Want to Buy a Convenience Store, Need help on the Viability of the venture

[Yashgroup]

The store built entire new in 2024. It is established in August 2024. Located in a university/studennt area.

Since it is newly build the ask is 1,80,000. How to evaluate it ? Plus the stock. It is doing sales of 15,000 / week on average. Currently selling Beers, Wines, Spirits, Cigarettes, Vapes, Fresh Coffee, Slushy Machine, Groceries, veggies, fruits, and Food to Go. Services such as a Lottery, newspapers, magazines, Pay Point & Parcel Services not added yet.
Size is 2000 sq. ft.
Running with one full time and two part time staff.
Rent is 25000/year.
Council rate 11,000/-
Ele. bill 1800/ month.

What to see in details? what will be the cost to offer ? Need help from someone who has knowledge of this.

 

[DontAsk]

I don't see any mention of profit or wages.

 

[Lisa Thomas]

I would expect you to use your accountant to do the due diligence for you. If you don't yet have one in place, and don't find one on here, dm me for a recommendation.

 

[Clinton]

Since it is newly build the ask is 1,80,000.

Are you in India? What's with the comma after the "1"?

Going by the text in your message and the type of questions you've asked, it sounds to me like you're a raw n00b who's likely to end up making the biggest mistake of your life (unless you have expert assistance through this).

Maybe you should start by reading this article I wrote on how to buy a convenience store.

Need help from someone who has knowledge of this.

Yes, you do. You need, at the very least, a good accountant with experience of M&A / corporate finance. And a good corporate lawyer.

What's your budget for this advice?

If you think you're going to get the necessary advice for free in this forum, or that it will cost just a few hundred pounds or a grand or two, you're living in cloud cuckoo land.

 

[fisicx]

The store built entire new in 2024. It is established in August 2024. Located in a university/student area.

So you want to buy a store that hasn't even completed a years trading (so lots of big bills to come) in a location full of broke students.

Why on earth would you want to do this? It's quite clear you have never done this before so you are going to be taken to cleaners.

 

[Yashgroup]

So you want to buy a store that hasn't even completed a years trading (so lots of big bills to come) in a location full of broke students.

Why on earth would you want to do this? It's quite clear you have never done this before so you are going to be taken to cleaners.

Yes, as you said I am new for this but i am supported by my brother who has experience with CC and other businesses here. The question of new establishment came to our mind too and this is a big question although now it is 8th month the place is for sale since 3-4 months. We are going for due deligence , asked for the accounts , bills and reports, and will ask for 2 -4 week trial run too is everything goes smooth. What else we need to do?

 

[Clinton]

I notice you conveniently skirted around the question of your budget for professional advice. I'll take it that you want to do it on the cheap and pay £0.

my brother who has experience with CC and other businesses here...

He sounds like an amazing guy. Why have you not not taken all the above questions to him instead of posting them in this forum?

From your grammar, you sound desi. From my experience, most Indians running these stores put zero value on their time and think they are making a profit when they're actually just running a job. I suspect this is where you'll end up even if the store doesn't turn out to be a complete disaster and collapse into oblivion.

 

[Mark T Jones]

The first thing I'd want to know is why the existing owner put it up for sale after just 4 months

The real reason, not the one they've prepared for you

 

[FreddyG]

What else we need to do?

Pray!

According to a finance acquaintance, 60% of convenience stores fail in the first five years. Those who succeed tend to be the ones where the manager-owner is also the owner of the building.

When you are running a business that is also a physical asset - and that can be anything from a convenience store to a petting zoo or a TV studio - you are in the real estate business. You must decide which side of the real estate desk you want to sit at.

That is why Aldi is slowly and steadily winning the retail game. It carries little debt and usually owns its own stores, despite making several mistakes lately. Lidl also owns its own stores but is carrying more debt. Tesco, Asda, et al have done sale and lease-back deals on their stores and that is a burden that ties their hands behind their backs.

You have told us the turnover is £780k p.a. (£15k a week) - but here (figures from The Grocer magazine) you should expect about 2% net profit and about 20% mark-up. (Aldi allegedly made 3.1% profit in 2023, which it ploughed into new stores.) It looks as if your total costs, including your management wage, are North of £150k p.a. You are going to have to drill down deep into the books and find all the gotchas hidden in there!

• Have they told you why they are selling the business, having only just opened the place?
• What do they know that you don't?
• Have you spoken to the landlord?
• What do the neighbours say?

 

[Ozzy]

According to a finance acquaintance, 60% of convenience stores fail in the first five years. Those who succeed tend to be the ones where the manager-owner is also the owner of the building.

That is quite a promising statistic, really. According to the most recent set of ONS data on business success rates I viewed, 90% of businesses fail within their first 5 years, with just under 50% failing in their first year. When someone tells me they have been trading for more than 5 years I tell them that they are in one of the few 10% of successful businesses in the UK.

Just emphasises the importance of proper research and planning before starting any business.

 

[Paul Kelly ICHYB]

Everything Clint has said and this:

The first thing I'd want to know is why the existing owner put it up for sale after just 4 months

£20k month would probably be £2k net profit a month. As mentioned, this what owners would consider as profit before thinking of their own drawings.

Even forgetting this, based on £180k, you are looking at 90 months (almost 8 years) to pay back the purchase price, assuming flat sales/profit.

If you really want to do it, pay a small deposit and pay outstanding over a few years.

 

[fisicx]

And we don’t know the terms of the lease. It could be a 25 year full repairing lease.

@Yashgroup - pay for solicitors and accountants and someone experienced in business acquisition to help with this. If you don’t you will fail.

And you would be responsible for the business. Have you ever run a convenience store? Are you prepared to lose your home to pay the debts if it fails?

 

[Mark T Jones]

Everything Clint has said and this:

£20k month would probably be £2k net profit a month. As mentioned, this what owners would consider as profit before thinking of their own drawings.

Even forgetting this, based on £180k, you are looking at 90 months (almost 8 years) to pay back the purchase price, assuming flat sales/profit.

If you really want to do it, pay a small deposit and pay outstanding over a few years.

I'd certainly agree on the numbers, however to want out after just 4 months would suggest something has gone seriously wrong....

 

[Mark T Jones]

That is quite a promising statistic, really. According to the most recent set of ONS data on business success rates I viewed, 90% of businesses fail within their first 5 years, with just under 50% failing in their first year. When someone tells me they have been trading for more than 5 years I tell them that they are in one of the few 10% of successful businesses in the UK.

Just emphasises the importance of proper research and planning before starting any business.

I could shoehorn in a case for borrowing here..
Most of these indie purchases are debt-purchased, and the process of getting debt often forces out those considerations and 'awkward' questions that the buyer overlooks.