Accy cyclist
Legendary Member
- Location
- The hills of Accrington
I think i know which shop the OP's on about. Buying loads of expensive stock hoping you'll shift it, then when it doesn't go having to sell it at cost price. Is it really worth it?
Should I buy a bike shop?
- Thread starter PaulB
- Start date
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GrumpyGregry
Here for rides.
You can make a small fortune out of a small local bike shop if you play your cards right.
The first card to play is to invest a large fortune.
The first card to play is to invest a large fortune.
Oldfentiger
Veteran
- Location
- Pendle, Lancs
Most businesses fail because they are under capitalised.
It's a no brainer but pay as little for the package as possible.
Stock has no worth until someone wants to buy it, so don't get sucked in by claims of thousands of £ stock.
I notice there's a 25% off everything sale sign up. Is what's left worth having?
In your position I would at least take your accountant with you.
There's nothing better than a good bean counter to act as devils advocate.
It's a no brainer but pay as little for the package as possible.
Stock has no worth until someone wants to buy it, so don't get sucked in by claims of thousands of £ stock.
I notice there's a 25% off everything sale sign up. Is what's left worth having?
In your position I would at least take your accountant with you.
There's nothing better than a good bean counter to act as devils advocate.
subaqua
What’s the point
- Location
- Leytonstone
You've just described the guy who used to run our local Raleigh dealer.
Wasn't Claude Crimes by any chance was it ?
KneesUp
Guru
Although it's from 8 years ago, this article about my lbs gives a decent idea of what it's like to run a bike shop. Minus any figures.
I wouldn't be out off by the owners selling per se - if no one in the family wants to take over my business when I retire I would hope to sell it. Being for sale doesn't necessarily mean it's a bad business.
http://m.sheffieldtelegraph.co.uk/news/butterworth-a-spokesman-for-generation-since-1930s-1-444971
I wouldn't be out off by the owners selling per se - if no one in the family wants to take over my business when I retire I would hope to sell it. Being for sale doesn't necessarily mean it's a bad business.
http://m.sheffieldtelegraph.co.uk/news/butterworth-a-spokesman-for-generation-since-1930s-1-444971
outlash
also available in orange
- Location
- ice station zebra
I'll echo others' experiences in retail here. I've worked in retail for a some years, helped my parents in theirs when I was growing up and have recently moved my own business on after running that for 4 years. You'll be in for quite a shock running your own business, you say you're genetically engineered to have a boss but everyone involved in your business is your boss, your landlord, your customers, your suppliers etc etc and you have to make every decision to keep all those balls in the air. If you can be obsessive about every detail and keep smiling when you're getting crap from all sides then you're halfway there.
If I was you, think about can you afford to lose that money. If you can't, walk away. If you can, get someone who knows that they are looking at to look at the books for the last few years, then think about how you're going to make money. If it was me, I'd get heavily involved in the local cycling scene on all sides (local CC's, Sustrans etc etc), depending on space, perhaps a cafe section (Garden Centres don't make money just on plants y'know
) and go for a 'clicks & mortar' model with an emphasis on the online presense. Be prepared for an awful lot of work.
If I was you, think about can you afford to lose that money. If you can't, walk away. If you can, get someone who knows that they are looking at to look at the books for the last few years, then think about how you're going to make money. If it was me, I'd get heavily involved in the local cycling scene on all sides (local CC's, Sustrans etc etc), depending on space, perhaps a cafe section (Garden Centres don't make money just on plants y'know
) and go for a 'clicks & mortar' model with an emphasis on the online presense. Be prepared for an awful lot of work.
Hacienda71
Mancunian in self imposed exile in leafy Cheshire
- Location
- Wilmslow, Cheshire
A business is only worth goodwill if after taking a reasonable salary for running it, there is net profit left. Even then it is a bit of a moot point if some of the business is generated by the person running it. Will existing customers respond and keep loyalty to the new owner with no overlap? An lbs near us was run by a former pro racer, a lot of the local riders went there because of this. When he retired they didn't keep using the shop and ultimately it closed.
I can't give too much away now in case the sellers are reading this but I'm as prepared as I can be for today's adventure! I appreciate the advice and tips from everyone (except you-know-who) and will be in touch with what I'm prepared to reveal later.
See you on the other side, everyone!
See you on the other side, everyone!
Andrew_P
In between here and there
Good luck! In every business purchase I have been involved in there is at least and I am being VERY conservative 30% of the stock is redundant.
If they are a ltd company you can look through their last 10 years filed accounts for free on Companies House beta. This will give you an insight in to how the business has been going over a period of time, overheads, are they increasing or decreasing profit etc.
In 14 years of being the one in charge, it has its upsides but it also has a lot of downsides. on the first of each month the amount of money I know I have to raise through sales scares the shoot out of me, and in the early days used to bring on a early in the month depression, followed by mostly an end of month relief. But try not meeting those overheads for a couple of months!
