My road so far...

[JackMaverik]

Hey all, I've seen excellentbars and allanjustallan and a few others document their process from the start of the project to the completion. I thought I'd throw my hat into the ring. So, be ready for reading.

And awwwwwwwwwway we go.

I've been a musician all my life and that has led me from playing in bands and touring the country, to getting off the microphone and behind the scenes. I spent a few years managing bands, and that led me to mixing live sound at concerts for a living.

One of the clubs I did occasional work for kept asking me to mix there more often (as the bands that played there often requested to have me mix for them). So I started mixing more and more and I guess you could say I drank the Kool-Aid.

Initially I was not too impressed with the establishment. The PA was was pretty shoddy, the talent wasn't that great, and it was really just a gig for me.

Over time I noticed the owners committment and dedication to the place. Slowly we became a fairly well oiled machine, and got on the same page. In a couple short years we were able to build something very unique in the Phoenix valley, and we started landing more and more national acts, and slowly became THE venue to play while in town.

At the time there were three owners, which I expected to cause to some internal strife and I was right. Eventually one of the owners stopped getting along with the other two (or the other way around) and it seemed that all management progress was halted/stalled for about 6 months. Finally the other two owners wound up buying the other owner out and he parted ways with the club.

Through all of this, I just kept a smile on my face and learned as much as I could. I asked a lot of questions and slowly got a feel for the business. I'd ask small simple questions "Hey how'd the bar do tonight?" on big nights and small nights. "Hey, how much are utilities in this place? I bet they're brutal!" and then they'd tell me. "What's rent for a place like this like?" etc. I spaced these questions out over a year or more and slowly got a feel for the financials of the business.

Slowly - owner burn out started to set in for the remaining two owners and their frustration level mounted. I started doing more and more "non sound guy" work as wanted to do less and less management work. I started doing more booking and promoting. I started making executive decisions on purchasing new sound and light equipment. Coming up with new marketing and vibe ideas for the club.

One day I came in with some ideas on the music scene and a modification to the clubs booking philosphy. I started talking to one of the owners about my ideas. Halfway through the story he looked at me said, "Look, why don't you just buy this place and you can do whatever you want."

I laughed.

He then told me that he was serious and that they would make me an incredible deal. They were burned out, and wanted to go do other things. They wanted to go into other industries, were sick of the responsibility of owning and operating the place. They were sick of it.

He tossed out a number that really blew me away. I then sat down with both owners and hashed it out. We were all on the same page. The bar is worth a lot more than they were asking (probably 100,000 dollars more) but how they wanted to "keep it in the family". That this thing they created over the last 6 years doesn't just disappear. That meant a lot to them, and was one of the main reasons they held on for the last year.

It's always been profitable, however, not as profitable as years past. They attribute this drop off in productivity solely on "owner apathy". They just weren't putting the work in anymore. They had adjusted their standard of living so high that a bad weekend, or a bad month was just killing them. It was time for them to get out.

So that started me in motion.

I got on the phone with everybody I know who had money. Other club owners that I had worked for. Guys I used to manage who had moved on to other industries and made lots of money (Real estate development). Even national touring musicians who receive a lot of money writing songs for other musicians (such as Kid Rock, Sammy Hagar, etc)

Everyone I talked to were really excited about the ideas I had and gave me "soft confirms" on the investment capital I needed.

I was looking to have funding in place by Oct. 1st, but a conversation with one of the current owners accellerated my time table. It seems as though burn out is setting in quicker and quicker and they've started squabbling between themselves. One of the owners told me he was going to place it on the market the first week of September.

I did not want this to happen.

I spent two sleepless nights, or 20 + hours creating and designing my business plan.

Then this week I've been going around, and getting hard confirmations from my potential investors who expressed interest.

Last night I had a meeting with a fairly large investor and did a walk through of the venue, showing him what we currently have, and what I want to do with the place. He will be cutting me a check next week - Success!

Now today at 10:30am (it's currently 8am), I have a meeting with my largest investor. He'd be providing me the capital I need to purchase my liquor license, however I'd be securing his investment with the liquor license.

