There is a bakery for sale near me. The price seems unbelievably low. I have a few investors that are possibly interested, but of course they need to know more about the current business.
If anyone has sold a business, how does it work? Is it standard practice to get financial information before an offer? Can I ask to see the past three (2?4?) years of taxes and get information from that?
I have a business plan based on my own calculations, but since this business is currently operating, I would assume that I need to use their numbers (as well as show where they could grow.)
"unbelievably low" asking price says to me something is wrong. Why are they going out of business? How long have they been there? Do they have a client base? If they were just retiring, they would not be asking a low price. Low price tells me they want out. Sometimes people want out because of partner issues, divorce, sickness, etc., so possible that is why. However, it could mean business SUCKS and they are losing their shirt. Just be cautious.
Yes, you can ask to see their past 3 years of profit/loss. Also, you can call the electric/gas companies and they will tell you what the monthly bills on a average are (to help understand the costs)
Find out if the rent is triple net which adds immensely to the cost of the monthly rent. Ask if the rent is flat or triple net.
Do your homework, make calls, ask people if they know of that bakery and what is the reputation. Sit in your car for hours on different days and monitor the traffic flow and the customer walk-in.
Good luck on the potential!
I also looked into a bakery that was for sale near me. I saw their financials as well as an inventory list of everything that was included in the sale. I also saw the lease because that was still ongoing and I was going to have to take it over. I discovered that the rent was due to be raised the following year. You might be able to go to the landlord and renegotiate the lease. Ask if the owner will either allow you to be at the shop for a week to see the ins and outs of the shop, or if they will stay on for a period of time (with no salary) to show you. This way you know how they were running it AND you get to see the REAL deal in the biz. Find out how much was cash and how much was reported income. They may tell you most of it was cash in which case you have to decide how much of it is true. Will you be continuing the biz the same way? Meaning, if they handle walk-ins - will you do the same or are you changing it to 'by appt only'? The shop I looked at HAD to be open for retail by the zoning dept. which put a BIG damper on my goals. Even though the rent was only $2500, I had to make at LEAST $5k JUST to cover expenses. How much exposure do they have? Will you have to advertise a lot OR is it a good visual location for potential customers? I was also able to find out approx. how many custom cakes, pies, cupcakes, cookies, etc were sold on a monthly average.
Treat this as if you were buying a house or a car. You want to know EVERYTHING you can about it. If they say no, then take it from there. GOOD LUCK!!!