Buying an Existing Frame Shop

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Scott M.

Grumbler in Training
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Feb 1, 2003
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Loc
San Clemente, CA
I have an opportunity to buy an existing frame shop. It's been a frame shop for as long as I can remember (At least 12 to 15 years) and has been under two ownerships during that time. I am seeking advise from anyone who has bought an existing business before. What should I be wary of , pros & cons, etc. Any advise would be greatly appreciated.
Thank You.

Scott Mantecon
 
Scott,

Welcome to The Grumble! You can check the search button to see if there is anything on this topic (which I'm fairly confident there is), but I would also check out www.pictureframer.com. Scott, the guy that runs the website has some differing opinions on this subject. He also produces a newsletter that is free and provides some great advice.

Good Luck

Tom
 
I will give my opinion based on experience. Make sure you do your homework about the business. Just because it has been there for 15 years doesn't mean it is thriving. When I bought my shop it had been here for 9 years. I still on a weekly basis have somebody tell me they have lived in the neighborhood forever and didn't realize there was a frameshop here. This shop had two previous owners too, but neither one of them did anything to promote it. In fact the person I bought it from didn't need the income. I've recently discovered she closed the shop a lot. It is amazing what you can find out from other shop owners in surrounding businesses.

I have had plenty of obstacles here overcoming my own ignorance on running a business. But, my biggest obstacle definitely is overcoming the way she did business before me. No marketing, uninspiring work, very old dated merchandise, unreliable hours and a general lack of knowledge about the business, these are all hard to overcome. Plus, she had no database of customers. I am having to rely on them coming in on their own. The stunning thing to me is how did this shop survive for 9 years without being properly run. All I know is both owners didn't rely on income from this shop. It didn't matter if it was successful or not. In fact my previous owner's daughter-in-law told me she thought they were using it as a tax write off. Seems like a lot of hard work for a tax write off to me. This is supposed to be my source of income so I can't let it languish like they did. But boy do I wish I knew that when I bought it.

I didn't know the questions to ask, I just threw myself in here and asked questions later. If I had it to do all over again I would definitely start from scratch. That is pretty much where I am now, starting from scratch. Only I'm in a location I wouldn't have picked and don't really have the equipment I want. I will say though I never would have done this through normal channels, fear would have prevented me. The way I look at it the Universe threw me a frameshop and I took it and am trying to make the best of it. I just know now how much easier it would have been to create my own little "Empire" instead of trying to recreate somebody elses.

I'm sure others will have more positive stories and ideas. I basically am giving you a "what not to do" scenario. Good luck!

[ 02-11-2003, 01:08 PM: Message edited by: emibub ]
 
We are in the process of selling one of our shops now. You have to look at the books. I would check monthly expenses and make sure the business takes in enough to cover those expenses, give you a salary, and pay off a note. Check with the landlord and see if you can take over the lease, or if a new one has to be written. Any increase has to be figured into the monthly expenses. Ask for a copy of the lease and have a lawyer check it out. Check out the equipment and make sure it is fairly new and in good working order. Since you will be buying the inventory, make sure it is new inventory and they are not selling you stuff they can't move.
 
Can't help occasionally flashing back to a previous life and pondering the worst case scenario, so I would investigate. Ask the neighboring business people about the business, check the local court records if they have had any lawsuits, D&B/credit report or the like and the local police/fire. Chances are all will be okay but if there are any negatives in those areas better to know ahead of time.
 
Listen to the advice so far! I have had my shop open about four months. Started from scratch. But, before I did, one of the options I investigated was buying a shop that was in operation. All the data I was looking at looked reasonable. The business broker I was dealing with painted a rosy picture. The place looked great and all the equipment looked reasonable. The place had been in business for some time and had relocated a short time ago. I started wandering the streets near the shop and asking the local merchants questions. Mostly non-commital or semi-positive statements. Then, I bumped into one shop that started complaining about the neighborhood, the reduced traffic recently, and finally said he thought his bookkeeper was the frame shop's bookkeeper. And, oh by the way, she's in the back. I wander back and start talking to the bookkeeper. She tells me that since they moved they have had nothing but complaints from old customers, although the gross revenue is only dropping slightly, the margins have been going down because the old customers are demanding discounts to make up for the increased hassle ... She went on and on. I am not saying you can't find a good buy and have a positive experience buying an existing business. Just keep digging. If you haven't heard any negatives then something is still hidden. Once you find the negative decide if you know how to overcome it.

The bank closed that shop up about 4 months later!

Good Luck,
Cliff
 
Scott,

I've done it both ways. A number of years ago (too many
) I bought an established shop from a fellow who had been in the business many years. He continued working at the shop during a transition phase of many months. This helped ease the minds of the existing customers and taught me the ropes along with many of those unknowable things that come along in this business. That worked out well for me. Like some of the others have expressed, you need to be careful about what you're buying. Will the current owner continue for awhile? Do you want him to?

Several years ago, I started a new business, from scratch. I wanted to have the oportunity of purchasing my own equipment, choosing a location, setting up the shop, and establishing a customer base. I have had a lot of fun doing this, but you should know that it is very expensive and time consuming. You have to have the finances to cover the expenses of the shop until it reaches a break even point. You then have to continue to carry your own personal expenses until the shop can provide you an income. This will be different for anyone starting a business.

I'm glad I started mine and wish you lots of luck in your endevour.
 
1) Listen to all these people
2) Get a $200K credit line from your bank
3) Don't get on Grumble more than once daily. It can become addictive and ruin your business plan and initiatives
4) Listen to Carter/Bluestone/Markoff?Goltz like they were the Second Coming
5) Follow people who are TRULY successful, not people who think they are.
 
