Advice for purchasing a toy store
December 28, 2021 2:54 AM Subscribe
I'm considering buying a successful brick and mortar toy store near my home and would love advice.
I've been a business owner for 9 years but I work from just a laptop. I'm in travel so my business has declined since COVID and I've been considering getting a job or possibly buying or opening another business. In my best year, I did $1 million in revenue, so I'm comfortable with owning a business, albeit a one-person business.
A popular and well-known toy store near me is up for sale because the owner is retiring. I can't share any details except to say it's been profitable for the 10 years they've owned it, enough to pay an owner's salary that would be sufficient for me. The sale price is lower than expected.
I realize there would be a huge learning curve to learn to run a retail store, and I expect managing employees, dealing with inventory, theft, cash, etc. can be challenging. However, according to the current owner, there's room for improvement and growth in the store operation which they think could increase revenue.
I have lots of questions.
1. What kind of accountant or attorney can I contact to help evaluate this opportunity? Where do I find someone qualified quickly? Are there other kinds of professionals I should be talking to?
2. How early in the process should I talk to a bank to see if would even qualify for a large enough business loan? If I can only qualify for a part of it, is it reasonable to think I could pay off part of the business over a year or two (to the current owners)?
2. What kinds of risks or issues should I be thinking of that I haven't already mentioned?
3. If they've been profitable for 10 years (even though COVID), is it reasonable to expect that this is a somewhat safe investment? I know brick-and-mortar is challenging, but this seems like a pretty safe investment as an owner/operator.
4. If you've owned a retail store, what was your experience? The current owner works just a few hours each day, so it sounds like the existing employees handle a good part of the daily operations.
I've been a business owner for 9 years but I work from just a laptop. I'm in travel so my business has declined since COVID and I've been considering getting a job or possibly buying or opening another business. In my best year, I did $1 million in revenue, so I'm comfortable with owning a business, albeit a one-person business.
A popular and well-known toy store near me is up for sale because the owner is retiring. I can't share any details except to say it's been profitable for the 10 years they've owned it, enough to pay an owner's salary that would be sufficient for me. The sale price is lower than expected.
I realize there would be a huge learning curve to learn to run a retail store, and I expect managing employees, dealing with inventory, theft, cash, etc. can be challenging. However, according to the current owner, there's room for improvement and growth in the store operation which they think could increase revenue.
I have lots of questions.
1. What kind of accountant or attorney can I contact to help evaluate this opportunity? Where do I find someone qualified quickly? Are there other kinds of professionals I should be talking to?
2. How early in the process should I talk to a bank to see if would even qualify for a large enough business loan? If I can only qualify for a part of it, is it reasonable to think I could pay off part of the business over a year or two (to the current owners)?
2. What kinds of risks or issues should I be thinking of that I haven't already mentioned?
3. If they've been profitable for 10 years (even though COVID), is it reasonable to expect that this is a somewhat safe investment? I know brick-and-mortar is challenging, but this seems like a pretty safe investment as an owner/operator.
4. If you've owned a retail store, what was your experience? The current owner works just a few hours each day, so it sounds like the existing employees handle a good part of the daily operations.
I would only consider this if the current owner was going to be working alongside you for a while so you had the opportunity to fully understand what has allowed their store to remain successful and learn from their experience.
Also, consider that the business generates enough cash to pay the owner but may well not generate enough cash to service a loan to purchase the store and also pay you.
posted by wierdo at 3:17 AM on December 28, 2021 [21 favorites]
Also, consider that the business generates enough cash to pay the owner but may well not generate enough cash to service a loan to purchase the store and also pay you.
posted by wierdo at 3:17 AM on December 28, 2021 [21 favorites]
If they've been profitable for 10 years (even though COVID)
What were the choices they made to be profitable these past two years, and would you be comfortable making them too? Also, do you have the figures on exactly how profitable they were during this period specifically?
What would it mean for you if the store failed?
posted by trig at 3:43 AM on December 28, 2021 [2 favorites]
What were the choices they made to be profitable these past two years, and would you be comfortable making them too? Also, do you have the figures on exactly how profitable they were during this period specifically?
