quesiton on buying business of convenience store
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any business which involves physical inventory is more headache than a business that sells service. Since you are in the IT, have you ever considered IT/ITES business as a starting point?
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sumjo
Let me tell you that I am looking for this kind of business for my wife and I am sure she can handle this kind of business and she has good experience. I would like to be the investor in this business and help to my wife on initial stage.
The main purpose was to increase the income of my wife through investing into business.
Let me know if you have better idea.
I had consider IT business but it is something where my wife can't help me much. So, her income will remain the same.
I believe it would be very tough for me to success in IT business with my current Job and at this point I can't afford to leave my Job and start IT business. let me know if you have any better idea for IT business.
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Success is Never Ending and Failure is Never Final.
Quote:
Originally posted by meitsme
Hi Guys,
I am trying to understand the business of convenience store in Canada and have few questions.
I have seen one convenience store for sale and got some information.
1) Average selling $2200/day. (includes lotto and smokes)
2) Monthly Rent of Property $4000
3) Opening hours: (Currently no employee and owner and his wife running the business)
Mon - Sun: 7AM to 11PM = 16 hours/day
4) Other Expenses:
Hydro and Gas bills
Just for now, let's assume utility bills and some minor expenses(like cleaning floor and window) are $1000/month. As per my understanding,
Expenses = 4000 (Rent) + 1000 = $5000
Total Sales = $2200 * 30 = $66000 (sales/month)
Profit on Sale = 20% of Sales approx. = $13200 / month
Net Profit = $13200 - 5000 = $7200
This means he is taking home $7200 which includes salary too.
Let's assume there are two employee. one is working from 7 to 3 and other is working from 2 to 11. Employees are working 17 hours/day = 510 hours/month.
Approx. salary $11/hour = $5610 / month.
Net profit after salary = 7200 - 5610 = $1590 / month. = $19080 / year.
Questions:
1) Do you think above calculation is correct OR I am missing something?
2) What could be other monthly/yearly expenses?
3) How much should be goodwill? (As per my understanding it should not be more than twice of net profit / year. In this case it should be less than $38160. I may be wrong here.)
4) There are some stuff (like grocery racks) for organization but I don't know what is the current value of it. Do I need to add cost of this when buying business? How much it could be approx?
5) How much should I pay for buying this kind of business?
6) I know top of this I have to pay cost for existing inventory. What other expenses could be while buying the business? (like one month rent in advance, lawyer fee, what else?)
Thanks in Advance,
I would say, if you are really interested in buying existing business, must study about pro and cones before making final decision. You must consult with real estate/business planner to get accurate idea.
Above sales and profit numbers could be cross checked for accuracy.
-You must check 3-6yrs sales and income reported to Revenue Canada.
-Must check turn over period of inventory.
-Ask for all invoices (purchases) with in 6-12 months would give you idea of sales and margin on product.
-Must check neighbourhood for other new competetors with in area.
-Existing inventory could be 60-70% of wholesale price, NO More than that.
-Furniture and appliances could worth 50% of original value if not older than 2-3 yrs.
-Rack/shelving could worth 25% of original value if 2-3yrs older.
-Must check with land lord agreement for lease for 3-4yrs with existing term and at renewal rent increase can't be more than 2-3% for new term.
Two friends of mine did not succeed, bought businesses as under:
1. $1200-1500 daily sales, $1500 monthly rent, 10-35% profit margin on items. Paid 25K goodwill, 15K inventory. 5K appliances. Maximum he could make 2 family member's minimal wages after all expenses.
2. $2500-3000 daily sales, 70K goodwill, $6000 rent, 50K inventory and $10k appliances, 2 employee hired. At month end hardly saved less than $5000.
In simple words, you can make 2-5% profit on your $50K investment and wife's pay.
**Since smoke involve there is higher risk of break in and theft.
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Meeting people is easy. Having meaningful connections is the hard part.
Regarding IT business, we can definitely discuss various options. Send me your contact details.
About your wife's business, you might also consider small scale export/import (maybe through Ebay, to start with), or day trading/forex trading, if she has an aptitude for that.
Let's talk someday.
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sumjo
i dont have much info but 2 things that i can think of to consider are (a) what abt insurance cost ? b) will u make any cash money, so no tax.
lot of exp can be claimed as business exp so less tax and more $ in pocket.
i ve a realtive in usa, they make abt $ 10 k take home....mainly cigarates and beer....
Location: God's own country
Posted on: 01-04-12 08:04:01
Aashu,
Unfortunately USA is not Canada.
We let in a lot of uneducated but cash rich people into Canada (for eg, HK, South Korea, Chinese people) who can afford to invest in a business just to bring relatives, work , write down taxes etc...
The convenience store model may not work for Desi's esp. with meitsme background.
Peace
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I am a Gents and not a Ladies.
Quote:
Originally posted by Aashu
i dont have much info but 2 things that i can think of to consider are (a) what abt insurance cost ? b) will u make any cash money, so no tax.
lot of exp can be claimed as business exp so less tax and more $ in pocket.
i ve a realtive in usa, they make abt $ 10 k take home....mainly cigarates and beer....
I haven't added tax on above income. Even without paying tax, it doesn't look like good ROI. Also, I am sure there will be some more expenses as you mentioned.
One more posssiblity:
If you get $25 short in register at the end of the day, it cost loss of $9125 at the end of year.
There is only one possiblity of running business. Profit margin may be more than assumed in above case of subway business. Instead of 47%, owner may be making 60% on sale after royalti. [Above example of convenience store is not good business. At least he should have daily sale of $3500 with same expenses for considering a good business. ]
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Success is Never Ending and Failure is Never Final.