In 1995 I bought an existing business, which had two prior owners in 20 years. The best advice I can give is for you to hire a CPA/CFP before you buy. The one I chose did an incredible amount of work going over the records/tax returns for prior years, understanding the inventory (usable or not?), helping with a budget, making me understand financial records, laying out the options for what kind of business (I chose S-corporation), and generally getting my business set up for success. And he did this before I made the final decision to buy the business. Also if there is a Small Business Center close to you, they are a great source of knowledge. Good luck in your decision making process.
 
I took over an existing failing business. The owner was getting a bit long in the tooth and basically had lost interest. Bailed him out for his knowledge & equipment. I considered the customer list worthless. I've got the place turned around, but most of my growth is a result of a move to a new location after I was able to get out of the old lease. Unless the books clearly show there is value in the business, not just good will, and the owner knows the craft and will stay to ensure a smooth transition, I'd recommend making a fresh start, particularly if you know framing and framing is going to be your focus.
 
Scott,

I'm assuming that you have some framing experience which is important if you take over this "established" business.

What should you be wary of? I think you identified this yourself, by stating that the shop has had two owners in 12-15 years! Something is probably not right.

The excitement and enthusiasum of running your own business and creating wonderful framed pieces will only last so long. There's a reason that these first two owners are not around, and typically it is that they didn't produce enough money to stay in business.

As you examine the books, look at key elements like growth, volume, percentage of COG to sales, competition in the area. Then examine the quality of the assets you'd be purchasing. If these are 12-15 years old, then you might be better off starting anew. The more "chinks" in the armour you uncover, the lower the selling price!

John
 
Scott,
Is the location really great? Is the reputation of the shop good? Is their product comparable to your idea of great framing? How old is the equipment? How extensive and current is their mailing list? How much advertising do they currently have in place? How profitable has the business been historically? Is the inventory dated? Is the layout efficient, or would you have to spend lots of time re-arranging? Why are the current owners selling? Make sure that you are aware of any long-term obligations attatched to the business. How much more or less would you spend to open your "dream shop". As Emibub stated, it is really hard to overcome bad perceptions already in place.
I bought my store from a lady who had worked in the industry many years. The shop had only be open about 8 months when I bought it (her husband got transfered). It already had a good client base, good reputation, excellent location, nice layout (although too small!) and all-new equipment.
 
This topic is depressing the heck out of me. I didn't do one thing right. It has to be some sort of testament to me and my determination that I am even still here. I bought a crappy little store that nobody else wanted. I have no money, I have no income. Considering the odds I can't help but wonder why I am still here.

$200,000 line of credit? I'd kill for a $10,000 line of credit. I better go listen to Deepak Chopra before I get depressed. You guys don't want me whining again.
 
Originally posted by Scott B. Mantecon:
I have an opportunity to buy an existing frame shop. It's been a frame shop for as long as I can remember (At least 12 to 15 years) and has been under two ownerships during that time. I am seeking advise from anyone who has bought an existing business before. What should I be wary of , pros & cons, etc. Any advise would be greatly appreciated.
Thank You.

Scott Mantecon
Click to expand...
 
I bought an existing shop and like emibub, I didn't do much right. First off, I didn't know the art business and bought a lot of old stuff. After six years, I still have some of those prints. I can't even sell them at big discounts. :( Then, I had such confidence in my experience and ability as a framer, I just knew I could do it. So, I ended up paying way too much for the business. It did have a great location that I ended up moving out of because it was way to expensive. (When I first went there, there were 7 shops and a real estate office. Today there are 2 real estate offices, 2 shops and a coffee shop.) I was very cash poor. I had to learn about accounting, how to keep stock rotating, advertising, promotions, customer service, buying, etc. etc.

Tread carefully!!! Don't let them bully you into a quick decision by telling you they have someone else looking at it, but they really want to sell it to you. Would I do it again? Maybe, but I hope I am a lot smarter now.

Good luck!!!
 
Just a thought...

why buy an existing business, when you could set up next door from scratch for less money, no negatives attached from prior owner, etc. ??

as I said, just a thought ;)
 
My husband and I have bought 4 businesses over the years.

Except for the frame shop (who was going BK), none of the others were doing as well as the seller indicated and I could make a long list of grievances and things to watch out for besides Location & Quality. Many paid their employees under the table or took cash sales, not reporting proper taxes....so the "books" were never real and there were lots of excuses. Nevertheless, we turned them all into profitable enterprises with ALL legal requirements in (proper sales tax reporting, actual payroll & payroll taxes, insurance, licensing, etc.) with a lot of hard work & determination. One was trendy and was naturally phased out and essentially turned over to the Frame Shop. Two were sold and continued on for some time by new owners.

I ended up taking over the Frameshop and have weathered the years.

I found it quite useful to have a client base that I could advertise to and even a few abandoned pick ups to collect on. New to the business it was also wonderful to have a collection of over 40 years worth of equipment and gadgets in varying condition, a library of books & a storefront that had been a frame shop for a few years.

It is quite common in the business world for new ownership to not do as well as the prior owners for the first year, but I believe it advantageous to take over instead of start brand new. Why not create your good reputation with the existing client base, keeping them as well as creating new ones...instead of just creating new ones?

Sure, I lost some customers who had been getting deep discounts and a personality clash here and there, but mostly I treated all like friends of the shop and have retained many of them for 2 decades. It is A LOT of work, which ever route you take, even if you buy a pricey very successful established business.

And--with SO MANY custom frame shops having owners over 50 and plenty near retirement age--do we really want them all to just go under? Or, could it be advantageous for the new business minded spirited framers to work out agreements with the older shops that could benefit both?
 
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