I'm new and got a question

[jayjacque]

Hi all, I've been lurking in the shadows for about 2 months now and thought I'd like to finally join to hear some of your opinions. Before Christmas my wife and I were looking at the possibility of purchasing a small detail shop in Victoria, BC Canada. The thing is we already have a going business of mobile vinyl, leather, fabric, and windshield repair. Been doing that for years. The reason for considering the detail shop was for son-in-law to have a job and also because at the shop we could also offer the aforementioned services.



The shop has only been going for 3 years and is located in an industrial park, so no real retail exposure. A one-man operation, he told us he gets a steady supply of vehicles from the Auto Auction. Also we looked at his financials and in first year it cleared maybe $14,000 profit working 6 day weeks (which could be explained by start-up costs or that it wasn't quite a full year). The second and third year did better, but still not great clearing around $21,000 each year. He wanted $48,000. If we wanted it we would have only offered maybe $30,000 which would include all his equipment and some training. But in the end after thinking about it, we decided against it; just didn't seem solid enough an investment.



Here's the question I have for you all: Did we do the right thing turning it down? We probably still could consider it, but it's a whole other business we'd need to learn from scratch, and depend on someone else to run, and the location didn't seem that great. And if it took a lot of time and effort, then we might not be able to service the accounts from our other business, etc. etc

 

[BillyL207]

New business owner rarely recoup their investment in the 1st year anyways. Did his finances include records of cash deals as well? As bad as it seems some people do pay cash. Most business owners recoup their investments their 2nd or 3rd year. Is his client base only the auto auction or does he have retail customers as well. What size is the shop? All these things you should consider because you could always make a business grow. Just the only thing that might hold you back is the experience you said.

 

[a.k.a. Patrick]

Also consider what your "bringing" to the business. You mentioned another line of mobile work which may tilt those scales.

 

[BillyL207]

I'm going to agree with Patrick because his income is based purely on detailing and you have the opportunity to offer more services = more money and profit. Therefore your income would be higher than what the books say.

 

[jayjacque]

What about the location? It's in the middle of an industrial section, the last business at the back end of a complex though he's got a few signs out towards the front. In that industrial section there are a few automotive related businesses, a body shop and an auto parts store just a block or two away, a trucking outfit also very close. Beyond the maybe 4 to 6 blocks worth of industrial section, there is plenty of residential neighborhoods. The city itself has something like 330,000.

 

[BillyL207]

If he has that amount coming in already I wouldn't be too concerned if your going to start off with that guaranteed. Businesses grow mainly on word of mouth advertisement. Statistics show that if someone is happy about a business they will tell on the average of 3 people. With the body shop there it might be beneficial to you. Get to know them very well and you might get business from them and you might give them some business. It's definitely all about you help me out I help you out. If your location on the road where everyone could see you that would be great too. Think about your investment good business men and women take risks and sometimes it pays off greatly. Alot of people despise Donald Trump but he has taken huge risks. Sometimes they paid off and sometimes they made him almost bankrupt.