Buying a convienence store (financial, stock, invest, job)
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Let's say that the initial capital investment is $100k for the store
Net income from the store is $40k a year
Opportunity cost for not investing the $100k in the stock market is $10k a year
Opportunity cost for leaving the current job to work at the store is $15k a year
With those assumption, the owner will break even after the 7th year of operating the store (instead of investing the 100k in the stock market and keeping his current job)
yea this is true,
The opportunity cost with the time it takes
But the one big win he will have is the store as his "asset", although we don't exactly know the EXACT details of the condition of the store
imho it sounds like you're "buying a low paying job" with a lot of headaches. I saying low paying especially with all the extra responsibilities you'll have that the clock punchers won't. They'll get to clock out, you'll be working by the midnight oil.
You have something he wants, he has something you may want. Try to figure out why he wants to sell, not his version but the real reason. See if he wants what you have more than the other way around, there are many businesses you could start, it's not the end of the world if you walk, negotiate much harder.
You have something he wants, he has something you may want. Try to figure out why he wants to sell, not his version but the real reason. See if he wants what you have more than the other way around, there are many businesses you could start, it's not the end of the world if you walk, negotiate much harder.
You should be paid better.
yea you bring up good points
I think the OP sees this as low risk, high reward
BUT... it could be high risk if it takes him 5-10 years to hit a break even point because there are other things he could do with that money
But at the end of the day, since it become his business/property/title/etc... it could be levied as an asset for himself as well
BUT... it could be high risk if it takes him 5-10 years to hit a break even point because there are other things he could do with that money
But at the end of the day, since it become his business/property/title/etc... it could be levied as an asset for himself as well
I personally wouldn't do it though lol
Neither would I but at least he is thinking.
Another thought, what hourly wage are the employee's being paid? If minimum wage increases will he make enough to compensate for that increase? His numbers say no.
A lot of people make the mistake of buying a job rather than a business that yes, may start off as a job but can be built into a business. In other words, if the business can continue running without the owner being there for a long period of time and competent employees run it then you got a business. I know he said that the owner isn't around but he is selling for some reason, maybe because he should be but doesn't want to be around.
But the one big win he will have is the store as his "asset", although we don't exactly know the EXACT details of the condition of the store
The tricky thing is the resale value of his asset ie the store that he's thinking about buying. If his store retains the resale value of $100k exactly the same amount that he's paying for it; then he's better off buying the store. His opportunity cost for lost wage and stock investment is 25k/year while his store profit is 40k/year. He will make an extra 15k/year right off the bat with the store PLUS the resale value of his store for $100k.
I also want to buy a Subway franchise but when I take into my initial investment, store's resale value at the 20th year (which is zero btw since the license runs out), store's profit, opportunity cost; I will break even by purchasing the franchise instead of keeping my job and investing in stocks
The tricky thing is the resale value of his asset ie the store that he's thinking about buying. If his store retains the resale value of $100k exactly the same amount that he's paying for it; then he's better off buying the store. His opportunity cost for lost wage and stock investment is 25k/year while his store profit is 40k/year. He will make an extra 15k/year right off the bat with the store PLUS the resale value of his store for $100k.
I also want to buy a Subway franchise but when I take into my initial investment, store's resale value at the 20th year (which is zero btw since the license runs out), store's profit, opportunity cost; I will break even by purchasing the franchise instead of keeping my job and investing in stocks
that's true but I doubt it retains that much value
Also, I don't know how upkeep goes for convenience stores.
If he PUTS in 75k like he claims and his yearly Net Income is 15k... and let's just assume it stay "steady"
So that's 75k/15k, which is 5 years to pay off. I don't agree with that ROI honestly
He can save in Wage expenses by having his wife work there but that's also opportunity cost lost on his wife lol so..
Another thought, what hourly wage are the employee's being paid? If minimum wage increases will he make enough to compensate for that increase? His numbers say no.
A lot of people make the mistake of buying a job rather than a business that yes, may start off as a job but can be built into a business. In other words, if the business can continue running without the owner being there for a long period of time and competent employees run it then you got a business. I know he said that the owner isn't around but he is selling for some reason, maybe because he should be but doesn't want to be around.
I think he said he would have his wife work there part time so that would take away some Wages Exp but that's also opportunity cost lost for his wife.
Also, there WILL LIKELY be opportunity cost lost if he has to do maintenance (which he most likely will) and most stores/buildings go through some Depreciation anyway
Typically such a store will have to be open 24/7 or at least 18/6. At 18/6 that is 108 hours a week. If making $40K a year, that will be about $7.00 per hour. Even if only open 80 hours per week that will be $9.61 per hour. Take some time off and you will have to pay someone to work the store thus the numbers only get worse. Also forget about benefits, retirement savings, etc.
I suggest they invest the $100K and take a job paying at least $10.00 per hour for 40 hours per week. They will be much further ahead.
I didnt end up buying the store, the assets were about 30% of what he said they were.
If I wasn't on my phone I'd go ahead and answer all of the other questions. I'll still answer some just for those curious. It was in a shopping mall, so not 24/7. All employees made less then $8/hour. I was only planning on putting in 15 hours or so a week, the current owner puts in less then that, maybe 5 or so, mostly just ordering and payroll related. I currently own a restaurant that takes the vast majority of my time, and I figured this would be a nice side job to make extra money. My wife and I discussed a lot and we are going to try to expand our restaurant business instead. Maybe add a 2nd location.
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