Need Help Quick! Buying a business - Soon

[Prison Kids]

Hey guys,

Need some help here. My parents have a friend who owns a computer tutoring company, and has run it for ten years here locally. The lady that owns it is moving and was talking to my dad about another unrelated subject, when my father brought up my passion for computers, and asked her if she had thought of selling her business.

She was just going to close her doors, but did think about it, and with 200 clients, thought she had something of value, and decided to meet with me.

I met with her, and we felt I could easily do the things she does for her clients (instructing on the use of software, updating software, defragging and maint., lessons on OS usage), plus more of the hardware stuff she normally subs out. She said she brings home aprox 30k, working 20-25 hrs per week.

I have never owned my own business, and don't even know what a good offer would be. I know I will not retain all of her customers, but I also will not be subbing out as much work. I am also concerned about the house payment, etc. I currently make about 28k (at the same job for the last 3yrs), working full time. I need to make a decision quick. I will be meeting again with her any day. I asked her to gather the info on her regular "steady" customers, as well as how much she subs out to her Tech. I was thinking of offering like 20% of profits for 2years on current clients (not new business). Does that sound like too much, or too little. Any thoughts?

I love working on computers and training others, and have acually made about 1K since Nov '03, setting up and sevicing friends and family's systems. The idea of doing somthing I love for a living has only been a dream, so I am excited about this, but also scared to death. Any helpful insite is appriciated.

[osprey4]

Wow, what a great opportunity! I would call up your local BBB and get in touch with other small business owners and ask them their experience. BBB can also steer you toward SB loans at very low or no interest rates or grants.

Also, if she had been planning to shutter the place, I wouldn't expect her demands to be extremely high. Your figure sounds very reasonable to me.

[Epidemic]

If she has really planned on closing up shop I would think that 10 to 20% of profits might not be bad on old clients. However think about what that means if business does not take off. 8,000 to 9000 bucks out of after tax money ( I would guess) would really put a ding in less than 30 k. Perhaps the definition of profits should exclude a pre defined living wage for you. Profits would not exist until your wage requirements were met.

[Prison Kids]

Thanks for the great info, Osprey!

Epi,

That is smart thinking, but wouldn't the 20% of profit be smaller if the business did not take off?

[Epidemic]

This is true Prison Kids.

but until you reach you living wage, you will be below you living wage. subtracting 20% from that would be a bad thing.

If you are bringing in 1000 bucks a month due to a slow start up the last thing you will need is to have 200 bucks sucked off the top. That was two week groceries, gas money for the month. Not showing up at the clients because your gas budget was broke that week would not go over real well AFAIAC.

[Martoch]

Hmmm...wonder where you'll be getting your answers to their questions. *cough* TechIMO *cough*


Are we going to be paid employees???


Well Robert...hate to ask the dumb question here (I have ZERO business owning experience), but can she produce spreadsheets/account books/etc showing her earnings over the past several years? You might be able to find a "safe" average of profit margin, enabling you to determine what you think is an overall fair price to the both of...looking out for yourself more of course.

Sounds like an exciting venture, too bad I don't live a little closer...

[Epidemic]

Ahhh yes. martoch reminds me. Take what I say with like a whole salt shakers grains of salt. My only business ventures include a lawn mowing service with 2 clients a week and a whole bunch of really long hard thinks at business ventures that I chickend out of.

[Prison Kids]

Originally posted by Epidemic
until you reach you living wage, you will be below you living wage. subtracting 20% from that would be a bad thing.

Hmmm, very true... I'll give that more thought. thank you.

Originally posted by Martoch
Are we going to be paid employees???

Sure, digital M&M's for you! Name your fee.

(thanks for the advice, we are going over the books this weekend. she has done an exelent job of tracking everything and evan has an emailing list. No site yet, but I just reserved a domain name yesterday!)

[MDS]

Also keep in mind operating cost of the business, such as phone service, travel expenses, will you have a store front? If you do go through with this I would suggest trying to get the business phone number currently in use and keep a real good track of earnings and costings(Keep all receipts paid out and income) Also you need to think about the tax end of things and most likely you will have to register with the county as a business. I would have to see hard doc. on earning before I would set a price. Don't just look at the last year get a good average of the last 5 and 10 yrs and see which way the business is headed. Talk with the techs that she has contracted out with and see what they have to say about the business, you would be surprised what you can learn by sub contractors.

[Knothead]

Hey, PK! Offering a percentage of the profits is a fine idea, but make sure the percentage is calculated on the NET profits, not the gross.

Gotta cover ya butt.

Good luck, man! It sounds good!