Advise on buying a not so well doing business

**inforbusiness** · 11-22-2009 09:27 AM

Hi,
I am planning to buy a Chinese restaurant. It is almost 2 years old. It is not doing very well right now. The sales are very close to the break even expenses. Many times the business does not even meet the break even.

I have some ideas about how to improve it and believe that I can increase the sales. I am going to be the financial partner, with my friend being the working partner.

I need some opinions, about what things I need to consider, before I made my decision, and if it is ever advisable to buy a business that is not doing well.

**Encrypted** · 11-22-2009 03:53 PM

If you feel you have a solution to make the business then I say go for it. Something to consider is that there is probably some good reasons as to why the business is performing poorly. For example, bad location, competition, etc.

**kameron** · 11-22-2009 04:42 PM

brick and mortar businesses are not an efficient business model. Stay online, work from home.

weather you decide on direct sales, or MLM there are thousands of home based business models out there with MUCH higher profit margins then ANY brick and mortar business.

One glance at the numbers... working from home, no building or lease over head, no inventory required dependings on business model.

your only real budget working with certain business models is your marketing budget, and you can COMPLETELY eliminate that if you learn how to market yourself.

there is a learning curve. BUT, why wouldn't anyone be interesting in learning the most valuable skill possible in this day and age.

Kameron George

**cg410** · 11-22-2009 04:50 PM

Uh yeah... anyway, there's nothing wrong with a brick-and-mortar business. Plenty of people have made millions or more on them.

I'm assuming the likely problem your restaurant is having is lack of customers. Some thoughts:

* Is it priced fairly?

* Is the service good?

* Is the food good?

* What can you do for local marketing? Promotions, specials, etc.

* What can you do for online marketing? Are they in Citysearch? Do they have a Web site? Are they in every directory you can find, along with rave reviews?

* Do they accept corporate accounts?

* What can you add to get people buying more? Do they sell alcohol yet? If not, fix that. If so, do they give customers a wine list and instruct the servers to promote expensive drinks?

--J

**kameron** · 11-22-2009 05:05 PM

hours of operation on a brick and mortar... 9-5

hours of operation online... 24 hours a day 7 days a week 365 days a year.

Not saying there is anything wrong with them. There is simply more efficient ways of doing business. Its simply evolution and taking advantage of technology that is available.

**cg410** · 11-22-2009 08:21 PM

Who cares what the hours of operation are? You hire employees to work the 9-5 and then you personally work whenever you want. For a restaurant, he can work on marketing plans, creating better menus, research, etc., any time. The owners of any successful retail business are not sitting there 9-5 unless it's their passion and that's what they choose to do.

I'm totally not trying to knock making money online -- almost all of my money is made on the Internet -- but to suggest to others to discount an idea simply because it's not on the net is doing them a disservice.

--J

**myfayt** · 11-22-2009 08:24 PM

One of the biggest reasons for a business to fail is management. Perhaps they don't know how to do taxes? they have too many employees on payroll? They don't count business expenses? etc. There is a dozen management things that could be the better. Bring in a better management person and sales could triple.

**TIM_S_JR** · 11-22-2009 08:31 PM

Before you buy something that is not doing so well make sure you know what is going on with the business. You don't want to get into it and then 6 months later have to sell it or declare bankruptcy. The reason that it is not doing so good might just be that the owner does not care and is taking the business down with him or that the employees done care. but if there is a bigger problem then look at it very closely to make sure you can turn it around.

Online business are great but if everyone that owned a business did everything online where would this world be. Walmart did not get big by only using the internet. I believe that a brick-and-mortar should also use the internet as much as they can to advertise and drive business to their store.

**DerekS** · 11-23-2009 08:06 AM

Originally Posted by kameron

brick and mortar businesses are not an efficient business model. Stay online, work from home.

Are you serious? Tell that to the thousands of American business actually doing business with people face-to-face on a daily basis. Brick and mortar business are essential to our economy.

As for the original question- buying businesses and turning them around is an excellent way to get ahead. That being said, you have to ask yourself how much experience you have in the restaurant business, why that particular business is failing, and if you can realistically turn it around inside of a set timeframe (and corresponding budget/time allowance.)

**benthomas** · 11-24-2009 03:16 AM

Hi,

I think you should go for it. People all over the world, including me love Chinese food.
I would recommend you to change the interior and give it an authentic Chinese look.

Regards
Ben Thomas

**solutions111** · 11-24-2009 04:37 AM

1. Explain that you are not trying to offend them
2. Explain how you arrived at your counter-offer. If appropriate, discuss how you need to get a return on your investment, finance the deal, pay yourself a salary, or whatever the key drivers are to your price.
3. Ask them how they arrived at their asking price. See if they are basing it on some valuation, or perhaps they are thinking in terms of the net cash that they will be getting. If it's the net cash, there may be a way to get them what they want and pay only what you want, by structuring payment terms differently, making tax related decisions etc.
4. Consider the possibility that they don't really want to sell the business. I've seen that. Some people really don't want to sell, so they price it too high.
5. If appropriate, consider an "earn-out" where they can get the price they want but only if the business grows to the point that you can afford it in some future year(s)

**leonyu** · 11-24-2009 04:58 AM

Originally Posted by benthomas

Hi,

I think you should go for it. People all over the world, including me love Chinese food.
I would recommend you to change the interior and give it an authentic Chinese look.

Regards
Ben Thomas

Frankly, I do not agree with this suggestion.

There are tons of young Chinese, like me, who are infuluenced by Hollywood movies and American culture, I suggest make your restaurant an Amercian style one.

BTW, where is the restaurant located? Which city? Which road?

**OnePriceSites** · 11-27-2009 12:28 AM

I think the big question is how much experience do you have running a restaurant? Have you ever managed one? Been involved in a turnaround?? It's not as easy as it may seem. If you have never worked in out you are out of your mind.

**The Stealthy One** · 11-27-2009 08:38 PM

Two things:

1. The business is awfully new. Is it struggling because it's new, or because it was not well run?

2. If you're going to be the limited partner, how much say will you actually have in what changes are made? If you have ideas for improving the business, that is fantastic, but perhaps you need to take a general partner role in order to ensure those changes are effected.