what are the five most important things to ask when buying a retail business?

Answer 1

Revenue and costs are the nuts and bolts of any business. You can tell a lot by pulling those numbers. Let's assume you can only tell me 3 things about the business. I would want to know:

1. Revenue (sales) and Cost for current year
2. Revenue and Cost for previous 2-3 years of the business
3. Revenue and Cost projection for next 2-3 years

100% - (Cost/Revenue) = Margin (higher is better)

* A successful company is growing so you want to see an increase year over year for Revenue looking backward. Anything less than double digits is bad news unless a very successfull, mature business.

* An increasing Margin means the business scales well and also a positive sign.

* A projection of future sales that is in line with previous growth patterns shows ownership that is practical and the business has been well managed.

* A decreasing Margin implies a volatile marketplace or a mismanaged business.

Answer 2

As a business consultant I have had experience with numerous retail business transfers. The first question I have my clients who are buyers to ask sellers is "why are you the selling the business?" Get ready to really listen and to build your buyout plan from there. Answers of course will be a range of blantant lies to sincere truths. Answers may be personal or related directly to the business. I have found my next 4 questions (finances, suppliers, personnel, contracts, etc.) start from what the answers are to the "why" of the business's sell. You will be surprised how many sellers are often caught off guard by this simple question when they thought people would want just to talk dollars and cents. The question is most often appreciated because it allows the seller (owner) to talk about things that may not show up on paper.

Answer 3

look at the books, and have areputable accountant look at them, that way you know wether the store is making a profit or having extreme losses, if it is having losses, there is no way your going to be able to turn it around without putting a lot more money into it.