nietzche Posted March 31, 2012 Share Posted March 31, 2012 Has anyone successfully bought an established business in Thailand that actually gave them a non-negative return on their investment? Seems like there are too many Thai businesses for sale online that have outrageous asking prices. It's not unusual to see a business quoted at 3,000,000 +, where net profits are stated as being in the 30,000/month range? Any bookkeeping information that is unaudited is in my opinion worthless in any country without supporting tax documentation. Another interesting recurring theme is the net profits being reported on an annualized basis, when the business has only been open a few months? Isn't this a bit of a stretch in a country where all businesses in the hospitality arena are subject to seasonal fluctuations? Link to comment Share on other sites More sharing options...
robblok Posted March 31, 2012 Share Posted March 31, 2012 As an accountant i agree with you i would not buy anything here easy. Too much things can go wrong and if its not audited then your in for a world of hurt. Even if it is audited last year might not be the same as this year. Link to comment Share on other sites More sharing options...
bangkockney Posted March 31, 2012 Share Posted March 31, 2012 Depends what's on the balance sheet. Link to comment Share on other sites More sharing options...
soundman Posted March 31, 2012 Share Posted March 31, 2012 Depends what's on the balance sheet. Which one? The owner's private balance sheet, or the one prepared for the revenue department..... Almost all business's keep two sets of books. Link to comment Share on other sites More sharing options...
bangkockney Posted March 31, 2012 Share Posted March 31, 2012 (edited) Depends what ROI you are looking for as to whether the valuation is acceptable. Edited March 31, 2012 by bangkockney Link to comment Share on other sites More sharing options...
brit1984 Posted March 31, 2012 Share Posted March 31, 2012 Has anyone successfully bought an established business in Thailand that actually gave them a non-negative return on their investment? Obviously yes but in many cases I suspect this will have been achieved by re-selling the business at a higher price to a newer newbie... Link to comment Share on other sites More sharing options...
brit1984 Posted March 31, 2012 Share Posted March 31, 2012 (edited) Seems like there are too many Thai businesses for sale online that have outrageous asking prices. It's not unusual to see a business quoted at 3,000,000 +, where net profits are stated as being in the 30,000/month range? Business owners (not just in Thailand) often have unrealistic valuation expectations, but you don't necessarily have to pay the full asking price. For example, I bought a business in the UK at a 80% discount to the advertised price.However, I suspect a higher than global average proportion of buyers of businesses in Thailand "hit the bid". Hence, it makes sense to advertise at a high price just in case a newbie suffering from heat exhaustion comes along and pays full whack. Edited March 31, 2012 by brit1984 Link to comment Share on other sites More sharing options...
NewlyMintedThai Posted March 31, 2012 Share Posted March 31, 2012 There is no set way to establish a business's value. It could be a factor of gross, of net, a strict asset sale -- there are no rules. Goodwill and intellectual property are especially difficult to set a value on. In the end, it comes down to what a buyer will pay and what the seller will accept. Link to comment Share on other sites More sharing options...
nietzche Posted March 31, 2012 Author Share Posted March 31, 2012 Has anyone successfully bought an established business in Thailand that actually gave them a non-negative return on their investment? Obviously yes but in many cases I suspect this will have been achieved by re-selling the business at a higher price to a newer newbie... I agree with this. I'm of the opinion that there are some people who are trying to make a business of starting businesses, and selling them quickly to make a profit Link to comment Share on other sites More sharing options...
lannarebirth Posted March 31, 2012 Share Posted March 31, 2012 I have never encountered a profitable business here if one has to account for cost of property, that was for sale. One basically has to own the property already and that still doesn't guaranteee profitibility. Link to comment Share on other sites More sharing options...
nietzche Posted March 31, 2012 Author Share Posted March 31, 2012 Depends what's on the balance sheet. True, but aside from fittings and fixtures, what is there in a leased property space that could command such high prices. Link to comment Share on other sites More sharing options...
brit1984 Posted March 31, 2012 Share Posted March 31, 2012 Another interesting recurring theme is the net profits being reported on an annualized basis, when the business has only been open a few months?Isn't this a bit of a stretch in a country where all businesses in the hospitality arena are subject to seasonal fluctuations? It is not only the hospitality industry that is affected by seasonality but your point is completely valid. Furthermore, seasonality is not the only reason why an annualised profit figure for a business that has been open for afew months needs to be taken with a pinch of salt. Obviously, you can go to see the business and speak to management to establish how they calculated the annualised profit figure. By definition, it is at best an estimate and from my experience it is generally not a very well-thought out estimate. Link to comment Share on other sites More sharing options...
