View Full Version : Finance/Small Business ownership etc.
Another left field question for some of the experts here. Especially this one as I know there are some small business type owners. I'm curious when it comes to a small business, esp. with the new court laws on how a business can be a person. What happens when a business fails? Does that debt go to the owner? Or is the owner actually clear of that past any personal investment they've made?
Other question is, I think I have a vague idea on starting a new business. But what about buying an existing business especially if it's currently profitable? Bank would be looking at business plan/merits of the business itself. Or would it largely based on your own personal assets?
Questions stem from basically finding a business directly involved in one of my hobbies may be for sale. Suddenly seemed like a good way to maybe have a career change. It's a hobby/store that I have another forum of people including an admin that works at the place. So I think I'd have a fair amount of support in terms of product knowledge that I might not know. The obvious big thing against me would be basically not having any college or education around running a business. I do have a practically fiance who is a long time billing lead/boss and I'd like to think generally academically I'm above average. (But am street-tarded) So bets would still be against a wise choice, but I'd think is at least in the realm of worth thinking about. All the better is for a fairly niche hobby, there is only one store in direct competition in town, none in loveland, and like one place in Greeley I've never been too. The best part is I've gotten wind that the competitor is going out of business which would help create a pseudo monopoly. (Another factor of why I'm considering it more than I would otherwise.)
So advice or just slap me down for a silly pipe dream.
College doesn't necessarily teach you the skills that you need, so don't start off by thinking that you are at some disadvantage. You need to be able to manage the money that you do have, and be able to make more money with the business.
You mentioned that there is little competition and the only other store you know of is going out of business. Why is the owner of this store looking to sell, and the other business going under, at the same time, with so little competition? Don't let that question scare you away, just find an answer to it. It may not be the right time for the market to bear the business idea. It should be your main priority to find out the answer, whichever it may be.
There is so much more to running a business than that, and I don't know that stuff. A good place to start will be to understand and be able to execute managing the money you'll start with, and being able to make additional money. Good luck.
SuperiorDG
08-17-2013, 16:35
It is really hard to answer this question. You might want to start with this read:"The E-Myth Revisited: Why Most Small Businesses Don't Work and What to Do About It" http://www.amazon.com/The-E-Myth-Revisited-Small-Businesses/dp/0887307280
Owning a business is only something you can truly understand once you have lived it. It's like living under your parent's roof and thinking that life would be so much better if you were out on your own. Once out, however, you realize how little you knew. But once your out, no matter how painful it is, you will never want to move back under their roof.
killianak9
08-17-2013, 17:13
Owning a business is only something you can truly understand once you have lived it. It's like living under your parent's roof and thinking that life would be so much better if you were out on your own. Once out, however, you realize how little you knew. But once your out, no matter how painful it is, you will never want to move back under their roof.
+1 worked for someone my entire career. Four years ago I had enough of making someone else rich. Took a huge gamble ( half of our savings- almost 65k) No prior experience owning a company or even in my niche industry for that matter! I have been blessed to have an awesome wife that supports me and helps keep me humble. The beginning was tuff , growing clients to grow your business , hell just to keep the lights on was a goal.
You only live once and If this is your dream, only you can make it happen.
FYI , I'never attended college and graduated hs with a 3.0. Sometimes real world is better than what any book might teach you!
Good luck and keep us posted
Owning your own business is the best way to go if you have the drive to be successful at it. I owned my business for 2 years and made a pretty good living at it. I was on my way to getting a new business going when I knocked up my GF (now wife) and couldn't give up my health benefits.
I'm now on a 2 year plan to owning my own business again. The new business will flow enough cash right off the bat to be able to afford private health insurance. We have to make some significant lifestyle changes including downsizing our house because the business will cash flow but the first couple of years will be pretty lean.
Before jumping in and buying an existing business I'd recommend having an accountant review the books, tax returns and etc. I'd also take into consideration what the longevity of the business is and where you'll be capped income wise. Are the long term returns going to justify the initial investment and more importantly is it something that's readily available on the Internet at a much cheaper price than you would be selling it for locally?
