Adventures with Lyrical: Buying a Business (REPOST)
- Thread starter Shonuff
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Guest, it's time once again for the massively important and exciting FoH Asshat Tournament!
Go here and give us your nominations!Who's been the biggest Asshat in the last year? Give us your worst ones!
Cad
scientia potentia est
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I'm not a federal prosecutor but I play one on TV, and this would have been rule 10b5 securities fraud. Which isn't to say you could have gotten your money back, but it would have been a serious crime.
Shonuff
Mr. Poopybutthole
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If there's a chance you think it's going to go bankrupt, don't do it. Or pay very little. It's no different than buying a stock.
I tend to only look at companies that have been around for 10 years or more. The ones that have been around for two years, and didn't file their second year tax return yet are fishy. They can't show you the tax returns, and the numbers they report are usually stellar. If they really made that money, then they should have already filed the return. Hell, one time I was looking at a mechanic's shop where the owner did his own returns. I asked for the latest returns, and he's like, "No problem, I can make the P&L be whatever you want it to say." Needless to say, I dropped out.
To answer your question, you could try to segregate your assets from your spouse, but the bank is going to want you to have adequate collateral in your name. They'll get their pound. We just recently went to buy a piece of land, and the bank had an issue, given that the equipment is fully depreciated and business is almost paid off. They said they had no assets to attach to. This isn't true, I spend $6k a month repairing and rebuilding my equipment to be like-new.
A friend is talking to me about cosigning on $250k for a laundromat that is $6k/mo in operating costs and $18k/mo in revenue.
I am going to hear him out.
I am going to hear him out.
Shonuff
Mr. Poopybutthole
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And the important thing with laundromats and car washes is making sure that there is actual revenue. Sellers don't report all of their cash coming in (duh), they take the money out and hide it. They then try to charge a multiple based on numbers that you flat out can't prove on a tax return. The only thing you can do here is to look at the electric bill, and also you can look at gallons of water used. A lot of time, there is no rational way to value this sort of business, other than for the value of the real estate and a SWAG number based on utilities.
Most rich people have the car wash or laundromat as their last business, because they don't need to actively manage it. I've been down this route before. I saw car washes selling for millions with $0 in revenue LOL.
Would you be co-signing, or be a partner? Fuck co-signing, you should make some money.
50/50 partners for sure.
I am still doing the research on how to validate a laundromat but yeah my first instinct was power and water usage based on how much a wash and dry might be.
Shonuff
Mr. Poopybutthole
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That's how it's done. But the real trick, once you get your SWAG number is getting a bank to buy into it. When I was looking at businesses, banks would only finance based on multiples of tax returns. I said that rich people tend to have this for their last business for a reason. They have to come out of pocket for most, if not all of the purchase, because the seller isn't reporting any income, and banks won't touch the loan. I've heard of one case where a bar owner claimed like very little in sales, but told the seller that he wanted $3 million for the bar, because he was pocketing 1m a year in drinks paid with cash. Based on the tax return, the bar was only with the fixtures.
On the plus side, if you can come to a buyout number based on the tax return, you win. Because this is the floor on valuation. I've heard of people buying businesses, and then quickly finding out that the seller was grossly under reporting sales. They come in thinking they are only going to bring in $500 a day, and then find out that the real number was 1,500 a day. Sadly, I found only 5% of businesses to be like this. The rest were falsifying to the upside to get the best sales price possible.
One problem I know with this type of business is controlling cash. It might be easier for you to line your pockets, but it's also easy for your partner or employees to pull cash out also. I know business owners in the this type of situation that are paranoid. Hell, a friend of mine owns six bars, and has the place lined up with cameras, and the registers all log all activity, and he still fires one person a week for stealing. He says its inevitable in a business with lots of untraced cash coming in. The IRS can't trace it, but neither can you, and your employees know that.
What is the laundromat reporting as income on the tax returns over the last five years? That is a good place to start.
