Need Advice - Going Into Business For Myself

[powderjunkie]

^Not paying taxes is not a sound business strategy.

[Sample00]

I would concur with much of the sound advice already posted.

I would probably ask to see some financial statements. And definately make sure that not all the establishments are amalgamated into one statement. You will want to get a true representation of what your particular bar is doing.

I would hate to say this but if it is in fact a "money maker", why would he be thinking of unloading it. Most entrepreneurs are unlikely to cast off a money maker.

Also, your investment into this venture is going to need to be substantial. Most financial institutions are highly unlikely to step into the hospitality industry because the mortality rate is so high. I would be cautious if he is willing to carry all or most of the financing. It would throw up another red flag as to why he is selling the business. If he is wanting to inject cash into the other two establishments, why would he offer to carry any financing?

A friend of mine in Calgary recently closed his bar. This was the place that he, myself and my buddies grew up in. It was around for 30 years and he bought it about 5 years ago. The demographics of the community changed and although he tried very hard, it was just became a bottomless money pit.

I urge you to be very diligent in your homework before you sign on the dotted line. If however, you do, I wish you nothing but success. Being self employed is a wonderful thing. I was self employed myself for 16 years until we got bought out by a larger company. You will laugh, you will cry, you will have anxiety like nobody's business but if succeed, the jubilation you will feel is undescriable!

Good luck to you.

[ToewsFan]

I'm thinking of starting my own landscaping/lawn care business. I figure it's a safe bet to make some cash. I'm a hard worker too, and CP posters will get 15% discount.

[Hockeyguy15]

Originally Posted by ToewsFan

I'm thinking of starting my own landscaping/lawn care business. I figure it's a safe bet to make some cash. I'm a hard worker too, and CP posters will get 15% discount.

Shouldn't you have started a new thread for this one?

[Bill Bumface]

Originally Posted by Snuffleupagus

I won't comment on the marriage but the bolded is not true, if you have a decent place with the right system you can put a couple hundred grand in your jeans tax free every year off the books. There is great money in selling booze and food. A properly run pub with a good lease should profit 32-36% of sales, a good system shows a profit of 20% on the books and the rest is for the stress.

P.S. I don't answer PM's from CP members working for revenue canada

I know of a business on Centre Street that was under reporting income for tax reasons.

When the Centre Street bridge was closed for a couple years and they had to rely on insurance for the business interruption, it sure sucked for them having payouts based on their book values.

So much so, they went out of business.

[FlamesAddiction]

Thanks everyone for the input. Just to answer a few of the questions.

Originally Posted by Sample00

I would concur with much of the sound advice already posted.

I would probably ask to see some financial statements. And definately make sure that not all the establishments are amalgamated into one statement. You will want to get a true representation of what your particular bar is doing.

I would hate to say this but if it is in fact a "money maker", why would he be thinking of unloading it. Most entrepreneurs are unlikely to cast off a money maker.

I have the P/Ls from the past 5 years and the have for the most part been trending up. The seller, who is also an acquaintance of mine that I have done other business with, is probably what you would call a serial entrepreneur. He started a company and eventually sold it to a major Hollywood studio for a few million dollars, then moved back home. That is how he got his start. Sometimes people do sell "money-makers". In this particular case, he started up a major establishment and runs another franchise for it under a different concept. He has been having trouble managing all 3 and well as his family obligations (dude has 4 kids under the age of 7). The establishment he is selling was the first he bought, but it wasn't his concept. The two that he is keeping are his concept and his "babies" so to say. He said that he can no longer spend 40% of his time at the 3rd location without hurting the other two. He is also franchising his concept out and so the one he is selling has become a "3rd wheel".

Also, your investment into this venture is going to need to be substantial. Most financial institutions are highly unlikely to step into the hospitality industry because the mortality rate is so high. I would be cautious if he is willing to carry all or most of the financing. It would throw up another red flag as to why he is selling the business. If he is wanting to inject cash into the other two establishments, why would he offer to carry any financing?

We have enough to do it without financing (although we are still going to try for it, because why spend your own money). I have hired a consultant to to help with the bureaucracy.

[pylon]

Originally Posted by driveway

Used to manage restaurants and bars in Calgary.

DO NOT DO THIS.

It is a terrible idea, will not make you money, and will most likely destroy your marriage.

It sucks that you hate your career, but getting into the bar/restaurant industry is a god awful idea.

I'll echo this.

The amount of destroyed credit and bankrupted people I have run into that have owned restaurants/bars is staggering.

The success rate of food service establishments, outside of major franchises, is something like 8-9% last I heard.

