Any ideas on how to buy out another person's business operating in the negative?

Question

I have an acquaintance and long time rival who owns two nail salons. Recently I joined her after her entire staff walked out of one of her salons. She has relocated to an old location after being evicted from her previous space. Initially my thoughts were to serve in a capacity to help her rebuild her clientele and make some extra cash but she is now asking for my assistance with managing and financially supporting her business. The biggest CONCERN is that I KNOW that she has not been paying creditors ON TIME. The landlord came by to collect rent; $1700/month not including utility and supply expenses. She assured me that the equipment in the salon is paid for. It would be great to get into this business, but it could be months, maybe even years before it is ever profitable like it was. She is in debt and at risk to lose everything. What would be a good way to acquire the business and with out creating any type of partnership?

Answer 1

Simple, you offer her a sweet deal and you pick up a sweet deal at the same time.

She is bout to go belly up, can't pay bills, is behind. To close her doors will destroy her life, even personal life. And she will have to go find a job, something that is not easy to do today.

You seek to remove your competition to gain that much more business. Yet don't have the cash flow to buy her out. But she's not a threat if she is in the negative.

So offer to just absorb her company as is, bills and all. Of course sit down and check them all out first. Take some hits but make sure no hidden 30,000 owed somewhere.

But as you absorb her and her bills, she is no longer the owner nor partner nor any ownership at all. But is now your employee or even head nail tech. Sounds like she is a good nail tech to get the business, but is not a business person who can run the numbers. Aces in their places, put her where she belongs, doing nails.

Now you have help, assistance, still the only owner, have doubled in size for almost nothing down. Removed the competition and even better, absorbed them and the customer count. Also she can do nails and you can go grow the business more, instead of being stuck doing nails yourself.

Saves her from bankruptcy and allows you to grow, win win.

Answer 2

I wouldn't get any more involved with this person. Entire staff walks out? Evicted? Creditors coming by to collect? Do yourself a favor and leave. The only thing of value is the client list (assuming she has one).

Answer 3

You could do an asset purchase, where you buy the assets and take over the business. Does she have any kind of financial statements?