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.

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-Rev.../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.

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Originally Posted by SuperiorDG

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.

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+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.

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Originally Posted by SuperiorDG

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-Rev.../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.

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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?

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.