Business possibilty

[Johnegold]

Hi, I have a chance at buying a comic book store. The owner had the business appraised for 90k but because he wants to sell it to someone local and he also likes the idea of selling to someone young, he will sell it to me for 40k. In a few months I'll be able to take about 15k from my annuity. I would like to have atleast 50k so I can pay him off and have 10k for inventory and to start off with. I live in PA and would like to know what you think would be the best options financially? Thanks :)

[Steve B]

Welcome to the forum Johnegold. I'd be very cautious based on what little you've shared. Think about it. Is he really being so generous as to give you a $50,000 gift just because he likes you! Most people wouldn't give that kind of a gift to their favorite relative.

I'd have it appraised again - with your own appraiser to find out what it's really worth.

[Business Attorney]

I'd also recommend getting three years worth of tax returns (and financial statements, if he has them) and sitting down with an accountant to study the cash flow.

What assets are you getting for purchase price? Store fixtures, a cash register and inventory? What is the liquidation value of what you are getting? If things don't go well, that is all you'll get back (if you are lucky).

What liabilities are you taking on? Is there a lease? For how long?

Have you seen the appraisal? What was it based on? If it was based on expected discounted cash flow from future operations, were those numbers reasonable? Even if they were reasonable at the time, have there been material changes in the business that would alter the picture? A lot of businesses that were doing well two years ago are really hurting in today's economy.

Getting back to your question, for the type and size of business you are talking about, if you need $50K and only have $15K, there are really only two possibilities of longer-term financing: (1) friends and family or (2) financing from the seller. Unless you have solid collateral (stocks, bonds, certificates of deposit, real estate, etc...) it will be nearly impossible for you to get a bank loan for the business.

If you have credit cards, you may also be able to use those to finance short term needs of the business, BUT BE CAREFUL. Many small businesses need to use credit cards to smooth out cash flow needs, but it is very expensive financing. In addition, if you misjudge your cycles and it turns out that you cannot quickly repay the credit card debt, you may find that interest payments bleed your business dry.

[phanio]

All great information here especially regarding doing your homework on the business. Tax returns or audited financials (if available) are great to start with as well as business bank accounts to see the flow of cash in and out of the business (good to predict when you will need outside funding throughout the year).

For your funding needs - you might try:

Micro credit loans - you can get up to $35K for new businesses and up to $50K for established businesses.

There is also peer-to-peer lending (social lending where members borrow and lend to each other) - max amount is around $25K - but you could try several sites.

Don't forget about SBA loans - especially since the owner is leaving money on the table (given a good appraisal). The SBA has really made improvements in their programs (less fees and better LTVs). Might be a good way to go.

Or, as stated, come up with a small down payment - then get the current owner to hold the rest of the note (paid by future business profits). If the owner agrees, then the owner has confidence in the business - which is a good sign for you.

Best of luck.

[Johnegold]

thanks for all the great replies! We have actually talked about putting a down payment and paying him off. He was fine with that, me personally I would like to buy it in full. I was going to try to write up my business plan and then get the returns and all other information from him. The selling price was 40k I just think having 50k to start off would be better for me. I've looked up a few programs in PA and there are a few that I might qualify for. 40k includes the business and all of the inventory in the building. There isn't a lease but a monthly rent. Thanks again feel free to keep commenting! :)

[Spider]

The amounts being referred to here seem to me to be rather high for any "comic book store" I have seen.

If I was to come up with US$40,000, I would expect to receive an investment return of at least 6% = $200 per month, that would be earmarked for 'paying back' my investment/savings account.

Plus, I would want a living wage, seeing as I would have to work this a full 40-50 hours a week. - Depends where you live I suppose and what your expectations are, but let's suppose, for arguments sake, you want to earn $50,000 a year = $4,000 a month.

Then you've got rent, insurances and sundry other overhead costs = guess, $1,500 a month.

Total, say, $5,700 per month with no employees.

How much profit can one make on a comic book? $1? $2 per comic?

Supposing it to be $2 per comic, you will need to sell 2,850 comics a month / 6 days a week = 113 comics each and every day. Allowing that fluctuations will occur, I would expect the shop would have to be capable fo selling 200-250 comics on a good day.

Another way I'd look at it would be, how many customers could I expect through the store in an average day and what would the average customer spend? Supposing the average customer spends $10 and I will make a 50% markup, I would need 1,140 paying customers per month = 45 customers per day. Same allowance for fluctuations, the store would, for me, need to be capable of serving 90 customers per day on a good day.

