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Ask HN: Does anyone have experience purchasing a brick and mortar business?

3 points by noisenotsignal ↗ HN
A store that I frequent recently went up for sale. Its business aligns with my values and I’ve actually thought about opening a similar store in the future. Does anyone have experience purchasing a brick and mortar store and have thoughts to share on what I should look out for as I’m evaluating the opportunity?

6 comments

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legitster
Not personally, but my family does.

Unless you are buying self-storage, do NOT expect you can buy the place and "it will run itself". Even with a dedicated general manager, the owner can expect an additional 15+ hours a week of commitments on top of that.

That said, there is so much low hanging fruit in brick and mortar stores. You wouldn't believe how many businesses leave money on the table by not keeping good hours, don't do inventory or purchasing well, or don't invest in basic marketing. Just a modicum of effort on your storefront is heavily rewarded.

You also need to be wired for customer service. If people pleasing makes you happy, running a business will be very fulfilling. If you are doing it to be your own boss or because you enjoy autonomy, you are going to have a really bad time.

When buying a business as a turn-key, you have to ask what value you get from it other than just taking over the lease. Really analyze the numbers. Good, consistent revenue lets you know there's actually some amount of existing customer base. High labor costs can actually be pretty good too, because that's something you can control and get value out of.

Timing is pretty bad though. A good ROI on an existing business is 5-10% (plus what you might be able to pay yourself if you run the thing). With interest rates what they are, you may be lucky to break even on whatever loan you need to take out to buy the thing.

noisenotsignal
Thanks for the info! We did meet with the owner and evaluated the books. You are right that a lot of money was left on the table, especially due to poor inventory management and overhiring in this case. Unfortunately, even with rosy projections we weren't able to come up with a compelling financial reason to purchase.
jaclaz
You might want to be a little more explicit (like, you know, which country/city that is, the kind of the store, its size/personnel needed, etc.), it is not like all "brick and mortar" businesses are the same, and they do not stand in a vacuum, in some cases the location is everything, in others it is irrelevant, the specific nature of the store might need nothing in particular or years of experience, etc., etc., and in different countries/places something may be promising in one and declining in another.
noisenotsignal
You bring up a great point! I was in a rush because the opportunity was sudden and didn't think through all the information that would be helpful to share. Unfortunately, the business' financials weren't great, so we've decided to pass.
dg27
batonmarket.com does free business valuations & has estimated valuations (like Zillow for small businesses) posted for a lot of businesses -- think there email is hello@batonmarket.com
noisenotsignal
Thanks for the tip! This is a useful resource and I can see small business owners getting value out of it. Unfortunately, the business wasn't listed and I don't think there is a way to generate a projection for an arbitrary business without sharing the business' data, which I don't have access to as a purchaser.