buying guitar shops

ToneControl

why buy this 

http://uk.businessesforsale.com/uk/Musical-Instrument-Retailer-In-Legendary-Location-In-London-For-Sale.aspx

with 50k profit

when you could get this:

http://uk.businessesforsale.com/uk/Specialist-Guitar-Retail-Shop-In-South-Midlands-For-Sale.aspx

capo4th

Turnover is not profit my friend

Drew_TNBD

I turn your mum over and then I profit all over her face.

hugbot

Its a denmark st place, wunjos?

ArchtopDave

Rent £50,000 a year - OUCH

fretmeister

Turnover £200K to 500K but net profit under £50K

That's shit.

There are far better ways of earning less than £50K

xmrchi

But, how fun would that be!?

capo4th

Drew_fx said:

I turn your mum over and then I profit all over her face.

Are you still taking your medication?

Drew_TNBD

capo4th said:

Drew_fx said:

I turn your mum over and then I profit all over her face.

Are you still taking your medication?

Yes boss. Three pineapple juices a day!

capo4th

Good work fella stay strong and keep groovin...

jellyroll

hugbot said:

Its a denmark st place, wunjos?

Does sound like Wunjo with the reference to tuition and practice rooms. 

richardhomer

Turnover '£200,000 - £500,000' - profit 'Less than £50,000'.

I've played with plenty of guitarists who had the same attitude to tuning - "It's close enough for jazz".

ToneControl

I'm not clear on most of these ads: do they mean profit after staff have all been paid, or do they assume the owner will work full time with no salary?

english_bob

hugbot said:

Its a denmark st place, wunjos?

The ad seems to say that it's on Tottenham Court Road:

"All our competition for guitars is behind us in Denmark Street which is a destination street for musicians and allows them to browse all the shops in one street.. There is no direct competition nearby as we are the only specialist retailer."

Snap

that's a sizeable range - 200-500k. So, profit on 200k is what? 10k?? Profit of 50k is not worth it. 10% margin? no chance. Slightest whiff of trouble and at that rate, you are quickly in debt.

I wouldn't go near any business unless you margin is at least 35%

ToneControl - profit, broadly, is what's left in your hand after all your costs, which includes wages, for everyone. The owner may in fact not be salaried or salaried very low, but that would be amongst your first questions. If the stated profit doesn't include owner pay, then in reality it will be naff all (profit), making the busines worth sweet FA.

That's what you have to watch in these valuations - what's the actual true profit, and what's the multiple (on the profit) that's driving the valuation. On a retail business, that multiple shold possibly be as low as 3 or 5, never 10.

Turnover is largely irrelevant. You're looking a) for decent profit, and b) steady reasonable turnowver, as obviously it drives a), but without good profit, you are stuffed regardless.You wil be floggin a dead and expensive horse

Snap

meant to add, the question for any business valuation is what does it actually cost to run the business? This includes every single cost, including everyone's pay. That's your true baseline.

Fretwired

ToneControl said:

I'm not clear on most of these ads: do they mean profit after staff have all been paid, or do they assume the owner will work full time with no salary?

Net profit will include salaries and costs but not income tax. On that basis £50K is not bad ...

maltingsaudio

I had a few hours spare yesterday and went for a wander round Denmark St haven't been there for 10 years or so . So its all changed the only shops I remember who were still there were Hanks and  Rose Morris. Hanks had moved into Andy's old premisses Rose Morris still in the same shop. All the other premisses which had music shops in them still had music shops in them but under different names. Maccari's still have there own premisses on Charing Cross Road but also have a shop in Denmark street.

Conclusion the industry is all bang and bust ie you open a shop with a bang and eventually you go bust its just the amount of time it takes you to loose all your money and move on. It is good to know however there are exceptions to this rule.

My impression of the visit was all the shops had virtually the same stock as each other only the colours change between each shop. Didn't see anything I haven't seen before or that made my wallet twitch. Maybe I've finally cured my gas or may be the guitar market has just got very stale  

Drew_TNBD

Why buy a guitar shop in the first place? The bottom has fallen out. You can buy a decent Les Paul for £80 from Thomann, and there is no money in music anymore.

Buy a flat in London. Rent it out. You'll make more money.

roundthebend

I'd never seen that site so I had a look for local businesses and found one of interest - a bike hire business. It states a turnover of ~£10,000 and a profit of <£50,000. Purchase price was £12,000.

It got me thinking, if you make a profit of, say, £5,000 where does that money go? Presumably to the shareholders of the business, or it stays in the company account ready for investing or expenses.

samzadgan

Snap said:

that's a sizeable range - 200-500k. So, profit on 200k is what? 10k?? Profit of 50k is not worth it. 10% margin? no chance. Slightest whiff of trouble and at that rate, you are quickly in debt.

I wouldn't go near any business unless you margin is at least 35%

ToneControl - profit, broadly, is what's left in your hand after all your costs, which includes wages, for everyone. The owner may in fact not be salaried or salaried very low, but that would be amongst your first questions. If the stated profit doesn't include owner pay, then in reality it will be naff all (profit), making the busines worth sweet FA.

That's what you have to watch in these valuations - what's the actual true profit, and what's the multiple (on the profit) that's driving the valuation. On a retail business, that multiple shold possibly be as low as 3 or 5, never 10.

Turnover is largely irrelevant. You're looking a) for decent profit, and b) steady reasonable turnowver, as obviously it drives a), but without good profit, you are stuffed regardless.You wil be floggin a dead and expensive horse

yeah multiple of 10 is absolute bullshit for a retail business in an industry thats in decline.

and when you get down to 3x you're basically running a marginal business...and at that point the business becomes a complete nightmare to run and becomes nothing but stress...all the fun of being surrounded by guitars all day is gone when you are so close to shutting down every day.