OTOH, couldn't you start up a new comic book shop and use the $40,000 or less (like the $15,000 you already have) for first month's rent, utilities' deposits and inventory?

[Johnegold]

A major point of buying the existing one is the rights to sell in the counties. In the comic world there is only one main distributor and the distributor will not give the area codes to another new store if there is one already in the zip codes. Also the store is the only one around us and has a very big following.

[nealrm]

A major point of buying the existing one is the rights to sell in the counties. In the comic world there is only one main distributor and the distributor will not give the area codes to another new store if there is one already in the zip codes. Are you talking mail delivery of the comic books?? If so, how is the distributor going to know who you mail the comics to? Plus zipcode tend to be much smaller than counties. So if you are limited to a specific zipcode I would check if you will be able to sell across county lines.

Also, you need to find out how much profit this business brings in. A 40K business is not going to bring in a great deal of income. One method of pricing a business is to take the yearly profits and divided by your expected return on investment(ROI) . If you expect to make 15% on your money, a $40,000 business would need to bring in $6000 per year in profits ($6000/.15 = $40,000). That is $6000 in profits before you get paid. Your pay comes out of those profits.

As stated above - find out what asset come with the business. Are you just buying the "Rights" to sell in a zipcode?

[Johnegold]

No, all I was saying was there is one distributor of comics for the most part. If there is already in your zip code they won't give you a buying license. Just one advantage of buying an existing one but not the only reason.

[huggytree]

a comic book store probably isnt a really unique idea...id just open my own and pay nothing...that $15k is a good start for a brand new store...you mention selling rights for the zip code....id just look for something nearby...isnt it worth saving $40k to spend some time trying to start your own store from stratch?....

is the comic store customer loyal? or would they drive 2 blocks away if your store was shiny and new with similar prices?

subcontractors sell their businesses because customers for HVAC,Electricians and Plumbers ARE loyal....they may not know the difference if it was bought from someone new....i dont see comic book buyers as being that loyal.....maybe im wrong..its not my world.

i dont think you will ever be rich running a comic book store...ill bet $25-40k is the most you'll ever make....why not start a business where you can make $150k +......unless you someday own 10 stores ill bet you cant make that from a single comic book store......i dont like any business where you make $1 profit from your product...i like to make $200-1000 profit from what i sell....relying on large volume to make decent profit means hard work just to survive...

I just finished doing the plumbing on an icecream shop...they spent $60k on a ice cream machine.....all to make .50 cents profit on each cone.....it will probably take 100 years just to pay back the machine....its a small mom/pop operation w/ a small parking lot... i just know they will not survive...its in your face obvious....i just want you to think of these things before you jump in on a $1 profit per item market.

i think selling comic books out of your basement on Ebay is a great way to make $5-10k extra for your family per year....i dont see a full time business is ever going to make you rich....why be in business if you cant someday be rich?...get a factory job and glide through it for the same money per year....youll work less and have no stress for the same reward...

maybe im wrong? maybe comic book store owners can be rich? you tell me!

[Johnegold]

why would I start a business unless I loved what I would be doing?

[Patrysha]

Really Mike? The only reason to go into business is to get rich??

Don't get me wrong I am all for making money, but if getting rich were the only acceptable reason to open or buy a business there wouldn't be many businesses out there. Wealth is not the only measure of success in life. It's okay to want a comfortable life doing what you love. It's fine for you to say that you only want to do high profit profit per transaction type business ventures, but that doesn't mean it's the only logical option. (McDonalds would not exist if everyone felt that way)

I don't know much about comic books from the retail end of the industry...other than there are enough fans out there to put together huge annual conferences (ComicCon) and the few snippets from television and movies but it is clearly a passion business...

I think you're a bit off on those guesstimates for the ice cream shop too. The profit margin is way higher than 50c and volume in a good location with good marketing makes it a pretty sweet business if that is what you're into...(Not that the one I was involved in had a 60k machine that does seem way out of whack)

[Dan Furman]

The amounts being referred to here seem to me to be rather high for any "comic book store" I have seen.

why the quotes?

[Dan Furman]

Hi, I have a chance at buying a comic book store. The owner had the business appraised for 90k but because he wants to sell it to someone local and he also likes the idea of selling to someone young, he will sell it to me for 40k. In a few months I'll be able to take about 15k from my annuity. I would like to have atleast 50k so I can pay him off and have 10k for inventory and to start off with. I live in PA and would like to know what you think would be the best options financially? Thanks :)

You've gotten a lot of good advice already. I also think there are some odd replies too, as if a comic book store is silly or something. Well, I used to be a big fan of comics, and loved the many comic book stores I went to. That's a business where if you have a good store, people will drive hours to go there.

