thinking of buying a small retail store. is it suspicious that the owner wants to sell after about 3 yrs?

Question

the owner is asking $89k for the retail store. the store is nice and the location is good. of course i'm going to meet with her and ask for all the documents needed in making this decision. i've talked to her broker and from waht she told me her cash flow is about half the asking price. my friend thinks it suspicious that she would want to sell her store after only 3 years. the broker said she is selling because she is moving, that's why i don't think it's so suspicious. i would be going into this deal with 2 other people, so financially it's not too bad. i'm 25 and feel i have nothing to loose. 2 of us will continue to work and go to school and the third will stay at the store most of the time. i would just like to get other people opinions, experiences.

thank you all for your answers. i have been doing what you all have suggested. we have a tax attorney and a cpa to help us review all documents. i also have someone with connections to the city who is going to get any info they can on the business. i was also planning to go to local shops and just ask around, actually my hair stylist is right around the corner, so i was going to stop by and ask. thanks again!

Answer 1

so she's asking 2 times her cash flow as an asking price? that alone is wrong. most who want to sell their business ask for 1 year of profit, not 2.

next....why is she not just moving the company instead of selling it? that is a red fleg as most would just either move the company and continue it or they would create a 2nd store in the new location leaving the original location still running.

I would check into city plans to see if maybe some new road is coming through, if some new project is being planned in the next few years that will hurt or crush this business, etc.

Don't listen to her broker as its in their best interest to protect their client...not to help you. I would have my own attorney look over it all, have my account look over it all and I would ask for complete P&L's for every year in business.

If this paperwork is not given over......RUN FOREST RUN.

Answer 2

You are paying two times cash flow for a small retail store. Can you grow it? Do you have a plan? How are you and your partners going to make decisions? What do you mean by financially not too bad? Are you better off investing that money in your education and doing something after you finish school?

Could you open the same store for less money and grow it to this level pretty quickly?

Be careful you don't strap yourself with a business that is smaller than you want that takes all of your time and money.

Answer 3

Most people wont sell a store that is doing very well, even if the area seems good, doesnt mean that the flow of customers is enough to pay the mortgage and overhead, do your resaerch on the areas customer flow by talking to other store owners and employees in the area and you and your friends should visit the store as much as possible during operating hours to see for your selves what business is like in th area, before purchasing it , 89k is a 'big' investment even for 3 people, if you cant pay the mortgage or other bills.

Answer 4

Professional and Student Art supplies. There would be art demons. A Jackson Pollock type studio would be rented out by the hour for people to be able to throw paint at their canvas on the wall, use great arm spans of their brush and take home their canvas or I could just gesso over it for the next person - it would be a gestalt therapy. Having an art therapy room with some one to help the Client deal with emotional issues would be fabulous. I would have classes on site and take surveys of the kinds of at people are interested in learning. I would also display their art works in the store having gallery wall, along that wall could cafe tables and small Coffee/tea stand. There would be used books (like mine I get from thrift stores) on art on the tables for people to look at while the are surrounded by art. Ah, Coffee, surrounded by art and artists, reading about water color technique with restful music - how cool is that?

Answer 5

I currently run own a convenience store. How is the store doing and what did the owners do before they ran the store? This business is very time consuming and a store of that size probably can not afford to have many if any employees if it is to turn a profit.

Answer 6

Is it profitable? If it is not profitable, do you think you can do better? If you feel you can do better, then buy it. Get a lawyer involved to ensure the transaction is legit. Although you are only 25, you always have something to lose. You can be buying some business that has no chance of making any money.

Answer 7

i agree with you...if the store is in a good location and you have the will power and can get great products to put on your shelves, then it shouldn't be a problem. My cousin owns a small retail store and it seems to be a lot of work (meeting with vendors, shelving, hiring, shipping, accounting, etc.) but if there are three owners, I don't see a huge problem.

Answer 8

I don't think selling after three years is suspicious. It sounds like she has a legit reason to sell.

Before you sign anything, talk to an attorney. There is a lot of money involved and it is better to be safe than sorry.

Answer 9

The bottom line is this: If you need to ask random people for free advice to make a business decision, you should not be buying a store.

Answer 10

You are wise to ckeck into the situation before commiting to buy the store. Keep in mind even books can be faked, and once you sign on the dotted line, the store and it's liabilities are yours,