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To purchase or not to purchase? - Page 2

post #16 of 74
You did not give the price but you want to know what to do. Without that information, it is impossible to help you.

The items you mentioned are very inexpensive and have little value except that they are already there, but they have some great disadvantages. Customers will think that you are the same company. There may be 40,000 customers, but they will think you are the same company. They will either not shop your booth because they have decided not to patronize the old company, or they will come expecting their very specific favorite items, not yours.

If you are not offering the exact products, a full change in looks is more appropriate. This is the only way to get that "Grand Opening", new business curiousity and excitement.

The former business will be doing a big campaign to attract their old customers and they will get them.

In essence, what you are buying is a sublease of the rights to that type of product. Have you been approved by the market and is a sublease allowed?

The value of the license is nothing, as you must have your own. You cannot buy someone else's business license. Fees will be paid by you again. Have you contacted the health dept? Also, you will be subject to any code updates that were not necessary for the former business, as they may have been grandfathered in to an old code.

What you are really buying is the rights to a certain type of product with no direct competitors. But this may also be subjective. You could get competitors based on a different value of product.

I have just done something similar in a high end market, but here are the legalities. Some of the vendors offer similar products, but they are not offering a certain level of product in their exclusive lines. I now have a contract for, "all things gourmet", making my product different, but not unique. Now there will be competitors with different price points. These options are strictly controlled by the market.

In our market, the vendors can sell their businesses as ongoing, but in these cases as with any where fixtures and decor are purchased, the value is in the intent to run it as an ongoing business, not a new one. Yes, it is cheaper to just walk in, but to keep it looking the same and change the product will not be your best move.

The demand for that volume will change everything and you absolutely will not be able to do it yourself, bringing you to another dilemma. You will need employees. Now your house has become a business, you must re-zone to commercial and your taxes will go up. You have many more requirements with an employee and in many cases, this is strictly forbiddden in a home kitchen situation. This means you must bake everything for that volume by yourself. You will then need an employee that will represent your business for a relatively low income. Good luck with that. The quality of the work force has deteriorated. Control over cash will be none.

You cannot bake all night, import products, work all day, close down, and do it again 4x per week. This new venture with employees requires a business/accounting plan to determine feasibility. Have you done a sf calculation and compared it all other options? Also, if the bakery does not get a buyer before they close, that space with improvements will be completely free except for a new lease. Have you seen their lease? hav you talked with the market? I'm sure they must approve you.

Do you have the capital for the venture? You will need to have equipment capable of providing for this capacity. This means costs plus you plus profit after taxes. Again, this is math, not a feeling or opinion. If you can't do these calculations, hire someone who can. If you have to hire someone for this, then you will also need to hire a bookkeeper/accountant... another ongoing expense not necessary with a home business. Home business finances are forgiving but retail miscalculations because of a lack of business experience can be devastating.

Remember, they started this venture from scratch, but you are buying an ongoing business with the intent to change the product and not the look/name. This is not a normal business path.
post #17 of 74
Thread Starter 
I did put the purchase price in the replies last night. YES, I do know what I'm doing in a business world, I have been running other business as their full charge bookkeeper and office manager for many years. I do know what it takes to start up, run a business and to crunch numbers.

I do have the capital for this venture. If I didn't I wouldn't have any come on here asking for opinions. There would be no sublease as I would sign my own lease with the market. The only reason I can't just walk in and sign a new lease and start my own is they only allow one business of the nature. Meaning as long as that one is open, I can't, and if I don't purchase it, someone else will.

And actually, they didn't start this business from scratch. She walked in and purchased the exact thing I'm looking at except she added the license and POS system. She grew so fast from being a stay at home mom doing this to opening her own stand alone business. The profit from the market is good and I would be happy with it, but there isn't enough to employ someone, which is exactly why she is selling. She has an employee sitting there while she is running her other shop and it's eating all the profits. That is why I would do it all. My son, husband and mother would be a tremendous help to me. My son is in culinary school so all the baking would only benefit him, so he could throw a couple batches in while I'm at the market. My husband has no problem stepping in the kitchen and decorating, he's actually pretty good at it as well. And my mother and son would be able to assist me at the market if I needed to take a day off.

