Need Advice About Buying A Business In Thailand

[kobesunset]

My wife returned to Thailand. I have offered her money to start a business there. However, she has no business experience. She saw an advertisement for a Thai Massage Spa place which is near the Skytrain. The price is about 580,000 Baht. She contacted the owner. Mainly I want to see how much net profit the business generates, however the owner said she will not show her books. The owner said that is is common practice in Thailand not to show the financial statements when selling a business. The owner says that during the low season she pulls in net profits (at the lowest) of 35,000 baht.

My wife says the lady is nice and seems like a genuine person. Why is the lady selling the place? The lady says she has had a baby and needs to take care of the baby and she also has another shop in HuaHin and is too busy to be running between Hua Hin and BKK.

I told my wife it doesn't sit well with me that the lady will not show the businesses financial records. My wife gets very emotional and starts crying. She wants to go see the massage shop. My wife says she doesn't have the confidence to start a business by herself so she wants to buy this business. I don't understand why my wife is attached to this one business. Is it because she talked on the phone to this lady one time and felt like they were friends or something? I told my wife I cannot trust this lady. My wife says, "But you trust ME, and I trust this lady".

What do you guys think?

[kuifje]

Stop, don't invest in a massage (or spa) salons or parlors, you will lose the money.

You really want your wife to work or run this kind of a business.

Don't start a business, if you not familiar with the trade.

Probably she was impressed by this lady, and maybe already made some promises, and now she is afraid to lose face.

If you really want to start a business, start from scratch, it will take longer before you have an income (or even profit), but less change to lose big money.

(probably a large part of the money you have to pay is 'keymoney' (in thai is called 'saeng') and most of the time it is not reasonable)

If she really wants to be self-employed let her do some trading, open a shop or market place, let her sell something.

Only need to rent space and build up a modest stock.

In case no success, you don't stand to lose a fortune.

Remember many first time businesses fail.

[richardt1808]

<P>absolutely forget it.</P>

<P>If it is a registered business, it is required to submit annual statements and keep proper records. If the owner is not willing to show, it can only mean one thing - and I leave that to you to figure out. </P>

<P>It's not about you trusting your wife and she 'trusting' the owner. Business is business. <BR><BR>Aside from the fact that you stand to lose your investment , also consider that when buying a business, you could also be inherriting previous debt - so aside from the previous financial records you would also have to do due dilligence to check up on that. <BR><BR>Yep, definitely forget it.<BR></P>

[gotlost]

Do not even think about it. Why do think the owner wants to sell and well not show her the books. It's a loser: :.

Edited June 29, 2010 by gotlost

[sevenhills]

"Buyer beware". Does not matter how nice this lady sounds, in my opinion if she will not show you the financials then she is hiding something?

It should have nothing to do with trust.... Trusting a seller here is very dangerous and costly, and if your wife has no business experience here then forget it. :jap:

Edited June 29, 2010 by sevenhills

[jackdawson]

My wife gets very emotional and starts crying.

...there but 4 the grace of god go I...

[taurus88]

The shop must have proper accounts for tax & revenue purposes and she is obligated to disclose updated statement on daily accounts and audit if she wish to sell. If it is a fully registered business, it is mandatory to have these financial records. In fact if business is making money, she will be happy to show to you. If not, I doubt her sincerity. 

[taurus88]

Your wife may be so confident that you will agree and may have promise the shop lady and now face a lose of face to explain. That could trigger her sobbing. I think you should re-negotiate and try to find an amicable solution and not let your wife carry all the burden.

[WorldTraveler]

A few years back, I dated a couple of different ladies who owned small massage shops. Both wanted out of the business for many reasons but I will just list a few:

1. If your wife wants to run a "clean" business, she will become frustrated to find out that several of her workers will want to provide "extra" services to make bigger tips.

2. It is a cash business and unless your wife is there all of the time, there will be a lot of "leakage" of money by the staff.

