Thinking of Buying a Pub or Bar? – If you are thinking of leaving your job or have even become redundant you may consider a career in the hospitality sector. This could involve buying a wine bar, or leasing a pub, there are many opportunities out there, on many high streets we can all see signs with the words “pub freehold for sale” or “Catering Business for Sale” .
Becoming self-employed is tempting and there are many opportunities for motivated induviduals within the service industry and hospitality.
However before jumping in and buying a business there are many things that one should consider
This guide will hopefully highlight some of those points for you.
If you have not bought a business before the whole process can seem daunting, don’t be put off, The key to remember is not to rush or be rushed, and consider everything carefully.
When buying a business you cannot ever ask too many questions, If the answers are not forthcoming there is usually a good reason, that reason may be why you should not buy the business.
Why is the business for sale? Always try to find out why the business is for sale. The seller will allways highlight the positive aspects of their business, if these point are accurate, why are they selling it? Ask the question and gauge the response, make sure you feel comfortable with the reason.
Do some detective work – Don’t just accept the answers given to you, check them out and make sure that they are right. Allways research the local area and find out if there are any future developments and changes which may affect the business. Visit other bars or pubs in the area and see what trade is like in the area. Speak to the barworker or land-lord. It is worth asking how trade is in the area. Speak to other local businesses and also speak to the local planning department. Look to see what proportion of “pub to let” signs you can find in the area. If there are many of these “to let” boards, there’s a good chance that trade is not that good in the area. Whilst you are doing this research in the local area it is a great opportunity to keep an eye on how much trade the business is doing, is this in line with what you have been told?
All pub business’s are required to complete full accounts. Check the these books carefully – look through all of the financial information that you have been given. Check the sales trends of the bar business during a typical year and also check that overall alcohol or food sales are stable or increasing. Try to make sure that financial accounts are backed up with tax returns and statements. From the information supplied try to establish the following: Is this pub business moving in the right direction?
- Is this pub business reliant on any key customers?
- Is the business reliant on key suppliers?
- Will these suppliers give you the same deal/discounts?
- Will these customers continue buying when the pub changes hands?
- What is the value of the stock, alcohol, dry goods etc? ?
- What is the value of the assets?
Check the costs – try to identify all of the fixed costs, you will also need to factor in the cost of any borrowing to purchase the business. Make sure that the cost which you are likely to incur will be similar or less than the seller.
Check the profits – it sounds obvious but make sure that the profits generated, less the running costs, including your own salary and finance costs make the purchase viable. Remember that owning a business can be a tough job, make sure there is enough financial reward to make it worthwhile.
Check the contract – once the contract of sale is issued you are almost there. Although this will probably come via your solicitor you should still take the time to read it very carefully, yes even the small print. You will need to make sure that the terms of the agreement match those that you agreed with the seller. The contract should also list all the assets included in the sale and the value of the goodwill. The contract should also protect you by stating that the offer is subject to the granting of any necessary licenses, obtaining finance, and ensuring that the business performs to a minimum standard agreed during a trial period.
Check the assets – having already established the overall value of the assets you should check the asset register and also the schedule of depreciation. Check that you are satisfied with the assets and level of current depreciation, and make sure that you accountant is happy too.
For detailed information, advice, and protection when buying a business you should always seek the advice of a solicitor, accountant, and business advisor. In addition to this a helpfull source of information is you local business link advisor. Find detals of your business link office at www.businesslink.gov.uk .
For licenced retail opportunities within your area check out http://www.fleurets.com
For opportunities in Mobile Bar Franchise’s check out www.marqueebar.co.uk
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