Big_w_powah
Trakanon Raider
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All this talk of buying businesses makes me want to go buy some IT related business, man. But I dont have shit for capital to guarantee the loan with.
Dashel
Blackwing Lair Raider
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I definitely can vouch for owning an ecommerce business. Or anything able to be run completely (or nearly completely) online. To be able to work from anywhere and at any time now seems normal to me. Ironically now that I don't have to go into an office I find myself needing to get out of the house to work. it's too distracting at home. I still structure my day sort of like a normal work day. Wake up, shower, kids to school, I go to breakfast around 9, go to a coffee shop and work til 3ish. I'll also work a bit at night.
I probably do much more actual work, but that's because my old IT job was babysitting a network. I only had to do "work" when something failed. Mostly of my time was just sitting in an office for 8 hours a day doing busy work. Brutal. The work I do now is much more fulfilling and directly impacts my paycheck, there is no limit. The business is mine so I am much more motivated.
Some sort of service industry is probably still the quickest way to get your own thing going... anything where you trade your expertise or time for money. But it's hard to scale that. Physical or information products are much easier to scale it seems like.
I probably do much more actual work, but that's because my old IT job was babysitting a network. I only had to do "work" when something failed. Mostly of my time was just sitting in an office for 8 hours a day doing busy work. Brutal. The work I do now is much more fulfilling and directly impacts my paycheck, there is no limit. The business is mine so I am much more motivated.
Some sort of service industry is probably still the quickest way to get your own thing going... anything where you trade your expertise or time for money. But it's hard to scale that. Physical or information products are much easier to scale it seems like.
Big_w_powah
Trakanon Raider
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I'm goddamn sexy good at IT, and thats service...But building a client base is my issue; I can't afford not to have income while I do that.
Xarpolis
Life's a Dream
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Shonuff
Mr. Poopybutthole
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Yet another Lawyer called today trying to get their customer out of paying a bill. We did the work, documented everything, and all of the calls are recorded. The contract was fulfilled to the "T." I guess this one Lawyer thinks they are the one that will intimidate me. I'm getting old. At times, I feel like Old Man Logan. I'm fresh out of give a fuck. I have zero patience, and I know that this Lawyer will be like the rest of them, scrambling to pay me 100% right before we go to Court.
This case is what I'd call a slam dunk. They allege we said we'd do an additional service that we never stipulated. Around here, Judges only look at what the customer signed for on the contract. They throw any verbal statements out the door. But I made it a point to say in our contract that, "This contract represents the sum entirety of the agreement and no other verbal statements were made." I also have a recorded call of the Office Manager explaining beforehand the services, and the customer agreed. This additional service was never discussed.
But still, I have to play the game and wait now.
This case is what I'd call a slam dunk. They allege we said we'd do an additional service that we never stipulated. Around here, Judges only look at what the customer signed for on the contract. They throw any verbal statements out the door. But I made it a point to say in our contract that, "This contract represents the sum entirety of the agreement and no other verbal statements were made." I also have a recorded call of the Office Manager explaining beforehand the services, and the customer agreed. This additional service was never discussed.
But still, I have to play the game and wait now.
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Xarpolis
Life's a Dream
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At least you're playing it smart. If I ever get into business the way you do, I'm going to have to pick your brain about how you record EVERYTHING to make it that much easier for the future. That's my biggest issue. I do things based off memory. I don't really follow the save your ass ideology.
Cad
scientia potentia est
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Make sure you're not in a two-party recording state if you want to record all calls.
Shonuff
Mr. Poopybutthole
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Some of the phone companies are now doing it. It used to be complicated and require servers. Now you can just pay the phone company to do it. We switched from a traditional company to do VOIP with call recording. It actually gives us the ability to record from our cell phones also, when we are in the field. It was actually $100 cheaper a month than the traditional phone company was. I recommend it. The only problem is that after 30 days, they can delete calls to make room on the server. They do it at random.
Yes.