I read the 40k includes inventory. That could be why the biz was appraised at 90k. If you know anything about comic book collecting (and I'm sure you do - I'm mentioning this for the others), there are two prices: the price guide price, and then what someone will actually pay for it, which is probably anywhere from half to 3/4th's list (I'm talking collectables, not monthly off-the-shelf issues.)

In the end, John, 40k is not that much money. If you think this is a good business, you are satisfied with the tax returns/books, and you have ideas to make it better once its yours, I could think of far worse things to do than throw your hat in the ring.

[Spider]

why the quotes?To limit my reply to the specific entity the original poster had stated - "comic book store" = a store that sells comic books - IOW, to quote him.

I was an angel investor in what the owner called a "comic book store, etc." that sold current comic issues but made most of their money from trading high-value collectors' comics and rare issues, plus sports and non-sports trading cards including collector and rare issue cards. Other items sold and traded were sports memorabilia. I was eliminating such activities from my thinking in commenting in this thread.

In the end, the business in which I had invested went broke because the owner had not considered the points I raised in my post above. I thought the original poster might benefit from this experience.

[huggytree]

im not down on comic book stores....im down on low profit type businesses...businesses where you must sell in large volume to make a good profit...or any profit in most cases.

isnt the main reason people go into business to live a better life? it sure is why i did it..

i love being in control too, but if the money wasnt there why bother..

you take on alot of stress and worry....if your not rewarded for it who would do it...

i say go ahead and open a comic book store...spend $40,000....but realize you will most likely live an average life....when that effort and money could be put into something else which you may love 'almost' as much...and be rich...you could do things with your life you never thought you could afford...go on high end vacations, better schools for your kids, better everything in your life...

i have blinders on when it comes to this stuff...i cant see any reason id go through what i do if i didnt make alot more money than an average worker...i know alot of small business guys who make $40k a year....none want to though...i dont believe any wouldnt rather make $200,000 a year...you choose how much you make....and by choosing to run/buy a comic book store you may be choosing $40k a year or less...and work 60-80 hours a week to do it....

like i originally said...maybe a comic book store owner makes alot...dunno...im giving it an educated guess....know what your top $ is...realize your choosing to do it...i wouldnt because of the money...if i loved comics or not....

i realize you didnt ask for my advice on which business to start...i enjoy giving it though..i wouldnt pay $40k for an existing comic book store. id start my own from scratch.

[Business Attorney]

Huggy, I know there are small business owners who are in business to make more money than they could have earned as an employee. But a lot of the small business owners I know, particularly those who have retail stores, are in business for reasons other than getting rich. Many of them simply want to be their own boss.

The hours are undoubtedly worse in most cases, there is no such thing as a paid vacation (or any vacation at all in many cases), and the stress of bringing in enough sales to pay the rent every month is a constant. But most of the ones I know would never go back to being someone else's employee as long as they can make it on their own.

It's not about getting rich, it is about freedom and lifestyle. Different peoples' ideas of "freedom" differ. For some people, freedom is being an employee. When the retail clerk leaves the store at 5:00 PM, he is "free" until he clocks in the next morning. His time outside the store is completely his own. The store owner, on the other hand, is "on" around the clock. But for him or her, not answering to a boss is freedom.

I think, however, your point about getting rich does highlight one issue. Before a person buys a business, they ought to carefully assess their personal goals. Is it to make a ton of money, have creative freedom, have flexibility to spend more time with the family, do work they enjoy, etc...? After they have a good understanding of their own goals, they should determine whether the business they are looking at will help them achieve those goals. If it doesn't, they should take a pass on it.

[Spider]

Dave, I think you are right on target for the one-man operation, or one man + a few employees, sort of operation - IOW, the typical small- or micro-business. Why, indeed, work 60-80 hours a week for a low to middling income? Even if one was passionate about the business, 60-80 hours, the pressure and risk of running your own business and a low income, will surely suck the passion right out of it.

The only reason I can see for doing that is where the income is unnecessary - someone who is retired, perhaps, with sufficient other income to make the income for the business irrelevant. Or a sports star who has made his millions and now runs a business just to keep himself busy. (Which is why I couldn't see the sense for Tiger Woods to make his public 'apology.' With the money he has earned, I'd have just bought a golf course of my own and become a hermit!!!!)

For most people, though, better to get a steady job, which you can switch off at 6 o'clock, and get passionate about your subject as a hobby. A lot of people refuse to make a business out of their passion because, as one friend told me, then it would be work and it wouldn't be fun anymore.