What would it mean for you if the store failed?
posted by trig at 3:43 AM on December 28, 2021 [2 favorites]
Also, just to be clear, would you be paying rent or owning the location (with a mortgage)?
posted by trig at 3:45 AM on December 28, 2021
posted by trig at 3:45 AM on December 28, 2021
Physical retail has been on a downwards trajectory for some time, accelerated substantially by the pandemic. You don't only have to consider the future situation for YOUR store, but also whatever else is nearby that forms the context that causes this location to be lucrative currently.
How long is the lease, that you'll have to keep paying even if trade is down?
It's reasonably likely that one, more or all of the current employees will leave when you buy the store. If that happens, do you know how to hire equivalently skilled replacements and do you know how much that will cost you? Do you know how much unpaid overtime the existing employees are doing, or how underpaid they are? Do you know how to manage a new employee in one of these positions, who may not have the skills you expect, or worse, may try to rip you off?
Do you know why this particular store was successful even during the pandemic? Do you understand how many of those factors relate to the existing owner and his skills, or his relationships with (staff, suppliers, customers, leaseholder), versus factors that you could quickly reproduce in his absence?
Do you know what salary the owner was paying himself?
Can you work in the store as an employee for a while to get a feel for how it works, before you make any decisions?
posted by quacks like a duck at 4:38 AM on December 28, 2021 [4 favorites]
How long is the lease, that you'll have to keep paying even if trade is down?
It's reasonably likely that one, more or all of the current employees will leave when you buy the store. If that happens, do you know how to hire equivalently skilled replacements and do you know how much that will cost you? Do you know how much unpaid overtime the existing employees are doing, or how underpaid they are? Do you know how to manage a new employee in one of these positions, who may not have the skills you expect, or worse, may try to rip you off?
Do you know why this particular store was successful even during the pandemic? Do you understand how many of those factors relate to the existing owner and his skills, or his relationships with (staff, suppliers, customers, leaseholder), versus factors that you could quickly reproduce in his absence?
Do you know what salary the owner was paying himself?
Can you work in the store as an employee for a while to get a feel for how it works, before you make any decisions?
posted by quacks like a duck at 4:38 AM on December 28, 2021 [4 favorites]
I think it's important to understand the location and the clientele to purchase from the store, and whether you can expect that clientele to keep buying from the store.
If the store is in a strip mall along a highway, I would be skeptical. On the other hand, if it is in a walkable downtown area in a community that has a large population of families with school age children and disposable income, then I'd be more confident about the store. Bonus points if the store is within walking distance of a school.
Also important: do you like toys? Do you like kids? Would you enjoy helping people pick out toys for their children, and for other people's children? Would you be excited to go to the Toy Expo every year to see the now toy pipeline and purchase stock for the store?
As others have said, make sure you understand the basic numbers: paying for any loans, keeping the store stocked, etc.
Good luck!
posted by Winnie the Proust at 4:56 AM on December 28, 2021 [2 favorites]
If the store is in a strip mall along a highway, I would be skeptical. On the other hand, if it is in a walkable downtown area in a community that has a large population of families with school age children and disposable income, then I'd be more confident about the store. Bonus points if the store is within walking distance of a school.
Also important: do you like toys? Do you like kids? Would you enjoy helping people pick out toys for their children, and for other people's children? Would you be excited to go to the Toy Expo every year to see the now toy pipeline and purchase stock for the store?
As others have said, make sure you understand the basic numbers: paying for any loans, keeping the store stocked, etc.
Good luck!
posted by Winnie the Proust at 4:56 AM on December 28, 2021 [2 favorites]
There is an independent toy store in my city of 130,000 people, so it's probably not impossible.
One of the key factors in the success of any brick and mortar business is what you pay in fixed costs, i.e. rent and taxes and insurance. The store here is on a very busy road but is in what is basically the basement though on the same level as a parking lot behind the building. Rent must be much less than if they were in a more visible location or, heaven knows, in a mall. You want to be sure the real reason the guy is retiring is not that he is at the end of a sweetheart lease, and the landlord is likely to put him out of business when the lease runs out.
posted by SemiSalt at 5:03 AM on December 28, 2021 [4 favorites]
One of the key factors in the success of any brick and mortar business is what you pay in fixed costs, i.e. rent and taxes and insurance. The store here is on a very busy road but is in what is basically the basement though on the same level as a parking lot behind the building. Rent must be much less than if they were in a more visible location or, heaven knows, in a mall. You want to be sure the real reason the guy is retiring is not that he is at the end of a sweetheart lease, and the landlord is likely to put him out of business when the lease runs out.
posted by SemiSalt at 5:03 AM on December 28, 2021 [4 favorites]
Seconding SemiSalt. Why is the owner retiring right now and why is the price unexpectedly low?
