Fully describe the business's activities?
The business supplies to home industry suppliers, caterers, bakeries, and,budding entrepreneurs . The business buys in bulk, ton loads at a time - directly from the manufacturers and spend a lot of time bargaining with suppliers to ensure competitive prices to cater for a cost-conscious market. The business stock more than 2,000 products - sold either in bulk or smaller quantities. This includes a wide range of packaging materials, baking ingredients, cake decor and ribbons, cake boards, baking tins (for hire or buying), icing equipment, cutters, dried fruits and nuts, herbs and spices, aluminium containers and a treasure trove of chocolate and related products.
How long has the business been established?
The business was established in 1992.
How long has the owner had the business?
The owners started the business from humble beginnings and grew the business in leaps and bounds.
How does the business operate on a daily basis?
Regular clients (retail and wholesale) orders or walk in to place orders. The business has a website linked to shopify where new and existing clients can place orders online. This online business was recently added and the business has already loaded 1,000 products. The clients pay via credit card and the orders are delivered via courier service. The owner has negotiated good prices with courier company.
How are the clients attracted to the business?
Since the business was established 29 years ago it has a large customer base. Word of mouth.
What Advertising/Marketing is carried out?
The business has an online website and also advertise on Facebook. The business has just started a loyalty program for its shoppers. The business employs a qualified home economics graduate, who also controls the quality of the stock and offers cooking classes. The income for the cooking classes goes to the staff member but ensures sales and added value. The business prints pamphlets with baking tips, recipes, and cooking class dates. Regular emails are being sent to their clients on the database, with tips, new recipes, and other useful information. The online buyers get an offer of a free gift.
Does the business have any contract work?
The business only has a very small amount of debtors who have been buying from the business for many years.
What competition exists?
Another baking supply business located about 26 kilometers from this business. Their prices are not as competitive.
What are the seasonal trends?
The business closes between Xmas and the 2nd week in January each year, thus, for 12 days.and also during Easter.
How did the Covid-19 pandemic impact the business turnover / daily operations?
The month of April showed a very low turnover due to lockdown. The staff was consulted and put on 3 days per week which has now increased to normal working hours. The company also applied for UIF for the staff to compensate for the lower income.
What steps / actions have been taken to combat the effect of Covid-19 pandemic?
Minutes of the meeting will be made available during due diligence to explain how the reduction in salaries and wages was calculated along with the monthly turnover achieved. Since covid this business has gone from strength to strength as is evident from the financials .
Is the business VAT Registered?
The business is VAT registered.
What VAT documentation is on file?
We have the last 12 months (6 VAT returns) on file.
Are there up-to-date Management Accounts available?
We have the management accounts for the period March 2019 to February 2020, as well as March 2020 to February 2021 are on file. We also have the last 12 months' bank statements on file. This information will be made available during due diligence. The management figures are all excluding VAT and ties up with the VAT returns on file.
What Balance Sheet and Income Statements are available?
The seller has provided us with the income statements for the 4 year period ending February 2017, 2018, 2019, 2020, and 2021. The close corporation owns the two properties.
What percentage of the business is cash/credit?
The business is almost 100% cash, EFT or swipe, only a handful of clients have payment terms, mainly due to the long relationship with the business, it is, however, a very small percentage of the turnover.
How could the profitability of the business be improved?
The shop should ideally be moved to ensure more walk-in clients and to cater for the growth and stock. The business is not on a busy road.
Is Seller finance available and for what amount?
The seller will look at reasonable offers from a qualified buyer.
What is the total staff complement?
1 x Home Economic who is dealing with stock control and offering classes 1 Admin and Bookkeeper 2 Front-line staff operating the till 7 staff members(packaging, cleaning, printers)
Give a breakdown of staff/ functions/ length of service?
We have a staff breakdown on file.
Do any receive special perks or incentives?
On good performing months the owner will as per discretion pay the staff a small cash bonus.
Are they on contract?
The staff are on employment contracts.
Do any have management potential?
The staff are able to run the business for short period of time in the absence of the owner.
How involved is the Owner in running the business?
The owner is in the business daily, doing stock control, ordering of stock and overseeing the finances.
Any special arrangements for the staff related to the Covid-19 pandemic?
The minutes of meeting with the staff outlines the arrangements.
When does the current lease end?
The owner owns the two properties from where the business operates. The owner is willing to sell both properties for R1,800,000.
Is there an option of renewal & what period?
A favorable lease could be negotiated at R25,000 per month for both properties, or buy the two properties for R1,800,000.
What is the annual escalation %?
To be negotiated.
What are the trading hours?
Monday to Friday 8h00 to 17h00 Saturdays 8h30 to 12h30
What is the square meters of the business?
The business currently operates from two adjacent properties owned by the sellers. The one property is the retail store +/- 180m2 (shelving, reception, small office, packaging area, and dispatch area) The other property is 110m2 with an office, rooms used for storage of stock and a kitchen area where the classes are offered. This property also has 2 containers (12x2m2 and a 6x2m2) as well as a shed of 5x5m2 where bulk stock is kept. This will be included in the monthly rental.
Who is the Owner/Landlord?
The seller owns the properties.
Is a copy of the lease available?
N/A We have provided for a monthly rental of R25,000 per month for both properties in the expenses.
What lease deposit and/or other surety is required?
One month rental deposit.
What are the main assets of the business?
The main assets are the shelving, tills, computer system with 5 computers, scales, wrapping machines. An asset list is on file.
Are any items not included in the sale?
All assets as seen on the asset list will be included in the sale. The equipment in the kitchen area with some stock are excluded from the sale, as this is where the home economic offers her own classes.
What is their overall condition?
The computer system has been updated as well as the security and camera systems.
Do any require repairing?
Ongoing repairs to ensure that the assets are in good working condition.
How have they been valued ?
The owner valued the assets at R300,000. The camera system alone costed R20,000.
Which assets are on lease/HP and with whom?
All the assets are unencumbered.
What are their settlement amounts?
Will Seller settle or Buyer to take over?
Are copies of agreements available?
Are they presently insured?
The business is comprehensively insured.
A well-established business opened for 29 years with loyal clients. Well-trained staff. Good systems controlling stock and POS The business has improved the turnover from R9m per annum to R12m.
Due to the GP margins, the business carries high volumes of stock. Good stock control systems are in place and obsolete and slow-moving stock is offered in the bargain corner. The month of April was very difficult as the business was closed due to Covid19.
Franchise the business. Loyalty points to regular buyers. The business is currently offering a cashback on a minimum amount of R400 sales as a once-off to new clients. They are spreading the word and this seems to be very effective marketing. Relocate the business to ensure more foot traffic to attract new clients. Open offset points/small retail shops.
General economic situation. This business has however remained constant in sales and profitability.
What is the reason for the sale?
The owners wife started the business in 1992, Due to ill health the husband had to take over the business three years ago. He is in his seventies and wishes to retire.
Why is this a good business?
Excellent client base with loyal and well-trained staff. The business has been in operation for 29 years.
What is the price plus stock and the profit?
The current stock is +/- R2,3 million, with an average of R1,8m. The owner will sell the business and its stock, including all assets and goodwill as a going concern at R4,000,000. The two properties are also available for sale at R1,800,000. The financials and our report have provided for a monthly rental of R25,000.
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