Buying An Established Business

[NordicMan]

Hi all,

It has dawned upon me that the chances of either a transfer to Thailand from my current company, or independently landing a good office job in Bangkok, are rather slim.

Me and my Thai wife are considering to instead purchase an existing business - as joint partners or outright ownership.

I have spent some time looking around on sunbeltasia's website.

Any suggestions for what type of business would be suitable?

Considerations

- Capital available for investment 10-15mn baht

- Need to come with work permit for myself

- My experience are in sales, accounting, project management, consulting and general operations, mostly in IT and in shipping/logistics (retail and manufacturing).

- Either a partnership with existing owner, or a full purchase.

- Location preferrably in Bangkok

I am not looking for a go-go bar in Pattaya, or for selling properties to foreigners. It needs to be a profit making venture, a full-time job, with potential for growth. Not a semi-retirement activity.

Many thanks

NM

Edited November 19, 2007 by NordicMan

[torrenova]

If you really don't know, I suggest you keep your money in the bank. Perhaps if you were working in Bangkok then you would know what sort of work you were suited to.

From my experience, agencies selling businesses have no idea how to value them. ONe particular one went down from Bt55m to some Bt30m in a couple of weeks. Certainly the agents just put up whatever bullshit the client tells them to.

[Moonfruit]

PM me.

[Manchester]

PM TonyLeung. He,s got this great idea about sandwiches.

[taxin]

If you really don't know, I suggest you keep your money in the bank. Perhaps if you were working in Bangkok then you would know what sort of work you were suited to.

From my experience, agencies selling businesses have no idea how to value them. ONe particular one went down from Bt55m to some Bt30m in a couple of weeks. Certainly the agents just put up whatever bullshit the client tells them to.

I couldnt agree more with these so called agencies. I looked at this myself and the prices these brokers are advertising for business's in Thailand is outrageous ! It amazes me how they come up with these crazy figures. I mean, who in there right mind would pay X ammount of millions for a coffe shop that will give you zero return on investment, and a measly 50,000 baht a month profit if your lucky !

My advice is go for a franchise or invest in an existing business that already has a working model, maybe a branch of that existing business. Thailand is a big country and there are lots of business owners out there who simply cannot or dont want to be in 2 places at once.

I have a franchise in Thailand that cost me nothing in terms of a franchise fee, I only had to pay the costs in relation to start up and getting the Thai company itself registered. I simply pay a cut of all sales to the company that lets me use there brand. Works well for me !

[NordicMan]

If you really don't know, I suggest you keep your money in the bank. Perhaps if you were working in Bangkok then you would know what sort of work you were suited to.

From my experience, agencies selling businesses have no idea how to value them. One particular one went down from Bt55m to some Bt30m in a couple of weeks. Certainly the agents just put up whatever bullshit the client tells them to.

Hi, thanks for the feedback. I have also worked as a corporate finance analyst in an investment bank, so have some understanding of valuation of businesses. As for high valuations... I guess any owner would like to sell it (or any asset) for as high price as possible. It shouldn't be for the agency to value it, but for the owner, no?

I lived 7 years in the Asia region, so also have some idea of what I am suited for. My family recently purchased a smallish factory, as the previous owner wanted to retire, and that business is doing rather well now. I'm not working there myself though.

My aim was merely to generate some ideas on what type of business would be suitable, based on my circumstances. I definitely have some industries in mind. Any suggestions would be welcome.

Best regards

NM

[MrSquigle]

A friend of mine in Los and myself have the same opinion as Torrenova...but worse...my friend a business operator and 23 year expat here has not seen one business advertised by these 'business sellers' that stacks up.

When asking prices are reduced from the ridiculous to mildy ridiculous, then its obvious the the person listing the business has no idea what he is selling and simply is in it for the biggest fee he can get. So what you may say, sure I agree that buyer beware and if anyone is silly enough to pay the ridiculous prices asked, then so be it. I have seen things advertised for tens of millions and reduced by half or more over a few months of little interest.

Thing is that the broker is on the side of the seller, not you the buyer in reality.

[torrenova]

I have a quote from a famous agency whose reply when questioned why a business turning over say 5m with costs of 4m could possibly make 2m profits was that I should undertake due dilligence. My further email asking why they publish such absolute rubbish remains unanswered some years later.

To the OP, I also worked in an investment bank but as a risk analyst and my starting point is that if you don't lose money then you are still in with a chance of making a profit. I have also used models to evaluate businesses in Thailand and a common trait is that people tend to think the intrinsic value of their business is worth much more than it really is, largely because they fail to factor in specific country, legal and other risks. Often owner operators forget about their remuneration or lack of it !

