I'm currently thinking about buying a business, the current owner has given notice on their lease ready to sell it on.
It's a well established beauty business with 2 staff members, I'd basically be paying a bit for the equipment and a lot for the business goodwill, as that is most of the purchase price since they don't own the property.
If I negotiated with the landlord and signed a lease agreement could I just start running my business without actually buying the current business?
Obviously with a different name, and I'd not have access to client information, and would have to buy equipment and get staff if these didn't want to stay on.
Basically is there anything legally stopping me from doing this? Surely if I have signed a lease agreement with the landlord then the current business would just have to move out? I realise this is not a nice thing to do.
You are under no obligation to buy the business of the current owner. I’m a little sceptical of the value of goodwill in beauty businesses; people tend to follow a good hairdresser loyally but to be frank I don’t think anybody cares about who waxes their bikini line.
The most important question you should ask is why the current owner is selling. If she can’t make a living with a beauty business in those premises, what makes you think that you can? Review your business plan carefully.
If you intenended to hire the existing staff then make sure they don't have any restrictive covenants and/or confidentiality clauses in their contracts of employment that would stop them working for you.
Like others I would be questioning why the existing proprietor is getting out. People with well established profitable businesses tend to hold on to that, or perhaps move to bigger premises. Why is she selling?
I would be extremely careful getting into this venture- you may be inheriting all the bad reasons why a business if failing- wrong area of town, lack of foot traffic, no demand, poor company image image or reputation, competition nearby etc.
The existing business owner is not selling you much really. You need to do the sums!!!! Can you rent somewhere else and kit it out cheaper than the price for the business? What is the goodwill worth? What do her books look like? How much profit is she making? Don’t base your decision on turnover. Could you generate the same profit or more by doing things differently?
Staff costs are the same whatever you do. The staff could be employed by you in any beautician business you may wish to set up. If the business is for sale, and possibly shutting down, the staff need jobs so the business owner cannot come down hard on confidentiality clauses. That would be restricting trade and it is not acceptable.
I would weigh everything up and do not over pay for a client list. They might evaporate overnight!