I have thought this out very much so over the past 3 days (that is when it was even brought to my attention). Yes, I know there are lot's more details that need to be gone over and figured out.




Quote:
Originally Posted by scp1127

You did not give the price but you want to know what to do. Without that information, it is impossible to help you.

The items you mentioned are very inexpensive and have little value except that they are already there, but they have some great disadvantages. Customers will think that you are the same company. There may be 40,000 customers, but they will think you are the same company. They will either not shop your booth because they have decided not to patronize the old company, or they will come expecting their very specific favorite items, not yours.

If you are not offering the exact products, a full change in looks is more appropriate. This is the only way to get that "Grand Opening", new business curiousity and excitement.

The former business will be doing a big campaign to attract their old customers and they will get them.

In essence, what you are buying is a sublease of the rights to that type of product. Have you been approved by the market and is a sublease allowed?

The value of the license is nothing, as you must have your own. You cannot buy someone else's business license. Fees will be paid by you again. Have you contacted the health dept? Also, you will be subject to any code updates that were not necessary for the former business, as they may have been grandfathered in to an old code.

What you are really buying is the rights to a certain type of product with no direct competitors. But this may also be subjective. You could get competitors based on a different value of product.

I have just done something similar in a high end market, but here are the legalities. Some of the vendors offer similar products, but they are not offering a certain level of product in their exclusive lines. I now have a contract for, "all things gourmet", making my product different, but not unique. Now there will be competitors with different price points. These options are strictly controlled by the market.

In our market, the vendors can sell their businesses as ongoing, but in these cases as with any where fixtures and decor are purchased, the value is in the intent to run it as an ongoing business, not a new one. Yes, it is cheaper to just walk in, but to keep it looking the same and change the product will not be your best move.

The demand for that volume will change everything and you absolutely will not be able to do it yourself, bringing you to another dilemma. You will need employees. Now your house has become a business, you must re-zone to commercial and your taxes will go up. You have many more requirements with an employee and in many cases, this is strictly forbiddden in a home kitchen situation. This means you must bake everything for that volume by yourself. You will then need an employee that will represent your business for a relatively low income. Good luck with that. The quality of the work force has deteriorated. Control over cash will be none.

You cannot bake all night, import products, work all day, close down, and do it again 4x per week. This new venture with employees requires a business/accounting plan to determine feasibility. Have you done a sf calculation and compared it all other options? Also, if the bakery does not get a buyer before they close, that space with improvements will be completely free except for a new lease. Have you seen their lease? hav you talked with the market? I'm sure they must approve you.

Do you have the capital for the venture? You will need to have equipment capable of providing for this capacity. This means costs plus you plus profit after taxes. Again, this is math, not a feeling or opinion. If you can't do these calculations, hire someone who can. If you have to hire someone for this, then you will also need to hire a bookkeeper/accountant... another ongoing expense not necessary with a home business. Home business finances are forgiving but retail miscalculations because of a lack of business experience can be devastating.

Remember, they started this venture from scratch, but you are buying an ongoing business with the intent to change the product and not the look/name. This is not a normal business path.
post #18 of 74
Okey doke. I wrote a response and posted it. Then saw your reply to scp1127. I don't think you want any more opinions so I deleted what had been in this box.

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post #19 of 74
Thread Starter 
I appreciate all of the replies. It is giving me some things to look further into and whatnot before jumping in. That's why I came here (I just wasn't expecting to feel as though I'm being looked at as stupid, I'm far from it, just asking opinions from others that have been in the same situation). I already replied to scp1127's response, it's above.

Quote:
Originally Posted by MimiFix

I know how tempting this must be for you. $3000 may seem like a good deal for a turnkey business where everything is set up and ready to go. But realistically, you are not looking at a turnkey business. Susan's reply (scp1127, above) has a lot of very important points and there are several subtle implications that need your attention before making a decision.

