Dealer/Store Purchase

MD_3%er · Jan 6, 2017

Question - Need help with purchasing existing store

Hello,

I wanted to get some advice on private equity partnership or suggestions on banks that may loan money for purchase of existing gun shop.

I have quite a bit of experience with running small businesses and the financial makeup of them. I also have experience with lending and equity partnerships. But, unfortunately I feel like that is not easy for this specific type of business.

Any suggestions?

MD_3%er · Jan 9, 2017

Is there a better forum to post this? 131 views... not a single reply....

Biggfoot44 · Jan 9, 2017

It has been said the gun business is 10% about guns, and 90% about business. We know a lot about the 10%, venture capital not so much.

We are taking you seriously , and respecting you enough to refrain from the usual punchlines on the topic .

MD_3%er · Jan 9, 2017

That is appreciated! I would hate to see another one retire! One less store front to support our right!

OCSlacker · Jan 13, 2017

I guess it all comes down to how much money you need.

If the amount is below $50k, then you're looking for a micro-loan lender. Above $50k-$100k you might be at a small bank or a micro-loan lender and a bank. Above $100k, you are really in bank territory.

Now regardless of who your lender is, you'll need to convince them that this is a decent business. You'll accomplish that by filling out a business plan and providing a multi-year income statement that shows your assets, liabilities, equity and the revenue/expenses from operations.

Considering this is an existing gun shop, you'll need to provide some historical data and prospective/expected future earnings.

Unfortunately, the resources I know are local to the Eastern Shore, but they might have other offices near you as well.
-Small Business Development Center at Salisbury University (there might be others connected to other University of Maryland system schools).
-Department of Business Economic Development (http://commerce.maryland.gov/grow/local-economic-development)
-Small Business Administration (www.sba.gov)
-Chamber of Commerce (these places frequently know groups that can help you)
-Maryland Capital Enterprises (http://www.marylandcapital.org/ they're based in Salisbury, but they have been known to lend out near Baltimore).

I hope this helps.

j_h_smith · Jan 13, 2017

MD_3%er said:
That is appreciated! I would hate to see another one retire! One less store front to support our right!

Is Chip selling HNP?

rseymorejr · Jan 13, 2017

How about owner financing?

MD_3%er · Jan 13, 2017

rseymorejr said:
How about owner financing?

Though about that... Don't believe there is interest there. It's an all or nothing thing I feel.

MD_3%er · Jan 13, 2017

OCSlacker said:
I guess it all comes down to how much money you need.

If the amount is below $50k, then you're looking for a micro-loan lender. Above $50k-$100k you might be at a small bank or a micro-loan lender and a bank. Above $100k, you are really in bank territory.

Now regardless of who your lender is, you'll need to convince them that this is a decent business. You'll accomplish that by filling out a business plan and providing a multi-year income statement that shows your assets, liabilities, equity and the revenue/expenses from operations.

Considering this is an existing gun shop, you'll need to provide some historical data and prospective/expected future earnings.

Unfortunately, the resources I know are local to the Eastern Shore, but they might have other offices near you as well.
-Small Business Development Center at Salisbury University (there might be others connected to other University of Maryland system schools).
-Department of Business Economic Development (http://commerce.maryland.gov/grow/local-economic-development)
-Small Business Administration (www.sba.gov)
-Chamber of Commerce (these places frequently know groups that can help you)
-Maryland Capital Enterprises (http://www.marylandcapital.org/ they're based in Salisbury, but they have been known to lend out near Baltimore).

I hope this helps.

Very helpful! Thank you. Worry that current owner will not release financial information. Not that that would be smart on their part because it limits pool of potentional buyers. Not many people walking around with 100k in their pockets.

Matlack · Jan 13, 2017

If they won't open their books to a prospective buyer, walk away. You can sign a non disclosure to review them, that's pretty common. Don't bring it up unless they do.

j_h_smith · Jan 13, 2017

Personally, unless the store has a killer business, I'm buying the stock and a few thousand more for the name. A gun store does not have an inherent value in my opinion. Why pay for something where you could start your own store front without paying for the business name. Gary the Gunowner is going to come into any new gun shop, just to see what's going on. You don't need to spend a lot of money on an existing business, unless they have something special to offer (like a shooting range). As a matter of fact, I'd say you would have a better chance at making it with a new store. You know how excited people get over having a new store opening.

YMMV

lee2 · Jan 13, 2017

location location location.

as stated 90% of all new businesses fail. a loan company will need assets to secure the loan. you will need to open as an LLC to protect yourself.
if it is an established business, you may have a better chance of securing a loan if you can prove continuous revenue. that is, a guaranteed income.
loan companies want a return on their investments.

A1Uni · Jan 14, 2017

lee2 said:
location location location.

as stated 90% of all new businesses fail. a loan company will need assets to secure the loan. you will need to open as an LLC to protect yourself.
if it is an established business, you may have a better chance of securing a loan if you can prove continuous revenue. that is, a guaranteed income.
loan companies want a return on their investments.

100% agree on location.

If you don't have a great location, good visibility, main roadways nearby, and/or big-pre existing foot traffic, forget it. If there are successful competing stores nearby, keep walking.

If you are essentially taking over the license at an operation, be sure you know exactly what they pulled in, and what went right back out.

Also, enjoy the licensing process with MSP. This is one time the Feds do it much better.

Is 100K the figure, or is that just a random number being bandied about? That is cheap for a store with decent inventory. It wouldn't even touch one of my small storage safes.

Good luck.

MD_3%er · Jan 16, 2017

A1Uniform said:
100% agree on location.

If you don't have a great location, good visibility, main roadways nearby, and/or big-pre existing foot traffic, forget it. If there are successful competing stores nearby, keep walking.

If you are essentially taking over the license at an operation, be sure you know exactly what they pulled in, and what went right back out.

Also, enjoy the licensing process with MSP. This is one time the Feds do it much better.

Is 100K the figure, or is that just a random number being bandied about? That is cheap for a store with decent inventory. It wouldn't even touch one of my small storage safes.

Good luck.

Appreciate the info.

ToolAA · Jan 20, 2017

One of the biggest challenges in purchasing an existing "store" is determining the value of physical inventory. The problem is that items fluctuate in value but physical inventory is going to be reported on the balance sheet as an asset valued at the purchase price. However I've seen many business who accidentally or intentionally over value inventory. There are financial methods to write down inventory asset value to keep the balance sheet accurate but many small business don't do that. If the store purchased 10 AR15's at the peak of a buying panic at $800 each but today those guns have a market sale value of $650 the are effectively carrying a $1500 loss on the books that had not been realized yet. Also things disappear over the years but the asset value remains on the books. They may be small things like hand guards and firing pins but they add up over time. During disclosure look for evidence of regular physical inventory audits if there are no physical records then it could be a sign if trouble. Due diligence would require that you (or a 3rd party) audit the inventory to asses proper value. Other than brand recognition and reputation, inventory will be the largest component of assessing the value of this type of business.

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