3. It is nearly a 24 hour business so your wife should expect to get calls nearly 24/7 from the staff.

4. Staff turnover is a big problem with this business.

Maybe with the facts, your wife will realize that getting into this business is a mistake.

[kuifje]

Quote :The owner says that during the low season she pulls in net profits (at the lowest) of 35,000 baht.

Maybe the owner is confused and meant turnover of 35.000, ha, ha.

Please look around in many Soi's in Bangkok, sooooo.. many 'massages' salons, but hardly any 'serious' takers.

People who wants a decent massage, will not go to these kind of shophouses.

[scorecard]

<P>absolutely forget it.</P>

<P>If it is a registered business, it is required to submit annual statements and keep proper records. If the owner is not willing to show, it can only mean one thing - and I leave that to you to figure out. </P>

<P>It's not about you trusting your wife and she 'trusting' the owner. Business is business. <BR><BR>Aside from the fact that you stand to lose your investment , also consider that when buying a business, you could also be inherriting previous debt - so aside from the previous financial records you would also have to do due dilligence to check up on that. <BR><BR>Yep, definitely forget it.<BR></P>

I agree with richardt1808, if it's a registered business then there are reports and tax returns which must be submitted, and solid fines if they are late. If it is registered, maybe the old owner hasn't paid the taxes etc., and that's why she won't reveal anything.

However the reality is that many businesses are not registered in Thailand and I've heard before that's it's quite easy to buy fake registration certificates (the framed documents / certificates you often see on the wall in a shop or office). So probably worth checking if the business is in fact registered.

If the BMA inspectors come by and it's not registered then this could bring fines and tea money requests.

I'm going to guess the premisies is rented, are the rent payments up to date? Is the rent high? If there is no income then covering the rent from additional capital injections will very quickly add up.

Is the electricity paid up to date? Are there other suppliers who haven't been paid?

Are the current staff capable of the required work / are they reliable / are they trustworthy?

Is the shop location in a place where large numbers of tourists can easily see the premises? Does the outside signage work? Does the interior (furniture / floors / beds / towels / etc etc) need any refurbishment?

Does the current owner have any conflicts with other local business operators, is that why she wants out?

I just checked with my Thai professional colleagues, they say that sellers not revealing business data to a potential business buyer is absolutely not true. They also say you can easily check on line about registrations.

In terms of the type of business, Thailand already has more spas/massage shops etc., than it can support and every day people open more of these shops without realizing that the industry is already more than saturated. And also not realizing that tourism is going to stay down for at least another six months, maybe more.

As Richardt said, you must do a comprehensive due diligence. If the owner refuses to cooperate to answer all of these questions, and more, then alarm bells are probably ringing loudly.

If your wife has no business / managerial knowledge or experience then I would be concerned whether she can manage the types of people who traditionally work in this industry. Put it another way, most of the shop owners/managers in this industry are pretty tough and need to be. And the staff are alo pretty tough cookies and often not easy to manage.

Has your wife actually met the sweet mouth seller?

Trust nobody in business.

As suggested by others, maybe better to set your wife up in a small trading operation where failure is not so expensive.

As mentioned small business failure is very common, some recent numbers (applicable pretty much anywhere in the word:

- 80% of first time small businesses fail within three to six months.

- a further 10% fail within the first 12 months.

When the economy is down and the likely customers are scarce, those numbers become even more frightening.

Good luck.

Edited June 29, 2010 by scorecard

[Johnny99]

There are so many problems with this scenario, some of which have been mentioned already. It just doesn't sound like a good idea no matter how you look at it. What I would suggest is that if you think your wife has already been enticed to make promises that you don't want to keep, or pay for, then just allow her to blame lack of interest on you.

My wife and I use this tactic whenever needed. Although I consider my wife to be an astute business woman she will occasionally be drawn in by friends or relatives and find it awkward to just say no. In this type of situation she will just say that she wants to help but her husband doesn't understand and won't allow her to get involved. Anyway, that's my suggestion.