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What to Look At When Purchasing a Retail Business

It's no wonder so many entrepreneurs are eager to purchase a retail business: retail continues to be a thriving, growing part of the national economy. And, buying a preexisting retail establishment, rather than starting a new one of your own, allows you to capitalize on a store's existing brand recognition and customer base.

But buying any business is a major investment. Retail businesses, especially brick-and-mortar stores, bring with them unique challenges. Read on to learn some things to take into account when making a decision about purchasing a retail business.

Locations and Leases

A retail space's success often depends on its location. A good location will be well-frequented by foot traffic, with ample free parking and no nearby competition. If a store's location is good, you probably don't want to uproot it and move it elsewhere, especially if its final location will be far away or substantially different.

With that in mind, see if the landlord is willing to transfer the lease into your name when you buy the store. If you don't have a lot of experience running retail establishments, they may balk. In this case, offering an advance on rent may reassure them. If not, you may need to start researching new locations where the business could be - as well as what the new location might do to its profits.



An Experienced Manager

If you don't have a lot of experience with the products the store sells, you may not be able to make intelligent decisions about what direction to take its inventory. Thankfully, if the business has been open for a while, it already has employees on-staff who are familiar with customers' needs.

While you're educating yourself, don't hesitate to keep the manager or a trusted employee (or even the previous owner) on staff to help you out. They'll help you make decisions about inventory and branding that your customers will react well to.


Loyal Customers

Successful established retail stores, especially independent ones, often have very loyal customers. These people react well to something about the store (its owner, staff, atmosphere, inventory, building, location or shopping experience), and choose to come back here instead of going to a big-box store or ordering online.

If your customer base is loyal primarily to the owner, they may react negatively when you take over the store. Especially at first, it's best to not make big changes to branding or inventory (unless you're turning around an unprofitable business). Otherwise, you risk scaring off loyal customers.

At the same time, one of the signs of a problematic business is if it's patronized by a small number of highly loyal customers. That's often enough to keep a store afloat, but if even one of those customers moves or changes loyalties, you can find that your once-profitable store has become a liability.


Positive Vendor Relationships

Entrepreneurs often ignore the importance of a store's relationship with its vendors. These business relationships are cultivated over time and can result in perks like expedited shipping, discounts on wholesale items or even a vendor who's willing to go above and beyond to find an unusual item.

As with customers, vendors may be loyal to a store's owner. You'll need to work carefully to build a positive, mutually respectful relationship with your store's vendors, and with time and repeated transactions, you'll reassure them that you want to keep doing business with them.

Buying a retail business is a major commitment, and there are many variables in play that determine a store's success. If this is your first time in the retail world, it might be daunting, but you don't have to make such a big investment alone. Transworld will work with you to discover the best way forward with a business purchase. Contact Transworld today to learn more.

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Scott Hislop
Scott Hislop
CEO & Owner at Transworld Business Advisors | Business Brokers Helping Entrepreneurs Achieve Their Dreams and Goals Through the Complex Process of Buying or Selling a Business

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