[14]

My advice is also do not do it. So many challenges out of your control with restaurants and bars. 3 quick ones:

-people totally underestimate handling low skilled labour. You will be a baysitter for the years you own the business. High turnover and dishonesty.
-profitability has nothing to do with being busy in that business. If you have someone who makes incorrect purchases on your inventory and how that relates to your menu and you are screwed.
-you have to always work evenings and weekends. Always. Even when you are not there you are 'working'.

[OMG!WTF!]

You should also reconsider the p/l statements with an extra 40% added to your labour costs...$15 minimum wage will kick in as soon as you think you're making money.

[Ace]

Originally Posted by dissentowner

I used to own a bar, it is where my username comes from as the bar name was Dissent.
First off let me tell you that owning a bar is a ridiculous amount of work and stress unless you are going to pay somebody else to run it and you don't want to do that because it is extra money out of your pocket and you're going to need every penny! I don't know what the licensing is like in Alberta but if you were to do it in Ontario you will need a liquor licence as well as a business licence and a damn good lawyer on retainer. You will have a million things to juggle just as a bar, as a pub that serves food you can double that. You have staff to look after and the type of people that work at a bar/pub is usually a student who might be more down with partying or hooking up than doing their job. You have to keep track of all your inventory so you don't run short and you absolutely have to remember long weekends and holidays or you are going to run out of product fast. You have to walk that fine line of spending on your staff, your products, your entertainment, etc.. and what you have left to put back into the business. I had my bar for three years and in the first two years I drew absolutely no salary for myself because I couldn't do it and stay afloat. Now maybe you can and maybe that pub really is a money maker, my bar was an alternative bar so I had a much more focused clientele. Regardless, I can tell you owning a bar is a 24/7 stress machine and there is always something to be done. Somehow people get it in their minds that a bar owner just hangs out at his bar and socializes, unless you are a money tycoon that can afford to pay extra people to run your establishment that is not how it works.

I find things like this so interesting, i've always read your user name as "Dissen 'Towner"; Dissent Owner...mind blown

[FlamesAddiction]

Babysitting millennials is probably my biggest worry. I plan on being there a lot. The food isn't daunting to me. I worked in a kitchen for a few years and this place has a very simple menu. It's on a strip when people basically go bar crawling. The seller is offering me to shadow him for 2 weeks and I plan on sticking with the same accountant he uses.

The 24-7 thing doesn't scare me. For the past 10 years, I have had a job that has me working or thinking about work non-stop. As long as my phone is on, I am working. I just figured that sort of thing was life if you want to do anything rewarding. I figure at least this way, I own my own labour and have some creative control.

[driveway]

Originally Posted by FlamesAddiction

Babysitting millennials is probably my biggest worry. I plan on being there a lot. The food isn't daunting to me. I worked in a kitchen for a few years and this place has a very simple menu. It's on a strip when people basically go bar crawling. The seller is offering me to shadow him for 2 weeks and I plan on sticking with the same accountant he uses.

The 24-7 thing doesn't scare me. For the past 10 years, I have had a job that has me working or thinking about work non-stop. As long as my phone is on, I am working. I just figured that sort of thing was life if you want to do anything rewarding. I figure at least this way, I own my own labour and have some creative control.

It sounds very much like you've made your decision and you're just looking for people to justify the choice you've already made.

It also sounds like you're really excited about this, have done a lot of thinking about it and are pretty emotionally committed. I remain steadfast in my belief that it's a bad idea, but I don't think anyone here is going to talk you out of it.

Therefore, good luck. I strongly recommend reading a book called "The E Myth Revisited" about small-business ownership. It's primarily concerned with how to develop systems to make your life easier. That's going to be the big thing, figuring out systems that work for you. The more well-built your systems are, the easier it will be to 'plug-and-play' employees in their roles. Also, the more smoothly, efficiently, and profitably your business will run.

Systems will be everything from which POS-system you choose, to where the microwave should be placed to allow maximum efficiency, to whether servers pull their own beer or if the bartender does it every time regardless, or if it depends on how busy you are at that moment.

I hope it works out for you.

[OMG!WTF!]

Have you done any shopping around? There are some pretty cheap businesses out there. Information is key. You need to know what you're getting into.

[taco.vidal]

Originally Posted by FlamesAddiction

Hey all,

So after thinking about it for a long time, I have come to the conclusion that I hate my job and I hate my career. Everyday I go to work, I fantasize about quitting. Fortunately, I have been able to save up some money in the mean time. My background is in Earth Sciences (as is my wife's, although she has some restaurant management experience).