Niche businesses can be very lucrative but they are often temporary because the thing they cater to can either be a fad that will eventually fade away or a larger big box will start offering the products you sell and offer them at a margin so small you won't be able to keep the lights on trying to compete with.
i'm on my 3rd business, the first two I failed at. Perseverance and sacrifice is the credo of the small business owner.
It is really hard to answer this question. You might want to start with this read:"The E-Myth Revisited: Why Most Small Businesses Don't Work and What to Do About It" http://www.amazon.com/The-E-Myth-Revisited-Small-Businesses/dp/0887307280
Owning a business is only something you can truly understand once you have lived it. It's like living under your parent's roof and thinking that life would be so much better if you were out on your own. Once out, however, you realize how little you knew. But once your out, no matter how painful it is, you will never want to move back under their roof.
Great book! Wish I had read it before I went into business for myself as well, (I read it a few years after the fact) it would have saved me several years of pain and suffering..
As far as the bank goes.. If you own the business you are liable for all debts the business acquires. As far as loans go, all banks are different. If you are a middle aged white guy forget getting credit/money from a bank, it won't happen. They will look at business records as well as your personal credit history, they will make you run through hoops and in the end find some reason to deny you. Most small businesses are financed via credit cards but based on my experience I would highly recommend paying cash for everything, buy only what you need when you need it using little to no credit. Things can go downhill fast.
My company is set up as a LLC and I file with the IRS as a S-Corp. All debt is considered mine, most business classifications are for general liability, not financial liability.
The other stuff scares me. Taxes, employee labor law etc. (2-3 employee's.)
Other business is more diverse, and I'd say seems to have wasted money on some more lavish things. Little less selection in the hobby area I'm in. The current store which is supposed to be making profit, wife is having him move elsewhere in state was what he said.
As far as dedication, the hope was since it's my hobby I could pour myself into it. I'm the type that wouldn't mind putting in 8 hours, 7 days a week as long as I can take off here and there. I have good credit, but without much collateral, I don't see it happening for just that reason. I could come up with probably 12k and that includes turning my car into a hoopty. Long term, I doubt I'd be getting say rich off of it. But if I could enjoy it and make say 40-60k + gf's job. (Whoops me at $25/hour atm) I'd be pretty happy with that.
To make some of the idea clearer and hoping none of the people at these places are on the gun forum. It's saltwater aquarium/coral/fish etc. Store I'm interested in sells just fresh/salt. I'd like to take it pure salt like Elite Reef in Westminster. The big money is on livestock/coral. Dry goods suffers from amazon etc. A few things in the trade have decent markup still though I believe. (Wholesale these new Chinese powerheads for say $40, sell for $100 and are way more powerful than the big name brand one that costs 350)
Scary thing I was thinking, I could actually if I throw away most of my free time still work my current jobs hours and 2 weekdays off make it into the store several hours each day also.
See if he will share the financials with you and go over how everything breaks down so you can see where all the money goes. Do you have the money to buy the business outright? If not, can you get a loan, will you need investors, will he do owner carry? This is important to consider because while the business may be cashflowing, does it currently cashflow enough to cover the current expenses plus whatever your financing will cost you?
Would you be willing to split ownership with potential investors if you can find them?
tmleadr03
08-17-2013, 18:45
Four almost five years ago I tried to buy an established repair shop. My financing fell through but the property owner where the business was at decided to buy the business and hire me as the tech/manager. So I basically with out risk started and ran a business for him. My first month I grossed just under 4 thousand dollars. That means I would have gone in the hole about 3K if it was my business. I took that place to the first full year grossing just under 200K total. That sounds great doesn't it? Honestly it is damn good. The business didn't make any money but in the first year it made all its obligations. The owner worked for free all that year and paid me a salary.
We sadly both got sick at the same time and the business closed. I am pretty certain the second full year would have actually made 300k gross and shown a REAL profit.
