Buying a cafe? Would you like free advice? (Offer now closed)

[mcboom]

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Put the business in trust that way you can split income to minimise tax and also get the 50% discount on capital gains tax when you sell it. Any accountant worth their salt can advise on this and set it up for you.

[The Cafe Ninja]

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bizexpert, post: 18152 wrote:

I am buying a small cafe restaurant. This will be my first business purchase and I am wondering what I need to do legally. I know I need to file for a business license but what else? We think we should form an LLC for protection is that correct? Should we both be on the purchase or is it better for taxes to only put one? Do we need a business attorney?

Where are you located? Sounds like you need to get a good lawyer wherever you are…if you are buying an existing business it should already have the relevant council permits…drop me a line: [email protected]

[beancounter]

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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

[The Cafe Ninja]

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beancounter, post: 20560 wrote:

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.

[beancounter]

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Dunn & Bradstreet suggest that some 85% of those businesses that do fail will do so in the first 5 years, and the Australian Government’s Productivity Commission cites ABS data showing 53% of business failures occur within the first 3 years – and 90% within the first 10 years!

Some businesses, such as Restaurants, experience the 80-20 effect in the shorter time of just 2 years!

[The Cafe Ninja]

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beancounter, post: 20621 wrote:

Dunn & Bradstreet suggest that some 85% of those businesses that do fail will do so in the first 5 years, and the Australian Government’s Productivity Commission cites ABS data showing 53% of business failures occur within the first 3 years – and 90% within the first 10 years!

Some businesses, such as Restaurants, experience the 80-20 effect in the shorter time of just 2 years!

Hi Beancounter – OK, so when you said “Most businesses go under within 5 years” what you mean’t was “if a business fails it is most likely to fail within the first 5 years” – I can live with that, but your comment implied that the majority of businesses (in totality) fail within the first 5 years! Looking at your stats I can see that you probably meant something altogether different to that.

[platform7]

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The Process Ninja, post: 2376 wrote:

Hi,

I’m currently writing a book about how to buy and run a successful cafe. I am looking for people who are going to buy a cafe as I would like their feedback on the topics I am writing in my book. It would also be great to get some details of other people’s experiences of trying to buy a cafe. In return I am happy to assist with the purchasing process and assessment of the business.

I can be contacted at [email protected] or 0400731029

Regards,

Craig

Hi Craig,

I’m starting an espresso bar from scratch. Would definitely be interested…

p7

[SurfSunSandCafe]

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Hi there Craig,
I am a true believe in Law of Attraction, and I have just stumbled on this site doing some research for my new adventure!
I am in the process of taking over an existing cafe on the central coast, it has been owned by a couple who are just burnt out!
This is a whole new challenge for me however embracing the road ahead.
I have my challenges ahead of me but I can see the potential in the business due to location and other variables, I am working on the business plan and have completed my mission statement on what I want to achieve.
I would interested to help you out with your book, and wish you all the success with it.
Regards,

Amanda Delalat

[The Cafe Ninja]

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SurfSunSandCafe, post: 22564 wrote:

Hi there Craig,
I am a true believe in Law of Attraction, and I have just stumbled on this site doing some research for my new adventure!
I am in the process of taking over an existing cafe on the central coast, it has been owned by a couple who are just burnt out!
This is a whole new challenge for me however embracing the road ahead.
I have my challenges ahead of me but I can see the potential in the business due to location and other variables, I am working on the business plan and have completed my mission statement on what I want to achieve.
I would interested to help you out with your book, and wish you all the success with it.
Regards,

Amanda Delalat

Hi Amanda, drop me a line if you would like some help. I provide a range of fixed price services (including business & marketing plans). You can view the complete list at http://www.thecafeninja.com. Alternatively I provide consultancy at $50 per hour + GST

Regards,

Craig

[email protected]

[The Cafe Ninja]

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Hi all, just to let you know that my book is now finished and available for purchase at my website.

[Otor2017]

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Hello Craig,
I am pleased to find this forum. What are your insights on running a bookstore cafe?
I have read from post above of the physical efforts need to run a cafe. What about hiring a person to run it and work 8hrs/day 10am-6pm, 5days/week. will that minimize the pressure? What will be the consequence on profit?
OR, should I rent the space to an independent cafe business owner? Again what would be the consequence of that?
My plan is still a draft, I may have more questions in the future.

Kind regards

[bb1]

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Otor2017, post: 247904, member: 98396 wrote:

Hello Craig,
I am pleased to find this forum. What are your insights on running a bookstore cafe?
I have read from post above of the physical efforts need to run a cafe. What about hiring a person to run it and work 8hrs/day 10am-6pm, 5days/week. will that minimize the pressure? What will be the consequence on profit?
OR, should I rent the space to an independent cafe business owner? Again what would be the consequence of that?
My plan is still a draft, I may have more questions in the future.

Kind regards

I hope you get an answer but Craig hasn’t been seen on here since 2013, and his last blog on his website was 2015. You may want to start a new thread, to get some current contributors to provide some advise.

[James Millar]

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bb1, post: 247906, member: 53375 wrote:

I hope you get an answer but Craig hasn’t been seen on here since 2013, and his last blog on his website was 2015. You may want to start a new thread, to get some current contributors to provide some advise.

A true vanishing Ninja.

Seriously cafe’s have to be one of the worst choices for the average person to try. So many moving parts and responsibilities. Lots of hours mostly unpaid and weekends. Where is the upside? Only for people that are well resourced and experienced in managing these operational issues

Helping build better businesses and better lives with expert financial and taxation advice. [email protected] www.360partners.com.au 03 9005 4900

[Author]

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