Bought a biz I am an idiot

[newbizy]

ok, so I bought a retail party store, couldnt wait to get started, worked the store for a couple of weeks before I bought the biz and WATCHED the inventory sell out the door, then I realized I didnt get the inventory I thought I was getting. I have now owned the store for 30 days, work 13 hours a day, bought over $5000 worth of product just to keep the store running and the place is still bare.

I am sick at how bad I was at negotiating this business I have a pretty good head for biz but I really blew it. The owner let the inventory go so low and the business has been dieing. How am I going to bring this business back? Its a wedding and party store with a Factory Card Outlet SUPERSTORE, just a few miles away. I am invested in this now and I am determined to make this work. It's is a specialty store only making 300 bucks a day, I AM SICK and mad at myself. Geez what was I thinking?

[Steve B]

What's done is done. I bet it can be turned around and this will all become a distant memory as you make improvements and infuse the place with new ideas and generate more customers than it ever had before. This type of business has been around for years, so I'm sure you can make it succeed.

For starters, I'd have a Grand Re-Opening. I think the public should know it has a new owner. If the place had been going downhill it could be because people chose to stop shopping there for one reason or another. If they know there is a new owner, a few might come back. Also, you will be able to take advantage of some free publicity. Most local newspapers will run a free spot on a new business - you might as well have a special day that they can help promote while they're telling the public about the new ownership.

[Spider]

Check out the thread "Money, money, money" -- http://www.small-business-forum.net/managing-your-business/4882-money-money-money.html

It's about cashflow, and that may be what you need.

[posylane]

You are at a key fork in the road. You need to decide now if it is time to go at it with everything you have, or ignore the sunk costs and simply move on with a painful lesson learned. What was it about the business that attracted you to it? I am hoping it was something about the financials? If you were to flush out the store, how much would it take? Could you do it if you wanted to? If you could, would it leave you so stretched you could not make a couple of months of low sales?

[Harold Mansfield]

I agree that it can be turned around. It's a specialty store so it seems obvious that you need to sell specialty products.
Just as an example, a friend of mine started a candle business and sells her candles at local stores on consignment . There may be a "big" retailer down the street but they probably don't sell specialty items like big fat, home made candles using natural ingredients...most of them sell soy based candles. Women who like candles know the difference. Larger store normally sell items that can be found anywhere. Boutique stores are where you are going to find your specialty and original items.

I actually think you are in the cat birds seat. Weddings are big business and everyone involved with a wedding are always looking for specialty and personal items that can't be found in most places. I don't know how big your area is, but I would be partnering up with every reputable service in town in the same niche...cake makers, bridal gowns, limo services, travel agents, beauticians, banquette halls, planners, musicians, and so on.
I'd also get into items for pre wedding festivities...bachellorette items and bridal gifts...you don't necessarily need to stock the items...as long as you can deliver them, such as catalog items from specialty retailers.

It is very possible that the store was unsuccessful because they lacked creative thinking or lost their drive.
Maybe you jumped in with both feet and should have stuck a toe it, but something about this made you think it was a wise investment.
You could either curl up and die, basically losing money, or you could throw on the gloves and go all in and take a chance on making money.

[Patrysha]

There are tons of ways to get creative and turn things around if you've got a little time and elbow grease...having volunteers like family and friends to help make it happen can be nice, but not always available. There's certainly tons of ways to partner with other suppliers (as eborg mentioned)...at least you are making some money...$300 may not be enough to cover the costs right now...but at least you have a base to multiply from...make sure you keep in touch with current clients...sell those brides anniversary decorations down the road and so forth...get their birthdays and keep in touch as they have kids and so on down the line...over time a bride can represent a lot of money to a shop like yours...

[billbenson]

We have Party City or some similar name store in our area. There prices are outrageous. People buy there because they haven't planned ahead or are lazy I suppose, but there are always people in the store and they must have really high margins on their products.

My wife usually just buys stuff over time at dollar stores when they have stuff so she doesn't need to pay the high prices at Party City. Still she will still be missing stuff and go there. Seems like there must be a business model that will work for you?

[posylane]

turn things around if you've got a little time

If you have time and money. This is the first $64,000 question for this guy - does he have $150k in cash or at least credit? Here is the second. What financial trends are the party store retail fronts seeing right now? Are sales now growing or still falling? Many sectors in retail spending have gotten hammered and wedding/gift/party stores are no exception. Look no further than the Swoozies bankruptcy, and at least half of these types of stores have gone out of business in the DFW metroplex, ours (store front) being one of them. We have friends with two stores and they are having a very hard time and they know what they are doing.


There are tons of ways to get creative

My wife did retail in this area for many years (worked her way up to being a manager at a Swoozies store before starting her own store). You have to know what you are doing in this area to survive. You can't just sit behind the counter and ring up sales. Has this fellow ever sold a wedding invitation? He has to go to market to get more inventory - does he have an eye for what is selling? Does he know a thing about wedding and party etiquette? Can he afford to hire someone who does? If he is sweating over dropping $5k in new inventory, I would guess no. A decent store inventory for him is going to be between $150k-$250k.