Such as: the owners are keeping their business. They are only moving it. Your business would be moving into their old space and customers need help understanding that you are a new business. Another point would be your daily reality of baking at home/manning the store/baking at home to replenish stock. And the issue of licensing is crucial - the owners may believe they have the right to sell the license with the space, but you need to check with your county HD to see if that is legal.

You may feel disappointed with several of the responses to your post. Again, I know how tempting this may seem. But please know that we are pointing out potential issues so that you can make an informed decision.
post #20 of 74
Thread Starter 
I was responding to you while you deleted. I DO want more opinions. I don't know everything about a cake business. I do know how to run a small business but there are some different issues when it comes to handling food, as you know.

Quote:
Originally Posted by MimiFix

Okey doke. I wrote a response and posted it. Then saw your reply to scp1127. I don't think you want any more opinions so I deleted what had been in this box.
post #21 of 74
No one said or wrote that you are stupid, or even tried to make you feel that way. You got some of the answers and comments that you did because of the following:

The majority of people here on CC who ask the same questions as you asked are people who think they can just jump right in as a business owner, without having done their homework (business plan, demographics, etc.). These are the same folks who complain that they aren't making enough money, ask everyone here what they should be charging instead of figuring out their costs and charging appropriately, they don't charge enough and they (grotesquely) undercut the competition, and then they close a year later, bitter. They're the same ones who get pissy when long-time (successful) business owners give good advice - because they only want answers that agree with what they already think.

So, if you have all your ducks in a row you shouldn't take it personally. They're just trying to help by putting small business into perspective.
post #22 of 74
You made an interesting comment - :"The profit from the market is good and I would be happy with it, but there isn't enough to employ someone, which is exactly why she is selling. She has an employee sitting there while she is running her other shop and it's eating all the profits." - That just doesn't compute in my brain. So if it is profitable, why can't they afford to pay someone to staff the booth while they are running their new shop? Think about the amount of hours you will put in preparing product at home - and then the amount of hours you, or someone else will be sitting in the booth. How much per hour would that be?
I am a therapist and used to have my own company. I did home health visits - and charged $50 per visit. Once in a while, I would get a referral for a patient that was an hour drive away. That is 2 hours drive time, usually 45 -60 minutes treatment time in their home. Plus usually another 1/2 hour of paperwork (documentation, billing, etc) back in my office. Divide 3.5 into $50. Add in the cost of gas, social security taxes, Medicare taxes, unemployment, liability, car insurance, office rent, etc. I used to joke that I would be better off flipping hamburgers at McDonald's.
Love cakes!!
Valerie
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Love cakes!!
Valerie
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post #23 of 74
Quote:
Originally Posted by sfrog68

. The profit from the market is good and I would be happy with it, but there isn't enough to employ someone, which is exactly why she is selling. She has an employee sitting there while she is running her other shop and it's eating all the profits.

That is why I would do it all. My son, husband and mother would be a tremendous help to me. My son is in culinary school so all the baking would only benefit him, so he could throw a couple batches in while I'm at the market. My husband has no problem stepping in the kitchen and decorating, he's actually pretty good at it as well. And my mother and son would be able to assist me at the market if I needed to take a day off.



These two statements seem to be in conflict. If there is not enough profit to pay an employee, where is the profit to pay yourself? If an employee gets $10/hr, and that traffic "feeds" customer to my new "primary" location (as in seller's case), it is worth staying open at the market even if I only break even with one $10/hr employee....no? Yes, I have to add my overhead and expenses... but at least the one employee gets $10/hr- if that is me, my son, my mom, or a random employee. So I am a bit leery of the seller's statement, "The profit from the market is good ... but there isn't enough to employ someone"

I am really afraid of "That is why I would do it all." (GREAT- as long as you are compensated!)

Second, extra "help" from family is great, but won't they expect to be paid at some point too? I volunteered to babysit when my neighbor has her 4th child (emergency- fill in- watch the other 3), but I don't/ won't do that regularly, and certainly not for free. Maybe my sons are just spoiled, but I can't see any one of them working for me for free.