Was the owner paying themselves a salary at all?
posted by M. at 5:17 AM on December 28, 2021 [2 favorites]
Was the owner paying themselves a salary at all?
posted by M. at 5:17 AM on December 28, 2021 [2 favorites]
The current owner works just a few hours each day
I find that surprising. My wife and I co-owned a smallish retail outlet for about two years. In my experience, the whole place goes to pot the second you set foot out the door. Also, whether you're onsite or at home, there's a never-ending stream of busy work that needs to get done. In theory, some of this work could be delegated to a manager, but in practice it's hard to find someone who has the skills and reliability to do it properly. And supervising employees was always a challenge, to say the least. Frankly, owning the business was a huge pain in the butt, and I was partly relieved when COVID forced us to close down.
posted by JD Sockinger at 6:58 AM on December 28, 2021 [5 favorites]
I find that surprising. My wife and I co-owned a smallish retail outlet for about two years. In my experience, the whole place goes to pot the second you set foot out the door. Also, whether you're onsite or at home, there's a never-ending stream of busy work that needs to get done. In theory, some of this work could be delegated to a manager, but in practice it's hard to find someone who has the skills and reliability to do it properly. And supervising employees was always a challenge, to say the least. Frankly, owning the business was a huge pain in the butt, and I was partly relieved when COVID forced us to close down.
posted by JD Sockinger at 6:58 AM on December 28, 2021 [5 favorites]
The real estate is hugely important, as others have suggested. Other than inventory and goodwill, real estate is basically the only real asset you are buying - so what's the story with the real estate?
You should try to find a lawyer who has helped others buy small businesses. Sometimes a business sale includes an "earn out," which means that part of the sale price is paid out over time after the sale, depending on how the business does. I.e., buyer pays $x per month, but only if sales are above $y.
posted by Mid at 7:05 AM on December 28, 2021
You should try to find a lawyer who has helped others buy small businesses. Sometimes a business sale includes an "earn out," which means that part of the sale price is paid out over time after the sale, depending on how the business does. I.e., buyer pays $x per month, but only if sales are above $y.
posted by Mid at 7:05 AM on December 28, 2021
Why would you want to compete against Target, Walmart, Amazon etc where Toys R Us have failed?
Toys r Us was the victim of a leveraged buyout (investment bankers buy the business, then saddle it with the purchase debt and huge consulting fees). It was making money, just not enough to pay all the grifters involved.
The Toy Store in question here probably received forgivable PPP loans to keep it in business through Covid, which is not a bad thing, just means it's not bullet proof.
If the owner is not actually working seven days a week, ten hours a day, then the manager is doing all the work. What happens if the manager leaves?
Assuming all that is covered, at the very least, you should to insert yourself into the bookkeeping process once in a while so you don't discover one day that you're missing thousands or tens of thousands of dollars through theft or incompetence (this happens _all the time_).
posted by jabah at 7:09 AM on December 28, 2021 [8 favorites]
Toys r Us was the victim of a leveraged buyout (investment bankers buy the business, then saddle it with the purchase debt and huge consulting fees). It was making money, just not enough to pay all the grifters involved.
The Toy Store in question here probably received forgivable PPP loans to keep it in business through Covid, which is not a bad thing, just means it's not bullet proof.
If the owner is not actually working seven days a week, ten hours a day, then the manager is doing all the work. What happens if the manager leaves?
Assuming all that is covered, at the very least, you should to insert yourself into the bookkeeping process once in a while so you don't discover one day that you're missing thousands or tens of thousands of dollars through theft or incompetence (this happens _all the time_).
posted by jabah at 7:09 AM on December 28, 2021 [8 favorites]
All your due diligence questions are good and should be pursued. As are the questions raised by others above about the state of physical retail in general and competition from various other players in the toy space, online and physical retail.
But you are ignoring the #1 thing you should be doing, which is market research including especially the customer base. You can get at that by looking at the demographics of the area in terms of age, income, numbers of children, etc. But you won't REALLY get at it without talking to customers and potential customers. You would not open a brand new store, of any kind, without doing that. So you should not buy an existing store, regardless of its track record, without doing that.