At the end of 2011 I decided to do it for myself. So I spent about 2 months talking to the banks. And getting used to the answer NO. That is as a disabled vet trying to use SBA moneys. The banks were not loaning money. I finally walked into a bank and had a banker basiclly lie about my income to get me a credit card and an overdraft line of credit for my checking account. And I have over 5 years of working in the industry that I started a business in. I also had at the time a high 700s credit score. And the business name had been active since 2009. Banks are not loaning money. But due to the duplicity of the banker I got a CC and a small overdraft line. I bought a truck and went out as a mobile service.
It sucked. It sucked so much that even if someone tried to hire me and paid me a good wage to do it again I would say no. Never again. But what it did was get my name out there and get me some reviews that helped jump start me when I got into a fixed location.
First three months in the fixed location after signing a 5 year lease I worked on a car 8 times, 6 of those times it was my own car. If I had had to pay rent for the first three months I would have been completely and totally fucked.
I am doing pretty good now. As I like to say I am not making any money, but I am making my payments. And I have jacked up my fixed costs monumentally. Snap On owns me. Seriously. I make payments totaling more then my personal mortgage to him (if anyone tells my wife this I will hunt you down and kill you). I have bought a second lift and paid cash and if I need a tool for a job and Snap On doesn't have it I just buy it. But, and it is a big but, I haven't gotten a paycheck since the first of last year. Every dime I take in gets rolled back into either debt management or equipment for the shop. And still the banks wont lend me money. I tried to get a line of credit to expand a bit faster and manage my debt a bit better and was turned down. And my credit score is still over 700.
If I had to do this over I would probably do it a bit differently. Ah well. It has been an adventure and every day I am happy to go to work. Even though my boss is a raging asshole. Before this year is over I will cut myself a paycheck. An honest to god paycheck. At least one. Because I want to tell people that I was able to get a paycheck before the end of my second year...
Look at why they are selling, why they are going out of business. These are really important questions. The previous owner for the shop I took over ran it into the ground. When I walked in I found out that the only parts store that would sell that business parts was Autozone. I spent the next month kissing ass at Napa, Carquest, and OReillys while hanging Autozone parts. I spent the next six months replacing the Autozone parts for free with Napa parts. So buying an established business is not always a good thing. And I will not let Autozone in my shop.
If you have any specific questions feel free to ask me.
tmleadr03
08-17-2013, 18:47
The other stuff scares me. Taxes, employee labor law etc. (2-3 employee's.)
Other business is more diverse, and I'd say seems to have wasted money on some more lavish things. Little less selection in the hobby area I'm in. The current store which is supposed to be making profit, wife is having him move elsewhere in state was what he said.
As far as dedication, the hope was since it's my hobby I could pour myself into it. I'm the type that wouldn't mind putting in 8 hours, 7 days a week as long as I can take off here and there. I have good credit, but without much collateral, I don't see it happening for just that reason. I could come up with probably 12k and that includes turning my car into a hoopty. Long term, I doubt I'd be getting say rich off of it. But if I could enjoy it and make say 40-60k + gf's job. (Whoops me at $25/hour atm) I'd be pretty happy with that.
To make some of the idea clearer and hoping none of the people at these places are on the gun forum. It's saltwater aquarium/coral/fish etc. Store I'm interested in sells just fresh/salt. I'd like to take it pure salt like Elite Reef in Westminster.
What about 14 hours 6 days a week? There have been a few times when I hit 60 hours on Thursday. Then worked Friday all day and some on Saturday.
Batteriesnare
08-17-2013, 18:58
I was about to say the same thing. I've had the awesome opportunity to work for two family businesses, and if the owner had less than a 70 week it was a slow week. I'm the second employee of my current employer and I'm lucky to stay under 65 hours a week - but I'd rather be in small business 65 hours a week than corporate business 40 hours a week for the more pay.