Agencies are poor but they offer the only real solution to many vendors who have no knowledge of what a business is worth but you have to trawl through an awful lot of rubbish to find something worth looking at and then you often find a lack of accounts, some mumbo jumbo from the seller and even hostility when pertinent questions are asked.

The idea of a franchise could appeal to me but I suspect they want silly money due to the amount of people with sums to invest who want to "live the dream" but don't really want to work.

As for starting a business which is "out of the box" thinking then beware. I have had one on the table for 2 years which my prospective customers agree offers them a far better service and at a reduced cost but they are hesitant to commit. Despite multiple meetings I have been unable to start the engine as I cannot get launch customers. They are just too stuck in their ways and things are ok at the moment. It is like I cannot give them money !

[NordicMan]

A friend of mine in Los and myself have the same opinion as Torrenova...but worse...my friend a business operator and 23 year expat here has not seen one business advertised by these 'business sellers' that stacks up.

When asking prices are reduced from the ridiculous to mildy ridiculous, then its obvious the the person listing the business has no idea what he is selling and simply is in it for the biggest fee he can get. So what you may say, sure I agree that buyer beware and if anyone is silly enough to pay the ridiculous prices asked, then so be it. I have seen things advertised for tens of millions and reduced by half or more over a few months of little interest.

Thing is that the broker is on the side of the seller, not you the buyer in reality.

I definitely agree with you on that point - the seller is in it to make money for himself, which he gets from as big commission as possible, which again he gets from selling the biz at as high price as possible within a reasonable timeframe...

brgds

NM

[NordicMan]

I have a quote from a famous agency whose reply when questioned why a business turning over say 5m with costs of 4m could possibly make 2m profits was that I should undertake due dilligence. My further email asking why they publish such absolute rubbish remains unanswered some years later.

To the OP, I also worked in an investment bank but as a risk analyst and my starting point is that if you don't lose money then you are still in with a chance of making a profit. I have also used models to evaluate businesses in Thailand and a common trait is that people tend to think the intrinsic value of their business is worth much more than it really is, largely because they fail to factor in specific country, legal and other risks. Often owner operators forget about their remuneration or lack of it !

Agencies are poor but they offer the only real solution to many vendors who have no knowledge of what a business is worth but you have to trawl through an awful lot of rubbish to find something worth looking at and then you often find a lack of accounts, some mumbo jumbo from the seller and even hostility when pertinent questions are asked.

The idea of a franchise could appeal to me but I suspect they want silly money due to the amount of people with sums to invest who want to "live the dream" but don't really want to work.

As for starting a business which is "out of the box" thinking then beware. I have had one on the table for 2 years which my prospective customers agree offers them a far better service and at a reduced cost but they are hesitant to commit. Despite multiple meetings I have been unable to start the engine as I cannot get launch customers. They are just too stuck in their ways and things are ok at the moment. It is like I cannot give them money !

I would assume that for an existing business, unaudited accounts are a huge barrier to reliable valuation. How can you trust the accounts provided? What stops the owner from simply making up whatever financial statements he wants? I have yet to figure that out

[Cyberstar]

I would assume that for an existing business, unaudited accounts are a huge barrier to reliable valuation. How can you trust the accounts provided? What stops the owner from simply making up whatever financial statements he wants? I have yet to figure that out

I'd go one step further and say that books and accounts - even audited ones - can't contribute much to the valuation of an existing business in Thailand. As for the unaudited ones - the books can be as much free fantasy and as much tailored for the purpose as the owner feels like. No control at all of books/accounts of businesses for which a certified auditor is not required - simple as that. As for audited ones - well, the audited books will only tell what the owner felt like telling RD, which may be less (in most cases) or more than the actual money flows (think money laundering for instance).

The only kind of businesses that would have somewhat reliable books would be VAT-registered companies, which solely deals in B2B with other VAT-registered businesses (which would hate not to tell RD about their expenses).

I'd say: before investing those 10-15 million in an existing business - invest 1 million in one until you've seen what it is worth. The 1 million suffices for a WP for you so you can keep in touch with the million and help make the best out of it... This would sort of shift focus of evaluation from "how much is the business worth?" to "how good are the potentials?" --- And - in case of failure - you'd still have 9-14 million (plus experience about doing business in Thailand).

Edited November 21, 2007 by Cyberstar

[TonyLeung]

i would start small and see how it goes.

[VocalNeal]

It has dawned upon me that the chances of either a transfer to Thailand from my current company,

Does your company have an office in Thailand? If so have you considered offering to work for local expat salary. I believe 200,000 is acheivable. Then as someone else suggested you could sound out the market. What about the family business? If they have more than 5 employees you could work there with a WP and also sound out the market Depends of course on whether you are interested in the product.