Talk to your friends and family who buy toys for kids. Do they know the store, and do they shop there? Talk to kids, who are your real customers. Talk to random people on the street where the shop is, or in coffee shops nearby, or at playgrounds or other places where they might take their kids. Just introduce yourself honestly, say that you are considering starting a toy store (so as not to break any confidence about the store being for sale), ask about their toy buying habits and preferences, how they decide whether to buy in a store versus online, how often they buy toys, etc. Talk to at least 50 people that way, 100 is better. That's going to tell you a lot more than the bankers, lawyers, accountants, etc. whom your should of course also talk to. AFTER talking to the customers and potential customers and their kids.
posted by beagle at 7:40 AM on December 28, 2021 [3 favorites]
But you are ignoring the #1 thing you should be doing, which is market research including especially the customer base. You can get at that by looking at the demographics of the area in terms of age, income, numbers of children, etc. But you won't REALLY get at it without talking to customers and potential customers. You would not open a brand new store, of any kind, without doing that. So you should not buy an existing store, regardless of its track record, without doing that.
Talk to your friends and family who buy toys for kids. Do they know the store, and do they shop there? Talk to kids, who are your real customers. Talk to random people on the street where the shop is, or in coffee shops nearby, or at playgrounds or other places where they might take their kids. Just introduce yourself honestly, say that you are considering starting a toy store (so as not to break any confidence about the store being for sale), ask about their toy buying habits and preferences, how they decide whether to buy in a store versus online, how often they buy toys, etc. Talk to at least 50 people that way, 100 is better. That's going to tell you a lot more than the bankers, lawyers, accountants, etc. whom your should of course also talk to. AFTER talking to the customers and potential customers and their kids.
posted by beagle at 7:40 AM on December 28, 2021 [3 favorites]
How long is the lease, that you'll have to keep paying even if trade is down?
Not just that, but how many years until the landlord could dramatically raise the rent? I've known so many businesses that were viable up until a spike in rent drove them under (or the place was sold to build a fancier and larger building).
posted by Candleman at 8:02 AM on December 28, 2021 [10 favorites]
Not just that, but how many years until the landlord could dramatically raise the rent? I've known so many businesses that were viable up until a spike in rent drove them under (or the place was sold to build a fancier and larger building).
posted by Candleman at 8:02 AM on December 28, 2021 [10 favorites]
I would also delve into the staffing. If the owner's statements about their time are correct, that likely means he has someone who is actually running the day-to-day operations. Quite often the attraction of that job is that they may be getting to do it the way they want to, without a lot of supervision. So if you buy the business and change it in any way, you may lose that person.
(I'm also a bit skeptical of the description. And you definitely do need to talk to accountants, and do market research. I'd sit outside of the store some days as well, keep an eye on foot traffic.)
posted by warriorqueen at 8:10 AM on December 28, 2021 [3 favorites]
(I'm also a bit skeptical of the description. And you definitely do need to talk to accountants, and do market research. I'd sit outside of the store some days as well, keep an eye on foot traffic.)
posted by warriorqueen at 8:10 AM on December 28, 2021 [3 favorites]
The current owner works just a few hours each day, so it sounds like the existing employees handle a good part of the daily operations.
Among many, this, is a huge red flag...especially if you are going to rely on that labor to help you competently take over to any degree.
I've worked at couple businesses with an ownership change and that very attitude has lead to basically everyone bailing 3-6 months after the switch. I've seen some extreme bitterness creep up in situations like this because the staff isn't getting paid any more money, and they're expected to basically keep the place up. While the owner currently only works a few hours a day, they've done it for a long time and can step in to assist with any number of tasks without much difficulty (I hope?). This gives a release valve on the staff. An ownership change with an owner who doesn't really know whats going on day to day just breeds disaster. That's not to say it can't go well, but you shouldn't be relying on them necessarily to show you the ropes and train you up. They're gonna hate you for that, and having your entire staff turn over in the first couple months of a switch can nuke the whole dynamic the previous owner built. It's easier than ever for employees to leave for better gigs; anyone on the fence will honestly probably take this as a reason to bug out.
posted by furnace.heart at 8:12 AM on December 28, 2021 [11 favorites]
Among many, this, is a huge red flag...especially if you are going to rely on that labor to help you competently take over to any degree.
