Investing/Opening a B&M...

[Mr.Mcknowitall]

The Owner recommends jettisoning the Stamps portion.

 

Why?

 

I assume you will have some type of agreement that will protect you against the present Owner competing against you, in some vein, in the coin business.

 

OK. The Stamp portion is kaput. Get it in writing that he won't compete/use the Stamp portion to his benefit, either, because you don't know what he knows. It is not only about U.S. Stamps selling in the U.S.

 

For instance, the popularity of Philately in other Countries....what do you know or not about this?

[Nutmeg Coin]

Anyone thinking of buying out a business, should have a skilled and smart CPA (not all of them are) go through the books over the last few years and those who have done this for many others will be able to profitably advise whether it is a winning proposition. I once looked at buying a motel in northern New Hampshire and the CPA looked over the books over significant years and saw that the asking price was unrealistic, not to mention all the challenges that go with any specific type of business.

[Conder101]

Funny - 'cause I prefer the traditional one...

I think I would feel more comfortable in the traditional one as well.

[TonerGuy]

The Owner recommends jettisoning the Stamps portion.

 

Why?

 

I assume you will have some type of agreement that will protect you against the present Owner competing against you, in some vein, in the coin business.

 

OK. The Stamp portion is kaput. Get it in writing that he won't compete/use the Stamp portion to his benefit, either, because you don't know what he knows. It is not only about U.S. Stamps selling in the U.S.

 

For instance, the popularity of Philately in other Countries....what do you know or not about this?

 

Not only will the old owner not compete, I will employ him/her as a consultant over several years. Non-competes are good but as a consultant he/she has a vested interest in my success - IF I actually do this.

 

The owner does agree that something other than stamps would probably increase revenue. They just arent interested in making that change after 20 yrs and when they are getting ready to sell it.

[Walkerfan]

The best (and only ----as far as I'm concerned) B&M near me sells jewelry, which is an BIG part of their business.

 

Also, I feel better about this, now, in light of the fact that you have a good amount of business experience-----that's HUGE!

 

If you decide to do this----I really hope that it works out for you.

[TonerGuy]

Anyone thinking of buying out a business, should have a skilled and smart CPA (not all of them are) go through the books over the last few years and those who have done this for many others will be able to profitably advise whether it is a winning proposition. I once looked at buying a motel in northern New Hampshire and the CPA looked over the books over significant years and saw that the asking price was unrealistic, not to mention all the challenges that go with any specific type of business.

 

And that is a huge part of the problem.

 

Here is the owner's valuation...

 

$2 million total. They plan on taking the more rare & expensive stock and putting it out to auction instead of making it a part of the purchase. That way they can cut the asking price to a mere $1 million... which is still high in my opinion for the stock they have (sans the great coins) and with a faltering stamp business.

 

The monthly overhead comes out to about $1000 a day or just under $30,000 a month. And I think about half of that is in salaries, payroll taxes and other employee based costs (medical/dental/ect).

 

Goodwill will be strong though. They have a solid customer base. They dont really have too much bullion so the purchase price should be 125-150% of last year's gross (at most) + the inventory of the lesser coins. I wouldnt really pay anything for the stamps.

 

So Im thinking that if they are making her monthly costs + some profit + the lesser inventory the right price would probably be around $750,000 as a rough estimate.

 

Cut the overhead by 1/3 to $20,000 a month by letting go of 2 employees and it might be worth it.

 

At $1 million though, I think it overvalued.

 

Add in other collectibles, an online store and do some shows and it could be a nice business.

 

 

[coinman_23885]

Anyone thinking of buying out a business, should have a skilled and smart CPA (not all of them are) go through the books over the last few years and those who have done this for many others will be able to profitably advise whether it is a winning proposition. I once looked at buying a motel in northern New Hampshire and the CPA looked over the books over significant years and saw that the asking price was unrealistic, not to mention all the challenges that go with any specific type of business.

 

And that is a huge part of the problem.

 

Here is the owner's valuation...