GM
Legendary Member
- Location
- North of the river
I've worked in the finance industry for 30+ years. Over this time I've seen 3 recessions which in addition to 'fashion' trends, cyclical events and changes to buyer behavior, all have had an impact on many small businesses. I've seen some startling successes, but also a number of good hardworking people being wiped-out.
I appreciate that you appear to be buying this from savings/investments rather than utilizing borrowing, but I hope that the following info it might give you some benchmarks to consider while weighing up the pros and cons of proceeding
When viewing proposition to lend to such businesses we look at 3 factors, Product, Management and Financials.
For Product we need to understand the marketplace the business is operating in, whether it is mature, growing, declining, and what trends (social, economic, environmental etc) are influencing these. We then consider where your business sits within this. To help this process, Google Porters 5 Forces, PESTE, Boston Consulting Group Matrix and SWOT. In this instance, my local cycle shops are palpably less busy at present, and having had 5 or so years of steadily increasing numbers of cyclists on the road, I think that this has peaked if not declined of late.
For Management, we look at relevant experience of the owner(s) and how this meets the various areas required by all businesses, namely sales and marketing, administration, product/supply, HR, Financials. We consider what gaps the owner's skill-set may have, and have they identified this themselves and if so how they are addressing this (i.e. outsourcing, partnering with other businesses, taking on other partners who have complementary skill-sets etc). We also consider age, health and protection (i.e. insurance), and secondary management team (i.e. who would take over in the event that the owner is ill/away)
Only if we can box-tick the above two categories do we look at the financials. Can I add to the earlier “Turnover is vanity, profit is sanity” comment a final rider “…but cash is king”. No business goes bust because it runs out of profit; it goes bust because it runs out of cash.
We need to be certain that the owner understands the cash cycle of the business, i.e. how much stock is appropriate to carry, how much credit you will get from the suppliers (and don’t forget that for a new owner the suppliers may provide more cautious terms than for the current owners at first) and how much credit your customers will require. We then look at historic financial trends, are sales and margins flat, growing or declining. Are these in common with the industry norms, and if not why? How much profit is the company generating and how long does it take to turn this profit into cash? Is the cash sufficient to meet all of the cash outflows of the business with a margin to cover any unexpected changes? We then sensitise the forecasts with a series of what-ifs and see if the model still ‘works’, i.e. what if sales drops by 20%? What if costs increase by 10%?
While this might seem exhaustive, may I respectfully suggest that you should be able to answer positively to most of these areas. If you cannot, and losing your investment in the business would substantially impair your financial position going forward, I would be extremely cautious about proceeding.
Do I get a prize for longest ever reply to a thread?
I appreciate that you appear to be buying this from savings/investments rather than utilizing borrowing, but I hope that the following info it might give you some benchmarks to consider while weighing up the pros and cons of proceeding
When viewing proposition to lend to such businesses we look at 3 factors, Product, Management and Financials.
For Product we need to understand the marketplace the business is operating in, whether it is mature, growing, declining, and what trends (social, economic, environmental etc) are influencing these. We then consider where your business sits within this. To help this process, Google Porters 5 Forces, PESTE, Boston Consulting Group Matrix and SWOT. In this instance, my local cycle shops are palpably less busy at present, and having had 5 or so years of steadily increasing numbers of cyclists on the road, I think that this has peaked if not declined of late.
For Management, we look at relevant experience of the owner(s) and how this meets the various areas required by all businesses, namely sales and marketing, administration, product/supply, HR, Financials. We consider what gaps the owner's skill-set may have, and have they identified this themselves and if so how they are addressing this (i.e. outsourcing, partnering with other businesses, taking on other partners who have complementary skill-sets etc). We also consider age, health and protection (i.e. insurance), and secondary management team (i.e. who would take over in the event that the owner is ill/away)
Only if we can box-tick the above two categories do we look at the financials. Can I add to the earlier “Turnover is vanity, profit is sanity” comment a final rider “…but cash is king”. No business goes bust because it runs out of profit; it goes bust because it runs out of cash.
We need to be certain that the owner understands the cash cycle of the business, i.e. how much stock is appropriate to carry, how much credit you will get from the suppliers (and don’t forget that for a new owner the suppliers may provide more cautious terms than for the current owners at first) and how much credit your customers will require. We then look at historic financial trends, are sales and margins flat, growing or declining. Are these in common with the industry norms, and if not why? How much profit is the company generating and how long does it take to turn this profit into cash? Is the cash sufficient to meet all of the cash outflows of the business with a margin to cover any unexpected changes? We then sensitise the forecasts with a series of what-ifs and see if the model still ‘works’, i.e. what if sales drops by 20%? What if costs increase by 10%?
While this might seem exhaustive, may I respectfully suggest that you should be able to answer positively to most of these areas. If you cannot, and losing your investment in the business would substantially impair your financial position going forward, I would be extremely cautious about proceeding.
Do I get a prize for longest ever reply to a thread?
Last edited:
Oldfentiger
Veteran
- Location
- Pendle, Lancs
