[hygiene]

hi there

i am after a little help and advise.!!!!! a friend who is also a competitor of mine has fallen on very hard times and offered me his business. He is a sole trader and tops debts in the region of 35k plus overdrafts lease hire etc.

He reckons his business is worth an annual income of approx 170k with only 90k of that secure (however fallen behind on the cleans required by that company to a tune of three months).

None of his work is contracted its all repeat business etc except the 90k one but that was only an initial 12 month contract due to be reviewed July 07.

No debts will be past across to me all i will have is about 18k of business booked in if they choose to stay with me..


ADVISE will be much appreciated

[PHILC]

It all depends on how much he wants for it?
I would be very careful as it seems strange how he turns over 170k and has a lot of debts?
Look at the contracts hes got and break down all the costings to see how much profit the revenue createsor ideally take his books to your accountant as he will also be able to advise you. Also with the biggest contract coming up for renewal you need to know what the chances are on being able to renew it for another 12 months and also what the relationship hes got with the client there would be no point paying a large sum of money for a contract which isnt going to be there in the summer.

Hope this helps

[BDCS]

It all depends on how good a friend he is ! you obviously know who the contracts are with so you could just go straight to them and snide the work especially if he is behind on cleans. Cherry pick his best workers and dump the rest. Then stand back and take a good look at what you got and give him what you think it is worth ! Don't expect to be at the top of his xmas card list afterwards though

[hygiene]

Thanks for your comments so far

[Ian Rochester]

If, as you are saying more than 50% of his business is to one customer and he is not keeping that customer top of his priorities, then I would say he will lose them very soon.

What have you got left then?  Approx £80K of unsecured business and probably not a lot of goodwill in the area.



As it stands, from what you have told us, the business is not really worth a great deal, it sounds like it has been badly managed and he has run up large debts which he is not able to pay off.  Are their any assets/equipment you could buy off him.

Friend are fine and should be helped out where possible, but don't let that draw you into a bad business decision that could cost you £,000s

I would be tempted to take him on as an employee and pay him a percentage of work that has been carried across.

[Timmy Boy]

This is a goodwill business with the only contract up in a couple of months, it is not worth a sausage in my opinion
Regards
Tim

[GeoffDerby]

What we do in this life should prepare us for the next life, being fair to yourself, your friend and your business should be a top consideration. I would personally be walking away not wanting take un necessary risks on a failing business, there are plenty of sound business opportunities  out there if you are a serious investor, this seems to be a flawed business with limited assets and minimal goodwill.

If you decide to proceed with the purchase and once you have a value I would suggest a two part payment plan an initial and minimal payment followed by a second payment in say 12 months dependant upon the retained business, this may also incentivise your friend to retain the larger contract and ensure a smooth transition for the other business, then get contracts in place Good Luck Geoff