The bank decided to move up the completion date for the loan on a custom home. I started counting Saturday am and had 40 hours in by Monday evening. I lost track of the hours after that, but we pulled off the completion by thursday, barely.
What about 14 hours 6 days a week? There have been a few times when I hit 60 hours on Thursday. Then worked Friday all day and some on Saturday.
I love 12 hour shifts but that's when you get many days off. Certain elements of the store I'd think would be limited on physical work work. Unlike mechanic. Though on other hand, I know some of the business is aquarium maintenance. I never see the owner that much, but he may be the only or main guy to go house to house doing that.
When we had to remodel a unit after the eviction we thought we'd knock it out in one day. It was only paint and flooring. We started later than we wanted on Saturday and finished late Friday. Kind of. We learned the hard way to let someone else do the flooring. It ended up being way cheaper and faster to have someone else do it, bit it still didn't get done until Tuesday. The tenant viewed the unit on Monday with no carpet and moved in the next day. Time was of the essence.
I missed a great weekend with my wife and kid, but still had more fun than answering phones work all day.
RCCrawler
08-17-2013, 19:31
You've mentioned several times already about having time off. Owning your own business you never have time off, you should be the first one there, and the last to leave, at least for the first few years.
Remember, any minute you are not there you are paying someone else to be there.
SuperiorDG
08-17-2013, 19:34
You've mentioned several times already about having time off. Owning your own business you never have time off, you should be the first one there, and the last to leave, at least for the first few years.
Remember, any minute you are not there you are paying someone else to be there.
Always remember that when you are not there, you are still there.
spqrzilla
08-17-2013, 19:36
Another left field question for some of the experts here. Especially this one as I know there are some small business type owners. I'm curious when it comes to a small business, esp. with the new court laws on how a business can be a person. What happens when a business fails? Does that debt go to the owner? Or is the owner actually clear of that past any personal investment they've made?
You are confused. Your first sentence has nothing to do with your question. Nothing. There are no "new court laws" that do any such thing. You should not listen to leftie tripe about the Citizens United decision, it was just about the First Amendment.
A business that is an entity with limited liability like a corporation or a limited liability company (LLC) insulates its shareholders/members from liability for the company's debts if and only if the shareholders / members did not separately promise to be liable (like signing a guarantee for a loan to the company or guarantee a lease) and/or so long as the shareholders / members are not separately liable for the debt such as being joint tortfeasors (e.g. get into an accident while driving the company car) and so long as they did not do something else to pierce the corporate shield (talk to your attorney about this when you form a corporation or limited liability company ... or you used Legal Zoom and got no legal advice? Tough titties).
Firehaus
08-17-2013, 19:43
Great advice already posted. Can't reiterate enough about no time off and enormous work load with long weekly hours.
Fish stores our a hard business. Have you started growing coral in your basement yet? Did you know CJ still works a full time job that pays well? Hard to have a business that pays the owners salary, especially at first. A lot of times, the boss makes less than some employees, especially the hourly rate! Lol!
Cj the one at Elite Reef? Don't know the name.
@ zilla, I phrased it poorly, meant it as a question whether any of that ruling and preexisting laws worked that way. Why? Because I don't know hence the question.
I don't do vacation, and some of what I do in my free time could almost be done sitting at work. The time I guess still would suck, but not that it bothers me too much. The idea that I wouldn't be able to pay myself for quite a long while though is a problem. (How do you live in the meantime.) I don't have the $ to take a business loan if I somehow got it and just live off my savings for a couple years. (Existing profitable business or not.) He won't finance, so it would have to be via bank or a partnership.
Maybe in a decade I could be to where it would be more feasible. Maybe a miracle and the economy will be back to a good place too and loans flowing.
Firehaus, I have more $$ in coral than I want to think about. I've been losing some because of a move and having too many crammed together waiting for a bigger tank. Not too many super pricey ones to sell, just large variety and #. Not big on SPS, lots of acan/zoa/chalice/misc. (<3 frogspawn) Some of it's really taking off. I'm past due to chop down some damn leathers.