nietzche Posted March 31, 2012 Author Share Posted March 31, 2012 I have never encountered a profitable business here if one has to account for cost of property, that was for sale. One basically has to own the property already and that still doesn't guaranteee profitibility. Agreed! Surely the only people who can make a buck or two out of your run of the mill business (bar, restaurant, massage shop) are those who own the properties outright. Even at the very least, if you have a mortgage on the property then the revenue from the business could cover those costs making it somewhat worthwhile since you are accumulating equity even if you are breaking even. I'm of the opinion that the only people getting rich here are the landlords. Link to comment Share on other sites More sharing options...
brit1984 Posted March 31, 2012 Share Posted March 31, 2012 To summarise, you should not place much, if any reliance, on the information provided in online adverts for businesses for sale in Thailand (same for most countries)... You should come here and due-diligence the businesses yourself but, from my experience, few will turn out to be anything like the advert online... My wife and I met with some such business owners when we first arrived and there was not a single case of a viable going concern business for sale and in most cases it was clear the real business was selling the business (ideally to cashed-up and/or loved-up newbie foreigner with more money than sense)... Link to comment Share on other sites More sharing options...
brit1984 Posted March 31, 2012 Share Posted March 31, 2012 I have never encountered a profitable business here if one has to account for cost of property, that was for sale. One basically has to own the property already and that still doesn't guaranteee profitibility. Agreed! Surely the only people who can make a buck or two out of your run of the mill business (bar, restaurant, massage shop) are those who own the properties outright. Even at the very least, if you have a mortgage on the property then the revenue from the business could cover those costs making it somewhat worthwhile since you are accumulating equity even if you are breaking even. I'm of the opinion that the only people getting rich here are the landlords. Good point but not entirely true. If you get the formula right for any of those example businesses you mention, you can cover the rent and make profit well in excess of the rent. However, if you get the formula right you are very unlikely to sell the business, which is why buying an "established" business is fraught with danger! Link to comment Share on other sites More sharing options...
NewlyMintedThai Posted March 31, 2012 Share Posted March 31, 2012 I have never encountered a profitable business here if one has to account for cost of property, that was for sale. One basically has to own the property already and that still doesn't guaranteee profitibility. I think you're talking about shops, bars, restaurants, etc. There are lots of office-based companies that are profitable. Link to comment Share on other sites More sharing options...
nietzche Posted March 31, 2012 Author Share Posted March 31, 2012 To summarise, you should not place much, if any reliance, on the information provided in online adverts for businesses for sale in Thailand (same for most countries)... You should come here and due-diligence the businesses yourself but, from my experience, few will turn out to be anything like the advert online... My wife and I met with some such business owners when we first arrived and there was not a single case of a viable going concern business for sale and in most cases it was clear the real business was selling the business (ideally to cashed-up and/or loved-up newbie foreigner with more money than sense)... And there's no shortage of cashed up/loved-up newbies to go around! Link to comment Share on other sites More sharing options...
brit1984 Posted March 31, 2012 Share Posted March 31, 2012 I have never encountered a profitable business here if one has to account for cost of property, that was for sale. One basically has to own the property already and that still doesn't guaranteee profitibility. I think you're talking about shops, bars, restaurants, etc. There are lots of office-based companies that are profitable. There are also lots of shops, bars, restaurants, etc that are profitable. The point is they are generally not for sale. Link to comment Share on other sites More sharing options...
NewlyMintedThai Posted March 31, 2012 Share Posted March 31, 2012 I have never encountered a profitable business here if one has to account for cost of property, that was for sale. One basically has to own the property already and that still doesn't guaranteee profitibility. I think you're talking about shops, bars, restaurants, etc. There are lots of office-based companies that are profitable. There are also lots of shops, bars, restaurants, etc that are profitable. The point is they are generally not for sale. True. Why sell a good deal? Link to comment Share on other sites More sharing options...
nietzche Posted March 31, 2012 Author Share Posted March 31, 2012 I have never encountered a profitable business here if one has to account for cost of property, that was for sale. One basically has to own the property already and that still doesn't guaranteee profitibility. Agreed! Surely the only people who can make a buck or two out of your run of the mill business (bar, restaurant, massage shop) are those who own the properties outright. Even at the very least, if you have a mortgage on the property then the revenue from the business could cover those costs making it somewhat worthwhile since you are accumulating equity even if you are breaking even. I'm of the opinion that the only people getting rich here are the landlords. Good point but not entirely true. If you get the formula right for any of those example businesses you mention, you can cover the rent and make profit well in excess of the rent. However, if you get the formula right you are very unlikely to sell the business, which is why buying an "established" business is fraught with danger! For sure. Although most of these ads have reasons for selling such as the obligatory "Owner has to relocate to focus on other business, etc." There are most definitely profitable businesses in these areas. I think however, that if you have such a business and you have legitimate reasons for selling, then you would not need to post it on the internet as such. The internet is the last resort for such things. The best deals usually happen offline, i.e. would be snapped up before it made it that far. Just a thought. Link to comment Share on other sites More sharing options...
