Looking To Buy an Existing Bar

[Haysoochreesto]

Hi all.

I've owned one business and worked closely to run another for 12 years. Neither were bar related but both dealt with inventory, labor, and insurance costs; all the stuff common to most businesses. However, I know that every business has its own quirks and peculiarities and this seems to definately be the case with the bar biz, so I'm going to hire my uncle, who used to own a small bar to help me manage whatever I may find until I feel comfortable doing it myself.

I'm looking for a bar that's likely in the 200-300K range, so it'll be a small place. I understand that finding financing can be difficult and that's what I would prefer to do. BUT, I don't need financing for a place in that price range, I can buy it cash.

Also, I'm really concerned about someone cooking their books to make the place more profitable than it really is (if at all). Like I said, I've been a business owner, but I've never bought an existing business. Another thing I wonder about is if an owner may be underreporting what their bar does if they've taken lots of cash over the years that they didn't report. I doubt that's a serious possibility but one can hope for small advantages once in a while.

And while I've talked to my uncle quite a bit about just how much one can expect to gross and net from a bar, I would like to hear from as many people as possible what their thoughts are on this. After all, the idea of owning a bar may be fun but that idea swirls down the crapper really quick if the thing isn't making any money.

I understand that a lot of my questions are vague and inspecific, but I didn't want to write a novel for my first post. So any answers are greatly appreciated----please feel free to write paragraph after paragraph of your opinions and experiences if you want to. Thanks!

[excellentbars]

Hey Hay

I believe that you need to look at your numbers and the prices of liquor license in SoCal...I just got off a 1 1/2 confrence call with a guy in SoCal and he is opening a place there....
Are you looking more for a bar and grill or restaurant and lounge? can you be a little more specific.....if you are buying a bar in Socal for $200K to $300K you need to look at what you are buying real hard......as you are buying the licencing and a lease....not a business......

Cheers
Chris

[Haysoochreesto]

Hey Hay

I believe that you need to look at your numbers and the prices of liquor license in SoCal...I just got off a 1 1/2 confrence call with a guy in SoCal and he is opening a place there....
Are you looking more for a bar and grill or restaurant and lounge? can you be a little more specific.....if you are buying a bar in Socal for $200K to $300K you need to look at what you are buying real hard......as you are buying the licencing and a lease....not a business......

Cheers
Chris

I'm looking for a bar only type of place. I want to start small. I'm fortunate in that I don't have to "make a living" so to speak right off the bat. I want a place that has a solid customer base but also has room to improve. To me, this means that I have 6 months or a year to learn the business and become familiar with it's details. Ultimate failure or success isn't riding on this first project.

I want a small neighborhood bar. Something that I can make some changes to and maybe increase sales by 10-20%. My experience is in sales, I've done it for over ten years. If I have nothing else going for me, I do have a personality that allows for others to feel they have an almost instant rapport with me. It's not a tangible skill, but one that's worked for me well my entire life.

I understand what you're saying about buying the license and the lease, but I'm not clear about what you mean by not buying the business. The way I see it, I am buying a business that's already up and running; there's a certain cash flow, regulars, etc. Whether it's a money-maker or not is something I'll have to try and figure out. I think that's where the risk comes in.

But please, clarify what you mean and if you have ANY other tips, ideas, insight, anything at all that you think is important, please, let me know. I am all ears.

Thank you.

[rootsreality]

Given that you want a small neighborhood spot and seem to be into this as a long term venture rather than focusing on a trend, I suggest that you try to find a location where the real estate can be purchased too. Rent can be a huge expense. If you own the building you control your destiny a bit more.........and get some market appreciation as well.

In California pricing of the on-sale liquor license can vary greatly from county to county. I don't know ranges for SoCal, but sometimes crossing into the next county can make a huge difference, so keep an open mind as you check out the marketplace. (I am assuming you'll stay in the Riverside area?)

Check www.bizben.com www.loopnet.com

[excellentbars]

But please, clarify what you mean and if you have ANY other tips, ideas, insight, anything at all that you think is important, please, let me know. I am all ears.

