Business Article - DVD Shops - A Buying Guide
According to one study, the global decline in theater attendance is not because there are no good movies to see. It is because of general dissatisfaction with the movie going experience: high prices and competition from other entertainment options make going to theaters less appealing for contemporary audiences. Films themselves, however, are as interesting and entertaining to people as they ever were.
Because of this, the entrepreneur seeking to buy a business would do well to look into purchasing a DVD rental shop. People still enjoy movies, and renting DVDs, videos, and video games is something nearly every household does at least occasionally. Even the smallest of towns and neighborhood can boast a DVD and Video store along its main street.
For a buyer interested in investing in a DVD shop, a love of movies is not absolutely required, but does make the work more interesting and enjoyable. Many DVD shop proprietors enjoy being surrounded by film and having access to new releases as well as classics. DVD shops have also benefited from stocking video games for rental.
There are several different ways in which a businessperson might start or acquire a DVD business. The traditional way is to acquire a space and start a brick-and-mortar business, in which DVDs, videos, and video games are rented and sold on the premises. This method offers the choice to buy into a franchise or to start an independent shop. A franchise offers name recognition and marketing support, while an independent shop allows the owner more freedom to set prices and determine stock. A shop of this sort can serve a community, or even be one of several shops serving a district or neighborhood, though not all communities can sustain more than one.
If a buyer chooses to go the traditional route, they must begin with a thorough understanding of the business in question. In that context, 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 DVD and video 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 and renting DVD’s and videos, and a familiar location which continues to be accessible to those in the area. In addition, a DVD business has the advantage that most families can afford occasional rentals, find it an convenient form of entertainment, thereby providing a ready market for the product.
For those who are considering buying a DVD 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. 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.
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 or rent the DVDs, videos, and video games 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 entertainment needs of that new cultural presence, including non-English language films?
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 stock 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? What kind of business reputation does the shop have in the area? If it is a positive reputation, and the shop is already known for its good customer service and good 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 DVD 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.
Conventional wisdom has been predicting for a decade that new technologies will render brick-and-mortar DVD and video stores obsolete. The idea is that DVD’s will be replaced by new technology, such as Blu-ray discs or HD-DVD, and that the rapid advance of digital technology will force proprietors to replace their stock too often to be profitable. There is also the fear that access to movies on the internet will preclude people traveling to video stores to rent or buy DVDs. Those predictions have never borne fruit; even with the gradual replacing of video cassettes with DVDs, brick-and-mortar shops have continued to prosper. A DVD shop buyer would do well to be aware of developing technologies and prepared to support them, perhaps by stocking Blu-ray or HD-DVD discs, but that does not indicate that a shop would not be successful in a specific location.
In addition to a traditional shop, there are also online DVD rental and purchase electronic stores. Many entrepreneurs make good livings buying DVDs, videos, and video games, and selling them on Amazon.com, ebay, or other retail sites. Other companies rent DVDs and ship them to customers, taking payment by credit card. More and more people are doing business through online media, and an astute businessman should not let that market share slip through his fingers. Many are, in fact, offering a combination of traditional and electronic shops for selling and renting films and games.
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 DVD shop is much larger or if it is expected to grow rapidly, as is sometimes the case with online businesses which have the potential to market internationally as easily as locally, the buyer should consider investigating the services of a venture capitalist, who can provide funding from established investment funds.
If all of the above aspects of the buyer’s plan to purchase a DVD 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 movie 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 movies that fit the shop’s location and customer base? Would he enjoy spending his time arranging special displays and watching movies play on the overhead television screens?
Owning a DVD and video store can be an enjoyable and profitable enterprise. The buyer should be encouraged by the fact that people will always want inexpensive entertainment, and will not mind traveling a bit to obtain it.