It seems to me that a low profit business can be hugely profitable if one is a big company - Wal-Mart is a prime example - but one has to have a solid marketing plan and set up as a big business from the outset. But then, business itself become the passion and business becomes a game.

Everyone has their own game to play!

[Steve B]

This is a great discussion.

It's a very nice feeling to support someone doing what they love and chasing a dream. But, I'm going to assume there is a practical limitation to the income that one comic book shop can produce. I'm going to assume that limitation will be such that it will prevent him from raising a family in what he may have considered a reasonable fashion (home ownership in a safe neighborhood, the ability to buy food, the option of going on a vacation every year or so). I'm also going to assume the original poster hadn't done enough research on this yet and is going to be surprised by these limitations. He certainly wouldn't have been the first one to buy a business without understanding the inherent limitations to it. Even if he doesn't want to get rich - he may not have understood he'll need to have another source of income in order to survive.

This sounds like what I call a "hobby business". When I sold advertising, I talked to a lot of business owners running small retail shops in small towns. There was no way they were making a living wage at their business. In many cases I seriously doubt they were covering the rent. But, they may have inherited a bunch of money or had a spouse that made so much money that income from the business didn't matter. They were really looking for something to do during the day.

I could be wrong about all the assumptions too. Maybe selling comics in a well run store can make enough money to support a family. Or, if the income potential is as limited as I'm guessing, maybe the original poster understands that and doesn't need to make money from this store.

[huggytree]

Steve B said the same thing as me but nicer...

i can see $40k off a well run comic book store...i see that as an average income..if the wife has a $40k job w/ health insurance they will live an average life....

i wouldnt spend $40k to buy a business to make $40k a year though...thats alot of what i was getting at.

when my wife was picking what she was going to be in college she picked Forestry...her mother talked her out of it because it didnt pay well...She went into teaching instead...if she was still working she'd be making $60k (instead of $30k)....and she'd have better benefits....the college education costs the same, what she chose wasnt her first choice, but a strong 2nd or 3rd....you need to use your head when picking what your going to do with your life......maybe you wont love it as much, but if you can make double or triple and still like it somewhat why not choose the money...

every company ive ever worked for i always upgraded my job to the highest paid one..most i enjoyed, a couple were boring.....but i always wanted to make as much as possible...i am money focused...but i also see enjoying your job as being a 2nd place consideration....sounds like alot of you put love of job 1st and money 2nd or 3rd...we all work to make money...to me that means money 1st

[Business Attorney]

I guess it all depends on your perspective. I live in a major metropolitan area and there are specialty shops whose focus is so narrow, you would be surprised that they can even exist, let alone thrive. For example, when a store called The Spice House (http://www.thespicehouse.com) opened two blocks from my home in Evanston, I wondered how anyone could make a living on selling only spices. They now have five stores.

The questions that have been raised in this thread about comic book stores could be asked about many niche stores in our area. A store selling only dance-wear (http://www.allegrodanceboutique.com/), a store selling only beads (http://www.beadcentral.net/), a store selling rocks (http://www.davesdowntoearthrockshop.com/), a store selling only antique maps (http://www.ritzlin.com/).

I don't know what kind of an area Johnegold lives in or whether it can support a comic book store (though it has apparently worked for the seller). All I can say is that I am glad there are people who would rather own a unique retail store rather than work a 9 to 5 job in corporate America simply because it pays a bit more. What a boring world that would be...

[Dan Furman]

Everyone seems to be focused on how the comic store can't make anyone rich. As if that's a bad thing. C'mon...

I mean, neither can a plumbing business if it's you and only you (just using Huggy as an example). But that's where you have to start. This is essentially an entreprenuer's forum - let's give the guy a little more credit than "own one store / just sell retail / and that's it forever".

Also, with comics, the store itself is only part of the equation. I would guess almost every comic shop gets a table at local comic/horror/sci fi conventions. They are plugged into the local comic community (yes, there's a definite community here.) If you build the store to feature a niche, certain people will drive many, many miles to come there. There's online sales... plus, having known many a comic book shop owner, there's a LOT of what I would consider "easy" competition. Many of these guys are not particularly sharp in terms of business. Just the fact that John ventured here tells me he's already a cut above many of them.

[huggytree]

Dan, i make a very good living.....almost 3x what i did as a journeyman plumber. I can do amazing things that i never dreamed i could...im grateful every day that i became a small business owner.

if you buy an existing business another problem is your feet arent wet...you jumped in all the way...sink or swim....if you start small at home selling on Ebay for a few years you will know how to run a business...i would never start a small business w/o being part time first...

