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Opening Record Store

Looking for advice from my fellow audiogoners...I have the potential to move into a store front that is already being operated as a record store (lps only) and become the new shop proprieter/owner. The owner has offered me the space (rediculously cheap rent) in a good area of town. He has had his store for about 5 years now and has a steady customer base. He will be taking all of his inventory and record storage bins that were in the store.He has a web site set up already and signs out front indicating the name of the shop...I plan on rebranding the shop with name change and interior upgrades. It is not a large space maybe 800-1000 square feet. I have a rather large inventory of my own so my up front investment of vinyl would be minimal. The owner wants me to buy him out..basically give cash in return for his customer base and the potential to get my hands on pretty good collections. I am trying to come up with a fair valuation of something like this and I am looking for advice..What do you think something like this is worth? Thank you in advance.
fromunda
mahler123
3,399 posts
 
Totally not my field but I am with the others that are puzzled what you are getting for 10K.  If you were allowed to keep the business name and the web domain, that would possibly justify it, based on the volume of sales, but if not...
   Your friend may be taking advantage of your friendship here in a business transaction.  My advice would be to decline.  If he moves and isn’t able to rent the space (how many people want to take a space that is set up to sell records?) then you can reconsider and approach him about renting and get a much better deal
barts's avatar
barts
728 posts
 
1)  How old are you and your friend? Not specifically, like in decades.

2) Why is your friend leaving California?  Personal reasons? Or just wants to get the hell out.

3) How much time have you spent in the store?  I mean full days at a            time?

4) Sounds like he is selling you his customer list, but he is keeping the          email addresses and opening an online store?

Just some random questions, there is much better advice elsewhere in this thread.  Best of luck if you go for it.

Regards,
barts
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bigwave1
241 posts
 
My answer to your question about the 10K is this. What’s the profitability after the figures are normalized? If the previous owner paid himself fairly as an hourly employee, added back in soft costs that he may have written off as a business expense that was really personal. What’s left over as the real profit? Then what you would be purchasing is the goodwill plus any hard costs, record bins, furniture, wall art, whatever. Theoretically, the good will is given a 3,4,5, X multiple. If the goodwill can’t be paid off(as in a small business loan) within 5 years, you are paying too much. This is a very broad generalization but a means to think about revenue stream. Hope it works and send us your stores website please. 
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bigwave1
241 posts
 
One additional point. The fact that the owner is already soliciting away the value, the good will, I would offer even less of as that is what he is attempting to sell you. Some States permit non compete clauses in the contract, and a contract, you certainly should have. 
Best. 
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tonykay
1,304 posts
 
We lived in the SF Bay Area for more than thirty years, and only recently moved. I have never owned a record store but I have been in enough to know that, unless you just loved the movie "High Fidelity" and envy the lifestyle of its employees, a record store is a money pit. I recall two record stores in the Hayward area that moved three times each before finally quitting the business.

Like many on this forum, I have fantasized about owning a high-end stereo store. But, after talking with former store owners and employees about the business, I realize that it’s long hours, demanding customers and diminishing cash flow. I believe a record store would be similar, just more dimes and slower dollars. I did like the "Analogue Room" in San Jose, which is a great store for audiophile records.


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