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Opening Record Store

Looking for advice from my fellow audiogoners...I have the potential to move into a store front that is already being operated as a record store (lps only) and become the new shop proprieter/owner. The owner has offered me the space (rediculously cheap rent) in a good area of town. He has had his store for about 5 years now and has a steady customer base. He will be taking all of his inventory and record storage bins that were in the store.He has a web site set up already and signs out front indicating the name of the shop...I plan on rebranding the shop with name change and interior upgrades. It is not a large space maybe 800-1000 square feet. I have a rather large inventory of my own so my up front investment of vinyl would be minimal. The owner wants me to buy him out..basically give cash in return for his customer base and the potential to get my hands on pretty good collections. I am trying to come up with a fair valuation of something like this and I am looking for advice..What do you think something like this is worth? Thank you in advance.
fromunda
lloydc's avatar
lloydc
778 posts
 
Good advice above.  I agree with those above who question whether you would be buying anything more than a headache and a quick loss.     No reasonable businessman is looking for a record store in California to buy.  You might approach it in terms of how much the seller should be paying you.  He wants to get away!  You could make a counter offer, once your due diligence reveals the liabilities he is trying to escape from.
   Don’t ever do anything like this without an attorney.  They would need to create an LLC to own this money pit, for a start.  California is a regulatory nightmare. 
jjss49's avatar
jjss49
6,920 posts
 
@tablejockey

Asking business advice on a internet forum....

Off to a bad start.

i was gonna type the exact same thing...

i will add... owning operating a retail operation is one of most unpleasurable things i can imagine... but that is just me
tablejockey
4,403 posts
 
"i was gonna type the exact same thing..."

Hate to be a downer, just keepin it real during these challenging times.

Any time is actually good to open a record shop if your idea is just having a cool neighborhood store with enough traffic to pay its way. Deciding what next to play while running "the business" is what my local guy does while enjoying his "retirement" years. Not a bad plan.
 
Power to the OP if it happens.
rettrussell's avatar
rettrussell
237 posts
 
I wish I'd had this forum to read back in 1993 when a "friend" at my favorite indy record store convinced me we'd make a solid profit if I joined up with some other investors to open a CD/record store in Tampa (which grossed over a $M the first year!).

Long story short: lots of money went down the drain, along with toasted friendships, and it's death was drawn-out and painful; we were direct-with-the-majors, letters of credit, etc.

A few pre-investment questions you should answer a hard "yes" to: 
- Do you know every single facet of the business you're undertaking?
- Do you have a person/employee in mind you trust explicitly to share the same business philosophy (i.e. won't steal or "give away" merchandise)?
- God forbid, have you established a $ loss figure that, once crossed, will result in immediate store closure....ceasing the bleed-it-forward?

No dream will ever be realized if it isn't acted upon....but also, every dream like this must be able to be unwound.

Best of luck!
ksosne
17 posts
 
I would not do it. If he is taking his store on-line you do not get a customer base only a competitor.  Now if he was to sign a 5 year non-compete agreement the business could be valued at 1 to 2 times annual sales but talk to a business broker or good accountant.

Additionally, I would take no less than a 10 year lease with a get out clause at 5 years.

The business is worth nothing without the lease and customer base.

You might be better off to start your own web based shop but talk to a good accountant.
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