[escflorida]

Al, Yes that net is likely on the low side so the seller is finding ways to reduce taxable income. But, a $76K net doesn’t really support a $300K selling price. I’d be in the low $200’s on this acquisition. Basically, it’s a bit like buying a job. You can likely make significantly more per year as an employee and have none of the headaches of an owner. I’d feel different if the opportunity happens to come with an option on the real estate. If you’re a cash buyer then I think there are likely opportunities that create a mucher better long-term upside. If cash is an issue and the acquisition includes some creative financing on the part of the seller then I’d likely do the deal and bust butt to pay off the debt. Make sure there are no pre-payment penalties.

 

[escflorida]

Al, I believe you’ve made a good decision in wanting to buy an automobile mechanical repair business. I have opened, grown, and sold a dozen auto related businesses over the years. I’ve also bought a few that were existing businesses.

The best advice I can give is to be thorough in your due diligence. Read the lease terms carefully, speak to the landlord, review payroll dating back at least a year to make sure the exiting operator hasn’t given his employees a raise in anticipation of his exit, interview the major suppliers and review parts purchase history, have the seller leave a small amount of funds in escrow for warranty repairs/come backs related to his/her ownership, tactfully terminate and rehire key employees and have them sign/acknowledge your policies that might be slightly different than what they’ve grown accustom to.

As for the net profit??? Hmmm . . . that sounds a bit off. The labor costs related to techs will be job-based but in round numbers, a shop that does $750K in sales has a gross of $375K. The technician labor costs, cost of parts, and sublet ops cost are already accounted for so deduct all the other expenses from $375K and see what you come up with. Rent, insurance, payroll taxes, and advertising will be big numbers. And, a manager that is running a $750K operation likely makes between $60-75K. After the manager expense there’s only $100K or so left over IF the seller is really netting $200K. Create your own performa based on known numbers.

Anyway, good luck to you. Never discount your oil changes . . . that’s a mistake.