So if this mornings meeting goes well - I should have enough start up capital to purchase the place!

Wish me luck!

[Havensloft]

Good luck Jack. I hope all goes well for you.

[Michael Black]

I love to see people taking on the bear- good luck!

[David]

Rock on dude.

Good Luck of course.

[Estefon]

I was looking to have funding in place by Oct. 1st, but a conversation with one of the current owners accellerated my time table. It seems as though burn out is setting in quicker and quicker and they've started squabbling between themselves. One of the owners told me he was going to place it on the market the first week of September.



Slow down Jack. Don't let him push your timetable. Let him put it on the market if he's so anxious. If he's willing to take the hit in broker fees (around 10%), you can still buy the place from a broker with no skin off your back. He's going to be on a one year contract with the broker and the business will not move for at least 3 months... trust me on this. I've been shopping for another bar for 6 months and none of my prospects have sold yet.

Get an honest 3rd party valuation of the business and find out what they think it's worth. http://www.therestaurantbrokers.com/ will to it for $1,000 in the valley. Talk to Ruly or Dave. They've been doing it for years and it will prove to the sellers that you're serious.

I also see problems with the liquor license. If the investor wants to front you the money with the license as security, the landlord will need to subordinate the license to your investor. The license must also be in your name, not the investor (AZ law). Surrendering it if default occurs is not an easy task.

I also hope you're forming your own entity and forming this as an assett purchase. Buying the existing owners shares is a very bad idea.

Purchasing an existing business is a long and expensive process. You'll need a good lawyer and at least 3 months worth of time. Don't rush this JackMaverick. There is no such thing as an opportunity of a life time. Your goal is to seek opportunities and be opportunistic.


Breathe,

Steve

[JackMaverik]

Hey thanks for all the advice. That stuff is great! I emailed you back a few days ago, and still would love to come down and sit down with you.

The value of the business is a lot more than they're selling to me for. In fact, if I were to flip the business with the liquor license and inventory, I'd probably break even/make some money - however that's not what I'm interested in doing.

The liquor license situation is common practice. A lot previous owners do a carryback on the liquor license or an Escrow situation with the liquor license as collateral. Also there are guys who purchase liquor license and sell them to businesses in an amortized situation (say 12% over 3 years) . A bunch of clubs in Scottsdale got their liquor licenses that way. I'm not uncomfortable with that situation at all.

I agree with you that I shouldn't feel rushed, and I don't necessarily feel rushed, but it would be in my best interest to get this deal done as soon as possible. I trust that if you saw the place, the numbers, etc you'd see that it is, in fact, a great deal.

I spent 20+ hours on my business plan, but I'm really happy I did, and very proud of that thing. I can show it to you sometime if you would like.

Thanks for everyone's well wishes.

My "yay or nay" situation from my potential liquor license lender is postponed to early next week as he gets with his accountants and sees how much money he has to play with.

[Innovation]

Good stuff man, it shows that hard work and effort have paid off.

Hope it all goes well for you

[Estefon]

I just sent you a PM JackMaverick. I would love to see your business plan if your willing to share it.

[BostonDave]

Sounds awesome! I think you're musical background mixed w/ work experience in the industry will prove to be beneficial to your success.

Like others said don't rush too much. I'm in a similar boat as you and we've been trying to secure a place since February and are only now moving forward. I know here in mass the liq license transfer process takes at least a month or 2 to get a hearing with your city/town and then for it to go the state. They do background checks etc and will not just let anyone have a license. Take that into consideration.

I'm assuming there is no real estate involved here and you would be assuming a lease? Have you tried contacting any local banks, credit unions, co-ops, etc.? Most will be unwilling to work with a club/bar but there are a few that we have found that don't mind. They can use the liquor license and any other major equipment as collateral for the loan. SBA (small business assoc.) financing might also be a potential option for you if anything falls through with your private investors. Financing is a crazy thing and I have found that being creative and making as many calls as possible to every possible lender has been super beneficial.

