Business Finder Mallorca News

 

 

The Do’s and Don’ts of buying in Mallorca

Why buy a business in Mallorca?

With 25 years of experience in the industry behind us at Business Finder, we can simply say that although prices, attitudes and trends have changed, one thing has always stayed the same, the desire for a better lifestyle and quality of life. We hear the same again and again from our clients; be they lawyers, accountants, shop workers, builders etc.. For them the better lifestyle may be the warmer climate, friendlier attitudes, slower pace of life and a sense of community not only with the locals but others from a large expat community.

Mallorca, the jewel of the med, with a little something for everyone, brings millions of tourists back year after year. Every corner of the island is different to the next and there are business opportunities available throughout the island giving buyers a real selection in terms of price, style, situation and personal choice. There are over 20,000 registered ex-patriots living on the island with many more coming to the island year on year.

Two main reasons to buy in Mallorca: 1)To own your own business, with the red tape, regulations and tax system being so much simpler and fairer than in Britain and other regions in Europe, setting up for the first time couldn’t be easier 2) Stepping stone, many clients come with little experience in the catering trade and continue to succeed with bars and cafes. Many however choose to go on to employment in their trade as the business has allowed them to meet people and find the suitable work whilst already making a living and enjoying a challenge.

For non-catering businesses, Mallorca can be the best place to be with ideas and new concepts, with the thriving ex-patriate market wanting a typical British standard of service. Most buyers’ experiences and passions will play a strong part in buying these types of business which can be Yacht brokerages, property management, publishing, repairs and much much more.

Tips – dos and don’ts on choosing a business

Dos

Do the research – look up the regions on the internet, familiarise yourself with the towns maybe “google” them. Look up leading tour operators and see how many hotels are available in that region, this will create a picture of how easy it is for your client base to get to that resort.

Inspection trips best to do initial research in season, then to buy a business out of season when prices are more negotiable, and more choice of businesses are available.

Negotiate the price – Most prices are inflated by 10/20% dependant on the time scale, with offers more likely be accepted in the winter months.

Ensure you understand the businesses activity, if going alone without an agent, ask to see the license and get it checked by a Gestor. Bar licenses can serve snacks and microwavable items where as a Cafeteria license is needed when serving chips! Be very careful.

Terms of the current contract, for a leasehold business it is best to ask to see the current tenants / sellers contract, the conditions are likely to stay the same to new leaseholder. Read through and check the clauses on deposits held, commission to re-sell and rights.

Write a list of questions ready to ask the agents, lawyers, business sellers. Use a recognised Agent – Going alone can save you money in the short term, but in the long run the agents have the experience and knowledge to save you time and money. Finding a reputable agent is not always easy, as fancy websites can be misleading, ensure that the agency is well established, with experienced staff who have been on the island for some time, with an office and support set up to help you post sale.

Don’t

Give cash directly to the seller, many Spanish owners will try to insist on a “signal”, a sign, should any problems occur whilst checking debts or licenses you could risk losing the money. To proceed on a purchase place a minimum of 10% deposit with lawyer or Agent.

Be pressurised, take your time in making the right decision, a reputable agent will try to match your needs to the business and tell you the pro’s and cons of each town, location, market, background to that opportunity.

Spend every penny of your budget, you need to allow for the rent deposit not only on the business but on accommodation plus legal fees and start up taxes approx 2,200 €. You should also allow at least a 6 months contingency fund to see you through.

Follow what everyone else does, be unique and do what is natural for you. If your lifestyle choice is a day time trading business don’t be tempted by a cheap night time music bar.

Think you can do it alone with out any support. To buy in Mallorca or anywhere in Spain 90 % of the time you will be dealing with an honest individual but there is the 10% chance of getting a business with debts and no licenses, so use a lawyer / gestor or go through a reputable agent who will vet businesses before hand.

Some little stories of people who have bought businesses – what they did right or wrong and how they’re doing now

We have heard the stories of people buying businesses directly and falling in to real trouble.

Keith Manners bought a cafeteria in Can Pastilla, front line, superb location. He decided to deal directly with the sellers and paid cash for the business. Only signing the rental agreement with the landlord and then taking the keys to the business. He’d spent his entire budget leaving him very little to start up with. Further on within 2 months the electric was cut off, with Keith finding out that he had bills totaling over 8,000 € from the year before. Keith had by this point faltered on the rent which he never negotiated and in addition strict clauses in the contract meant that Keith risked losing everything if he couldn’t sell within 4 weeks. Keith approached us to help find a quick buyer, having known his circumstance we successfully helped Keith to sell the lease ensuring the new buyers had all debts paid and re-negotiate the contract to be reasonable with the landlord. Unfortunately with the debts mounting Keith only achieved a 1/3 of what he originally invested but without our support he could have lost everything and more.

Jeannie Stokes came to Business Finder looking for a lifestyle choice bar or café in Mallorca. She had little knowledge of where she wanted to be on the island or how the system worked. It was clear from our meetings that she had the experience and ability to take on any catering option. Upon discussions and many viewings Jeannie nearly decided on an option for her sons a night time bar in Magaluf. While Jeannie was enthusiastic about this choice it was clear what was better for her was an all year round café bar. We completed a sale for her on Franklyns in Son Caliu in 2007 and since then she has had great success and is enjoying her new lifestyle in the sun.

Most popular businesses to buy

As a widely marketed internet based agency with a large presence in both Mallorca and Tenerife we receive a whole host of enquiries from bar / café businesses through to yacht engineering companies.

The regions most popular this past year has been the South East coast, with its beautiful scenery, coves and marinas. We have always had high demand in the South West Bendinat to Port Andratx. The market that is on the up is hostel / hotel and non-catering, we currently have a data base of clients actively looking for opportunities across the island.

The process – what costs are associated with buying a business – taxes etc.

  • Freeholds carry government, notary and transfer taxes / fees. Allow 10-12% of the official sale price to cover all there costs
  • Leaseholds – Taxes to change names on licences and paperwork at the town hall. Approximately 850€ one off payment.
  • Security Deposit to the landlord (usually 2 months rent)
  • Legal fees are approximately 1,400 € for a standard sale (Bar / Café)
  • In a few instances stock is bought at valuation however usually agreed in the price.
  • Don’t forget any funds for decorating, replacing furnishing etc, and contingency.

We hope the tips and advice on the dos and don’ts will help guide you onto the road of success.

Hope to see you soon, Business Finder Mallorca Team.