I've worked at couple businesses with an ownership change and that very attitude has lead to basically everyone bailing 3-6 months after the switch. I've seen some extreme bitterness creep up in situations like this because the staff isn't getting paid any more money, and they're expected to basically keep the place up. While the owner currently only works a few hours a day, they've done it for a long time and can step in to assist with any number of tasks without much difficulty (I hope?). This gives a release valve on the staff. An ownership change with an owner who doesn't really know whats going on day to day just breeds disaster. That's not to say it can't go well, but you shouldn't be relying on them necessarily to show you the ropes and train you up. They're gonna hate you for that, and having your entire staff turn over in the first couple months of a switch can nuke the whole dynamic the previous owner built. It's easier than ever for employees to leave for better gigs; anyone on the fence will honestly probably take this as a reason to bug out.
posted by furnace.heart at 8:12 AM on December 28, 2021 [11 favorites]
1. If you don't already have a trusted accountant, attorney, and banker from your time running your own business, I'm a little concerned. Best way to find them is personal recommendations from trusted business owner friends. If you don't have that network, I'm a little more concerned. It's also a good idea to talk to...
- your local office of the Small Business Administration (SBA), a federal program with free resources for business owners,
- your county/city economic development agency,
- and, if available, a local CDFI (special type of federally certified credit union with a community development focus - see full list of CDFIs here) with a business development program.
Each of those has should be relatively impartial and able to provide recommendations for professional services, access to resources, and assistance with your decision-making process in general.
2. Talking to the SBA before talking to the bank is a good idea -- they can help you plan the financials that you will propose to the bank, and in some cases they can give you access to lower-cost or guaranteed loans. If you have a CDFI with a business development program in your area, they can sometimes help you develop a financial plan and then fund your loan.
The arrangement you raised -- where the current owners hold a note and you repay them, along with the bank, as part of your financing -- is one that needs to be carefully evaluated based on realistic projections. It would be unusual for a note like this to be paid off within a couple of years. Until you're looking at a 3-5 year pro forma (your financial projection spreadsheets), you will have no way of telling whether this kind of financing is a feasible option for you. As wierdo mentioned upthread, the business may not generate enough free cash flow to both pay you and service one or more loans. The SBA can help you build and analyze these projections.
2. What kinds of risks or issues should I be thinking of that I haven't already mentioned? A few major concerns I have based on your question.
- Brick & mortar retail is in freefall. Toys can be purchased online, ergo your major competitor is going to be Amazon, the fourth biggest company in the world, with all the cash they need to crush you. Sure, maybe the store you're looking at is eking out a profit -- but what is the profit trend year over year? Is it by any chance in decline?
- Managing employees is a WHOLE DIFFERENT BALLGAME than running a business on your own. If you do not have managerial experience or skills, I would seriously consider whether you need to find a business partner with that experience in order to make this work at all. Do not underestimate the challenge of this particular part of the business, and DO NOT expect that you will be able to manage any staff in a hands-off, "few hours per day" way. The fact that you stated that as an expectation seriously concerns me.
- What's up with the real estate? Will you be renting? If so, that would completely rule out this purchase for me personally. If purchasing a property is part of the proposed deal, then definitely talk to the SBA about a 7(a) loan.
- I guarantee that the owner's personal relationships -- with distributors, employees, customers -- are part of what keeps that business running. Those relationships don't always transfer. If you don't have deep connections in your community (see answer #1) I'd be seriously thinking about what you bring to the table that could add to the business.
3. If they've been profitable for 10 years (even though COVID), is it reasonable to expect that this is a somewhat safe investment? No, that is not a reasonable expectation, for all the reasons above. I have seen plenty of folks -- people with experience and cash reserves -- burn a business to the ground in a year or two. Do your due diligence, take into account your own strengths and weaknesses, and understand the financials forwards and backwards before making a decision. Even then, this will be a risk, not a guaranteed investment.
4. If you've owned a retail store, what was your experience? The current owner works just a few hours each day, so it sounds like the existing employees handle a good part of the daily operations.
Ahahahahahahahahaha *cries tears of blood*
Do not walk into a small retail business expecting that you can work a few hours a week and have everything turn out alright. Expect that you will be working a ridiculous number of hours at completely unpredictable times. Make sure you have a really great support network, because you will need it. Think about your exit strategy, because you will need that too.