Good Luck and keep us updated!

[ca. club owner]

Sounds like you are on your way fella... Stay active an get plenty of rest. Buying a place is not an easy task, I can tell you from EXP.. Its a whole lot of reading... going to have alot of paper work coming your way.

I am with the other fella, dont be in a super hurry. I understand the dream and the good deal part. But you have to make sure the deal is good for you when its done. Not when it starts.. When you rush, alot of deals dont end up being what was stated. I am by no means saying your deal is that way. Just shedding a lil light on a few clubs I was in the middle of buying and it had a lot of hiden parts that came out when I slowed the deal down an started wondering about a few things that didnt seem right...

Stay on your toes, and keep your eyes on everybody. Because the club deal could be great, and the investment deal could be a nightmare. or vice versa. Neva stop looking for funding, because the golden rule is this. " no deal is good until the money is in the bank " Alot of investors drag there feet for many reasons. Saying there all for it, but they have to move some cash around or this an that.. Next thing you know its 2 months later.. No matter what anyone says about investing in your project. Listen to them an do your best to close the deal. But neva stop looking for funding because if for some reason it dont work out. You have another investor you can turn to. You dont want to get stuck. There are a few VC compaines out in AZ I dealt with many years back. They are interested in club stuff, I was just not willing to open a place in AZ. Its just to dam hot for me during the summer.. I will see if I can find there contact info for you. You can always just google VC companies and get to calling them up and seeing who wants to hear what you have to say. Wish you the best.. I been through what you going through, more than once.

ps... get plenty of sleep.. trust me you going to need it.

[JackMaverik]

ca club owner! Thanks for your kind words. I agree with you on the sleep thing. I've felt like a zombie the last month. I probably spend at least 8 hours a day reading a researching and understanding just exactly what I'm getting myself into. I have been around the day-to-day in the club/bar business for years, but actually having to do it is a completely different story.

I haven't stopped talking to investors since the day I got word that this deal was a possibility. Even the investors that have given me a "When and where should I cut the check", I don't count on until the money is in the sellers hands and cleared the bank account.

I have just recently thought about a Venture Capital firm. I have no experience in that area, is it simple as calling them and telling them what I'm looking for? Some advice in this area would be greatly appreciated.

And a big thanks to Estefon for taking the time to go through my business plan, tearing it apart and giving me some insanely great advice!

Thanks again guys. I'll keep everyone updated. Currently I'm going into my work weekend (mixing and such) and will know my current financial possibilities on Monday or Tuesday.

[BARTENDER 54]

Jack,

Now I realize that every state has their own little thing, but here when dealing with Realtors/ brokers, if you're already dealing on a property with the owner, you can get an exclusion where you don't have to pay any commission.

So ask if the owner if he would tell the broker/realtor that you are on the line to buy and you should be excluded from any commission to them if you buy. There is NO reason they should get a commissioned when they had nothing to do with the sale.

I have a friend that is a commercial realtor here. He told me that a guy just listed a bar with him, just to get the buyer that the owner had been dealing with to get off the pot, and it worked...listed it on Friday...Saturday he had his money. The little Hispanic dude didn't know about the exclusion thing and thought he was going to lose the whole enchilada so he jumped.

MAYBE A LESSON LEARNED ?????

Anyway good luck,
Rick

[JackMaverik]

Hey Rick,

Thanks for the info. Though this isn't a real estate deal so I don't know if those laws apply to me. The sale includes a token liquor license, assets, inventory and Goodwill. The space is leased.

I don't think there is a "rush" so much as I am pursuing it aggressively.

[ca. club owner]

Jack.... sounds like you are on your way if you felling like a zombie.. haa.. Its all ways good to have 1 or 2 people who have nothing to do with your project an that have some exp in the business read it over. As well as someone who is great with grammer. For a few reasons, if you wrote it you have made many many changes to it. Thoughts have came to you when you are driving, eating an half ass sleeping. So you have been cutting it up an changing it yourself. Now the only issue is, it will look perfect to you. haa But there will be errors in it and if you have a few people look at it like you have it helps make it well rounded. An having someone who is good with grammer an english is a big help. Not saying you cant write or anything. But they will look at it from a language point of view. An help to make adjustments in what you are trying to say. Because its all in the flow of the language..

