Forums: Discussions for entrepreneurs and small business.

Hi Everybody.  I`m new to SuNation, and to computers.  Currently, because of the death of my Mom, I am out-of-town.  When I return home (NV), I am contemplating making an offer on a small (800 square foot) retail niche business (New Age Shop) which is currently a sole proprietorship with Enron-type accounting practices by the current owner.  She appears to have a very loose way of doing things, although the business has been around for 13 years (she`s retiring out of the country).  She wants to put my name on her personal banking account and take her name off (I won`t agree to this), she wants to let the suppliers know I will be her "manager" so I can do the ordering through the accounts she`s already set up, she`ll put my name on the lease (which runs 2 more years), and the business will transfer to me after I obtain the proper licenses and permits.  I know she was NOT creative with the accounting for the retail portion, but everything else (expenditures, etc.) seems "creative".  She wants to simply install software she purchased in her name onto my own personal computer and charge me more than what she paid for it (this is not legal and I won`t allow it as I found out it was registered to her personally).

I would love to own this shop, know I can upgrade it into a much greater revenue producing business, but what is the best way to offer her what I think the business is worth (1/3 of what she`s asking).  I did a "retail pricing inventory" the best I could because she claims she gets 100% markup. 

I would need to discuss an offer as soon as I get back to Nevada next week, so any suggestions would be appreciated.  I`ll try to get a profile in sometime soon too.  Thank you so much for any help you provide.

Welcome to StartupNation.

I don`t see where you`re getting anything worthwile from her. Anyone who is so "creative" with everyone else is going to be just as "creative" with you.

Considering the emotional issues surrounding the death of your Mom, now is no time to jump into the middle of soneone else`s problems.


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I am skeptical of what`s really going on.

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Vincent Wilcox (a.k.a. KRAKR)
Drummer
My band: Letters Make Words

First of all, I`m sorry to hear about your Mom. I agree with Steve that perhaps you should not make any major decisions when you are faced with all the emotions you must be experiencing.

Since this person has offered you so many unacceptable conditions (putting your name on her banking account??), I would be very wary of the things she is not telling you about her business. She says she gets 100% mark-up. Have you looked at her books so you can verify this?

Does she have any other offers on the shop? If not, and if she is desperate to sell, you may be at an advantage. Can you not just offer to buy out her inventory and open up your own shop with no more strings attached to her? (As you can see, I am not business savvy -- yet.)

As for ordering from the accounts she has set up, businesses change hands all the time. If she is in good standing, there shouldn`t be a reason why you can`t do business without throwing around her name. She needs to be out of the picture entirely.

Anyway, red flags are going up left and right with this lady. I would try to find a trustworthy accountant or attorney who would give you a free consultation on this.

Good luck!

 

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lori m

Thank you all for your replies and I appreciate your condolences.  My Mom always had an entreprenurial spirit, which rubbed off on me since my first lemonade stand!

The shop is something I`ve been investigating since before my Mom got sick.  The retail numbers seem to be correct (everything else is creative), and I`ve been investigating realistic numbers for other stuff such as rent, utilities, insurance, hardware, software, etc. 

My thoughts are to make an offer based on inventory plus 3 months retail profit and contingent upon my name going on the remainder of the lease, her removing the computer/software that is registered to her personally, opening my own bank accounts and credit card processing accounts, and changing the other pertinent necessary things for legal reasons. The website for the shop has not been updated in over 3 years and I would tell her to delete it because at a future date I figure a new one could be made.

I`m hoping to reach a CPA tomorrow, but what I get from her is a business that`s been around 13 years and is licensed for a New Age shop, which requires special licenses and zoning in Las Vegas (amazing isn`t it--a place where most anything goes, it requires a special license).

Anyway, thank you all for your replies above and any you give below.

Jillybeans

A couple of other thoughts:

• Is the license transferrable? Don`t assume it is.
  
• Is the lease transferrable? The owner has to approve.
• How old is the current inventory?
• Get a non-compete signed. Moving plans can change.
  

I would drop the 3 months profits from your offer because all you`re really buying is inventory, and probably that at an inflated price.

In addition to consulting a CPA you really need to consult an attorney.


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Steve had some good thoughts.  The license is not transferrable, but a new person cannot get one without the current owner filling out paperwork for you to get it as an employee and then after it is received and posted on the wall of the business for one day, it can be revised as an owner and then the ownership of the business can be transferred.  I would still need the regular business license, tax i.d., etc. in addition to a psychic arts license to have the shop.  The sale would be contingent on the lease being transferable (among many other things).  I would be paying what I figured to be a wholesale price on the inventory less 10% for damaged goods.

The non-compete is a fabulous idea which I greatly appreciate and never thought about. 

Would anyone know if it is a specific type of attorney I need?

Jilly

Jilly,

I am sorry to hear about your mother.  I have to agree with Steve, due to the emotional stress of losing a loved one it is not the best to make major decisions even if it has been in motion for awhile.  Besides the red flags mentioned above raise many questions....

After reading the above postings, I am wondering is the license a state issued license or a local municipality issued license?  Is it a professional license to conduct business in a regulated industry or a special conditional use granted under zoning ordinances?

The reason I am asking is because in either case you can request a copy of the statutes and/or ordinances which are applicable to the business you are thinking about starting. 

One of the red flags which stands out to me is the employee status for transfering of the license.  I am wondering what steps an attorney would advise you so as to ensure you are not party to misreprenting or falisfing licensing documents.

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Nicole Champagne
Email: influencialexpectations@gmail.com
Cell: (734) 262-3730
Soar With Influencial Expectations!

Nicole, the more I thought about that license the more unusual it sounded to me too.

The depth and breadth of knowledge in the SUN community and the willingness to help amazes me. I`m wondering, will she listen?



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Yes, I do plan on listening and investigating the procedure when I get back.  From what I understand from other shops of this nature, you must be licensed in psychic arts even if you aren`t a psychic.  It is easier to get the license as an employee to hang in a shop.  Then the transfer of employee to owner status is simple and only takes a day, but it is done through the proper channels.  It does sound weird, but the process has been reiterated to me by several people from several locations . . . I still plan to contact the County Business Licensing and State Licensing to find out more before I agree to anything. I do know it entails fingerprinting and a background check, which doesn`t worry me since I am a licensed foster parent.  IF I buy this shop, I want to do things in a legal manner.  My integrity is of utmost importance to me.  I did speak with a CPA today and got a bunch of things clarified, including the fact that taxes amount to about 45% of the profit and must be paid at least quarterly.  That does explain some of the creative accounting this owner does...and it makes me want to check the numbers extremely carefully, including potential future earnings.  Let`s face it, if the money to be made isn`t enough to warrant buying the shop, why bother.  There will be other opportunities in the future somewhere.

I`m just attempting to do as much homework as possible before I make a decision.  I don`t mind taking calculated risks, but I won`t just do something like this without knowing the potential outcome (without the use of psychics, I might add  ). I tend to take my financial matters very seriously.

I greatly appreciate all the input from SuNation Members!  You are awesome and I hope my suggestions to some of you are helpful too.

Jilly