$300 a day is roughly going to meet his expenses if they are not crazy and don't include employees (but not even a salary for himself). It sounds like this guy bought the store on a whim and does not know what he is doing. I would not blindly advocate he put good money after bad. He is in a very difficult spot and needs to take a hard and realistic look at the situation.

Here is what is most critical for him right now. If the store is nearly empty of inventory, what remains are the stuff people don't want. The most desireable products sell first obviously. If you don't get good inventory back in your store, your sales trend is going to get worse and worse, putting you deeper in a hole, and making turning the situation around more difficult.

[Business Attorney]

newbizy, I am sorry to hear about your predicament. Unfortunately, as you have found, there is a big difference between having a "a pretty good head for biz" and negotiating a purchase of a business. There are simply too many pitfalls in buying a business that even an experienced businessperson is not going to recognize. A seller's converting assets to cash and delivering a balance sheet that was markedly different than what the business looked like when the price was negotiated is one of the first things an experienced business attorney would protect against.

If you have a written contract with the seller, you might consider showing it to an attorney. Even the standard contracts of business brokers (which are typically seller-oriented and not very thorough at that) may have provisions that are violated when the seller fails to replenish inventory consistent with past practices. There may be nothing there but it is worth a shot.

From a business standpoint, I think the issue identified by posylane is critical. Even if you have replaced $5,000 worth of inventory, if your inventory is sitting on nearly bare shelves or, worse, is lost in a sea of junk that no one would buy, you are going to have a tough time convincing shoppers that your store is a place to fill their needs. I don't see how $5,000 worth of inventory in party store can sustain sales of $300/day.

[huggytree]

so you bought a business with no inventory?

sounds like you dont have $50k+ to restock the shelves......if this is true your already out of business...a business w/ nothing to sell is what you have

Sell your house and buy inventory.....sell your car and buy inventory.....cash in your retirement and buy inventory.......this is what people do to start up businesses.....

its hard to start a business without a large cash reserve....when i started i had saved for years and had enough to buy all my tools/stock, took out a $10k loan for a van and had $40k in reserve in case things went poorly.

if you bought a business w/ no stock and have no money to buy stock you made a mistake that you may not recover from

i prefer the safe/conservative approach.....you may have no choice than to choose the full win or lose risk...if you win you win, if you lose you dont have a house or retirement

[Dan Furman]

so you bought a business with no inventory?

sounds like you dont have $50k+ to restock the shelves......if this is true your already out of business...a business w/ nothing to sell is what you have

Sell your house and buy inventory.....sell your car and buy inventory.....cash in your retirement and buy inventory.......this is what people do to start up businesses.....

its hard to start a business without a large cash reserve....when i started i had saved for years and had enough to buy all my tools/stock, took out a $10k loan for a van and had $40k in reserve in case things went poorly.

if you bought a business w/ no stock and have no money to buy stock you made a mistake that you may not recover from

i prefer the safe/conservative approach.....you may have no choice than to choose the full win or lose risk...if you win you win, if you lose you dont have a house or retirement

I agree with Huggy - you have to go all-in, or walk away. You can't wait around, and there is no marketing magic bullet. Empty shelves cannot be overcome - you either have a decent stock, or you are out of biz.

This is where it gets hard

[posylane]

We won't ever get enought information to know what the "best" choice for this man is in this situation, but now is the time for him to do his market research and come up with the hard go/no go of all in. If he goes all in and does it right, he is probably looking at a banko if it does not work out. Of course depending on what he is on the hook for already (thinking lease here) he might be past the point already.

Anyone looking to open or take over a small business like this should have to undergo mental health counseling to check their sanity and perhapes some business classes to check their business plan. It is easy to sign yourself up for huge liabilities and small potential gains.

[jamesray50]

I'll add my two cents, get in touch with some wedding planners and party planners to see what the trends are this season before you buy any inventory. Good luck.

[tylerhutchinson]

You may have bitten off more then you can chew here. Maybe look to take out some loans to get some inventory and spend some time and money advertising as a new owner and try to get your reputation back. If you can keep it up and going for a year or so and get it back up then you should be good after.

[Reflo Ltd]

Perhaps there is an opportunity to partner with some party and wedding planners that can use your services and you use theirs.

Contact your local chambers of business and see if you can advertise or partner with them for events.

Contact your local city halls and see if they rent rooms and how you might be able to partner with them to provide needs.... maybe even some party centers could use you for certain goods or services.

City events can also be good sales if your prices are right. Most government entities try to get at least 3 bids for everything they need and perhaps the superstore doesnt want to be bothered bidding or pricing events..... so this could be an in for you.

How about partnering up with a "talent" source that provides clowns, ponies, etc for parties?

Offer complete party or wedding services..... "give us your number of guests and we will do all the work for you"

Just some ideas.

[Bright Eye]

Great Information by all of you... Good to see your participation...
I am newbie and would like to learn more n more from my seniors .

[tylerhutchinson]

I agree with Reflo. To get back on your feet try to reach out and partner with larger party companies and offer them discounts to get their inventory from you. That should give you some decent income while you are trying to get the general public back in your doors.

[MostHeather]

Where there's a will, there's a way. There are lots of great suggestions here - just wondering what you've decided to do, NewBizy..