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First Time Buyer-Pmuchi

Patrick Muchirahondo
Posts: 2
20/07/2008 19:02:22
I want to buy a nursery with a capacity of 80 children. The montly rental & rates £7K Wages
£18K Food & other operating costs £4K -Potential monthly Income £27k. No assests of any value perhaps £3k. The business has been running for 5 years as a family business. The present owner is looking for £150K as price which is basically goodwill. I do not know what to do and how to negotiate for a better price. Is this a good buy and if so how can i obtain funds to pay the seller his/her £150k. From my calculation my monthly net positive cashflow is £2K+-. Please advise.Thank you.

4 Replies
David Rhodes
Posts: 281
21/07/2008 07:10:57
You say they have £2k per month profit,(£24k a year) on this basis they are dreaming hoping to obtain £150k for the business. I would suggest that £50k may be more of a fair price.

Simply tell them this if they are not willing to move on price then don't waste any more energy on this one.

Horizon Business Agents www.horizonbusinessagents.co.uk
Jamie Goldsmith
Posts: 136
21/07/2008 09:04:03
I would happy to take a look at the accounts for you and get back to you with some positive advice. We won't be able to help you with funding though! Post your email address to the forum and I'll be in touch.
Pat Field
Posts: 12
21/07/2008 15:05:09
Hi there, Its not so long ago that I had a nursery business but the property costs were nothing like 7k a month - had they been so, I wouldn't have survived. But the most obvious anomoly, looking at the figures, is the ratio of income to staff costs. I know things have changed over the past five years with wages going up and up, but the rule
of thumb was always that staff costs should represent no more than 50% of income per month. No sure what the other 4k per month is for but that too, seems quite high. I would recheck the figures if I were you. Does this also mean that if numbers drop, you won't even make the 2k expected? Its such an overwhelming responsibility for not a great deal of gain. Hope this at least gives you something to think about. ps Is this before tax!!!
Also the income doesnt seem to represent 80 children.
Greg Eaton
Posts: 4
06/08/2008 00:08:09
I'd check your maths, based on the figures you outlined you're making a 2K loss per month.

The montly rental & rates £7K, Wages £18K, Food & other operating costs £4K = Total of 29K,
then you state the maximum revenue is £27K = loss of 2K.

As the guy from horizon said, it's marginal profit-wise anyway so it's not worth £150K. I would also be worried about my sensitivity to making a monthly loss if a few kids left...

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