| What are the initial set up costs for a bar or small business in Benidorm and Spain? |
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Set Up Costs
The set up Costs Of Buying a business in Spain depends on if it is a sole trader business
or a company. A small shop will cost much less than a disco bar to set up. License name
changes are much less then a new license application. As a rule of thumb you should put
aside a minimum of 3,500€ for legal fees, architects plan and Licence. 7,000€ if you are
to form a limited company. If you are buying a simple rental contract on a bar this may be
much less but you should allow for the 3,500€ rule to cover all possible requirements.
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 3,000€ to 4,000€ on top of the buying
price for legal fees, licences and incidentals. As a general rule we would recommend you
put aside 10% of the purchase price (Minimum 3,000€). This can change depending on
the type of license of course. For example a late night bar license can cost up to 5,000€
and you may require a music sound limiter in certain areas of a town if you are playing
music after midnight.
This is where many buyers then go wrong as you will require on top of this enough capital
to ensure the business operating costs can be met during the change over period and for
several months after this. You may need capital to cover any new EU or local regulations
such as a disabled toilet or ramp and improvements to Electrical wiring or emergency
lighting. This is especially prudent if you are re-opening old premises requiring a new
license as regulations not adhered too will need to be complied with.
First 4/6 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 your
budget as a shortage of capital is the number one reason for failure during the first twelve
months of trading.
Therefore when setting your budget you should look at ensuring you have enough cash
on top of the purchase price and fees of at least six months rent, and working capital
(stock, fixed monthly costs etc) for a minimum of 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 and 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€
for 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 this is a true story:
Mr A buys a Benidorm 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 and
whilst some of what we have discussed seem scary it may not be needed but it should be
in your budget just to be on the safe side.
Next page - Marketing and advertising
The set up Costs Of Buying a business in Spain depends on if it is a sole trader business
or a company. A small shop will cost much less than a disco bar to set up. License name
changes are much less then a new license application. As a rule of thumb you should put
aside a minimum of 3,500€ for legal fees, architects plan and Licence. 7,000€ if you are
to form a limited company. If you are buying a simple rental contract on a bar this may be
much less but you should allow for the 3,500€ rule to cover all possible requirements.
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 3,000€ to 4,000€ on top of the buying
price for legal fees, licences and incidentals. As a general rule we would recommend you
put aside 10% of the purchase price (Minimum 3,000€). This can change depending on
the type of license of course. For example a late night bar license can cost up to 5,000€
and you may require a music sound limiter in certain areas of a town if you are playing
music after midnight.
This is where many buyers then go wrong as you will require on top of this enough capital
to ensure the business operating costs can be met during the change over period and for
several months after this. You may need capital to cover any new EU or local regulations
such as a disabled toilet or ramp and improvements to Electrical wiring or emergency
lighting. This is especially prudent if you are re-opening old premises requiring a new
license as regulations not adhered too will need to be complied with.
First 4/6 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 your
budget as a shortage of capital is the number one reason for failure during the first twelve
months of trading.
Therefore when setting your budget you should look at ensuring you have enough cash
on top of the purchase price and fees of at least six months rent, and working capital
(stock, fixed monthly costs etc) for a minimum of 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 and 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€
for 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 this is a true story:
Mr A buys a Benidorm 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 and
whilst some of what we have discussed seem scary it may not be needed but it should be
in your budget just to be on the safe side.
Next page - Marketing and advertising
