I was looking at a pizzeria to buy… i ran all thenumbers by you guys and i think we all agreed it was worth it. Now i have a question,… I have the option to run the place becuase the owner is going back to his old job. I am having problems getting funding so here is my question. I might work out a deal where i am slowly paying the owner off for the place, how exactly would you guys work this situation. I would rather buy the place then just be the manger… how could i make this deal appealing to the owner so we both benefit from it. I just graduated college so i dont have the cash to buy it and my partner backed out so my funding is gone… what do you guy think?
consult a lawyer…
are there enough profits & cash flow to pay the owner what he wants, say in 3-5 yrs?
Whats in it 4 him?
Where is your security/investment?
You might get dissatisfied and and walk away, so where would that leave him?
When you solve those questions, you’ll have your solution!
Seller financing is very, very common when it comes to business acquisitions. Especially pizza places since they tend to have some difficulty qualifying for conventional financing (mostly due to the fact that most owners out there get creative with their tax returns). I would NEVER buy a pizza place that could not qualify for bank financing where the owner would not carry half the note. It is entirely too easy to be dishonest on sales claims.
Usually for seller financing, the terms will be 3 years, maybe 5. You can expect to pay between 8 and 10%. I would fully expect this guy to require at least 50% down, maybe more.
I can’t imagine any scenario where you could not meet those terms that would be favorable to the seller.
try the manager position maybe you wont like it,easy out.if you do a good job and you like it then talk about buying.much easier for owner to take a chance on you…
The best bet is to try to find the funding. I’ve seen 2 things happen. You become the manager, and he always has total control. He can make you feel like your job is in jepardy, like you’re not doing things right, etc. He’s still the one calling the shots.
I’ve also seen guys just out of college who have let the seller finance the acquisition, and they feel like the seller always has control over them. They have the potential to pull the loan and ask for the money if their personal cash flow runs dry. It can get ugly.
Before you let the seller finance this, make sure you know who your dealing with. Don’t get into a bad deal, especially this early in your life. I know you probably really want this place, but make sure you put all of the negative things that could possibly happen out on paper first, and think about what you would do if they actually did happen. The last thing you want is a bankruptcy on your name at age 23…not to mention all of the stress that would come with it.
Just my opinion, it depends on the situation, who the seller is, your financial situation, etc. Just make sure you know who you’re dealing with if you’re going to put your financial destination in his/her hands.
Mike, I feel for ya. I’ve been there. I’ll give you a little advice and you take it for what it’s worth:
Never try to push a bad position.
If the deals not right, don’t force it for the sake of doing the deal. I’m sure people have told you over and over again til you got sick of it, “there will be plenty more pizza shops just like this later on. Just wait.” People told me that in the past and I, of course, never listened and tried to make bad deals work (with no success, of course). Now that I look back on things I am soooo thankful those deals never came through.
So, if you want this place make sure the deal is squeaky clean. Usually, when an owner gets a little “fishy” about something… there’s a reason. Make sure you do your homework from a 3rd person’s perspective. If you can take an outsider’s perspective and it looks good, go.
With that being said… no money = no business. It’s impossible to open a business with no money. You have to establish your corporation, pay for new signage, pay rent deposits, utility deposits, pay for health permits, business licenses, cereal malt licenses, come up with starting cash for the till, start up your business checking account, hire an accountant, etc.
I don’t care how good the deal looks. If you don’t have a minimum of $10,000 in cash for these startup costs and $10,000 in cash for operating capital it’s not going to work. I know you think you can get in there and use the money from your initial sales to pay for all these things and that you can raise sales quickly to get yourself out of an upside down position. The reason I know this? I was there once, too. Mike, it just doesn’t work like that. The money you’ll be bringing in from sales will go to paying your payroll, your rent, your food bill, your payroll taxes, your utility bills, etc.
Now, if you are anything like I was when I was younger, I’m sure you’ve already made up your mind that you want to go for this no matter what the costs because you want your own store. I know you don’t want to hear, “just wait until you’re financially ready”, so I won’t tell you. Just be smart and be careful. -J_r0kk