What you're considering is a serious commitment with, realistically, slim chances of success. I'm not trying to be a jerk -- I would just suggest that you make the decision with your eyes open. The resources I suggested can help you make a realistic evaluation.
posted by ourobouros at 8:18 AM on December 28, 2021 [12 favorites]
- your local office of the Small Business Administration (SBA), a federal program with free resources for business owners,
- your county/city economic development agency,
- and, if available, a local CDFI (special type of federally certified credit union with a community development focus - see full list of CDFIs here) with a business development program.
Each of those has should be relatively impartial and able to provide recommendations for professional services, access to resources, and assistance with your decision-making process in general.
2. Talking to the SBA before talking to the bank is a good idea -- they can help you plan the financials that you will propose to the bank, and in some cases they can give you access to lower-cost or guaranteed loans. If you have a CDFI with a business development program in your area, they can sometimes help you develop a financial plan and then fund your loan.
The arrangement you raised -- where the current owners hold a note and you repay them, along with the bank, as part of your financing -- is one that needs to be carefully evaluated based on realistic projections. It would be unusual for a note like this to be paid off within a couple of years. Until you're looking at a 3-5 year pro forma (your financial projection spreadsheets), you will have no way of telling whether this kind of financing is a feasible option for you. As wierdo mentioned upthread, the business may not generate enough free cash flow to both pay you and service one or more loans. The SBA can help you build and analyze these projections.
2. What kinds of risks or issues should I be thinking of that I haven't already mentioned? A few major concerns I have based on your question.
- Brick & mortar retail is in freefall. Toys can be purchased online, ergo your major competitor is going to be Amazon, the fourth biggest company in the world, with all the cash they need to crush you. Sure, maybe the store you're looking at is eking out a profit -- but what is the profit trend year over year? Is it by any chance in decline?
- Managing employees is a WHOLE DIFFERENT BALLGAME than running a business on your own. If you do not have managerial experience or skills, I would seriously consider whether you need to find a business partner with that experience in order to make this work at all. Do not underestimate the challenge of this particular part of the business, and DO NOT expect that you will be able to manage any staff in a hands-off, "few hours per day" way. The fact that you stated that as an expectation seriously concerns me.
- What's up with the real estate? Will you be renting? If so, that would completely rule out this purchase for me personally. If purchasing a property is part of the proposed deal, then definitely talk to the SBA about a 7(a) loan.
- I guarantee that the owner's personal relationships -- with distributors, employees, customers -- are part of what keeps that business running. Those relationships don't always transfer. If you don't have deep connections in your community (see answer #1) I'd be seriously thinking about what you bring to the table that could add to the business.
3. If they've been profitable for 10 years (even though COVID), is it reasonable to expect that this is a somewhat safe investment? No, that is not a reasonable expectation, for all the reasons above. I have seen plenty of folks -- people with experience and cash reserves -- burn a business to the ground in a year or two. Do your due diligence, take into account your own strengths and weaknesses, and understand the financials forwards and backwards before making a decision. Even then, this will be a risk, not a guaranteed investment.
4. If you've owned a retail store, what was your experience? The current owner works just a few hours each day, so it sounds like the existing employees handle a good part of the daily operations.
Ahahahahahahahahaha *cries tears of blood*
Do not walk into a small retail business expecting that you can work a few hours a week and have everything turn out alright. Expect that you will be working a ridiculous number of hours at completely unpredictable times. Make sure you have a really great support network, because you will need it. Think about your exit strategy, because you will need that too.
What you're considering is a serious commitment with, realistically, slim chances of success. I'm not trying to be a jerk -- I would just suggest that you make the decision with your eyes open. The resources I suggested can help you make a realistic evaluation.
posted by ourobouros at 8:18 AM on December 28, 2021 [12 favorites]
I don't get why everyone thinks retail is in freefall. Depending on the city, retail is doing gangbusters this year, and retail square footage in the US is not decreasing in general. Everyone keeps bringing up competition with Amazon and anecdotal examples like Toys R US but the details of those are completely incorrect and are not generalizable to every retail experience.
Independent toy stores can exist (even extremely niche ones, ie: my city has two stores that just sell Legos (even though both nearby malls have Lego stores).
Also independent stores regularly sell for low prices for many different reasons - an important one is that evaluating the sale price of a unique thing is actually pretty hard and most small business owners are not relentless business sharks. Some grad school friends of mine bought a successful auto repair place for less than $40k.
