The life of a shopkeeper is a varied one, covering everything from customer service to accounting to stock taking, often all in the same day. If you’ve ever considered being a shopkeeper you’ve probably wondered how you’d start a shop, but have you ever considered buying one?
Read on to find out how to buy a shop.
1. Think About the Type of Shop You Want to Open
There are a plethora of different kinds of shops on any British high street, all serving different people and different needs. Have a think about what type of shop you want to run and how you’ll differentiate it from the competition. Do you want to run a shop that sells model boats, or a shop selling children’s clothing?
2. Consider Your Budget
How much do you want to spend on buying a shop? Will you be taking out a loan, or do you have enough to buy one outright? Does the location you’re interested in come at a premium, or are you flexible on where it is? These are all questions you should be considering when determining your budget. There’s no set way to work out your budget – each person is different – however, there are some additional costs you’ll need to factor in.
As well as legal fees, you’ll have to consider the price of the Stock at Valuation (SAV) which may be added to the asking price, and even fixtures and fittings may be added to the asking price too.
3. Find a Shop for Sale
Having decided on the type of shop you want to open and how much you can afford; the next step is to look for shops for sale.
4. Create a List of Businesses You’re Interested In
During your search, you’re likely to find several businesses you’re interested in. It’s a good idea to keep an open mind at this point and enquire about several, rather than just one, as each seller will have different priorities and you could lose time on a business that isn’t suitable. When you find a shop that fits your bill you’ll need to contact the seller and ask any questions you might have to see whether you’re still interested.
5. Evaluate the Shop’s Financials
Before taking any enquiries further, you should view the business’ financial documents. Reviewing the shop’s Profit and Loss sheet and General Trading Accounts will give you an idea of how profitable the business is, what expenses you would be inheriting and whether there are any initial costs you’d be able to cut when taking over the business.
6. Arrange a Viewing
If you’re happy with the accounts and want to further the buying process, the next step is to arrange a viewing with the owner. This will give you a chance to look around the business and ask any further questions you may have.
You’ll want to think about what you need to know when you view the business. Thinking about questions beforehand will help you to make the most of it, but some initial questions to ask are:
- Security and CCTV – do they have any and, if so, does it work?
- Fixtures and fittings – will they need replacing when you take over the business or are they still under warranty?
- Problems with the property – do they have any problems with the property, and is it leasehold or freehold? If it’s freehold, find out if they’ll make the fixes or if you’ll have to pay for repairs if you buy the business.
- Stock – will stock be included or added to the asking price? Find out how much the stock is valued at and how much you could expect to pay.
- Staff – does the business have staff and, if so, will they be happy to stay on once the business is sold?
7. Perform Due Diligence
An integral part of the process, due diligence is taking a fine-toothed comb to the information you’ve been given by the owner to really make sure the business is a good proposition before putting in an offer. You can find our full guide to due diligence here.
8. Put in an Offer
Having satisfied yourself that the shop is a good opportunity, the accounts add up and that you’d be interested in buying it, the next step is making an offer. Knowing what to offer can be difficult, but the key is arriving at a realistic valuation and leaving some room for negotiation. There’s more than one way to value a business, and you can get a free and instant valuation here.
You should be clear when making your offer about what it covers and whether it includes stock, assets and even a handover period.
10. Negotiate With the Seller
Much like buying a house, the seller will likely come back with a counteroffer. It may be that they’re looking for more money than you’re prepared to offer, or they want to work a shorter handover period before receiving the money. Determine what they’re looking for and try to achieve a deal that you’re both happy with.
11. Complete the Sale
When you’ve both agreed on an offer, the final step is to complete the sale. This is usually started by both parties signing a Heads of Terms, which outlines the sale. From there you’ll need to involve a solicitor to help create a contract for both parties to sign that will transfer ownership and agree on the payment. As when buying a house, this can be a lengthy process, so it’s important to remain patient as you haven’t bought the business until contracts are exchanged. Once the business is signed over, the last thing is to enjoy your new shop!