There is an existing home baking and party supplies store for sale in my small town.  The owner used to do sheet cakes as well, but stopped doing them about two years ago. My husband and I are looking into the possibility of purchasing this business and reopening the cake kitchen for custom cakes (it's missing an oven and need to be re-licensed). Currently, the owner sells baking supplies (cake, candy, etc) for the home baker, themed party supplies (invitations, banners, toppers, balloons, paper goods, etc), and a miscellaneous selection of home decor items.  After speaking with her, it's apparent that she's tired, has elderly parents, and just wants to sell.  Our concerns are that she has been using the business as a hobby for quite a few years and doesn't pay herself regularly (she doesn't make enough money to pay herself, much less a profit).  She says that she believes a person could easily do so if they reopened the kitchen and sold cakes again, but, of course, it's what the new owner is willing to put into it that they will get out of it.  Which, of course, I know to be true.  I've always had a yearning to own my own business, so I'm considering this one with some big changes to make it profitable to replace my current full-time job income and health insurance benefits for my family of three.  It needs to be able to not only cover expenses and such, but pay me $45,000 per year and cover insurance costs (probably another $15,000 per year).  We would expand the home baking supplies, reduce the party supplies by eliminating the character themes that are readily available elsewhere nearby and stocking only traditional ones that aren't (cowboy, beach, etc), eliminate the home decor items, include fairy garden and dollhouse miniature items for sale.  I am currently working on a business plan.  This is all very, very new to my husband and I.  And extremely scary.  We don't want to lose everything if we are wrong.  Any suggestions, hints, advice?

Seriously, why would you purchase a business that makes no profit? Even with changes, I don't think this is a good move. You would be buying someone else's problem.

I understand the dream about business ownership. But please be realistic. If your family depends upon you for income and health insurance, be aware that it would be years (if ever) before this, or any similar business in a small town, would reap the income to replace your salary and benefits. I strongly suggest you have an accountant help you with the business plan.  

I'm w/Mimi on this one!         I bought a similar business almost sight unseen........found out the owner/seller lied, lied, lied to me about almost everything.  Gave me a  foney set of books and oh so much more.  Since I was new in town I could not enforce the 'no compitition' clause (I had to prove it and couldn't get anyone to help me).   So much more involved......  That's a lot of $$ you need to generate....I don't see it happening  at least for several years IF you can do enough cakes - and the money isn't in sheet cakes - it's in wedding cakes mostly. 

I beg to differ....the money is in the sheet cakes.  Today there is a lot of competition out there.  But there are also a lot more birthdays then there are weddings, and your sharing that wedding business with all the other bakeries in the area along with home bakers (which in my opinion are commercial bakeries biggest competition)  You can also crank out a lot more sheet cakes in an 8 hour day over tiered cakes.  

"need to be re-licensed"= $$ to comply with TODAY'S standards as the city or county may apply to the business.

"she doesn't make enough money to pay herself"= she only covers the rent and utilities and uses it as a hobby and escape from life.

"She says that she believes a person could easily..."= Of course she does! Everything is "easy" when someone else does it. See kakeladi post above.

"I've always had a yearning..." is great until the stress and long hours kill you. Even at best, until a real profitable business materializes.This should be a though out business plan and competition survey.

"...cover expenses and such, but pay me $45,000 per year and cover insurance costs.." So that is $60K/yr plus fixed expenses (rent, utilities, insurance, etc.)?  Is that $5K salary/benefits + $2K overhead/ month? Even at 50% profit margin, that means you have to bring in $14,000.00 per month, either in retails sales and/or cakes. EVERY month. $3,500 cash in every week---even the slow times.

"...eliminate the home decor items, include fairy garden and dollhouse miniature items...". Is that based on the demand of the neighborhood for these choices? Is there a market and demand for it? You have to sell what sells to get bang for every inch of retail space.

"And extremely scary.  We don't want to lose everything if we are wrong.  " This is the most important thing you said. Planning, research and information on local competitors is your best plan.

It IS scary and it IS a risk.Verify everything and trust no one. Your family's security depends on it.

I've had various businesses for 25 years.  However, I could only have MY business because I had a spouse with a REAL job AND health insurance.  If you're providing those (weekly salary, and benefits) then you're the one who needs to keep that job.  Especially these days, with the uncertainty and rising prices of health insurance and health care, those benefits actually are more valuable than your salary.  Don't get me wrong, I love owning my own business, and help to mentor new entrepreneurs, but caution everyone one of them to be realistic.  Also, don't start a new venture unless you have savings to pay everything - all the businesses' expenses and to sustain yourself - for at least six months.  You have to start a new business venture with a lot of cash on hand.  You will not make a profit for at least a year.  If your business can cover its own expenses in the first year, you are wildly successful.  Been there, done that.