The owner is selling it for $50,000 with everything included inside. It is 2500 sq. ft. and the lease is $3,200 a month. In 2009, it did $150,000 gross in food/liquor and $50,000 net in lottery. I don't have experience in running a bar but have always wanted to own one. The current owner just bought it 3 months ago and is not working at the place. I know that he is selling because it probably isn't doing too well. I would like to get some thoughts to see if this is a good buy?

Well.. Bars are recession proof. People are always going to need their booze

Johnny, the value of a business is determined by its future cash flows. Unfortunately, until the physicists get the bugs worked out of time travel, one can never know with 100% certainty how the cash flows are going to play out. What one does instead is the next best thing: One obtains every scrap of data and intel he can put his mitts on that will help him forecast the cash flows (or more accurately, a spread of possible flows) as best as possible. It's only after doing so that you can estimate whether the asked-for 50K is an overpricing, an underpricing, or right in the ballpark.

This fact-finding mission usually has four main fronts: Legal, Financial, Tax, and Operations. You'll want an attorney to vet the situation. Are there any legal risk exposures you're not considering; is the current lease assignable; are there any hidden debts or pending lawsuits? (A one-way plane ticket to Argentina protruding from the seller's pocket might be a tip-off, but they aren't always so easy to spot :-) ) Are you buyings assets, or buying a corporation that owns the assets?---different sets of legal considerations, depending on which.

Usually it's an accountant you'll have helping you with the financial and tax picture, although there are also other consultants doing similar work. You'll need to obtain copies of recent tax returns and/or financial statements, showing the recent history of sales volume, expenses, net earnings, assets, and so on. The accountant / advisor will help you develop the projections, and help you decide how the deal should be structured to optimize any tax planning opportunities. Will seller financing be a component, and if so, how should that be arranged?

From an operational perspective, you mention you haven't the relevant experience, so there's one piece of the puzzle you'll need to put in place. How will the bar be staffed; hours of operation; growth prospects (given the demographics and the neighborhood, etc.; marketing strategies; and so on. You'll need to develop a good biz plan that helps you decide how you'll run each aspect of the business, should you decide to acquire it. A lot of businesses get a substantial makeover from new owners right after they change hands---is the potential there for you to increase the revenues, get more efficient with expenses, etc? These are also questions you'll address in your biz plan.

You probably got the idea a couple of paragraphs ago that whether a certain price is a "good deal" can't be answered in a forum. True... you've got some homework to get through first en route to answering that one. Having said all that, though, I'm NOT suggesting you spend 30K in advisory fees investigating a 50K acquisition---everything should be kept in proportion. And if it's a relatively small operation with a fairly simple setup, it's likely that much of this stuff I've scared you with will turn out to be somewhat easier than you may be envisioning right now. So just think of it this way: How much would it hurt to lose 50K, and what steps would you take to help you feel pretty confident that you're placing a sensible bet?

Final thought: Don't approach it as a "one and done" opportunity. Successful entrepreneurs often investigate a number of opportunities before pulling the trigger on one. Every investigation process, whether it culminates in a deal or not, adds a ton of valuable of experience to your repertoire. Best of luck with it!

Thanks for the feedback. I have been looking at many places for over six months and this is the best one I have found so far. My plan is to work at the business to limit the employee expenses. I also have a lot of different ideas to try and bring more people in by having a theme for each night. I have been to many bars and have picked up on some things that I believe I could use. One of them would be giving raffle tickets every time a customer buys a drink and giving prizes such as jerseys or gift certificates during games. I would also try and lower the prices of beer and food compared to the competitors. I have given a lot of thought and feel confident about doing this since I feel that $50,000 isn't that big of a risk. The only problem is I have to convince my parents to loan me half of the money. They feel like its too risky.

First for a bar 150,000 gross is not very much. That is what about 12,500 a month gross ( est) or about 3000 a week based on 4.3 weeks a month.

After rent taken out, gross is about 2250 dollar a week ( rough estimate) We have to then take taxes, license fees, insurance) electric and/or gas and of couse the product. ( is most sales draft beer , larger profit, or mixed drinks or can or bottle beer.

If you plan on doing all the work, and maybe being the only employee, you may break even with those sales figures. So how much do you need to live on, 500 a week ? 700 a week.

Also the lottery 50,000 in lottery net? No way, not unless your state pays big bucks to the store. At least here in GA the store gets 5 cents for each ticket. That would be what a million tickets a year to net that much. I would believe 50,000 gross, but remember unless it is bringing in customers who will buy a drink, the time to stop, go tear a ticket, and keep up with the book keeping for the records, you are spending more time to sell a ticket than you ever get with ticket payments.

Now if you have a dream, if you have hanged out there for several weeks, perhaps working for the guy free of charge to see how many customers and how much is really being made gross anyway.

The ticket side is 5 cents but the video lottery pays 27 cents. The bad thing is the food and liquor has really low numbers so I would have to do something differently. Even the lottery is probably below average.