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lamoe

How much to buy a business

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lamoe

This is truly asking for a friend :db:

He's got a line on  a small inn in lapu lapu  - off the main road  past New Town - about 24 rooms - some long term  - some tourists - with owner's suite

I know how it's done in the US - type of business, yearly revenue vs expenses, etc.

Given what I've read here they have a tendency to ask what they think is should go for not what it's truly worth and never change the price even for years.

Is there a rule of thumb?   4 to 5 x yearly net (not gross)?

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JohnSurrey

It's a very interesting question - Can't wait to read the replies!

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Ozepete

Me, I wouldn't touch it with a 40 foot pole! I doubt any business that is really making money would be offered up for sale at a viable price as there is no shortage of alternatives if its the real thing! JMO

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lamoe
1 hour ago, Ozepete said:

Me, I wouldn't touch it with a 40 foot pole! I doubt any business that is really making money would be offered up for sale at a viable price as there is no shortage of alternatives if its the real thing! JMO

He asked why for sale - present owners (Chinese man / Fillipina wife) say they have land on Panglao and want to build inn there

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savarity

I know nothing about buying in PI, but in the West 5 years of audited statements in nice to have. If their financials have never been audited, then a reduction in price to compensate for the increased risk should be expected.

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Headshot
2 hours ago, savarity said:

I know nothing about buying in PI, but in the West 5 years of audited statements in nice to have. If their financials have never been audited, then a reduction in price to compensate for the increased risk should be expected.

:ROFLMAO::ROFLMAO::ROFLMAO:

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liquido

In this country they can come up with any kind of statements you want...

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Mike Bannister

Well my take on the whole deal is a bit different. Many expats get involved in running bars and resto's they are on average about as successful as a similar bar or resto run by a Filipino. Some Filipinos have these establishments as tax 

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Mike Bannister

Don't know what happened to the rest of my post, only about a quarter is there

Well my take on the whole deal is a bit different. Many expats get involved in running bars and resto's they are on average about as successful as a similar bar or resto run by a Filipino. Some Filipinos have these establishments as tax covers, they run a resto bar, feed their families, relatives, get access to all kinds of tax writes offs they don't want a profit, just the sames as some expat do. 

If I were considering buying these are the things I would look at

The buildings and land

a. Cracking or powdering of concrete slabs or block. May indicate poor building materials or significant land movement, specially look for repairs to these that have opened again.

b. Smells may indicate either poor sewage or drainage. Flush toilets by any means available and run showers and sink faucets, watch how quickly they drain see if water appears outside.

c. Conversely water pressure may be to low to sustain the number of units all using water at once.

d. How is hot water supplied to the units  check tanks and heating units.

e. Check all pipes and how accessible they are in they need to be repaired or replaced.   

f. If you are offered a plan check that critical things actually exist.         

g. Check the line from the pole to the fusebox of each unit. These are often done by a handyman after the electrician has wired the units.

h.  Does runoff get trapped by a unit and create  issues in heavy rain.

Legal

a. Do they have clear title and is it genuine? Very important and a trap hundreds of expats fall into.

b. Is there any interest in the property from any level of government. Compulsory acquisition hurts in the Philippines.

c. Are there any disputes between the motel and the locals. check court records and newspapers.

d. Are the liens on the property. Some may say they will settle once you do, dpn't buy it. Their bank will bridge them if they have enough equity.

The business

a. Where does its income derive the proportion of resto, permanent and short term guests.

b. What is the real stability of the long term resident

c What arrears are there month on month.

d. What is the longest term arrears.

e. For the real motel guests what is the occupancy rate, how does that compare with the occupancy rate for the area.

f. What is the tariff, how does it compare to similar typae accomodation

g. Does the restaurant have a good reputation?

h. Does It look clean?

i. Does it have the appropriate business licenses?

j. How is it staffed?

k. How is it viewed by local law enforcement.

