He claimed we screwed up and was backcharging $4000 for our $300 survey. Who is overcharging?? BTW - He was full of it and when we showed up at the jobsite to put this to bed he backed right down.

I was just backcharged $5000 because my field crew surveyed 2 lots sidfe by side for the same builder. He painted the lot numbers on the street wrong and the clearing company cleared the wrong lot. It was a non-issue since we were building on both lots anyway, or so I thought. I recived a bill for $5000 on a job I got paid $275 for. I am man enough and honest to admit a mistake I was not expecting to get raped for it.

A full builders package runs approx. $700. Find another sub on the job site getting paid $700 and taking on the liability I am.

I am honestly sick of this business and I have been looking into getting into something else and selling this one. Possibly in a couple of years.

Of that 500K gross my insurance runs me 50K a year and my payroll (not including me) runs me 350K a year add in vehicle maint. office rent daily expenses and its not so profitable. I am seriously considering opening up a Quiznos.

TerryBPP · 11-15-2005, 11:34 AM

Quote:

Originally posted by Jim Cesiro
Over charge?

If I make 1 mistake it will cost me a min of 100K

I was just at a meeting this morning with a land clearer. He claimed we screwed up and was backcharging $4000 for our $300 survey. Who is overcharging?? BTW - He was full of it and when we showed up at the jobsite to put this to bed he backed right down.

I was just backcharged $5000 because my field crew surveyed 2 lots sidfe by side for the same builder. He painted the lot numbers on the street wrong and the clearing company cleared the wrong lot. It was a non-issue since we were building on both lots anyway, or so I thought. I recived a bill for $5000 on a job I got paid $275 for. I am man enough and honest to admit a mistake I was not expecting to get raped for it.

A full builders package runs approx. $700. Find another sub on the job site getting paid $700 and taking on the liability I am.

I am honestly sick of this business and I have been looking into getting into something else and selling this one. Possibly in a couple of years.

Of that 500K gross my insurance runs me 50K a year and my payroll (not including me) runs me 350K a year add in vehicle maint. office rent daily expenses and its not so profitable. I am seriously considering opening up a Quiznos.

LOL, I sent you a pm.

I know a guy who opened a Quiznos 11 months ago. Prime location. Its a flop. He so far in debt it would take 5 great years to get him out. Probably claim bankruptcy in the next few months. And this guy owned 2 very successful restraunts. He says there is not enough rev to cover the cost of food and rent.

Owain · 11-15-2005, 11:55 AM

Quote:

Originally posted by ilikemy944
Small absintee owner business.

Can you run it like the present owner and keep your day job? Not ideal, but maybe you can run it for a while like that until you're sure you will be able to keep up with your payments and have learned the ropes somewhat.

I guess the question is, is it absentee because there's someone else doing the managing (whom you have to pay and can eventually take over from) or is it a business that mostly runs itself (like vending machines)?

Shaun @ Tru6 · 11-15-2005, 12:19 PM

all good advice above.

as an entrepreneur going out on your first venture, your best bet is to start with something you are passionate about. It will carry you through hard times, investors will appreciate your depth of understanding and commitment ot the business, and it will be something you really enjoy which means positive energy all the way around.

john walker's workshop · 11-15-2005, 12:28 PM

i started with about $2K in 1980. i had skills and my tools and i was determined to not work for anyone ever again. you have to have a long term plan to succeed and hang in there, because you have to work for it. the person who runs the business IS the business. you would be buying goodwill and hope for $95K. no guarantee the clients will continue to do business with you. best start small doing what you're good at and work up from there. don't do a partnership and don't bury yourself in debt right from the start.