personal finances

Business, anyone?

16.07.2009 | Borys Beletskiy, special for Weekly.ua, PH: Sutterstock

Ready-to-go businesses are up for sale at UAH 15,000-25,000. Strange, nobody seems to be in a rush to take advantage of the deal

The Internet and press are teeming with offers of turn-ey business projects at the prices that are even affordable for students and pensioners. One even gets the feeling that its as easy as a pie to become an entrepreneur in the throes of the recession. Weekly.ua decided to look into this issue to find out exactly how much it costs to open up a small business and whether becoming an entrepreneur in the heat of the financial crisis pays off

A hot tour into
business
Recently, pop singer Svitlana Loboda acquired a travel agency. PR managers of this years contender in the Eurovision Song Contest trumpeted this left and right. But the song didnt last long and Loboda pulled out of business like a scalded cat without even reaping the first harvest.
Today a ready-o-o travel agency with a license for inbound and outbound tourism, a contract with tour operators, lessors of office space and two or three managers costs UAH 20,000 and up. An agency or tour operator with regular clients, accreditation with embassies and a name on the market has a higher price tag, though not exorbitant UAH 400,000-00,000.
It turns out that a turn-ey travel and tourism business can be bought for the price of a one-oom apartment in Kyiv. So, why is nobody in a rush to take advantage of such a good deal?
The price of UAH 20,000-0,000 for a travel agency is an absolutely realistic figure. More often than not those that bought such a business and failed to succeed put it up for sale. In short, if you bite the bait in such offers, beware of possible underwater reefs. It is quite tough to learn everything about such businesses at the stage of purchase. You have to call around to all tour operators and collect information about the agency and its reputation on the market, warns Director of the Dva Chemodana (Two Suitcases ed.) travel agency Anna Tymoshenko.
For example, it might turn out that the tour operator sold travel packages for many months in advance, but did not settle the bill with hotels and airlines. As a result, having bought an agency for a dime a gullible neophyte businessman ends up having to deal with outraged clients and debts in the millions.

Business for any wallet
Even the least expensive project such as an online shop could turn out to be a pig in the poke. The prices of such projects start at UAH 15,000. On the one hand, the demand for online purchases continues to rise every year. On the other, developing an online project and popularizing it requires entails major expenses for advertising and website promotion, seeing as the competition between online shops in the Internet is stiff.
In addition to that, one must have solid connections with suppliers and banks for acceptance of payments, a high rating, a dedicated administrative zone and other pluses.
Though a kiosk selling ice cream, snacks and other cheap food is not exactly a prestigious business, it is more reliable. A kiosk selling food products with an area of 6-0 square meters currently costs from UAH 15,000-5,000, depending on the location and product inventory. The monthly profits from such a kiosk located near a bus stop or some other place with high human traffic can be as high as UAH 5,000-7,000. Mind you, the starting price of retail outlets kiosks in such locations is UAH 100,000.
Among the cheaper variants are the franchises of well-stablished companies that sell baked goods, such as Fornetti, Chudo Pich, Pan Pyshko, etc. According to different estimates, a kiosk selling freshly baked goods, buns and rolls could yield a return on investments within 2-6 months. The secret is in cheap raw materials and high mark-ups (up to 40%).
There are more prestigious businesses than small trade, for example, beauty salons, restaurants, cafes and car repair stations that range in price from UAH 100,000 to UAH 5.5 mn.
A beauty salon in Kyiv with a steady flow of regular customers, state-of-the-art equipment, professional hairdressers and 300 square meters costs around UAH 5 mn. A less prestigious salon, though with a decent location, 93 sq. m. and a staff of 5 professionals sells for half that amount. Furthermore, the sellers promise profits of UAH 30,000 a month.
Car repair stations in Kyiv with a turnover of UAH 55,000 a month sell for a minimum of UAH 860,000. The operating costs of restaurants start at UAH 250,000 and can be as high as in the tens of millions. Be that as it may, prices today are much lower than before the recession set in, on average 20-30% lower.

Hope for a lawyer,
but help yourself

It is clear that people are selling their businesses at low prices as they are experiencing financial hardship. But even if you feel you have the strength to catch a second wind, be very cautious when buying a new business.
Lawyer Denys Telcharov says that inexperienced investors oftentimes pay people that are not authorized to effectuate transactions. Buying a business directly from its owner is the most reliable path to take. But there are cases in of an owner selling a business without the notarized consent of the co-owners, for example, a spouse.
It would be wise to check into the reputation of a company, its position on the market, whether the tax authorities have any claims against it and, naturally, the existence of any unpaid loans.
Indeed, it may turn out that the premises of store or cafe for sale are mortgaged with a bank and the seller forgets to inform the buyer. One should also check the companys articles of incorporation giving it the right to operate. Hiring a lawyer to deal with this would be careless. After all, a lawyer can check that the documents and transactions are in compliance with the law and check the authority of the seller or its representative, but nothing more.
A lawyer is not interested in the profitability of your business.
Acquisition of a business at a reduced price can be a profitable investment. Of course, investors must understand that they will not see profits immediately. They will only start to see a return on their investment when the economy starts to recover. Until that time, one must learn how to make ends meet.
In addition, if to analyze the dynamics of depreciation of small and medium enterprises in Ukraine, they continue to fall in price and so far there are no signs of price stabilization. This means that the depreciation of the assets of many Ukrainian companies has not hit rock bottom yet.
If to put away some money now, by the fall one may strike a better deal. Moreover, by that time it is possible that commercial banks may start issuing loans for project development at a decent interest rate.

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