I am glad you have a strong business background! Just trying to throw some thoughts in the air that help--- no "slam" to you or the family... icon_biggrin.gif
post #24 of 74
My primary concern would be this:

Up until now you have been making custom cakes from your home kitchen. This new venture is a completely different proposition.

I would be asking myself: Why I feel the need to grab this opportunity? Is it simply to prevent another caker moving in and making money from the markets? Have I had enough of custom cake making in all its complexity, and wish instead to switch to making and selling the same small items over and over at the market? Do I want to lose my current autonomy/independence and start relying on the free labour of my family members? (even when it comes to family, sooner or later, someone somehow has to pay up).

You are the person in charge of your business. If this was always your plan, and you are wholly sick and tired of caking as you are, then yes, look over the books and listen to all the advice about taking on this opportunity. Look especially carefully over the costs of doing business, especially lease costs + staffing costs.

My only advice is to look deep inside yourself and ascertain what exactly your business goals are, and what it is you really enjoy about doing this work. Because frankly, the two business models are completely different animals.

Life's too short to make cake pops.
___________________________________
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www.sweetperfectioncakes.blogspot.com.au/
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Life's too short to make cake pops.
___________________________________
www.sweetperfection.com.au

www.sweetperfectioncakes.blogspot.com.au/
www.facebook.com/sweetperfectioncakes (come visit sometime!)

Reply
post #25 of 74
I stand by my post. There are many red flags in what you wrote. It cannot be done. But since you know everything, why ask us stupid people who only have accounting/economics degrees, have successful startup companies, and are analytical to the point of being anal, which is what it takes to take a business beyond the four walls of your home.

In the subsequest posts, you still did not address any of the issues that I stated. I didn't even see the one where there is no money for an employee. Good luck with your new venture. For everyone else, a good business plan that leaves no stone unturned with the ability to have employees and growth is a better path.

It seems that you will rely on free labor because the business plan doesn't work. A better plan would be for everyone to go out and get a real job with real money.

85% of all businesses fail in the first year, over 90% in the food industry. The number one reason is lack of experience and planning.

It is well known in the business world that a one-man-show in business is not really a business and has no real value. When the owner does everything, there is no room for expansion beyond what the one person can produce and manage in under 60 hours a week.Obviously, the owner of this business knows this and is looking to sell for this very reason. She even told you the truth.

You can run me down if you want, but I am doing a similar project, opening Nov 1. Your plan will not work unless this is a low customer count market and you can keep everyone working for free. Have you done the math on output and capacity on COGS? And then applied COGS to viability?
post #26 of 74
Thread Starter 
First off, you DON'T know me. I may not have an accounting degree HOWEVER, I do have a Business Management degree. I have also worked in the accounting field for many years. Secondly, I never called any of you stupid. Third, I wouldn't be asking my family and friends for FREE work. Do you happen to have a 16 year old son that has everything, that you PAY for? Example, his phone, his car insurance, his internet, his cable, his money to spend while hanging out with friends and the list goes on? If not, then you can't possible tell me that I would be making my child work for free when he is already getting PAID. As far as my husband, hmmm, does helping pay for the roof over his head, the utilities, his toys for his garage, and contributing to the family finances not count as paying him? Don't assume that I'm asking for a hand out. And, on top of that, life is full of risk and if you don't take a risk then you will never know. And, that's important lesson I want to teach my children, so what if I'm taking money that is not hurting my family in any kind of way if I happen to fail as you state I will. I would rather them know that sometimes you fail in life but you have to get up and brush yourself off again.

I'm done with your negativity. I asked for series opinions and advise, I didn't ask for you to tell me I'm stupid and will fail at my business. So thanks for your response, but keep it.

Quote:
Originally Posted by scp1127

I stand by my post. There are many red flags in what you wrote. It cannot be done. But since you know everything, why ask us stupid people who only have accounting/economics degrees, have successful startup companies, and are analytical to the point of being anal, which is what it takes to take a business beyond the four walls of your home.