[Dan Furman]

Dan, i make a very good living...you'd be suprised how much i make a year...


I doubt I'd be surprised - I know you do well. But it's not "rich" (for the record, me neither).

But I do think someone owning a comic store can hit six figures. It's a lot more than making a dollar profit on a retail book.

[Patrysha]

if you start small at home selling on Ebay for a few years you will know how to run a business...i would never start a small business w/o being part time first...

Selling on ebay and running a physical store are such world's apart, I don't know if you would have the foundations to run a B&M retail store just from lessons learned on ebay. Some, for sure, but not enough to have a solid foundation I don't think.

[nealrm]

Dan - The typical millionaire in the US owns a small to medium business like HVAC or plumbing. So don't discount the money to be made in small business construction. An interesting read on the subject is "The millionaite nextdoor". I highly recomend it.

Huggy - Not sure quite what you meant by not wanting to buy a business for 40K that only makes $40K per year. Last time I checked, that is a 100% return on investment. At that rate you could easly hire a manager and still bring in a 25% ROI.

[billbenson]

Personally, I would view a comic book store as something that can build multiple revenue streams. Could go online, could go to other collectible items etc. If I'm correct in that, I would see it as a starting point, not something with a very low maximum income potential. I certainly agree with Dan that it can make in the six figures.

I'm a career salesman. I enjoyed it when I was younger traveling around the world and wining and dining prospects. There aren't very many jobs like that anymore with sales presentations, quotes etc being done over the Internet. So these days I'm locked in a closet of my office with a computer and a phone for 12 hours a day. My product line is a pretty boring construction product. I DON'T enjoy it. Used to. Not any more.

Ideally you have a blend of something you really like to do and decent money. I suspect most jobs, whether its a job or your own business become mundane eventually.

My recommendation would be to do something you like but also something you can always refine to make more money. Lets say, for arguments sake that a business will make $200k but never more than that. While thats more than most people will ever work, that wouldn't be enough motivation for me even if I really enjoyed the business. I want a bigger carrot at the end of the stick than that. So, I guess like Huggy, I'm money motivated.

There are people on this forum who have found jobs they enjoy and meet their comfort zone financially. I still see most of them making posts occasionally about doing things to make more money though. I don't think there is anybody on this forum that doesn't have money as at least a partial motivator?

[huggytree]

you and me Bill are the only 2 who admit money is our motivator.

i suspect there are more

i wouldnt pay $40k for a $40k business because you could just work at a factory for $40k...im looking for a higher multiplier than $40k x how ever many years you go out...id rather pay $100k for a $100K a year business....in 10 years that $40k investment will make you $400,000....in 10 years the $100k investment will make you $1,000,000....

and no im not rich...I may be in a couple of years by Obama's definition...my definition of rich is $1million a year.....i dont think $1 million in the bank makes you rich...but $1 million a year does.....i dont think many small businessmen make anywhere near that....i just strongly feel when you take a risk you get rewarded...if you cant make 6 figures i dont see why you'd risk it....

yes running an online business is probably completely different than a store, but it would still help just to become a businessman and get some idea's...unique idea's...

Questions to the original poster:

How much do you expect to make your 1st year in business? your 5th year? long term?

Will you change the business or will no one know the business has changed hands?

[Patrysha]

Oh I'll admit it...money is a motivator for me too...if it wasn't I'd still be running a home childcare. When things are going poorly I miss the simplicity and ease of those days...

[Johnegold]

Steve B said the same thing as me but nicer...



i wouldnt spend $40k to buy a business to make $40k a year though...thats alot of what i was getting at.


Just went over the last three year incomes of the business. Average was around 100k.

[billbenson]

Ya, there are those days I wish I was a postal carrier. But I just did a search for the pay scale. Works out to about $50k plus benefits (which are shrinking) after 10 years or so of employment (I don't remember what the starting salary was for the first 10 years). That's enough right there to get me back to working my 12 hour days.

[Spider]

Just went over the last three year incomes of the business. Average was around 100k.Excellent! So is this just a comic store - a store that sells comics - or is there something else going on that you aren't telling us?

If my guess of $2 profit per comic is anywhere close, that represents selling 50,000 comics a year or 1,000 comics per week. Allowing that a customer buys an average of 2 comics a week, that's 500 customers per week or close to 100 customers per day.

