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Is this a good time to buy an existing bar/tavern/pub? Some say alcohol is recession-proof...

Is this a good time to buy an existing bar/tavern/pub? Some say alcohol is recession-proof...I'm tired of working 9-5 making other people's dreams come true and am interested in purchasing an existing bar/tavern. How much can the SBA help me? I have very good credit but i have a feeling most banks will want at least 30% of the purchase price from my personal funds.

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The BAF Group LLC

FORD KENNETH: Another one to ignore!

Oct 29, 2016
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The BAF Group LLC

As a Broker, I would almost ALWAYS recommend Seller financing. Most bars depend on a lot of cash for payment, and a lot of that payment never seems to get to the Tax Return. Cash is what you use to value a bar operation. So, how are you going to value the business? There are a number of ways to do this, but none of them are normally satisfactory from the standpoint of getting a loan. That goes even more for the SBA.

Alcohol is somewhat recession proof. In liquor stores I deal with, many owners are saying they are selling the same number of BOTTLES that they sold 18 months ago, but instead of top brands, they are selling lower end product. So, if you are selling a bottle of Johnny Walker Black for $25 with a 20% profit margin back then, you are probably selling Brand X Generic Scotch for $15 now; with the same 20% profit margin, you are definitely making less money today, than you did a year and a half ago.

In bars and taverns, it will depend upon your clientele. But many people are saying they will pay the $25 for a bottle of good scotch to take home, rather than $7 for a single drink at a bar for the same brand. How many more drinks can they afford for that same $25 by drinking at home?

The key is to look at the Seller's last 2 to 3 years of Tax Returns, plus any information they can give you on Year-to-Date (YTD) Financial Statement. Remember, most of them lie about their Revenue, so don't pay attention to that as much as the Cost of Goods (COG) section of the Financials. See how much the business has grown, diminished or stagnated over the periods of time represented in their Financial Statements.

And by the way, if you are tired working 9 to 5, think about working from 7AM to 2PM, six or seven days a week in a bar. You have to be there, because if you are not, that cash I talked about never seems to appear in your pocket, any more than it will show up on the Tax Return!

Aug 11, 2009

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