Starting from scratch isn't the only way to get into business. Learn how to find a business to buy, advantages and disadvantages fo this approach, and where to find help. Even if you don't take this class, at least check the Sunday classified section under "Business Opportunites." Here, you can at least get many names and compare prices and locations.
 

Charlie Rose has been working at the WebChip assembly line for the last 13 years. He is now 56 years old and has been having some back and shoulder problems. Also, he feels he is not getting anywhere in his job. While the pay is competitive at $16 per hour, he realizes he must get a college degree to move up in the company. He has been thinking about starting his own small business, but doesn't know whether to start from scratch or buy an established business.

Charlie recently received a $30,000 lump sum distribution from the estate of his late father. His wife Thelma, 52,  is an accounting clerk who has been employed for 28 years by a local utility company. The couple has a good health plan. Besides Social Security, the Roses can count on receiving about $2,200 in combined retirement from their respective employers; $500 more if Charlie works until age 65. Their IRA investments total $12,000. Thelma loves her job and will work there until age 65, then they'll move to Arizona to live near her sister.

The Roses have $50,000 equity in their home (valued at $150,000) and have $5,000 in credit card bills. They finally paid off Thelma's car last year. The couple also has a $25,000 regular account with KeepEm Mutual Funds. The couple live in suburban Piney Slopes, located forty minutes from Portland. Their two adult children are gainfully employed and have established their own households in southern California.

Business opportunity:                                                                         Back to top

Over the past year, Charlie has been eyeing Sprockets, a "mom-and-pop" video rental store. The nearest competitor,  6 miles way, is the video booth at Handy Andy, an area chain supermarket. Charlie approached the elderly couple who own it and found that they are willing to sell. Both in their mid-70's, the Simpsons have been planning their belated retirement to Arizona. Harry suffered a heart attack last year and can no longer work. Mary runs the business by herself and wants to sell and move as soon as possible. Asking price: $120,000 firm.

To Charlie, Sprockets seems like a good opportunity because it's located just 2 miles from his home. If Charlie could buy it, he would not have to drive the 42-mile round trip daily commute to Silicon City. Also, as he puts it, he could quit the mindless repetitive shuffle and call his own shots.

Sketchy financial statements provided by the Simpsons suggest monthly gross sales of $5,000. The inventory consists of 4,000 videos of popular mainstream American genres. Other business assets include several wire racks, some signage, a 486 computer, a printer, a cordless phone and a mechanical cash register. No expenses nor owners' draw  were mentioned. The Simpsons have been leasing their space for $1,000 per month. The lease is assumable; however, the landlord hinted he would require a new $2,000 deposit and would raise the rent by $100.

Research:

At Thelma's urging, Charlie called GrossVideo, an area video wholesaler. The price for a core inventory of 4,000 used videos is in the neighborhood of $25,000. New videos range in price (per cassette) from $20 (for megahits) to $85 for popular movies. While Charlie has been a Sprockets regular client for the last two years, he has been dropping by more often and has also assessed activity from the parking lot. He confided in Thelma that he has a hard time justifying the $5,000 per month sales figure based on his traffic count (seven one-hour counts in two weeks).

Developments:                                                                                    Back to top

1.  Charlie counteroffered with $90,000, but received no response.

2.  Two weeks after his offer, he dropped by and found a clerk working the store. She seemed to know who Charlie was and made small talk, but offered no explanation beyond the fact that Mary had taken ill. As Charlie watched her work, he noticed that the clerk did not ring up late fees which clients usually paid in cash. Her explanation, "They told me to do it that way."

3.  Charlie left the video store and walked across the parking lot to pick up his laundry. Lee, the owner, had heard about Charlie's plan to buy Sprockets. Lee told Charlie that he believed the Simpsons still owed close to $40,000 on the business. He recalled that shortly after establishing his laundry six years ago, the Simpsons bought the business from a man from Seattle.

4.  The next day, Charlie read in the local paper that several new Piney Slopes building code ordinances were set to go into effect next month. One mandates all doors of commercial establishments be enlarged from the current 36-inch width to a new 42-inch width. Another calls for all businesses to have wheelchair accessible fire exits. In order to enhance Piney Slopes' rural charm, a third ordinance calls for the installation of decorative light poles and flower boxes in front of all businesses.

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