Buying a Retail Business
You have decided to buy a business, but what type suits you?
There are 4 main types:
· Manufacturing
· Distribution
· Retail
· Services
Each has its own unique characteristics that may or may not suit your skills
and strengths. In this article we look at retail.
This covers a lot - and is by far the largest category. It's the
restaurants, bookshops, hairdressers, dairies, hotels, and motels to mention
a few. Retail operates everywhere, attracting customers to come and buy, and
generally relies on people through your door. This can be unpredictable at
times, as you play with the selling mix of location, promotions,
advertising, layouts etc. You rely on the customer coming in and making a
purchase. In recent times there has been a move towards national chains and
mall shopping, both of which operate large marketing budgets. Other
opportunities do exist, but tend to be in more speciality areas often
offering higher levels of service.
If you like dealing with people (customers), and can display patience then
maybe this is for you. Retailing is selling to people. It generates good
cash flow and is generally more straight-forward than the other options; it
can however be unpredictable due to buyer behaviours.
One key element of retailing is the building - if you don't own it, you'll
be paying rent. This can sometimes be an edgy relationship as the landlord
works to maximise his or her position - they have usually borrowed heavily
and need to keep everything going - keen to collect the rent but not so keen
to replace the roof. The higher the rents the greater the value of their
property, and if it's a popular site - theirs others waiting to take your
place. Popular sites usually also mean good traffic - unfortunately your
success can become the landlords; with your rent increasing as the location
becomes more valuable.
There are many successful retailers, but there are many more very average
ones. Your location and lease are significant factors in the success of your
business, it is important to understand these. Also worth considering is;
(1) How easy it is to target your customers to get or keep them coming
through the door for your products.
(2) Your market. Is it in a growth
phase, if not, how will achieve your sales?
(3) Are there any factors that
could have a negative impact on your business ie. Proposed shopping malls,
town planning changes, competitors moving in?
(4) Most importantly the
lease, make sure it's fair and that your business won't become hamstrung.
Richard O'Brien (nzbizbuysell.co)
When purchasing any business always seek professional advice.
For further details, visit www.nzbizbuysell.co.nz
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