The bad part of it all is, alot of investors including myself skip the Lit. part of a business plan an look straight at the numbers. Because they all pretty much read the same. Just got to make sure your budget makes good sense...

As for the VC companies.. Its pretty much like looking for a job. you have to search out the right one. Alot of them may not take cold calls. Because you have to remember. They have alot of people beating down there door for cash for projects.. haa One guy I talked to when i seeking funding on a place I bought told me. That his office gets over 500 business plans a day. he told me they dont even read them all... yea he admitted they may have tossed a few good deals in the trash. So he gave me a few pointers that helped me out. I have dealt with a few big firms for cash for some projects.

Here are a few ways to cut through the BS with them an get there attention. write yourself a lil intro. Something about who you are what kinda project you have. DONT put how much you are seeking. (Because sometimes you may be looking for to much or not enough for them. So they will just delete it. What you are trying to get is a response. how much do you need?, where are you located? etc. That way you know you made contact.) An then, search out every web page you can find for a VC company. Look in the contact section an then cut an paste your intro in an e-mail to where ever they are taking questions. I was typing it a million times then I had wrote something that seemed to catch there attention. An I started cutting an pasteing. Dont worry about it being the same thing to different companies. If they have e-mail address's for like the pres of the company, add his an who ever is listed that you may think is important. And send it. Now you will have some companies say they are only interested in certian area's of investing. Tech, health etc etc.. Its ok, you are seeking cash. An companies with cash deal with others with cash. Because some of them pair up with other compaines to go in on big multi mill projects. So when they e-mail you back an say we are not into that line of business. ALWAYS reply an say thanks for there time. An tell them feel free to forward your e-mail to anyone that maybe interested in your project. As well as ask if they know of a company that maybe interested.

You will catch someones attention and when you do then its up to you to sale them on what you are doing.. Just to give you an example on how crazy it gets. When i was seeking funding I was e-mailing VC companies all over the U.S. even ones that said they only invest in there region only. I felt like someone had to know somebody. I had one VP of one company that was based in Virgina e-mail me back and tell me that if I was in his region they would be willing to get involved. But since I wasnt they couldnt do biz with me. But he gave me the name an number to another VP of a different company an told me to call the guy up. So I called they guy, an sure enough the other guy forwarded my e-mail to the guy so when I called he was expecting my call. We talked, an come to find out he wanted to get into the bar biz himself! as a private investor. Since I was seeking a few mill it was a lil out of his range he was looking to put up 500k though. He told me he knew of someone at another firm, an told me to call him back in a few days. I did, an he said he forwarded my e-mail to a company that maybe a fit for me. Said they may call me in a few days. Sure enough they did, an they liked the project an off to ATL I went for a meeting.. It took alot of time because it was alot trial an error since I didnt know how to approach them at 1st. An they didnt have this kind of site when I was breaking ground in the business. Or at least I didnt know about it. lol

Like anything else in this business its hard work. But if you give it 100% it will give you a 100%.

Money Talks In All Languages...

[JackMaverik]

Update!

I had a really serious chunk of investment capital locked down and committed.

Then Sept. 29th happened and the stock market imploded and investors went from "Tell me when and where to sign" to "ummmm... I'm going to wait this out and see."

Terribly frustrating.

However, I had a conversation with a woman who's the chair of a/the business brokers association (friend of a friend of a friend) and she's been very helpful in getting me some info. She has assured me that if I can come up with a 30% down payment, and the owners do a minimum 10% carryback - then she's confident in her ability to get me an SBA loan (even in current market conditions).

The rub is - I had more than the 30% committed before the stock market implosion.

My hope is I can get my investors back online (for smaller dollar amounts).

