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Originally Posted by beancounter  One of our clients bought a cafe - as Howard said- ended up with sleepless nights, lost all they owned, aged rapidly and their health suffered.
Some people are dreamers - nothing wrong with that, But just because you've had a coffee in a coffee shop and can make a coffee at home, doesn't qualify you to buy a cafe
Similar story with someone buying a DV rental shop. How hard is that to operate? Well, he was rude to his clients, diminished his data base, ended up selling his stock to pay the rent!!!!!
Most businesses go under within 5 years - many because they have no handle on their finances - cafes are hard - you buy raw food with no GST, then sell the prepared food with GST so there's a hefty BAS bill each quarter that they forget about till it's too late - we saw disaster after disaster with our cafe client |
Hi Beancounter - your advice is spot on - up to your comment about business failure which is quite simply untrue. The following is a section from the book I am writing...
In a rather wonderous 182 page document published in 2000 (“Business Failure and Change: An Australian Perspective”) our productivity friends share some fabulous facts with us, which I would like to share with you now. Are we sitting comfortably? Then we’ll begin…
“Contrary to common perceptions, most Australian businesses survive for a considerable time – for example, around two–thirds of businesses are still operating after five years and almost one–half are still operating after ten years.”
Ok, great news. Let’s hope those two-thirds of businesses are making loads of money – I’m not so sure, are you?
“Around 7.5 per cent of businesses exit each year – cessations account for around 80 per cent of exits (changes in ownership account for the remainder) - but most exits are not firm failures.”
Ok, so what they are saying here is that 7.5% of all businesses exit each year, but that of this 7.5% 80% are due to business failures i.e. going out of business. The rest are sold on to new owners.
“Less than 0.5 per cent of businesses exit each year due to ‘catastrophic’ failure (bankruptcy or liquidation).”
So you can sleep easy at night knowing that the chances of catastrophic failure are so low! It is only everyday failure you need to worry about!
“97.5 per cent of cessations involved small businesses (less than 20 employees)”
Uh oh!
“…while the largest two states, NSW and Victoria,
accounted for around 61 per cent of all Australian businesses in 1994-95 and 1995-96, they were responsible for approximately 69 per cent of all business exits.”
So if you live in NSW or VIC you are more likely to get into trouble…
“…businesses in urban areas have higher rates of exit than rural areas.”
So you run more risk running a business in the city rather than in the country.
“…areas with high rates of new business formation are also those with the highest exit rates.”
Think before you choose to open a business in that shiney new development…
“Retail trade has the highest overall exit rate of 9.9 per cent, followed by property and business services and accommodation, cafes and restaurants.”
OK, it’s bad, but not the worst!
“Small businesses are typically owner–operated. If the owner dies, gets sick or seeks a lifestyle change, business cessation is the likely outcome.”
In other words, all your eggs are in one basket – and that basket is you!
“Total exit rates appear to be significantly higher for very young businesses aged less than 2 years and lower for businesses over 10 years. In fact, exit rates of the former — at close to 10 per cent — are almost twice as high as the latter”.So, the longer you own your business the less likely it is that you will be forced to sell or go out of business. And if you are going to have to sell up or if you go bottom up, then it is more likely it’ll happen sooner rather than later.
re: Buying a cafe? Would you like free advice? (Offer now closed) 
