Choosing A Business

Q: My business partner and I are planning to buy a major-brand convenience store in the next 3 to 6 months. We’ve already identified three stores for sale in our target area. Can you offer any advice on how we should be comparing/contrasting these stores?

A: I’m thrilled to learn that you have set a very specific time limit to complete a transaction.

Not working with a timeline or having a sense of urgency is one of the biggest reasons why many prospective buyers (90% in fact) fail to complete a transaction.

There are numerous considerations you should be making when comparing different opportunities. Although it is oftentimes difficult to compare different businesses, you’ll want to evaluate the following:

  • Whether or not the location is a franchise or generic operation. If it’s a franchise, what are the ongoing fees to you, what training/ongoing support can you expect, and what are the agreement conditions? Plus, will the franchisor readily transfer the existing contract or require a new one? Either way, you’ll want some clarity on this issue.
  • Are you and your partner planning on working in the business? If so, you’ll want to evaluate any businesses and consider adding back the manager’s salary if they are currently being run absentee by the present owner.
  • Similar to a recent question I received about gas stations, you want to know about the location. For example, C-stores typically flourish because of location. If traffic patterns change, it will impact the business. Therefore, you’ll want to investigate with the city planning department to learn what new permits have been granted for building in the area (for competition) or other businesses that could impact the traffic and most importantly, when was the last major roadwork done. Typically, major routes will undergo some work at least every ten years. During this time there can be a major disruption to the business.
  • Regarding the competition, are there any nearby locations currently operating or possibly being planned to be built that could severely impact your business?
  • What ancillary services will you have at the store?

    When comparing businesses, you must attempt to have an apples-to-apples comparison.

    For example, if one sells gas, while another has a Subway-type in house satellite franchise, then certainly you must take these into account.

On a separate note, I want to discuss the partnership issue. You and your partner need to be certain that you both have a very clear understanding of what each person is responsible for, that you be upfront with one another in your expectations, that you share the same vision for the business, and that you have a mechanism in place to deal with a decline in the partnership. As long as you get that done now, partnerships can be a tremendous way to build a business.


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