In the subsequest posts, you still did not address any of the issues that I stated. I didn't even see the one where there is no money for an employee. Good luck with your new venture. For everyone else, a good business plan that leaves no stone unturned with the ability to have employees and growth is a better path.

It seems that you will rely on free labor because the business plan doesn't work. A better plan would be for everyone to go out and get a real job with real money.

85% of all businesses fail in the first year, over 90% in the food industry. The number one reason is lack of experience and planning.

It is well known in the business world that a one-man-show in business is not really a business and has no real value. When the owner does everything, there is no room for expansion beyond what the one person can produce and manage in under 60 hours a week.Obviously, the owner of this business knows this and is looking to sell for this very reason. She even told you the truth.

You can run me down if you want, but I am doing a similar project, opening Nov 1. Your plan will not work unless this is a low customer count market and you can keep everyone working for free. Have you done the math on output and capacity on COGS? And then applied COGS to viability?
post #27 of 74
sfrog68, I have been a business owner (childcare) for almost 17 years. It is a risk taking that jump. I don't make much "profit" anymore (I had to cut my workload in half on that business when I had more kids) but I can not put a price on being able to stay home with my kids! I also work a farmer's market in the summer and do custom cakes on nights and weekends. I have never been in the red. I have never borrowed money for my businesses. If you have the start up money without borrowing, you will be off to a good start. I made a business plan when I started my first business even though I didn't have to borrow money. I just wanted to see it work on paper before I quit my day job! It really helped! It sounds that you have weighed a lot of this out. If you have a dream I would say go for it. If it doesn't work, you know in your heart that you gave it your best shot. I wouldn't suggest that if you were going into debt for it because that is just more stress! Best of luck to you. I would love to see pics if you get it up an running!
post #28 of 74
Hey froggy....

Remember that this forum has the stupid people, and the smart ones, and the bunch that walked the line and learned through trial and error and costly mistakes- that they often share here. No one knows what your background is, and as such, really gave you great business advice.

Too often, we read about the newbie that think they can open a shop and sell cakes without any basic business skills- like the old I love Lucy episode where they make salad dressing to sell without considering the cost of the materials. You must count all overhead, including labor (in any form), and the pans, and the electric, and the bottle of soap. My aunt and uncle ran a mechanic's shop---- one 6 month period, they made $2/ hour when all the expenses were considered. I understand- you got this- but don't fault the rest of us for not knowing details of your experience and background...

A number of us saw a "red flag" regarding hours invested manning the booth and profit, based on details you gave us. That is still a concern. Regardless of how the booth is staffed, that individual needs to be compensated (yes, business growth, name recognition, or car insurance is some form of compensation- depending on who it is).

We all wish you success!
post #29 of 74
If you have a business management degree, why are you asking us? This is a no-brainer with red flags everywhere before you even do a detailed business plan. And if you had used that education, the full business plan would answer the question. Not viable as written.

Get mad at me if you want. I could write pages and pages about what you are not considering. She will sell that business to someone with big ideas and no business plan, just like someone sold it to her.

And yes, my children have plenty. They also pitch in here and there with the business (and I pay them), but I employ one daughter full time and trust me, she has an above average wage from me. No, I do not make my children work for me for free.

I had to work in my father's business (as my children have worked in mine). We were upper income and my father gave me a choice: "Work in the family business and I'll buy you everything or don't work and get nothing." But I still got a per-hour wage. I have many friends who own businesses where their children work, but I don't know one who does not pay them. This is the time when we teach them the value of money and money management, not, "Get free labor if the business plan doesn't work".

I'm from the south and even though I love my heritage, we have one despicable sin in our history. Same as above. If the numbers don't work, free labor is not the answer.

There are many people who read these threads and some of us have gone to great lengths to help people write complete business plans. The OP may want to shoot down my responses as mean, but, in fact, they are truth that a dreamer does not want to hear.
post #30 of 74
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