This was a checklist I saw not for the philippines but for Australia

hope that helps

                                                                                                  

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shadow
6 hours ago, Mike Bannister said:

Don't know what happened to the rest of my post, only about a quarter is there

Well my take on the whole deal is a bit different. Many expats get involved in running bars and resto's they are on average about as successful as a similar bar or resto run by a Filipino. Some Filipinos have these establishments as tax covers, they run a resto bar, feed their families, relatives, get access to all kinds of tax writes offs they don't want a profit, just the sames as some expat do. 

If I were considering buying these are the things I would look at

The buildings and land

a. Cracking or powdering of concrete slabs or block. May indicate poor building materials or significant land movement, specially look for repairs to these that have opened again.

b. Smells may indicate either poor sewage or drainage. Flush toilets by any means available and run showers and sink faucets, watch how quickly they drain see if water appears outside.

c. Conversely water pressure may be to low to sustain the number of units all using water at once.

d. How is hot water supplied to the units  check tanks and heating units.

e. Check all pipes and how accessible they are in they need to be repaired or replaced.   

f. If you are offered a plan check that critical things actually exist.         

g. Check the line from the pole to the fusebox of each unit. These are often done by a handyman after the electrician has wired the units.

h.  Does runoff get trapped by a unit and create  issues in heavy rain.

Legal

a. Do they have clear title and is it genuine? Very important and a trap hundreds of expats fall into.

b. Is there any interest in the property from any level of government. Compulsory acquisition hurts in the Philippines.

c. Are there any disputes between the motel and the locals. check court records and newspapers.

d. Are the liens on the property. Some may say they will settle once you do, dpn't buy it. Their bank will bridge them if they have enough equity.

The business

a. Where does its income derive the proportion of resto, permanent and short term guests.

b. What is the real stability of the long term resident

c What arrears are there month on month.

d. What is the longest term arrears.

e. For the real motel guests what is the occupancy rate, how does that compare with the occupancy rate for the area.

f. What is the tariff, how does it compare to similar typae accomodation

g. Does the restaurant have a good reputation?

h. Does It look clean?

i. Does it have the appropriate business licenses?

j. How is it staffed?

k. How is it viewed by local law enforcement.

This was a checklist I saw not for the philippines but for Australia

hope that helps

                                                                                                  

I have been involved in a few businesses here in the Philippines, and I don't see where there is any kind of "tax write off". As far as I have been able to see, there is no "write off", a business owner is taxed for every peso they take in, regardless of whether or not they make any money on it. We pay 3% on every peso, with no deduction for expenses. In many cases, we have paid more in taxes than we earned on a given job.

 

??

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Davaoeno
12 hours ago, Mike Bannister said:

Well my take on the whole deal is a bit different. Many expats get involved in running bars and resto's they are on average about as successful as a similar bar or resto run by a Filipino. Some Filipinos have these establishments as tax 

I wrote a lengthy reply in this thread which then just disappeared. I now assume ( since Mike says that part of his post disappeared) that someone has been using their ability to change or remove people's posts? )

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to_dave007
4 hours ago, Davaoeno said:

I wrote a lengthy reply in this thread which then just disappeared. I now assume ( since Mike says that part of his post disappeared) that someone has been using their ability to change or remove people's posts? )

That would certainly discourage ME from writing a lengthy post.

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shadow
5 hours ago, Davaoeno said:

I wrote a lengthy reply in this thread which then just disappeared. I now assume ( since Mike says that part of his post disappeared) that someone has been using their ability to change or remove people's posts? )

Me, I would assume it was a software glitch.

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Dafey

FYI...Off Topic but of concern...

I checked on Mike's post and there were no indications that it had been modified. Sorry man, I hate to say it but it appears to be software error or the operator.

@Davaoeno, I see no indication of a previous post at all. Again, possibly software error or the operator.

We'll have @Salty Dog look into it.

Thx...back to topic, please

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