| Advice for running a small business or bar in Spain - Avoiding the pitfalls! |
| Buying a small business or bar in Spain - Why is the failure rate so high - Pitfalls running a bar in Spain |
| Spain Business Guide Why ex-pat bars fail! Business Transfer Agent Benidorm Costa Blanca We specialise in the sale of bars |
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top of your list before you jump in feet first and buy just any old bar!
FOR A COMPLETE GUIDE TO BUYING A BAR IN SPAIN
WITH FAQ ANSWERED Please Click Here
1) The basic idea is wrong.
2) Start-up capital was too low.
3) Capital is wasted.
4) A lack of hard work.
5) A lack of business / financial knowledge.
6) A lack of common sense.
7) No ability to deal with a people: suppliers, customers, employees, local authority,
language problems.
8) Poor pricing ( too high or low).
9) Ignorance of local authority and government requirements or restraints.
10) Taking the business lightly after completion.
11) Thinking you on holiday
12) Prefer to go to the beach
13) Opening to suit your lifestyle not the business needs
Which of these is the most widely experienced?
Experience in the service and food industry tells me it's numbers 1 and 2 with number 5
coming right behind (financial knowledge). Although number 11, 12, and 13 are also sadly all too
common.
Too many business start-ups are emotion based rather than conceived after a detailed study
of the market and very deep self examination especially when starting a business in Spain where
emotion rather than pure business is the main reason for wanting to go into business to realise the
dream of living in Spain. Take it from one who knows living and working here is harder and takes
longer hours than in the UK
So many small businesses in Spain fail because owners never even bother to budget
income and expenses. The most common sign of this is Beer a € a pint when the operating costs
are 1500 € per month - it just does not make for a good income to expenses budget. You may
think low priced beers that generate a 50 cents a pint gross profit will make money but the nett
profit is likely to be ZERO after taking the operating costs from the 50 cents gross profit.
Not understanding costs is a shortcoming for most new business owners.
The least understood aspect of business is the real cost of stock and wage costs against
productivity.
What are true wage costs then?
If you employ someone or pay yourself 10€ per hour you should in general multiply this by 3.5 to
get the real cost.
For example you or a member of staff will only be productive for 70% of you time in any working
day therefore adding 3 € per hour to the productive wage costs. Add to this productive hour the
cost of rent, rates, utilities, licences and incidentals you will likely be looking at a cost of 30 plus €
per hour. This is the true cost per productive business hour ( the hours you are open)
Another blind spot is the relationship of every cost item to revenue. If you are operating a 70%
gross profit business ( about correct for food and licenced trade) then for every 30 € you spend
you must make 100 € revenue. Therefore you pricing policy must match you expected gross profit.
Be prepared to keep costs low and keep shaving them daily even saving a € a day will make a
difference to your bottom line and will mean your gross profit is easier to attain.
How much will it cost to buy a business in Spain?
This of course depends firstly on your budget and how much you have to spend.
Secondly the costs associated with buying a business can vary depending on which type of
business you are buying such as a sole trader business or a company.
The majority of buyers are looking to purchase a bar or small restaurant as a sole trader in which
case you should be looking towards costs of around 10% on top of the purchase price for legal
fees, licences and incidentals. This is where many purchases then go wrong as you will require on
top of this enough capital to ensure the business operating costs can be met during your first
months trading.
As with any new or take over business the settling in period whilst you find your feet and find your
market can mean that the business operates at a low profit or even a loss for some months. This is
not always the case but it should always be planned for in you budget as a shortage of capital is
the number one reason for failure during the first six months of trading.
Therefore when setting your budget you should look at ensuring you have enough capital on top
of the purchase price and fees of at least six months rent, and working capital ( stock, fixed
monthly costs etc) for three months.
As a guide you will be looking at this much working capital on a purchase price of a small bar for
50,000€ with a rent of 1,000€ per month with an expected turnover of 6,000€ per month.
Six months rent 6,000€ Stock purchase 5,400€ approx 30% of turnover Fixed costs 2,000€
Electric, insurance, performing rights etc
Why so much?
As much as you may plan for every eventuality, Spain is your new country, you are in a new
business, and learning the way things are done in Spain. By ensuring you have enough Capital to
cover minor and major problems you will ride out any unexpected storms. The bonus of course is
that you may not need all or any of this capital but it would be unwise not to budget for this.
For an example of an unexpected Storm and these things can happen.
Mr A buys a bar
In the first two months all goes well and the bar turns in a good 4,000 € profit, which Mr A after his
living expenses is left with 1,000 € capital in the bank. After a day off Mr A returns to find his bar
flooded with water, only to find that the drains to his bar are blocked having collapsed overnight.
After seeking professional advice he is told that the entire bar floor is going to have to be
excavated and the drains replaced which will take one week at a cost of 4,500 € plus the lost
revenue and profit during the closure. In addition the fixed costs and rent still have to be paid. Two
weeks later Mr A has closed due to lack of working capital even though he has a profitable
business.
If you take note of the pitfalls and buy in the right location it is possible to succeed. Don´t
be one of the 60% of ex-pats who fail within two years, do your homework and be realistic.
Never let your emotions rule your decisions. More information and free advice
