I need some help.

There's an opportunity for me to
buy over a laundromat business in Ang Mo Kio.

How much should I pay or
rather how do l determine how much to pay ?

Thanks.

Just to share my thoughts, without knowing much details about the business and your preference. This is a blind shot, so take it with a large pinch of salt.

1. I would think in turn of "Net Return on Investment", in term of percentage and absolute numbers.

1a. The % is to see if the investment is worthwhile, and the opportunity cost of fund (if used elsewhere to generate other income). I think I would peg this to around 8-15% NET.

1b. The absolute numbers is to see if this final net $ received is worth the effort. If the $ received is small, thought in percentage term is high, it may not worth the effort (and risk).

1b(i) Do explored if the business can be duplicated (expanded) if it is of high percentage return but low number . Total market (in $ term) and ability to capture market share, financial and human capital involved has to be considered in this situation.

1c. Balance of % return and $ number return has to be of your liking. Generally speaking, low % goes with high absolute numbers, and vise versa.


2. The Net Return is arrived from 2 components: 2a-2b

2a. Total taking: This is simple case since this is a laundromat.

2b. Total Outgoing: This include all rentals, utilities, consumables, maintenance and up-keeping, labour (if any, full or part time), insurance, depreciation, and compliance (tax & law) cost.


3. Generally, when buying over a business, I would consider the following:

3a. Why the existing business owner is exiting? Are you convinced that the reason they give is genuine?

3b. What do you think you can while the exiting owner cannot do? Because of network, capital, time, skill or knowledge?

3c. How reliable are the number given? Any seasonal fluctuation?

3d. What about competitor? What kind of pricing they are charging? What are your strength compared to theirs?

3e. What is the generally trend in the market?

3f. What is your exit plan when the business performing or not performing (as trader, we alway think of the downside first, right? :) )

Hi HC,

Thanks.

Let me summerized.

(1) To determine whether the business is viable,
we need to see positive future earnings.

(2) To determine future earnings,
we need to know the nature of business well.

Others shy in contributing ? :D

This thread will become important soon,
but not now.
Because any $*(*# stocks can make 100% a day.

During the last madness,
WB was laughed at,
other traders were making 1000%
and he missed out all the goodies.

But the 1000% traders are no longer around,
and WB got stronger.

Let's shelve this for a moment,
but we definitely have to come back.