An acquaintance of mine is quite wealthy and owns 3 pubs (I think his net-worth is around $4.2 million). Two of the pubs have the same branding and he wants to sell the third to free up some cash to put into one of his other pubs (which is larger than all three combined) and to expand his franchises. Right now, the pub he is selling is a money maker, but it has some issues because he has been hands off for a while. His bar manager runs it and he says the guy is an idiot.

It nets about how much I make right now at my job, but I think there is room for growth. I am thinking of quitting my career and buying it. In no way do I expect it to be easy and I am sure that it will be a parade of putting out "fires" non-stop, but part of me really wants to have complete creative control over something like this. I have been reading books about it and plan on using the same format and bookkeeper.

Am I insane to do something like this? Can any offer me sincere words of encouragement or advice? I am scared, but I really want to do it. But I am also a crazy person...lol.

Originally Posted by FlamesAddiction

Thanks everyone for the input. Just to answer a few of the questions.



I have the P/Ls from the past 5 years and the have for the most part been trending up. The seller, who is also an acquaintance of mine that I have done other business with, is probably what you would call a serial entrepreneur. He started a company and eventually sold it to a major Hollywood studio for a few million dollars, then moved back home. That is how he got his start. Sometimes people do sell "money-makers". In this particular case, he started up a major establishment and runs another franchise for it under a different concept. He has been having trouble managing all 3 and well as his family obligations (dude has 4 kids under the age of 7). The establishment he is selling was the first he bought, but it wasn't his concept. The two that he is keeping are his concept and his "babies" so to say. He said that he can no longer spend 40% of his time at the 3rd location without hurting the other two. He is also franchising his concept out and so the one he is selling has become a "3rd wheel".



We have enough to do it without financing (although we are still going to try for it, because why spend your own money). I have hired a consultant to to help with the bureaucracy.

Here are some points Id suggest to consider or questions to ask, in no particular order

Hire a professional for advice, like a business valuator. At the very least you can get an idea of valuation and an idea of what comparable entities have been priced at and a guideline for valuation using a given a metric like how many times net revenue or cash flow.

What exactly are you buying?
Is there a building or real estate included? Is there a lease? How long is the lease? What's the lease rate compared to what youd pay for something similar if you signed a lease now? Is the lease likely to be renewed, and if so for what rate?
What equipment is included? Fixtures? Furniture?
How about inventory?
Any trademarks? How about the name of the establishment? Secret recipes for key menu items? Any beer thats brewed by the pub? Or the names/recipes of beer brewed for the pub?


How important is the owner to the business? Do people come in to see him because he is a character and his personality is all over the pub? Does he know how to run it really well? As part of the deal will he stay on during a transition period? Will there be a non-compete where he cant open a pub across the street and attract back his old customers? Is he key to running this place in that he is there almost all the time and does everything from bartend, serve, host, act as security, bookkeeping, payroll, managing inventory and ordering, hiring and firing, etc. Are you prepared to put in that much time?

Have you been to this place at various times such as Monday lunch, Wednesday afterword and evening, Saturday night, Sunday brunch? Whats the crowd like? Whats staffing like? How hard is the owner working or what is he doing during these times?

Does the restaurant need any major upgrades in the near future? Is the equipment on its last legs? Is there anything thats not up to code that may need to be replaced?

How did the increase in minimum wage impact the business? What would the numbers have looked like for the past 5 years if you ran a scenario with the higher wage costs?

How does the place make money? Booze sales? Food sales? How do each of those contribute to sales and profit? Any other sources of revenue?

Is this pub open 7 days a week? Is it open for lunch daily? How late is it open, and how many nights a week? When does it make most of its money? For example, booze sales on Thursday, Friday, Saturday nights, or is it a lunch time work crowd on weekdays and its dead on weekends?


What are the statements he's showing you? Even today with debit and credit, a lot of cash goes through a restaurant and combine that with things like paying people under the table, a lot can be off of the books. And that if the statements are made up completely.

Some less likely things, but is there anything like a 3 year road construction project or a new retail complex with a restaurant and 2 pubs going up across the street?

Lastly, I find it curious that he knows the manager is an idiot but he doesnt replace him. You would the think the successful owner would do something like promote someone from one of his other 2 establishments to manage this place or just be able to hire someone better.

[GGG]

Does the staff at the place know who you are. If not go in as a customer and chat about their jobs with them. Sit at the bar and listen to the bartender talk with the servers to see if the place is working.

[FlamesAddiction]

Originally Posted by driveway

It sounds very much like you've made your decision and you're just looking for people to justify the choice you've already made.

It also sounds like you're really excited about this, have done a lot of thinking about it and are pretty emotionally committed. I remain steadfast in my belief that it's a bad idea, but I don't think anyone here is going to talk you out of it.

