Considering purchasing a retail business

[Andrewski]

So there is a retail business for sale for 400k near where i live, the owner said he had 110k in cash flow last year and he doesn't put any hours in the store, just over sees that everything is going smooth so it is mostly turn key. He is selling it because he is retiring. The store normally had 5-7 employees depending on the season and did over 1mil in sales.

It's not exactly a fastlane business but my fastlane journey has been through rental properties so far and my most recent purchase was a duplex for 390k that cash flows 6k/yr. So in my eyes this is like a killer piece of real estate!

I'm only 24 and haven't owned a business yet. So what i'm looking for advice on is from people who have owned/managed a small business similar to this. How hard will it be to own it and learn everything to run it? Is it going to be a lot more time consuming then i think? Will it be stressful? If you had this opportunity available would you scoop it up? If no, why?

 

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[Trivium iz rC]

More information about this business would be great. What kind of retail business? Is it in the plain center of town or a great down town/ beach location? What's the growth of the business? If you interested in buying the business why don't you ask the guy to see some AUDITED financials?

A retail business is a different type of monster compared to your real estate venture. Do you have the saved capital to buy the business? Your chances of a bank loaning you money for this type of businesses is none.

What I find interesting is that the gentleman that you are talking about has basically selling it to you as a "turn key" business. My question is if the owner said he had 110k in cash flow last year and he doesn't put any hours in the store, just over sees that everything. Why would he want to sell a business that is generating him 6 figures in cash flow & he has to spend no time in the store. Seems dumb to me to sell a business for 400k instead of just keeping it & sucking some of the profits out to buy other cash flowing assets.

Also before you invest ask him if you could work for free & see if everything he is saying is true about the business. Talk to the employees and see what they say as well.

My partner & I have a seasonal retail business near the NH Coastline. For 4 months out of the year (June, July, August, Sept) business is great. We open memorial day & close right after labor day. Rent was reasonable for beach retail & we just use that location to push volume. We have no interest besides taking the cash out of that business and throwing it into other assets. Unless your a extrovert or really enjoy retail I wouldn't recommend it. At one time retail was one of the biggest industries in America, but now with ecommerce some of America's biggest retailers are having a hard time competing, I can only imagine what Mom-Pop shops are going through that aren't willing to adapt to change.

 

[Andrewski]

More information about this business would be great. What kind of retail business? Is it in the plain center of town or a great down town/ beach location? What's the growth of the business? If you interested in buying the business why don't you ask the guy to see some AUDITED financials?

A retail business is a different type of monster compared to your real estate venture. Do you have the saved capital to buy the business? Your chances of a bank loaning you money for this type of businesses is none.

What I find interesting is that the gentleman that you are talking about has basically selling it to you as a "turn key" business. My question is if the owner said he had 110k in cash flow last year and he doesn't put any hours in the store, just over sees that everything. Why would he want to sell a business that is generating him 6 figures in cash flow & he has to spend no time in the store. Seems dumb to me to sell a business for 400k instead of just keeping it & sucking some of the profits out to buy other cash flowing assets.

Also before you invest ask him if you could work for free & see if everything he is saying is true about the business. Talk to the employees and see what they say as well.

My partner & I have a seasonal retail business near the NH Coastline. For 4 months out of the year (June, July, August, Sept) business is great. We open memorial day & close right after labor day. Rent was reasonable for beach retail & we just use that location to push volume. We have no interest besides taking the cash out of that business and throwing it into other assets. Unless your a extrovert or really enjoy retail I wouldn't recommend it. At one time retail was one of the biggest industries in America, but now with ecommerce some of America's biggest retailers are having a hard time competing, I can only imagine what Mom-Pop shops are going through that aren't willing to adapt to change.

It's a gift/souvenir shop in the main tourist drag of town. The town claims 3 million tourists visit throughout the year. It's in a national park where there is limited land to build housing so to live in this town you have to be born here or own a business. To retire here you have to have owned and operated a business for at least 5 years. The current owner was already a millionaire and only bought this business so he could live/retire here. 66% growth over 9 years.

I'm currently pre approved for 500k mortgage on a house. I know it's a different ball game but you don't think a bank or private lender would loan me the money? I will ask for audited financials next time i see him and if i can get the loan i'll be sure to work there before closing the deal, that is good advice thanks!

 

[devine]

It's not exactly a fastlane business

Yes. It's a F*cking slowlane.

Before you buy (my parents had a lot of different businesses, I've seen it since I was 3 years old) - you live in the shoes of the owner for a week at least, you analyze statistics, you speak with staff, customers, walk around, thinking about all the ways to make the business more profitable - and if you are 100% comfortable with the idea - you buy.
You're 24, 66% growth over 9 years is too boring.

 

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[Andrewski]

Yes. It's a F*cking slowlane.

Before you buy (my parents had a lot of different businesses, I've seen it since I was 3 years old) - you live in the shoes of the owner for a week at least, you analyze statistics, you speak with staff, customers, walk around, thinking about all the ways to make the business more profitable - and if you are 100% comfortable with the idea - you buy.
You're 24, 66% growth over 9 years is too boring.

It's not exactly slow lane either. If it actually takes very little time to manage then it's mostly passive income and is similar to having a rental. My goal to retire is to have no debt and 200k/yr passive income. Along with my 2 duplexes and purchasing 1 more similar property i would attain that goal at 31.

 

[devine]

It's not exactly slow lane either. If it actually takes very little time to manage then it's mostly passive income and is similar to having a rental. My goal to retire is to have no debt and 200k/yr passive income. Along with my 2 duplexes and purchasing 1 more similar property i would attain that goal at 31.

I think you can do even better than that.

My suggestion:
1. Don't rush into making decisions. Like, never.
2. Spend most of the time searching for attractive ideas, building relationships with people who can help you execute them.
Can talk about this 24/7, 90% of potentially very profitable projects never start, because the team is weak, or doesn't exist.
3. Learn about available markets.
Some markets have no real competition, take literally a couple of thousands $ to build a business, and make you the amount you invested on monthly basis.
4. Don't rush into making decisions & don't put all eggs in one hat.

And in a few months from now you will have a much better idea on how to generate 200k$/year passive.
You'll do it quicker, and won't have anything that holds you like a 400k$ invesment.

 

[Leo Hendrix]

Sounds like a good opportunity and that you have done well two already own 2 duplexes.

I think forecasting is also important, will the biz maintain the numbers over the years or not? Can you take some aspects online? Like Kosta B said beware of e-commerce. So yeah my 2 cents is try and see about forecasting in advance before any decision is made.

 

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