brit1984 Posted March 31, 2012 Share Posted March 31, 2012 I have never encountered a profitable business here if one has to account for cost of property, that was for sale. One basically has to own the property already and that still doesn't guaranteee profitibility. Agreed! Surely the only people who can make a buck or two out of your run of the mill business (bar, restaurant, massage shop) are those who own the properties outright. Even at the very least, if you have a mortgage on the property then the revenue from the business could cover those costs making it somewhat worthwhile since you are accumulating equity even if you are breaking even. I'm of the opinion that the only people getting rich here are the landlords. Good point but not entirely true. If you get the formula right for any of those example businesses you mention, you can cover the rent and make profit well in excess of the rent. However, if you get the formula right you are very unlikely to sell the business, which is why buying an "established" business is fraught with danger! For sure. Although most of these ads have reasons for selling such as the obligatory "Owner has to relocate to focus on other business, etc." There are most definitely profitable businesses in these areas. I think however, that if you have such a business and you have legitimate reasons for selling, then you would not need to post it on the internet as such. The internet is the last resort for such things. The best deals usually happen offline, i.e. would be snapped up before it made it that far. Just a thought. Absolutely right but don't forget there are two sides of the deal... these sales of worthless businesses to unsuspecting newbies (often new to Thailand and new to business) represent great deals for the seller! Link to comment Share on other sites More sharing options...
nocturn Posted March 31, 2012 Share Posted March 31, 2012 (edited) I have never encountered a profitable business here if one has to account for cost of property, that was for sale. One basically has to own the property already and that still doesn't guaranteee profitibility. owning the property (if you got in early) is a great hedge, especially with beach side pubs, bars, restaurants, dive shops etc. you may be able to sell the business, it may go tits up, but in the end the land will appreciate. It is a waiting game that can make you money (or at least cover costs) in the interim. buy it, kit it out, rent/lease/sell the business to a few morons for a few years apiece and then sell the land for a huge profit a few years down the line. Its not a bad business model at all. please don't go on about owning land, there is money to be made out there, and we all know the speil Edited March 31, 2012 by nocturn Link to comment Share on other sites More sharing options...
bangkockney Posted March 31, 2012 Share Posted March 31, 2012 Depends what's on the balance sheet. True, but aside from fittings and fixtures, what is there in a leased property space that could command such high prices. stock work in progress money owed by customers cash in hand or at the bank short-term investments pre-payments - eg advance rents Link to comment Share on other sites More sharing options...
robblok Posted April 1, 2012 Share Posted April 1, 2012 Depends what's on the balance sheet. True, but aside from fittings and fixtures, what is there in a leased property space that could command such high prices. stock work in progress money owed by customers cash in hand or at the bank short-term investments pre-payments - eg advance rents All those things don't have to be included in the price. You can easily separate them from the business. I for one would not want to take over any money owed by customers (without knowing their payment history and current situation you could end up with a bad debt). Stock and property would of course influence the whole deal. You do wonder then if the depreciation of your stock and property is already accounted for in the 30k profit. If not.. run . Link to comment Share on other sites More sharing options...
brit1984 Posted April 1, 2012 Share Posted April 1, 2012 Depends what's on the balance sheet. True, but aside from fittings and fixtures, what is there in a leased property space that could command such high prices. stock work in progress money owed by customers cash in hand or at the bank short-term investments pre-payments - eg advance rents All those things don't have to be included in the price. You can easily separate them from the business. I for one would not want to take over any money owed by customers (without knowing their payment history and current situation you could end up with a bad debt). Stock and property would of course influence the whole deal. You do wonder then if the depreciation of your stock and property is already accounted for in the 30k profit. If not.. run . As I mentioned above, having met some of the vendors of these small businesses, the profit figures stated in the advert are normally a construct of the vendor's imagination and are barely, if at all, a reflection of reality. Link to comment Share on other sites More sharing options...
nietzche Posted April 1, 2012 Author Share Posted April 1, 2012 I know a guy who owned a small bar in Bangkok a few years ago. Had known him over the years and I used to visit the bar on every visit. He was a retired accountant from the UK. He had told me that the bar made a profit of around $1,000/month (30,000 baht). Last time I saw him he was selling the bar. He was asking 2,000,000 key money. Rent was 90,000/month. By the looks of the fittings, I think you would be lucky to get 15,000 baht for everything in the bar (minus the inventory). I think this says a lot about the expectations of sellers in Thailand. It's worth pointing out that clearly this guy thought he could get close to this sum or why would he bother. The truth is, he probably could. Lot's of folks who leave their brains in their home country. Link to comment Share on other sites More sharing options...
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