Ask Entrepreneur

How do I buy out my employer's new, failing business?

I'm currently in school for skin care, scheduled to graduate in September 2008. However, my current employer owns a spa that isn't doing very well because of poor marketing and business ethics. I feel that with my marketing and business administration background, I can make this spa a success. I'm the last employee left, after only a month since the spa opened. How do I go about taking over this business?
You can offer to buy your employer's business by making an offer to
purchase it. The assets, the customer list, the lease--all will have a dollar value. However, as the business is failing, you might also find yourself saddled with the debts of the business if you're not careful. And the landlord may not be willing to lease the space to a recent graduate without 1. Your personal guaranty that you'll make good on the rent payments or 2. A co-signer who has assets to attach in the event you default.

Buying a business--especially a failing one--requires careful due diligence. You'll want to figure out exactly why the business wasn't doing well. It could be more than just "bad marketing." It could be poor location, inadequate parking and/or the skyrocketing cost of supplies.

If your boss has really made a mess of things, your bright-eyed and bushy-tailed attitude may not be enough to turn around the "bad will" (as opposed to "good will," an asset worth paying for) that customers will associate with the spa.

Due diligence will also involve valuing the business properly and seeing if there are any obligations--such as the lease or equipment--for which your employer may have signed a personal guaranty. Do not take this step without the sound advice of an attorney and an accountant.

Share Your Thoughts

Today's Editor's Picks

About ASK ENTREPRENEUR

Ask Entrepreneur is a question-and-answer forum for and by the Entrepreneur.com community. Send in your burning business question, or comment on someone else's now. Have a Question? Ask Now

Topics (over 1000+ answers)

Ask Entrepreneur Q&A Hangouts

Google + Hangout With Shark Tank
Google + Hangout With Jason Falls
Google + Hangout With Angela Jia Kim
Google + Hangout With Grant Cardone

ASK Quick Tips