 

$2 million total. They plan on taking the more rare & expensive stock and putting it out to auction instead of making it a part of the purchase. That way they can cut the asking price to a mere $1 million... which is still high in my opinion for the stock they have (sans the great coins) and with a faltering stamp business.

 

The monthly overhead comes out to about $1000 a day or just under $30,000 a month. And I think about half of that is in salaries, payroll taxes and other employee based costs (medical/dental/ect).

 

Goodwill will be strong though. They have a solid customer base. They dont really have too much bullion so the purchase price should be 125-150% of last year's gross (at most) + the inventory of the lesser coins. I wouldnt really pay anything for the stamps.

 

So Im thinking that if she is making her monthly costs + some profit + the lesser inventory the right price would probably be around $750,000 as a rough estimate.

 

Cut the overhead by 1/3 to $20,000 a month by letting go of 2 employees and it might be worth it.

 

At $1 million though, I think it overvalued.

 

Add in other collectibles, an online store and do some shows and it could be a nice business.

 

 

Without having more details, all I will say is that $1 million for good will and the left overs seems high. And with regards to strong clientele base, is there a way to verify this? I can think of a more lucrative way to invest $1 million.

 

 

P.S. Why doesn't she auction off the dreck and offer the better material to you? It sounds to me she doesn't want to lose money on it even though the market has probably fallen on a lot of it. I wouldn't buy someone else's mistakes.

[orifdoc]

Having run a small business, don't forget that between illness, vacations, surgeries, maternity leave, and other unforeseen issues, you'll almost always have one person away. You might not be able to cut the staff as much as you think.

 

On the other hand, it sounds like there are areas where you could expand your presence. If I was running a B&M shop, there's no way I wouldn't have all of the slabbed inventory on the shop's website and much of it on eBay or Collector's Corner (or both). I'd also work on increasing the bullion side of the business. You can do much of that on-line with very little added overhead.

 

The price for goodwill seems a bit steep. Maybe give them a bid for significantly less and see if anyone wants it more badly than you do.

 

One final tidbit. Hire a good website designer and hire a good photographer......can't overstate the importance of that.

[TonerGuy]

Having run a small business, don't forget that between illness, vacations, surgeries, maternity leave, and other unforeseen issues, you'll almost always have one person away. You might not be able to cut the staff as much as you think.

 

On the other hand, it sounds like there are areas where you could expand your presence. If I was running a B&M shop, there's no way I wouldn't have all of the slabbed inventory on the shop's website and much of it on eBay or Collector's Corner (or both). I'd also work on increasing the bullion side of the business. You can do much of that on-line with very little added overhead.

 

The price for goodwill seems a bit steep. Maybe give them a bid for significantly less and see if anyone wants it more badly than you do.

 

One final tidbit. Hire a good website designer and hire a good photographer......can't overstate the importance of that.

 

Very sage advice...

 

Yeah I would probably lose the stamp employees and hire a FT website guy and photographer.

 

I think expanding into other collectibles will have a cross pollination effect. Collectors are collectors. It is rare they only collect one thing. An antique gun collector might become a valued coin client and visa-versa. And agreed I would have all of the slabbed coins on the website and I would probably specialize in toners...

 

You can never undervalue goodwill. You cannot discount the effect of having a solid client base and a solid reputation. In my current business I spent hundreds of thousands of dollars advertising within the first 5 years of launch. In the last three years I havent had to spend anything and I now turn away more clients than I had in the beginning. I would rather overpay for goodwill then overpay for advertising.

 

If no one buys the shop outright - what the owner will do is what I have watched three other owners do with coin stores when they retired... they simply sold off the inventory to their neighboring competitors/friends shops. They didnt make as much but also the world lost one more coin store forever.

 

When this happened in my area the shops that bought the inventory didnt get my business because I already disliked the owners. More coins didnt mean more business. It simply made me venture further out and find shops where I did like the owners.

 

Are there better ways to spend $750,000. Sure, but its not about that. None of us would be here since there are always better investments than coins.