Re: taking over an existing business-convenience store

Hi there,

I wonder if anybody would be to pass on some advice re taking over an existing business (convenience store with lotto & deli) as sole trader who will be on site as manager.
This shop (939 sq ft.) with a good footfall, great location near schools & church with great potential, years ago used to be a famous busy place & was purchased a few years back by a business man with not experience in shopkeeping but installed staff who now seem to be running the place, 2f/t, 3 p/t.
We are going tomorrow to view the premises officially but I have a few figures which I obtained from the estate agent by phone;

weekly
800 rent (€40,000 pa - advertised)
2,600 wages (2 f/t 3 p/t) - 2 of us will be going in full-time - what's the best thing to do re letting go of surplus staff - I wont need the hassle of that - the owner now will take care of that, if we include it in the deal, i suppose?

monthly
103 sign
900 ESB
130 telephone
430 for sth..... didnt catch this one but im adding it in

yearly
2,700 rates
292 water
4000 insurance
1570 waste disposal

I will have to take into account fees for accountant & bookkeeper throughout the year & solicitor & any unexpected bills.

30,000 (20 till, 10 cigs/lotto) is the weekly turnover quoted - I find it a bit hard to believe 25 would be more realistic but will have the books looked at - after doing some calculating it looks as though this business is just breaking even but I am only doin this roughly now.

Has anybody out there anything to advise me before I go tomorrow for the viewing - I know it's early days but must be ready for all surprises & i know there will be lots.

Thanks in advance guys

I read your post really quickly and will have a think about it and post again if I think of anything worthwhile - obviously the figures you are given are annual figures however I always think it's good to work out exactly how much you need to take in on a daily basis just to cover your costs, ask yourself if you would realistically get that money, & also is there anything else you could add to the business to improve takings. Also sit outside the shop for a couple of hours and see how busy it really is, is it as busy as it was last year? because those are the figures the owner will be giving you. Also check the cost of insurance yourself as it is often a major cost. Hope that helps, good luck with your decision.

I suppose make sure you know the area well. In Dublin it seems a lot of new spars & centras have opened up in recent years, historical figures might not mean much if one of these has opened recently (or is about to open) in the area.

I have no experience in this area but lots of different institutions (VEC, local secondary schools & colleges etc) run bookeeping courses.

might it be worth your while one of the two of you (or even both) to do this course?

Yes, we have been monitoring the shop over the past few days and lunchtime seems to be the busiest time.
The figures would be last years as you said (Shopgirl), I suppose an average weekly t/o figure been 30 grand. We have great ideas to boost sales as we both come from catering/shop background but not as owners as such, managers yes.
As for a bookkeeping course - that is a very good idea but time is not on our side as we are also doing a SYOB course as well as working more than full-time.

even taking the cigs/lotto figures out of the equation (cos i dont know the mark-up on these but im sure its very small), a €20k per week turnover of other goods is over €1m per annum. For a 940 square foot store with only 40k per year rent this seems like a great turnover. What margins are you working off?

My staff costs are approximately 12% of my turnover (yours will be 8.7%)
My rent is 12% (yours is 2.7%)

And i'm looking at making a small profit in my first year trading in a smaller shop than yours.

Whilst I obviously dont know the specifics of your stock costs etc, your turnover in my shop would allow for a huge profit

Take the opportunity to renegotiate the rent - don't get stuck in someone else's lease at a price that was set in the good times.

i. You will have to pay the staff redundancy if you let them go (once they meet the terms) but you can claim some of this back. See "transfer of undertakings reg 2003"

ii. With that t/o I would guess your gross margin would be around 19% (those t/o figures are ex vat right), which would leave around 60k nett profit at the end of the year for you. Remember that under JLC rates of pay wages are going up next month!

There are some big cost that you left out ~8k bank charge they charge to lodge money. On going cleaning package etc, security and stocktaking prop another 10k.

If you approach some of the smaller symbol groups londis/gala/costcutters etc they will go though all the figures etc for you. At that level of t/o none of the bigger ones would touch it. Also they would give you advice on lots of other stuff too like registering with the HSE, along with how to obtain a lience to sell cig, you have to registor with the concil to sell batteries as you have to except old one etc...give you HACCP training etc. There is quiet alot to it!

That 60k excludes any key money etc and if the shop has a wine liencee you now need to go to court to obtain one, more expense.

It is also important to get very up todate accounts Jan ->Aug as lots of smaller shops have seen year on year drops of up 20% on turn over.