Sunday, June 30, 2013

Buy A Store

There are a lot of people looking to start a game store right now. The game trade is doing quite well at the moment, so it looks like easy money. At the same time, this is probably a good time to sell if you've been doing this for a while. You can claim success and move on with the next stage of your life. How often is that possible in the game trade?

So my advice to prospective new game store owners is to talk to successful existing store owners about buying their busines.* I write about this because it almost never happens, with most stores bought by current game store owners. My reasoning is that most game store start-ups are created for the wrong reasons that have little to do with business and more to do with personal passion and interest.

So step back, check your ego, and consider what's the best business decision. Do you really need to spend tens of thousands of dollars on startup losses, money that evaporates into the ether, or could you find a successful store today? Could you put your mark on an existing business?

I'll also warn you to be careful. I think we're in a CCG bubble, so any store worth having has been around longer than the bubble. Look at their POS and project their CCG sales backwards to before that time, say a 5-year average from before 2010. If that store could be profitable with those CCG sales today, then perhaps they'll survive later. Avoid "Magic" stores as they'll be gone in time. Leave the rest of their sales intact, as they've likely grown that market more organically.

Also avoid a "Buy a Job" unless that's really what you want. If you want a business with growth potential and a future, look for strong management with processes and procedures that don't tie the owner to the till. Does the owner have weekends off? Take vacations? Have a plan for retirement (clearly, if they're talking to you)? Ask to see their Policies and Procedures binder. Or consider that a major detriment in negotiations if it doesn't exist. Have an accountant look at their books, especially their income statement. Use my three buckets to get an idea of where their expenses should be.

What will you pay for an existing, successful store? It's hard to value one, or any current business really. There are many ways, which you should research. Still, it's far less risky to drop $50,000-$100,000 on a known entity than to start one from scratch.

*Not me though.

1 comment:

  1. Just got my check for $500.

    Many times people don't believe me when I tell them about how much money you can get by taking paid surveys online...

    So I show them a video of myself actually getting paid over $500 for taking paid surveys to set the record straight once and for all.

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