Firehaus
08-17-2013, 20:30
CJ and Heather own Elite, or they did last time I was in there ( over a year ago).
You just need a bigger frag tank! Want to by mine? :)
If you don't remember, you came to my place to buy some coral from my buddy and picked up a cleaner shrimp from me.
tmleadr03
08-17-2013, 21:21
One last thing. When it is busy, you are stressed about getting everything done. When it is slow you are stressed about not having enough money to make rent. Basically it is stress.
Firehaus
08-17-2013, 22:10
One last thing. When it is busy, you are stressed about getting everything done. When it is slow you are stressed about not having enough money to make rent. Basically it is stress.
Truer words never spoken!
I remember now, didn't know you were on COAR15 ;p. Still have all those corals, didn't die on me like some others. Still regretting spending too much on MBC's live sale. $200 I don't really feel good about. Granted the zoas once go colony will be great. The acans... one of 4 in same place in tank didn't like life. None of which looked as good as pics even in person under their lights. Yay photoshop. Looking forward to once setup maybe buying a few colonies at Great white.
Maybe no big store. But so many out of home coral shops. I'm thinking of starting a bhergia farm, then some frag sales here and there, at least I can pay for the hobby if not make it my career/business.
A lot of truth in the replies.
Your love of the hobby will not help you succeed. Working your ass off will help you succeed. Steady customer traffic will help. Keeping up on payroll (not your own), lease payment, cam fees, utilities, employee taxes, sales taxes, distributor bills, silly town/county/state fees...will help.
I haven't seen a 48 hour work week in 8 years. 60+ is the norm. Your employees are not invested in your business. Most will just want to collect a paycheck.
Do I want to go back to working for someone else? Hell no! But it's no cake walk.
ChunkyMonkey
08-17-2013, 23:26
I take my hat off to any independent business owner, more so to those who employ others. As far as not wanting putting too much time into your own business.. think 'passive income' instead.
I would probably will NOT own a business/corporation, unless I can sell an $1 product for $10 with all the cost (incl depreciation and taxes) of $5.
There are so many taxes that it isn't funny. Regulations, taxes, insurance, unhappy clients, vendors who are almost always late on their pay, etc. It is pain in the @ss.
When I was working at one of the small company located in Longmont, I learned how hard it is to run a business.
Every damn day has a meeting. EPA, CO haz waste mgmt, vendors, clients proj mgmt, client's accounting, engineers, sales team, corp attorney, you name it.
ChunkyMonkey
08-17-2013, 23:54
I would probably will NOT own a business/corporation, unless I can sell an $1 product for $10 with all the cost (incl depreciation and taxes) of $5.
There are so many taxes that it isn't funny. Regulations, taxes, insurance, unhappy clients, vendors who are almost always late on their pay, etc. It is pain in the @ss.
When I was working at one of the small company located in Longmont, I learned how hard it is to run a business.
Every damn day has a meeting. EPA, CO haz waste mgmt, vendors, clients proj mgmt, client's accounting, engineers, sales team, corp attorney, you name it.
ahh..but not all business/corporations sell product. Best kind of business out there is being the middle person or selling service. Brokerage, consultant, and so on. [Flower]
ahh..but not all business/corporations sell product. Best kind of business out there is being the middle person or selling service. Brokerage, consultant, and so on. [Flower]
LOL , okay, let me rephrase it.
I would probably will NOT own a business/corporation, unless I can sell a service for a $1.00 with all the cost of .50 (incl depreciation and taxes). :D
You are confused. Your first sentence has nothing to do with your question. Nothing. There are no "new court laws" that do any such thing. You should not listen to leftie tripe about the Citizens United decision, it was just about the First Amendment.
