1-Find out what percentage of the $$$$$$ you get from the contract.
Alot of contract business involves the owner selling the contract for a percentage on the dollar.
Depending on how its structured the owner may have already been paid for the current students.
2-Find out what the "churn" rate might be---how many students drop over a certain period of time.
I'd find out in at least these increments:
You also need to know how fast new students are coming in.
3-How long is willing to stick around and help the new owner get settled--help him meet the current students/their parents?
4-If he is open 6 days a week---whom is going to be teaching the classes?
Are you going to have to do it all?
Or are you going to need to hire help?
5-What is he paying for insurence, lights, heat, AC, cost to him for the MA equipment he sells (and what he makes on selling it) snow removal, promotinal materials--and how much stock does he have of those left--and are you going to have re-do them all when the guy is no longer there???
Any changes on the name of the school when he leaves--any signs that need re-painting?
BTW--is there a website that needs to be paid for and maintained?
6-How is the lease in the current space set up?
Is it almost up--or are their many years to go?
Is it set up to automatically increase over time--or is the cost locked in?
7-You also need to look at the growth pattern---what its worth "today" might be very different in 3 years.
School could be growing or school could be shrinking.
You need to find out what the growth pattern has been over time.
8-What the competition like?
Is he nearly the only game around?
Or is there another school the next block over?
9-Find out how old the equipment really is and what he paid for it when brand new.
The cost to YOU depending on how old it is--when it needs to be replaced etc might be a A LOT less than you think.
Besides, if you have to replace it soon---then that should bring the price down.
10-What kind of advetiseing is he doing if any?
Another cost you need to consider.
11-Tougher to get a handle on---but is the school "personality driven?"
By that I mean is the guy the main driving reason for students to be coming and staying?
If it is---then without him the school is worth FAR less than the W-2's would indicate.
Not going to be easy but you need to find this out.
Again, the big questions are:
-Just how much net income is he really makeing right now?
-Based on that, how long will it take you to recoup your buy-in expense?
At what point are you going to makeing a profit?
-What is the growth potential of the school--along with the chances of the school shrinking?
-What is a complete list of his actual financial outlay and income.
Best I can do at the momment.
Sorry for the length.