It sure is sounding like this "comic store" is selling more than comics. Is it more like the shop I invested in? - collectors and rare issues, trading cards, sports memorabilia? and so on? Are we talking about postal and telephone sales, online sales, export and import? Or walk-in traffic of local children?

I'm not clear on what this business is.

[Dan Furman]

Dan - The typical millionaire in the US owns a small to medium business like HVAC or plumbing. So don't discount the money to be made in small business construction. An interesting read on the subject is "The millionaite nextdoor". I highly recomend it.


Read it. Am living it. Not a millionaire yet, but am on my way.

My point to Huggy was a stand alone guy is not likely to become rich. He will when he hires guys, has a few trucks, has other income streams, etc. Whether it's a small comic store or a plumber or a copywriter.

[Dan Furman]

It sure is sounding like this "comic store" is selling more than comics. Is it more like the shop I invested in? - collectors and rare issues, trading cards, sports memorabilia? and so on?

This is 100% of the comic stores I've seen. That's why I was puzzled by your quotes earlier - have you ever seen a comic shop that just sold new comics? I never have, and I've probably been in more than 100. Never even heard of one. They all sold new comics, but they all also sold old issues, collectors stuff, maybe some sports cards, something else, etc. Not every one went as far as selling sports memorabilia, but they all sold back issues, rare things, some type of trading cards... many sold role playing game items, dice, etc.

Comic stores are "just (new) comics" like drugstores are "just drugs". I kind of thought that was common knowledge.

Yes, I am a proud alpha nerd.

[Dan Furman]

you and me Bill are the only 2 who admit money is our motivator.

i suspect there are more.

Of course money is a motivator. A Huge one.




i wouldnt pay $40k for a $40k business because you could just work at a factory for $40k...im looking for a higher multiplier than $40k x how ever many years you go out...id rather pay $100k for a $100K a year business....in 10 years that $40k investment will make you $400,000....in 10 years the $100k investment will make you $1,000,000....

Well, like someone pointed out, it's a 100% return. Not bad.

Plus, the higher multiplier you speak of is possible with almost any business. So maybe he opens a second shop? Or he becomes the comic dealer to the stars, getting the Jerry Seinfelds of the world Action Comics #1, etc. Whatever - but you have to take that first step. You sound like you wouldn't advise someone going into anything unless they were guaranteed success and riches. That's kinda unrealistic.

[Johnegold]

This is 100% of the comic stores I've seen. That's why I was puzzled by your quotes earlier - have you ever seen a comic shop that just sold new comics? I never have, and I've probably been in more than 100. Never even heard of one. They all sold new comics, but they all also sold old issues, collectors stuff, maybe some sports cards, something else, etc. Not every one went as far as selling sports memorabilia, but they all sold back issues, rare things, some type of trading cards... many sold role playing game items, dice, etc.

Comic stores are "just (new) comics" like drugstores are "just drugs". I kind of thought that was common knowledge.

Yes, I am a proud alpha nerd.

Yeah all you said including the sport cards. Also there are events such as tournaments but much more than just comics.

[Steve B]

Hi Johnegold,

How are you defining income? Was that gross income, income before taxes, or net income after taxes?

[Steve B]

BTW - isn't it ironic that just yesterday a comic book sold for $1,000,000?

[nealrm]

Just went over the last three year incomes of the business. Average was around 100k.

Now my warning bells are going off. Is that 100K in revenue or 100K in profit? No one sells a business for 40K that makes 100K per year. It doesn't make sense.

I would go through every detail with a fine tooth comb. Verify that the seller is who they say they are and that they do own the business. Check with the local authorities and see if there are tax liens or other liens against the business. I would also verify that the paperwork provided was legitimate. Check to see if something was in the works that would make the business less viable. Things like a Barnes & Noble opening across the street, or the building being sold out from under the business, etc.

[Patrysha]

Now my warning bells are going off. Is that 100K in revenue or 100K in profit? No one sells a business for 40K that makes 100K per year. It doesn't make sense.

Well yeah, he should do his due diligence and check out all the angles, but it really isn't that odd with a passion business that he would want to keep going.

I can totally see the guy who owns the collectibles store in town selling out at a low price just to keep it going in good hands. The couple who owns it is all about the kids...from spearheading an anti-bullying program with a few of the regulars this past summer to getting donations to a program so they could serve free lunches on the weekends. The one here in town has comics but focuses on the TCG's and only carries a tiny range of comics...kids pack into that place for games and tournaments just to hang out (including my own).