A business that is an entity with limited liability like a corporation or a limited liability company (LLC) insulates its shareholders/members from liability for the company's debts if and only if the shareholders / members did not separately promise to be liable (like signing a guarantee for a loan to the company or guarantee a lease) and/or so long as the shareholders / members are not separately liable for the debt such as being joint tortfeasors (e.g. get into an accident while driving the company car) and so long as they did not do something else to pierce the corporate shield (talk to your attorney about this when you form a corporation or limited liability company ... or you used Legal Zoom and got no legal advice? Tough titties).
Also 100% responsible for any tax debts even after Plc or corp goes under. (All board members, and the person who signed the return)
Great-Kazoo
08-18-2013, 07:20
EVERY reply is the same. many hours at the business, followed by many hours at the business.
Finances. Do you have enough capital to cover the business [ lease, ins, utilities, inventory , payroll, unforeseen issues] for a few years?
You get what you put in to it AND you must prepare yourself, mentally, for every unexpected piece of drama that employees bring [ wife, GF, BF, kids] to the job. When you hire someone, can and will they be able to operate, make decisions,, if and when you are not on site / available?
Is your business seasonal and how do you adjust for said times? Besides selling fish, coral, and all associated items. Are you going to offer seminars / tutorials on maintaining their tanks. Are you going to offer in home maintenance plans, lease a tank to small business (dentist, Dr, etc) for those who might like your product, but not want the hassle of cleaning , and upkeep.
The lease idea sounds like a smart business plan. How difficult would it be to market yourself to businesses as a maintenance person for tanks? Don't most of the tanks on the show Tanked go under after about a year because the tanks don't get maintained. Doing maintenance and consulting would really be able to utilize the hobby aspect for you with pretty much zero overhead. Plus you could sling live coral out of your basement at the same time.
Great-Kazoo
08-18-2013, 11:42
The lease idea sounds like a smart business plan. How difficult would it be to market yourself to businesses as a maintenance person for tanks? Don't most of the tanks on the show Tanked go under after about a year because the tanks don't get maintained. Doing maintenance and consulting would really be able to utilize the hobby aspect for you with pretty much zero overhead. Plus you could sling live coral out of your basement at the same time.
AND he starts building a clientele, BEFORE having overhead. If pumps are a decent mark up as the op said. Who needs a storefront for that and to sell live coral? Rethink the business plan, by omitting a storefront, and run it out of your house. This way you have no workers comp, SS payroll deductions for employees, lease, INVENTORY etc. You make the hours, you sell yourself, you build a successful business, THEN consider an actual shop.
tmleadr03
08-18-2013, 11:57
AND he starts building a clientele, BEFORE having overhead. If pumps are a decent mark up as the op said. Who needs a storefront for that and to sell live coral? Rethink the business plan, by omitting a storefront, and run it out of your house. This way you have no workers comp, SS payroll deductions for employees, lease, INVENTORY etc. You make the hours, you sell yourself you build a successful business THEN consider an actual shop.
Mobile service where you dont have to work outside in the weather is very good. Low overhead. Fixed costs will but a business under.
The site should build a business together. Too many cocks in the henhouse? No way, it will be a great success.
tmleadr03
08-18-2013, 12:37
The site should build a business together. Too many cocks in the henhouse? No way, it will be a great success.
Lol.
gnihcraes
08-18-2013, 15:32
Don't turn a Hobby into a business, it ruins the Hobby.
Do Business as a Sole Proprietor, less hassle with taxes. No employees, insurance etc.
Lie to the tax man about how many products you've sold. Better to show losses than profits I believe. (or make little money) Expense everything you can to the business. Car, Gas, Rent etc. (legally)
Cash is king, no credit cards.
I believe it is about 65% tax load on a business run by my father. (sales tax, excise tax, etc) tax tax tax tax.
Dad says, Two people tell him what to do, one he can lie to and the other he can ignore.
1. Government (lie)
2. Wife (ignore)
:)
Private investors, they already know how, where, when, and all the tax shit, what to do, etc.
Get a few at 20% (ie: 10 at 20k or so you get the pic). payment to ea at 5% per 1/4, buy out at 3 years.
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