Some have raised good points, but I'd add another: is this something you want to do for the next 50 years, or would 5 to 10 be ok? Are you ok with this consuming your life? If it did go bankrupt would you be ok with that?
posted by The_Vegetables at 8:55 AM on December 28, 2021 [2 favorites]
Independent toy stores can exist (even extremely niche ones, ie: my city has two stores that just sell Legos (even though both nearby malls have Lego stores).
Also independent stores regularly sell for low prices for many different reasons - an important one is that evaluating the sale price of a unique thing is actually pretty hard and most small business owners are not relentless business sharks. Some grad school friends of mine bought a successful auto repair place for less than $40k.
Some have raised good points, but I'd add another: is this something you want to do for the next 50 years, or would 5 to 10 be ok? Are you ok with this consuming your life? If it did go bankrupt would you be ok with that?
posted by The_Vegetables at 8:55 AM on December 28, 2021 [2 favorites]
I'm guessing that you mean more, mm, traditional toys than something like collectables and trading cards. Because a gaming/trading cards store is a vastly different beast, and if it's a CCG driven business, that's a whole new layer of complexity to consider.
posted by Jacen at 10:31 AM on December 28, 2021
posted by Jacen at 10:31 AM on December 28, 2021
Toys can be purchased online, ergo your major competitor is going to be Amazon, the fourth biggest company in the world, with all the cash they need to crush you.
I will echo what The_Vegetables says, and the sort of Amazon doomsaying I’ve quoted fundamentally misunderstands Amazon’s business and how they have changed the retail landscape. Amazon is a marketplace (and cloud hosting company) first. I don’t know the toy market, but it may even be a channel you want to sell through.
As someone who currently owns a retail store, I can see how a long-term owner may be at the point where they are hands-off to the point where they are only spending a few hours a day on the business. But if the staff is small enough that one absence or departure suddenly pulls you back in full-time or more, you have to be prepared for that. Are you ready for your only vacations to be trips to buyers markets?
The best business advice my dad ever gave me about being a business owner was to not have employees. I didn’t take the advice, but I agree with it wholeheartedly. I think that it’s the hardest part of being a business owner.
posted by jimw at 10:32 AM on December 28, 2021 [1 favorite]
I will echo what The_Vegetables says, and the sort of Amazon doomsaying I’ve quoted fundamentally misunderstands Amazon’s business and how they have changed the retail landscape. Amazon is a marketplace (and cloud hosting company) first. I don’t know the toy market, but it may even be a channel you want to sell through.
As someone who currently owns a retail store, I can see how a long-term owner may be at the point where they are hands-off to the point where they are only spending a few hours a day on the business. But if the staff is small enough that one absence or departure suddenly pulls you back in full-time or more, you have to be prepared for that. Are you ready for your only vacations to be trips to buyers markets?
The best business advice my dad ever gave me about being a business owner was to not have employees. I didn’t take the advice, but I agree with it wholeheartedly. I think that it’s the hardest part of being a business owner.
posted by jimw at 10:32 AM on December 28, 2021 [1 favorite]
I'm not so convinced by toy stores dying as a result of Amazon and online sources. They are, in all shopping trips, then one place you can promise to go when you're done and have the kids look forward to. And they're the one place where you can find out what your kids are genuinely interested in for birthdays or Christmas. For a guy in particular, the toy shop is the combination of a return to childhood, a treat you can give your kids, and a blessed relief from all the other places you had to go that day to get stuff.
Lots of toy stores have gone down around here, but they have their reasons. They filled their shelves with plastic junk or film merchandise # they didn't understand their products, and they didn't attempt to stock things that were beyond the usual department store high volume toys. Those stores who know details about what's on the shelf, how to get spare parts, and have the latest difficult to find Lego sets on the shelf have got a decent chance.
posted by tillsbury at 11:40 AM on December 28, 2021 [1 favorite]
Lots of toy stores have gone down around here, but they have their reasons. They filled their shelves with plastic junk or film merchandise # they didn't understand their products, and they didn't attempt to stock things that were beyond the usual department store high volume toys. Those stores who know details about what's on the shelf, how to get spare parts, and have the latest difficult to find Lego sets on the shelf have got a decent chance.
posted by tillsbury at 11:40 AM on December 28, 2021 [1 favorite]
My two cents on the viability of brick and mortar toy shops… We have an independent toy shop in my neighborhood that has been around close to a decade. I know nothing of it’s ownership or financials but here’s the reason why I think it’s still around:
1. It stocks educational and non-local (I.e. European since this is the U.S.) and higher quality toys than the a Toys R Us does/did. I’m sure some of these toys are available online/Amazon, etc. but would take some searching.
