How much does it cost?
Buying a business is like buying a house. Once you have chosen the property you wish to purchase and are happy with the price and payment agreement you can then go to the agent in question and sign on the dotted line. But what about all the extra costs involved?
If you are buying a business then it is essential you consider the hidden expenditures that lie under the floorboards of every retail outlet.
This will cover the price of the business as well as the initial startup costs involved. Startup costs will also vary. In some cases the equipment, stock and staff may already be in place and some cases they may not, so make sure you know what you’re getting for your money.
Costs could include the following:
- any renovations or improvement work to the property/premises
- any additional equipment not supplied within the purchase of the premises. This can include a cash register, a computer to collect and collate orders and business stationery, for example
- initial stock to cover the opening
- transport: A delivery vehicle or your own car or van plus the price of petrol
As an off-licence is a volume based business it is important that you have the right amount of stock due to high demand on certain products. There may already be a certain amount of existing stock within the business, but it is crucial to know what stock you have, as the first few weeks of trading will be a vital sign of things to come.
The cost of the products you will sell will be a certain proportion of the sales price. In the independent off-licence trade, the cost of goods to be sold can often be as high as 80% of sales. If you then apply this percentage to the monthly income figure you have estimated you will have a rough guide as to what your monthly stock cost will be.
In addition, if the business doesn’t quite get off to the best of starts, it is important that you have enough working capital to cover any eventualities. Rhodes says: “If you have a business costing between £50,000 and £70,000 you should have between £20,000 and £30,000 to tide you over.”
This estimated figure of between £20,000 and £30,000 will cover:
- your initial stock purchase
- wages (if you have staff) as well as your own living expenses or ‘drawings’
- repayment rates if you have a loan or have borrowed a sum of money
- utilities such as electricity, gas, water, telephone bills (fixed and/or mobile)
This will and may include the following:
- a licence fee. Every off-licence must have a licence. This costs, as does the attendent local authority training
- equipment contracts for photocopiers or computer(s)
- cleaners (some retail outlets have their windows cleaned on a regular basis, for example)
- repairs and maintenance