Although I have no real plans to buy an existing business, after a comment on my Thinking Big post I have been much more keen on evaluating local small businesses in my area. What’s their niche? What kind of overhead and time commitment does it take? What are their profit margins? And sometimes – How the heck do they stay in business?!?
I’ve also ran across a couple of sites that list small businesses for sale – BizBuySell.com, BusinessesForSale.com, and BusinessBroker.net. It’s very interesting searching in your local area – you might find a shop you frequent for sale! In reading the descriptions you can learn a lot and also see how hard it is to make a profit as well:
ColdStone Creamery in Illinois
Cost: $550,000
Profit: $45,000 a year
At least it’s profitable, but still, I wonder if that $45k including giving yourself a salary as the owner. I’m betting that running a Coldstone ice cream shop takes 80+ hours a week since it’s open all the time, and turnover is high. Finding a manager that is willing to do all the work for you at a low salary would be key, but I would imagine that would be hard to find.
eBay Consignment Store in SE Florida
Cost: $125,000
Monthly rent: $3,300/month
I have a feeling much less than $250k if the selling price is so low. Usually stores like this sell for a certain multiple of cashflow. Still, this is a business that pretty much anyone can figure out the basics for. You just sit there, take people’s junk, snap some pictures, and sell it! Has anyone actually used one of these services before?
Cottage Rentals in Hawaii
Cost: $3,500,000
Now this looks more like it. Five rental cottages in paradise. Here is the actual website, a 2 Bdrm cottage runs about $200/night. At their stated 90% occupancy rate that should cover the mortgage loan, right? And you get the real estate appreciation as well. Hmm… where can I get my hands on $3,408,180… =)
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Market Competition and Expansion:
Cold Stone Creamery is the fastest growing ice cream franchise in the country. We were in on the ground floor in Illinois, and secured two of the best sites in the city.
Hard not to laugh
These links were really helpful and insightful. Thanks much!
I thought about using an eBay consignment store, but the % they keep from selling your stuff was 38%! That included all of the eBay fees and such, but it seemed very steep to me.
As a business broker, I’ve seen my share of BAD businesses. Using your ColdStone example, if you put $550,000 in T-Bills at 5% interest, that would be about $27,500. And if you went to WORK at ColdStone full-time, at $10/hr x 40 hours/week and 52 weeks, you would make $20800. Add these two numbers together and you would make MORE money than if you had actually owned the ColdStone.
However, there are opportunties to invest in small businesses if you research the market carefully. Owning a small business is a great vehicle to reduce your overall tax exposure. And remember, the profit reported to the IRS is not usually the actual profit. You have to add back the “paper” expenses to realize your actual profit from a business.
I’m thinking about looking into the auto car wash business. You know those places that have 4 or 5 bays and one automatic washer. What do you think the down payment and profit margin on those are?
45k is not enough money to be making to own/operate one of those places, especially when the financial outlay is 550k.
There are too many variables to give you a rough number on the profitability and the price of a car wash. The location would dictate seasonality, how much you could charge, insurance, etc… If you are serious about buying a business of this nature, you best route is to put together a personal financial statement, an acquisition criteria document, and to search the internet for car wash businesses which are for sale. Once you have a better idea about your requirements and the location you want to seek a business, you’ll be better equipped to work with a business broker or to approach a business owner. Good luck.
I’m starting to look into owning my own businesses also, see my blog if interested. I spoke with a franchise consultant (take what they say with a grain of salt, it’s like buying real estate from a seller’s agent without your own rep). Automotive franchises (Midas, Maaco) are among the most profitable. Cash-checking services seem the easiest to operate and generate good profit, but generating income off lower wage workers seems unsavory to me. For food services, she recommends Nestle Tollhouse Cafe, The Counter, and Bear Rock Cafe. Subway is saturated, and McDonald’s is expensive.
There are franchises for just about any field, home nursing, child education, you name it.
Easy ones to start out of your home are cleaning services and window blinds (you do the measurements, and place the orders).
My franchise consultant is a franchise consultancy franchisee.
In the coming weeks I will be analyzing some of these businesses in more detail, and crunching their numbers for comparison.
Fast forward 5 years and they can give the Cold Stone Franchises away:
http://www.coldstonefacts.org/stores-for-sale
-CSF