One guy bought a hockey card there worth over $10,000 last year. The wife is on lesson three of my build your own website course so it's a bit rough around the edges but it's at Anything and Everything Cards and Collectibles Whitecourt (http://aandewhitecourt.com)

[nealrm]

A business with 100K in profits a year is worth between 500K and 1,000K. I would view an asking price of 40K for such a business with a large amount of caution.

[Patrysha]

I didn't read it as profit, I read it as revenue...

[Johnegold]

sorry for the confusion, it was in revenue.

[Dan Furman]

sorry for the confusion, it was in revenue.

That sounds fine / realistic.

I'm excited for you. Helps that I like comic stores (and yes, I agree with Patrysha - it's not all that odd for a "passion" guy to want to sell it to someone similar. I agree homework needs to be done, including making sure the lease is sound, etc - but there may not be anything nefarious here at all.)

Like I mentioned earlier, 40k is not a big nut.

[Dan Furman]

I didn't read it as profit, I read it as revenue...

I'm liking your website lately.

[huggytree]

$100k in gross sales may equal $20k in wages and profit depending on how many employees....it could be a loss....who knows.

i think i was right on with my $40k number of what you will make if you are a full time employee...

sounds like money is not your motivator...ill bet it will be a year or 2 into the business when your sick of working 80 hours to make $20k.....im trying to drill this point into every ones head....ill drop it now.

does anyone else think its better to save the $40k and start from scratch?...i sure do

[nealrm]

Huggytree - At this point I don't have enough information to make a decision. We know 3 things: 1) Selling price=$40K, 2) Revenue=$100K, 3) Store sells comic books. In order to determine if this is a good offer or not we need to know profits and how much time will it take to manage. Until we know more all we can do is guess.

[huggytree]

its an educated guess...not just a guess

ill bet i was right on at $20-40k per year

$100K in sales is probably worth $40k i admit that.....its probably $20k in profit x 2 years...thats probably how they came up with the price...he's not selling a $50k business for $40k.....we all know that...

[Patrysha]

I'm liking your website lately.

Thanks. It is coming along as I get things sorted out in my own head about where I want to go and what I really want to do :-) Course, losing the furnace, having the sewer invade my basement and crashing my car in the same month kind of lit a fire under my butt too...

Back on topic.

If the current store has a good customer base, then why would a person open a new one (and have to deal with all the hassles of finding the right location, doing all the reno's, buying all the fixtures and hardware and dealing with getting all the vendors on board) -- it wouldn't save any money and would be a lot more headaches than taking over the existing.

Do be sure to make sure that the vendors will transfer though with the same terms as the old business (or at least knowing in advance what the terms are going to be)

There was a local stereo shop here that the owner lost interest in over the past few years before finally selling it...and the new owners couldn't get anywhere with the vendors...everything had to be started up as a new relationship (something they didn't account for when buying...bad research on their part). They were gone by the end of summer.

[huggytree]

Patrysha..i had to check out your website too...looks good...you look very serious!..you may want to smile!...

open up a couple of miles away, spend a couple of thousand on shelves, spend a week putting together the store, spend another week and stock the shelves, spend a few hours a week for a few months getting contracts together....sounds like 200-300 hours to save $40,000

you already know your main competitor is being bought by a new owner....50% chance he will be out of business in 2 years like any new business....good chance he will make mistakes....its more risky...but if you have a great new idea it sounds like a good way to save $40k......

i have no idea how difficult it is to get suppliers...in this economy i have trouble believing they wouldnt sell to anyone....if they are they are alone....

in the middle of a recession i dont think comic books are a necessary product which hasnt taken a 25% hit...ill bet they are hurting.

[Spider]

You wouldn't have to spend any time or any money at all for premises build out (redecorating, adding shelves cabinets, counters.) You can get the landlord to do it and pay for it, and increase the rent to cover.

Opening a new shop doesn't have to cost much more than paying deposits for utilities and buying inventory.

[Patrysha]

Patrysha..i had to check out your website too...looks good...you look very serious!..you may want to smile!...