2. It is organized in fun displays by age. This is helpful for us childless folks to pick out presents for our friends’ kids. They get new and interesting toys and books seasonally.
3. The staff are super helpful and free gift wrapping is included.
4. The window displays are fun and change often. We always stop to look even though we don’t have kids. It’s also located in a high foot traffic area in front of a summer farmer’s market.
All this to say I think not all brick and mortar toy shops are folding to Amazon, but high end more specialty/gift shops (quality, not quantity) have a chance if they curate a great experience and offer specialty products. If I was a parent I probably couldn’t afford to buy most toys there, but as a present-buyer I am willing to pay more for the convenience this store offers me.
posted by Bunglegirl at 1:48 PM on December 28, 2021
1. It stocks educational and non-local (I.e. European since this is the U.S.) and higher quality toys than the a Toys R Us does/did. I’m sure some of these toys are available online/Amazon, etc. but would take some searching.
2. It is organized in fun displays by age. This is helpful for us childless folks to pick out presents for our friends’ kids. They get new and interesting toys and books seasonally.
3. The staff are super helpful and free gift wrapping is included.
4. The window displays are fun and change often. We always stop to look even though we don’t have kids. It’s also located in a high foot traffic area in front of a summer farmer’s market.
All this to say I think not all brick and mortar toy shops are folding to Amazon, but high end more specialty/gift shops (quality, not quantity) have a chance if they curate a great experience and offer specialty products. If I was a parent I probably couldn’t afford to buy most toys there, but as a present-buyer I am willing to pay more for the convenience this store offers me.
posted by Bunglegirl at 1:48 PM on December 28, 2021
One risk is if the birth rate in your area is falling consistently year over year. Depending on your time horizon you might be able to ride out some baby busts, but one thing I'd be looking at is the general birth rate of your neighboring communities. Looking at the population rates of those 65+ might also be illuminating.
posted by cocoagirl at 3:17 PM on December 28, 2021
posted by cocoagirl at 3:17 PM on December 28, 2021
Quite a few years ago, I bought an existing bookstore. Many of the same concerns were raised. Look closely at sales history. On the advice of a Small Bus. Admin. volunteer advisor, I did a Pro-Forma Profit & Loss statement, back when it was on paper, because Lotus 1-2-3 didn't exist. This was incredibly helpful. I researched potential costs, so there weren't too many surprises. There's room in most decent-sized towns for a toy store where people can buy nice toys and probably some kids' books and get good service. Offer shipping at cost. Have game nights and kid-friendly events.
Do the research and let the numbers make the decision. An existing business has accounts with major vendors; I didn't inform them of the change immediately and because I'd shown expertise and good payment, the accounts stayed open, huge help.
I got financing from a family member and the previous owner, who was highly motivated. They used a business broker; he was barely competent. Brokers approached me about selling and they were some of the least capable business people I've ever encountered. I worked 6 - 80 hours weeks, learned a ton, enjoyed most of it. MeMail me with questions.
posted by theora55 at 12:49 PM on January 15, 2022 [1 favorite]
Do the research and let the numbers make the decision. An existing business has accounts with major vendors; I didn't inform them of the change immediately and because I'd shown expertise and good payment, the accounts stayed open, huge help.
I got financing from a family member and the previous owner, who was highly motivated. They used a business broker; he was barely competent. Brokers approached me about selling and they were some of the least capable business people I've ever encountered. I worked 6 - 80 hours weeks, learned a ton, enjoyed most of it. MeMail me with questions.
posted by theora55 at 12:49 PM on January 15, 2022 [1 favorite]
This thread is closed to new comments.
- Educational toys
- Comic book / video game toys
- expensive “hand made” hipster toys
- used toy shop
- and your regular independent toy store
Each had a niche, and each failed.
Based on that, I can’t imagine a toy store would have great chances of success.
posted by Geckwoistmeinauto at 3:09 AM on December 28, 2021 [2 favorites]