Therefore, good luck. I strongly recommend reading a book called "The E Myth Revisited" about small-business ownership. It's primarily concerned with how to develop systems to make your life easier. That's going to be the big thing, figuring out systems that work for you. The more well-built your systems are, the easier it will be to 'plug-and-play' employees in their roles. Also, the more smoothly, efficiently, and profitably your business will run.

Systems will be everything from which POS-system you choose, to where the microwave should be placed to allow maximum efficiency, to whether servers pull their own beer or if the bartender does it every time regardless, or if it depends on how busy you are at that moment.

I hope it works out for you.

Thanks. Yeah, this is something I want to do. And to be quite honest, I am not afraid to fail if it doesn't work. My goal is to make it as "automated" as possible and apparently one of the the servers is showing a lot of promise and could be assistant manager material. In fact, I just got the signed agreement back today, so I'm in. Having said that, I have had some promising job interviews lately outside of my current field, so I don't know for sure what is going to happen.

And to the person who asked why he doesn't get rid of the bar manager, I think it is simply because he doesn't have a presence there and good help is hard to find. My first act of owner would be to get him to show me what he does and then then assume his position myself.

For a little more background, I am an environmental engineer and have completed environmental assessments for the the seller on some of his other ventures. I spend a lot of time doing BD with him and just through dialogue, I revealed that I wanted out and he offered me an in. I trust this guy as every indication so far is that he wants to see the business succeed. in 2009, he transformed it from a dive to a decent business. We have even agreed that his accountant will keep her office at the establish I would be buying (if all works out of course). So we will still be rubbing shoulders a lot.

Originally Posted by OMG!WTF!

Have you done any shopping around? There are some pretty cheap businesses out there. Information is key. You need to know what you're getting into.

This was the 7th place that I looked at and did a viewing. It's the 2nd one that I tried to negotiate an offer. The first guy was not being reasonable at all. Just this week he circled back to me though and wants to talk, but I never returned his calls. I figure I will let him sweat.

[SeeGeeWhy]

It's clear you've made up your mind and you're doing this. Have you already resigned from your other job? Can you afford your mortgage and basic living expenses on your wife's income?

You're not crazy to try this, but it is a hyper competitive industry with fickle customers, staff and suppliers. It is going to be very tempting to take almost everything personally, which can be debilitating for a lot of people. I don't know what kind of person you are. Entrepreneurship is an emotional roller coaster, so start preparing yourself to be deeply emotionally and mentally resilient. There are obviously many ways both healthy and unhealthy to cope with these pressures. Just do your best to be self aware and always improving. Focus on the things you can control, and do your best to take small actions every day.

Small business ownership can also be very isolating - find other business owners and build a support network. Normal people will crap all over you for this being the worst decision of all time, but all that really says is that THEY would never do this themselves. Its not relevant or helpful for you to be surrounded by this sort of energy. Spend time with people who have already done it well - study what they did and do - break it down to the fundamentals and copy them. And having peers to blow off steam about the unique pressures of this lifestyle is important.

What are your expectations? Would you feel like you failed if you are also not left holding 4.2 million in the bank with a chance to expand a franchise after 5 years of operations? Obviously, this can happen but is a very rare outcome. Most small retail businesses are lucky to provide a decent annual income after it's all said and done. Most never even achieve that level of success. Be very aware of when enough is enough for you, and GET OUT if you hit that point. Seth Godin's "The Dip" is excellent at explaining the art of knowing when to quit.

What was it about your old job that left you so deeply dissatisfied? Are you truly going to escape those problems by doing this? Take a long look at yourself in the mirror before you go into your new venture. Be honest. Contribute what you're best at and hire people who are excellent at the things you suck at. Fire garbage staff with impunity. No winner wants to play on a team of losers. The talent does exist, always be recruiting.

As for the business... has the transaction already closed?

How did you value the business?
What are the terms of payment?
What agreements were made for working capital and inventory to be left in the company on day 0?
Were you able to negotiate a % of the other bars (or an option to purchase) as part of the deal?
What other financing and guarantees have you left behind? (i.e. if it all blew up, what would you be left holding to recover?

This is just what comes top of mind. PM me if you have more questions.

[JohnnyB]

Originally Posted by FlamesAddiction

And to the person who asked why he doesn't get rid of the bar manager, I think it is simply because he doesn't have a presence there and good help is hard to find. My first act of owner would be to get him to show me what he does and then then assume his position myself.

Ha. Hope the bar manager isn't a CP poster.

[bizaro86]

I'd be interested in the details of the lease. Space is cheap right now, so I'd want to make sure it wasn't overmarket really rents.

If it is, I would only go ahead if the landlord would lower it.

[DuffMan]

my advice, is to do it.