Despite the squeeze that small independents are experiencing thanks to savvy shoppers and the rise of the discounter, convenience stores are enjoying renewed popularity. Situated in handy locations – urban and rural – they offer an increasingly popular alternative to the big out-of-town supermarkets. It’s a business that appeals to a growing group of entrepreneurs but what are the most important considerations when buying a convenience store?
1. The Location
Location and size are probably your two most significant considerations. Retail space is expensive and location will obviously impact the asking price – though you can probably make a saving if you have the experience and confidence to buy a badly run business with the potential to build into a successful store. Higher turnovers are possible in busy urban locations but rents are likely to be punishing, too. A rural store may provide a slower pace with a favourable work/life balance.
2. The Bottom Line
Examining financials may be complicated but it’s important to track the different income streams as they often carry varying margins and turnover figures can be misleading. For instance, while the sale of groceries may attract an average margin of 20%, tobacco could run at just 7%. Some items, like ATMs, are commission-based and will need to be recorded separately from other sales. Be sure to map turnover and profit against outgoings such as rent and rates.
3. The Footfall
Check out your chosen store on different days and at different times. You may be convinced it’s in a great spot with good parking but what’s access like during rush hour and how busy is it in the evenings? Be your own mystery shopper and make a few purchases using different payment methods. Are the staff helpful? How well do you think the store is being run – and can you see room for improvement? The more information you can gather about the condition of the business, the better placed you’ll be when it comes to negotiations.
4. The Potential
Do you think there’s the opportunity to explore a new revenue stream or to increase existing sales with just a few tweaks? It may be possible to significantly increase your turnover by lengthening your opening hours, introducing new products and services, cutting supplier costs or stocking higher-margin goods. It’s important to give customers as many reasons as possible to come into your store and buy.
5. The Neighbourhood
Many of us would prefer to run a store in a safe neighbourhood with relatively low crime rates. If you think this would be a deal-breaker for you, it’s important to check out the neighbourhood of every store that piques your interest. Find out as much as you can about the area by looking at the crime statistics, ask around and make your own observations of the surrounding area to help you build up a picture of the store and its environs. It’s important to feel you’d be happy living and working in your new store.