Not till I get my teeth fixed...or until I have time and $$ to get a professional to take the shots so they can mess with photoshop to fix them.


i have no idea how difficult it is to get suppliers...in this economy i have trouble believing they wouldnt sell to anyone....if they are they are alone....
The thing is some suppliers will only sell to one place within a zone. Exclusivity still exists in some product categories. Not sure if this applies to comic book stores, but it does for some of my clients in retail (for example only one retailer in our town carries a popular sportswear line and a certain line of shoes...her competitors can't carry those lines). Johnegold seemed to indicate that the distributors might have some sort of exclusivity arrangements.


in the middle of a recession i dont think comic books are a necessary product which hasnt taken a 25% hit...ill bet they are hurting.
Maybe not a necessity, but they are an affordable luxury. For example, the TCG store that I mentioned earlier gets $15-$30 ($5/kid/visit every 2 weeks from my boys. (more when they have birthday money or have done extra chores to earn more...though mostly they save the money they earn cooking dinner and such for video games) Now I know that's different from comics, but imagine that it wouldn't be too different from the perspective of parents of kids who are into comics. Spending $5 here and there really isn't that much...sure it's the same as a jug of milk, and if things were really, really tight they would have to go, but if it's possible to squeeze in...sure you're going to do it for 'em. (Plus comics are actually aimed at a far larger market than just kids).

Not to say that you don't make good points, but I don't things are as bleak as you might think.

[Patrysha]

You wouldn't have to spend any time or any money at all for premises build out (redecorating, adding shelves cabinets, counters.) You can get the landlord to do it and pay for it, and increase the rent to cover.

Opening a new shop doesn't have to cost much more than paying deposits for utilities and buying inventory.

True, if you can get a landlord to work with you. They don't seem to be interested in that at all where I am. I've seen two recent deals fall through on reno issues.

And even if they did cover the physical aspects..they aren't going to cover the POS system, signage or the marketing that a new store would need to find customers...at least the existing store has a clientele that can be tapped through the business start up stages...

[Johnegold]

The thing is some suppliers will only sell to one place within a zone. Exclusivity still exists in some product categories. Not sure if this applies to comic book stores, but it does for some of my clients in retail (for example only one retailer in our town carries a popular sportswear line and a certain line of shoes...her competitors can't carry those lines). Johnegold seemed to indicate that the distributors might have some sort of exclusivity arrangements.


Yeah, the distributor won't sell to a new store if there is an established store in the area or if they have the rights to the zip codes. The store has all of the local zip codes.

[Spider]

True, if you can get a landlord to work with you. They don't seem to be interested in that at all where I am. I've seen two recent deals fall through on reno issues...I've heard of proposals not being accepted but never had that happen to me - mainly, I think, because I made it worth the landlord's while. Those who weren't successful tried to scrimp the landlord. These guys are not stupid, but many a tenant seems to think they are. Or just not consider what is involved.

My proposals have always been on the basis that the landlord would earn more from accepting my proposal than he would not acepting it. I also couple it with including a longer lease than he had asked for. Landlords prefer longer leases.

I'll bet anyone, even in your area, Patrysha, could develop a proposal that your landlords would happily accept. It just means finding out what they consider beneficial. It's called the Art of Negotiating.

[Patrysha]

I'll bet anyone, even in your area, Patrysha, could develop a proposal that your landlords would happily accept. It just means finding out what they consider beneficial. It's called the Art of Negotiating.

And I'll bet it would take a pretty special person to make it happen ;) Both of these deals were experienced, long term business owners with existing businesses...not noobs who have never run a successful business.

[Dan Furman]

do you guys have any idea what a comic store is like, and what buyers expect? I do. Rows and rows of back issues. That issue of west coast avengers where they went back in time and Hawkeye put the note in a bible he knew someone from his future would read? Yea, you got that one? How about the whole 7-issue story arc?

Buying inventory from scratch in a new store would likely cost 30k. I would guess that's a minimum.

He's hardly "saving 40k". Not even remotely close.

[Johnegold]

do you guys have any idea what a comic store is like, and what buyers expect? I do. Rows and rows of back issues. That issue of west coast avengers where they went back in time and Hawkeye put the note in a bible he knew someone from his future would read? Yea, you got that one? How about the whole 7-issue story arc?

Buying inventory from scratch in a new store would likely cost 30k. I would guess that's a minimum.

He's hardly "saving 40k". Not even remotely close.

so very true, You know the comic world aha

[Patrysha]

do you guys have any idea what a comic store is like, and what buyers expect?

Nope! All I know about Comic Books stores is what I've picked up from The Lost Boys, True Romance, The Simpsons and Big Bang Theory.

[Johnegold]

Nope! All I know about Comic Books stores is what I've picked up from The Lost Boys, True Romance, The Simpsons and Big Bang Theory.
you have to love the comic book guy from the simpsons.

[Dan Furman]

Nope! All I know about Comic Books stores is what I've picked up from The Lost Boys, True Romance, The Simpsons and Big Bang Theory.

The Lost Boys... love that movie.

[Dan Furman]

so very true, You know the comic world aha

Comic stores rock. Nothing like a good comic store.