If you are buying a business for that cheap....their is no business.......you will need to reinvent the business.....or reinvigorate the business..


Cheers
Chris

[rootsreality]

and what the poster is looking for.

I have seen plenty of viable bars in this price range but they won't be in San Francisco, New York or Las Vegas. They could easily have a solid base of regular customers and enough cashflow to support themselves. They probably won't support extensive upgrades or remodeling costs however.

If there is a willingness to try a turnaround you can find failing bars in lower price ranges. Just be sure to have a plan for a new concept. You'll need to budget for big changes.

My bar is a turnaround project. It is in a small but growing rural community. The previous owner had it for 25 years but wasn't running it well. (Granted he was 78 years old.) I bought it in a package with the business, the liquor license and the real estate. The "business" was basically the fixtures. There was no cashflow to speak of. (Actually I think there probably was decent money coming in but he was taking it all off the top.)

I sold or trashed most of the fixtures - booths, tables, chairs, sinks, appliances - and remodeled. The only thing I still have from the closing inventory is the walk-in cooler and the mop bucket. Everything else is gone. That's all fine with me. In the sales contract the business was valued at $5,000. Yup, you read that right. The liquor license was $50,000. The rest was real estate, and even that was a great deal. With the improvements I have made the real estate value has nearly doubled in value even in this down turned market.

Stay positive and be patient. Keep your eyes open for a great deal and sooner or later you'll find something that works for you.

[rootsreality]

When you are valuing the place consider the fixtures and cashflow separately. Give each an estimated value. Value inventory separately from the business price negotiation. Fixtures should be valued at current market value. What the current owner paid for them is useless information. There are accepted formulas for valuing the cashflow, provided it can be substantiated. Use the sum of these as your starting point for pricing the business regardless of the asking price. Everything is negotiable!

Some sellers need a big reality check. A local competitor in my town sold six months ago. The seller started out asking $1.3M. When the deal was done, the actual selling price was under $600K and in my opinion even at that it may have been overpriced.

[etosh]

Ok.. Im in the same boat ....
Im looking to buy a neighborhood bar in Ohio. The current owners are asking WAY too much. It averaging $25000 per month in sales. The rent is $1200... after crunching their books it looks like it made net. 31,0000 last year before taxes. I have every receipt for every nut and bolt they've bought. There are some things that bother me, but I will get into that in a later post. They are asking $225,000 for it.... I dont think its worth anywhere near that. It does have a good customer base. I know it could do better. My problem is ..... How do I valuate this place... I've read net. x 3 I've read net x 2 ... How do I valuate it.... ant suggestions would be great. Love the forums here... first time poster about to go postal !!!

[BarBoy]

Ok.. Im in the same boat ....
Im looking to buy a neighborhood bar in Ohio. The current owners are asking WAY too much. It averaging $25000 per month in sales. The rent is $1200... after crunching their books it looks like it made net. 31,0000 last year before taxes. I have every receipt for every nut and bolt they've bought. There are some things that bother me, but I will get into that in a later post. They are asking $225,000 for it.... I dont think its worth anywhere near that. It does have a good customer base. I know it could do better. My problem is ..... How do I valuate this place... I've read net. x 3 I've read net x 2 ... How do I valuate it.... ant suggestions would be great. Love the forums here... first time poster about to go postal !!!

It is worth no where near $225k!!!! If their owner benefit (SDC or seller discretionary cash) was $31,000 last year then this place is worth $90,000 tops. I'd let them sit on it for a while. Better yet have a friend of yours go in there and tear them apart and laugh at them that "this place isn't worth $75k, sorry but it isn't". They'll be all offended and then remember that nice man who offered $90k.

I'd be real surprised with those numbers if they are even making $31k/year. And that's probably with the wife bartending! I'd walk from this deal.

[JamesH]

I had a Purchase Agreement on a bar that was claiming $130k/Yr SDC (with a full time manager, the owner did the books) for $195K no real estate.
During "Due Dilligence" we discovered an "accounting error", the place was really making about $65k/Yr. We lowered our offer to $100k, they pulled it off the market.... We moved on....

James