I thank everyone in this thread and everyone who talked to me over the last few months. You all made me realize that I was going too fast and I needed to stop and breathe. And that's what I have done. I am much calmer about all of these things and am now able to move with a sense of purpose instead of just passion.

I hope this update helps.

[JackMaverik]

UPDATE!

I opened Escrow yesterday and should be closing escrow at 3pm today.

At 9am this morning I will be going to the bank with my investor and wiring the rest of the down payment to the escrow company and we have a meeting with the escrow company at 3pm.

So hopefully the next time you guys hear from me, I will actually own this thing.

Thanks for all the great advice everyone gave me. I took it all to heart and calmed down and stopped rushing (which was my biggest problem) I got the owners down to a $50,000 down payment and they carry the rest. I got to name my interest rate and monthly payment. I got to name when I had to pay my first payment back. My "investor" gave me a straight loan at 7% to be repaid whenever me and my business partner feel like it.

If all goes according to plan in a couple hours - we take over April 26th.

Cheers everyone! I just bought a job!

Thanks again to everyone. Seriously.

[alshorses]

Best of luck. By the what type of venue is it.

[Estefon]

Cheers everyone! I just bought a job!

Isn't that the truth! Congrats Jack! Looks like you did the right thing and did it in the right way! I love it when a plan comes together.

I'm curious about this "investor" who is giving you 7% at a whenever rate... Friend? Family? collaterlized? There should be a payoff date for your own sanity.

Come down to my newest bar in Mesa when you have some time. Or PM me and I can share some strategies between now and April 26th.

Way to go brother

Steve

[JackMaverik]

It's my business partners friend. He's been super great. I'm going to be drafting up a schedule and a way to get out from underneath him for sure.

[JackMaverik]

Mark it.

Today - April 9th, 2009 I closed escrow on my bar, shook a bunch of hands, filled out enough paper to kill a couple trees and I now own a bar/nightclub.

Today is weird and good.

[Crazy Mike]

Good luck! Keep us posted!

PS: Don't worry about the trees

[JackMaverik]

Fer sher!!

[Estefon]

Figure out a time when you want to get together Jack.

Or PM me your phone number. I stayed working until 9:30 PM, but never heard from you.

That is, if I can help. I never claim to be a consultant or expert in this business.

[JackMaverik]

Sorry buddy. My phone ate your phone number and I wasn't near my email to get it back. I have to set up my phone to do email. I have a Moto Q and just now starting to figure it out.

I'll call you this weekend. I"m programing you in right now.

[Iontheprize]

Awesome! Good luck!

One thing that caught my attention "to be repaid whenever me and my business partner feel like it." I could see some potential problems here?

dp

[JackMaverik]

And she all comes tumbling down.

I realize where I messed up and how this kind of thing sucks, so I offer this up as a cautionary tale to every single one of you out there thinking of getting into this.

I closed escrow last Thursday. I bought the bar.

This week was getting the necessary paperwork together and filling out forms and applications (tax licenses, liquor license transfer, lease finalization, etc.).

Tuesday I met with the leasing office rep (who i had talked to previous to this point) had a nice little meeting. Let her know what we wanted (1st months rent free plus a $3000 TI credit or 2 months rent free). She said "Cool. I'll just run everything by the owner and get back to you later today. We should be good to go."

Tax Day - April 15th. I get a call at 10am from the leasing lady.

"I talked with the owner, he won't give you any free months of rent, no TI credit, but he will allow you to keep the lease amount the same. Also, he does want a larger security deposit."

"Wow. Okay. What's that?"

"He wants a years rent as a security deposit - $40,000. That's option 1. Option 2 is he wants to file a UCC lien against your liquor license for $40,000."

And that ruined my day.

So I now own a bar - and have no place to put it.

What an awesome business. haha.

FML.

[Estefon]

Whoah! Jack! You never told me that he was willing to do a UCC-1 Filing against the license for $40k!

This can be an option. He already has first postion, remember? Let him put a lien on the license... No big deal!

Call me, I'll see what I can do to help.