Rose colored glasses

[shoottx]

Welcome to the world of small business!

The joys and pains of a small business are beyond comprehension. As several have said, owning a small business is more than a full time commitment.


It appears you are leaning toward this challenge, if so you need a walk away decision going into the negotiations. The business is valued at the point of sale. The value you can add after the sale should not be included into the sale price. They are the "profits" you will add to the business, your success if you will.

My concern as you have described the business are as follows. Are the figures in the books accurate? If they are accurate then there are problems either with the business model or with execution of the business model. If they are not accurate, which is often true in single owner small businesses, what are the liabilities and jeopardy created by the inaccuracy, (ie unpaid sales tax, or other taxes)

The other common issue with valuing a small business is the in kind use of the business for personal use. Depending on the business it may be expensing items that would often be a personal expense to some one else. Phones, computers, trucks, insurance etc. The in kind use of a business must also be factored into the decision.

So if you do buy the winery you could start a private label business ith labels like:

BT3K - a unique inexpensive vintage!

[Tom Slick]

Just be honest, you don't have to go into detail, just tell him it doesn't meet your expectations and you aren't interested. If you ignore the current financials and think you can make it work then you have your answer.

a slight side note: Never do business with friends or family that you can't afford to lose. Your biggest issue here is you don't want to offend the guy so you are figuring out how to walk on egg shells. Business is not a nice touchy-feely place, money talks.

[Uncle Cracker]

Maybe your decision will have more to do with your interest in wine-making than in money-making... To use your woodworking analogy, most (not all) of us view our investment in tools and equipment as a way to do the things we enjoy doing, rather than making a living. But the point is that, even given your woodworking interest, you wouldn't buy a shop for twice what it was worth, would you?

[cgallery]

I agree with the first part. But it does have value, and that is the equipment and build out. It is capable of making money though. Getting rid of the franchise agreement and it would have made another $17K last year, which is why I said the franchise agreement is a loss. Being willing and able to work more than two days a week would add in another $15K+, there is no sense in paying someone to work on the slowest days. Advertising well adds more, if done properly. The problem is, these are things I bring to the table. Value I can add, not value that is there at the time of transaction.

He wants to sell. I guarantee you he wants to sell. He wants out bad. And there are a limited number of buyers for his business. You may be IT.

Maybe he doesn't think he can do it for any less than 50%. But I'd tell him, "I can't afford 50%. Nobody can in this economy." Have some comps. If he has some gear he paid a lot of money for, find some actual auction sale prices in the last year or so. If he paid $10k for a vat, show him one that sold for $2k.

When buying or selling a business, you need to be persistent more than anything else. Make him a low offer. Explain why it is low. Let him reject it.

Then call him a few days later and tell him you still wanna buy it.

Then again in another week. Just keep calling him. Keep it friendly.

I guarantee you that after you've made your offer, he will remember it each time he writes out a payroll check. Or doesn't want to cover a shift. Or would rather go fishing. And one of those times that you catch him on the phone (ask him out for lunch) will be the time he will bite.

[Tom Slick]

What type of franchise for a winery? Is it like a brew on premises brewery? is it brand name association? etc.

[jonmulzer]

The franchise is called WineNot. Like a brew on premises, sort of. They are based in Canada so their American model comes directly from the BOP/FOP market there. Same concept. Wine made from juice instead of fresh grapes. Luckily, that makes a pretty darned good red wine if you use upper-end juice.

The other good thing about it is, if I get away from the franchise agreement, I am working out an agreement with a local orchard that I get my cider from currently to make hard cider and apple wine to purchase and then make wines from scratch. I make an apple wine that is REALLY good, and a hard cider that at about 9% alcohol and carbonated goes down way too easy. A couple of those will make you plenty tipsy! The apple wine is a huge hit with everyone that tries it. My new neighbor who has always been a big red drinker would buy every case of it I have squirreled away, if I could sell it.

Living in the midwest, most people here have a VERY sweet palette. I like plenty of fruit wines, but most are way too sweet for my tastes. So over the past few years I have been working on my own recipes. Just like I enjoy hard cider on a hot summer day, but Woodchuck and others just have way too much sugar for my tastes. So I make my own. I just like making things, which I think is why woodworking appeals to me. Winemaking is very relaxing for me, and not just because one of the most important parts is tasting it! Being in the basement with the airlocks gurgling away is therapeutic.

Odd thing happened today though. I was planning on helping out at the winery today regardless of what happened and planned on meeting with the owner. Well, he never showed up. He did not even come in today. Sundays in the winter are very slow usually. At least there. Three part time workers on the clock all day today. It was a loss of about $40 by the time wages are paid. One worker would have been sufficient just to do sales, and that could easily be the owner. Instead three were paid.

I have to think he knew what was coming.

[Tom Slick]

I know a guy who owns a BOP that was previously a franchise (Brew Factory). The franchise BOP idea failed miserably but he has kept this brewery going by producing a retail product along with the BOP. Another key has been networking with other breweries to co-op and place larger orders on things like glass.
This is their website http://www.centralcoastbrewing.com/ email George if you are interested.
This area is a "wine region" so there are plenty of wineries. We specialize in Zinfandel, Merlot, etc, all of the strong dry reds, not many sweet wines. In fact "Sideways" is about an area just south of here.