Business Article - Clothes Shop Business - A Buying Guide
Buying any business is a serious undertaking, and must be entered into with caution and a thorough understanding of the business in question. Yet, buying an established business can provide the buyer with a head start not always available to those starting their own business from scratch. In the case of a clothing business, those advantages include a clientele already committed to buying, an inventory already on display or in stock, a property already outfitted for the purposes of selling clothing, and a familiar location which continues to be accessible to those in the area. In addition, a clothing business has the advantage that every person requires clothing, and can expect to spend a significant part of their income on that clothing. Therefore, a clothing shop has a large market at its disposal to begin with.
For those who are considering buying a clothing shop, those advantages must be weighed against several other important questions that must be explored before a final decision is made. First, one must ask why the current proprietors are selling the shop. Are they simply trying to get out from beneath an unprofitable investment? Have the demographics of the area changed since the shop’s original establishment; i.e., have customers declined or crime risen? A buyer must look carefully at this matter, as it is possible that the seller will not volunteer such information. There are, however, good and acceptable reasons, as far as the buyer is concerned, for a current owner to sell a clothes shop. Perhaps they are retiring, or perhaps they need to liquidate their assets in order to pay medical or tax bills. Neither of those reasons reflects upon the shop itself, and can be considered acceptable reasons to divest oneself of an otherwise profitable shop.
Next, the buyer should look carefully at the area and do his or her own demographical research. What is the projected future for this neighborhood or district? Who can be expected to buy the clothing being sold in this shop in the next year, five years, or decade? If the population seems to be aging, can inventory be acquired which will serve that population? If young families are moving into the area, can that very different inventory be easily acquired? The buyer should consider whether the projected demographics are those which he is capable of serving; for example, if the ethnic makeup of the area is projected to change, will the buyer be able to meet the clothing needs of that new cultural presence? The buyer should also determine whether it has been customary for the shop to sell designer clothing or more economical brands and styles, and whether he, as the new owner, will continue in that tradition. That determination will rest in large part on the disposable income of those in the district surrounding the shop.
After discerning that the location of the shop is acceptable, the buyer should look at the physical plant of the shop itself. A buyer should always have his or her own independent inspection done of the property, including inspections for pests and for structural soundness. A leaking roof or inadequate plumbing are enough to destroy clothing and make it impossible to sell. One should consider whether there is adequate parking and lighting, easy access from the street and sidewalk, and handicapped accessibility. If not, the buyer must factor in the cost of making these improvements.
Next, the buyer should examine the records of the business itself. Does the shop have any outstanding bills that could carry over even if there is a new owner? It is advisable to have an accountant or attorney examine the shop’s financial records. Does it have a record of profitability? If so, have the profits been sufficient to cover expenses such as rental or leasing, insurance and marketing that all businesses incur? If not, the buyer must discern why not. Has advertising and marketing simply been insufficient, which can be easily remedied, or is the merchandise inferior? Suppliers can be changed and merchandise replaced, but the shop’s reputation in the district takes more time to overcome if it is negative. If it is a positive reputation, and the shop is already known for its good customer service and good quality merchandise, the buyer should find that fact an encouraging part of his discernment. It often takes years to build a positive reputation in business, and if the shop’s current owners have already done that work, the buyer should take that into account in his decision.
Once all the particulars of the clothing shop have been investigated, the buyer needs to turn to himself and his own circumstances and resources to discern whether this purchase will be beneficial to him. Is the shop in an area convenient to the buyer? Many people buy businesses in areas other than where they live, but a buyer should consider whether a long commute is worthwhile.
Other considerations, of course, have to do with the buyer’s financial resources and his ability to acquire adequate funding. It is important for the buyer to learn what amount will be expected as a down payment, and then to discern whether he has those resources available. Next, he must consider what type of funding is most appropriate for a clothing shop. A first step in making that choice is to draw up a business plan. This plan will make use of all the research done up to this point: demographics, physical plant, profit margin, potential marketing strategies, and the history of the business. The business plan can then be taken to an individual investor willing to provide a large amount of cash in return for interest or shares of the business, or it can also be taken to a bank, many of which have departments specializing in small business loans. If the clothing shop is much larger or if it is expected to grow rapidly, the buyer should consider investigating the services of a venture capitalist, who can provide funding from established investment funds.
An important part of the business plan is a clear presentation of the management of the new business. It must be decided who will run the shop on a day to day basis, and who will have authority over financial, merchandise, hiring, and marketing decisions. In a very small business, it is often the owner who takes on all of those responsibilities, but in a larger one, or a growing one, a competent staff is essential. Investors or those considering funding a business such as a clothing shop will want to know that their investment is being overseen by competent people.
If all of the above aspects of the buyer’s plan to purchase a clothing shop fall into place—that is, if the demographics are promising, if the building is sound, if the potential for profit is strong, if the funding is available and the managerial staff is ready to work—there is one more important consideration that must be placed alongside the others.
The buyer must ask himself whether he would enjoy being the proprietor of a clothing shop, and whether he would be good at it. Owning a business is not only an investment of capital, it is an investment of a person’s time, which is invaluable and irretrievable. Is he willing to pore through catalogues to find samples that fit the shop’s style and price range? Would he enjoy spending his time dressing and undressing mannequins and posing them in the windows week after week?
Owning a clothing shop is also an investment of talent and creativity. Clothiers must posses an aesthetic sense, as well as a commitment to keeping on top of fashion trends and styles for different age and income groups. Is he willing to read magazines and attend trade shows in order to reinforce his natural skills? Is he willing to deal with jewelry suppliers and shoe salesmen in order to display his merchandise effectively and profitably? Is he willing to share his talents with others, not to hoard them to himself?
Finally, owning a clothing shop requires a respect for and and interest in people that not all business people have. Would he enjoy helping people try on a hundred outfits that they may or may not buy? Does he gain satisfaction from helping people look their best and feel more confident about themselves? Can he cheerfully sustain contact with people for long hours six, perhaps seven days a week? Will he go out of his way to find the clothes his customers feel comfortable wearing?
Owning any business is a significant investment, and the buyer must ask himself if he is willing to put in this kind of work knowing that he risks not turning a profit for a year or more? So he must discern, while he is till making the decision whether to buy a clothing shop, whether he is suited to this business? Is he cut out to be a clothing shop owner?
If the buyer determines that the business is a good investment, that he is able to purchase it, and that he would like to do so, a clothes shop can prove to be an excellent business opportunity.