We live in a fairly small city with only 1 kids clothing store and it’s now for sale. Of course, we have Wal-Mart and a few other chains where people can buy kids clothing but if a person is looking for name-brand clothing or other speciality items, the kids clothing store is the place to go.
The clothing store is for sale because the lady who runs it is only doing it for fun and games. She opens the store whenever she wants to; does not advertise; does not run sales; and does not update her inventory very often.
We would love to purchase the store and move the location to a better spot (near Wal-Mart). I know we need to sit down with the lady and look at her books to see how the store is doing financially. I’m not sure how helpful this will be since she doesn’t run the store very well but at least we can see her expenses. What else should we do or research?
We have the money to purchase and operate the store but want to do the whole process the right way. Thanks much!
I would not purchase without doing a comprehensive study on the clothing store business. There are some red flags for me. The owner opens when she feels like it? She does not advertise? She owns it for fun and games? Aren’t there other ways to have fun? travel maybe. Expenses on cost projection and operating can be fudged. Look at her monthly receipts for the last 36 months as well as her operating receipts for the last 36 months. Look at her traffic flow during different times of day. Review her advertising budget. Also look at her inventory. Does she lease or own the building? Does a friend of her own the building? If you are astute at accounting review everything carefully. If not get an accountant friend to review. Review her client base as well. What is the market there for children’s clothes? What will be the cost to lease space next to Walmart for 3 years? Remember these things are what you are purchasing. Price accordingly. I sincerely hope you have over $100,000 put away for operating expenses for 3 years. No this does not cover the cost of purchasing the business. If you do not, you might want to reconsider. Leveraging everything you own or borrowing for this is not the best way to purchase a business and certainly in the long run will not give you peace of mind as you revamp this business. Let me know how things develop.