Thinking About Buying A LFS

Discussion in 'Reef Fishes' started by Rcpilot, Nov 29, 2008.

  1. Rcpilot

    Rcpilot

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    I must be nuts. I might try to get a small business loan and buy the LFS. :shock: The LFS that is about 1 mile from my house he is trying to sell out.

    Here is a list of whats in the store:
    79 -- 40g breeder tanks. They are up and running with livestock.

    59 of those tanks are freshwater with undergravel filters and a common oil less air pump that is mounted in the back of the store.

    20 tanks are dedicated to saltwater. 6 are for corals. 6 are for inverts. 14 are for fish.

    All the SW tanks are running on refugiums with separate sumps and skimmer tanks. Each set of 6 tanks is running on the following setup:
    There are 2 of the 40g breeders. One is the sump, skimmer and return pump. The other tank is the refugium.

    There is a 180g SW display tank in the front of the store. It has about 150lbs of live rock and 1 large tang. (not sure what it is) It is running on a 55g refugium and a 40g sump with some kinda big skimmer. The lights are MH and more than adequate for a nice reef.

    There is about $800 worth of livestock in the store right now. Only about $100 of that is saltwater. The rest is in FW.

    The bread and butter of the store is in freshwater fish sales. But, if you stocked the SW tanks, it could produce about 40% of the overall sales each week.

    The store produces about $20,000 in sales per month. Operating costs run just under $3000/month.

    The cost to purchase the store and livestock is $25,000

    I would need an additional $25,000 in operating capital. This would give me the cash I'd need to stock the tanks full. Right now, the tanks are about 10% of capacity. It would take about $5000 to stock the tanks full. That would leave about $20,000 in operating capital.

    The store has about $2500 worth of dry goods in stock right now. He is willing to sell it to me at a loss for $1750.

    The current markup is 2-3X Keystone on livestock and about 60% on dry goods. He is doing pretty well at that rate.

    I have calculated it out on paper and I think I can make it work. If I kept doing exactly as he has been, I should net about $85k per year. Thats NET -- meaning AFTER I pay the bills and Uncle Sam.

    I'd need a $50,00 loan to do it though. I don't have that kind of cash lying around. Who does? :shock:

    How many of you would even consider it?
    Rcpilot, Nov 29, 2008
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  2. Rcpilot

    Altohombre The Tennis Pro Reefer

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    make sure to take a look at actual financial information just don't take his word for it. If he was making such great money he probably wouldn't sell it.
    Altohombre, Nov 29, 2008
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  3. Rcpilot

    yote Ceritfied Mantis Hunter Moderator

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    If I could get my hands on the money to buy it,and operate for a month at least,then I'd probably go for it.
    If you jump on it,I wish you luck with it.And expect a decent discount:mrgreen:
    yote, Nov 29, 2008
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  4. Rcpilot

    Oscarsdad608

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    That is a lot of money. We have had 3 stores close in the last 6 months. Right now people just don't have the disposable income to blow on their tanks. If you do decide to go with your plan, good luck.
    Oscarsdad608, Nov 29, 2008
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  5. Rcpilot

    Rcpilot

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    He's selling it because he wants to retire. He's been in the Denver area, operating fish stores for over 40yrs. He's 60yrs old and wants out of the business.

    I know it's a ton of cash. Thats the scary part. I also know the economy is pretty rough and people don't have the disposable income to spend on the tanks.

    I talked to him for about 3hrs today. I tried to get financial info out of him, but he either isn't willing to provide details, or he simply doesn't know. I think he's just such a poor businessman that he really doesn't know. Thats been his problem for years and years. He simply doesn't MANAGE his business. He doesn't know how much he spends and how much he takes in and how much his net is at the end of the year. I think if he had the records, he would show them to me. He just doesn't keep track. His accountant must hate him. :mrgreen:

    He can tell me how much his weekly sales are. But he has no idea if he's making money or not.

    Risky move for me. :grumble:

    But the idea of being self-employed and having a business less than a mile from home is very appealing. I positively HATE the HVAC industry. I'm so tired of working with contractors and architects. I'm sick of dealing with ignorant construction workers ( I used to be one, so I can say that) who have no clue how to build a building. I HATE working hard for some other guy when he makes all the money at the end of the year and all I get is a weekly insult (paycheck).

    My wife is willing to run the store during the day while I continue to work my estimating job for a few months. But I'm not sure if that is the right move. It's the "safe" move because I could keep my weekly income from the estimating job I have now. But would the store be successful without my leadership and work the entire time the doors were open from day to day?

    It would be the end of a hobby for me. As soon as you start doing business, the hobby is gone. I'm not sure I want to give that up. Cleaning fish tanks every day is not pretty or fun.
    Rcpilot, Nov 29, 2008
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  6. Rcpilot

    Altohombre The Tennis Pro Reefer

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    He has to claim income on his taxes. I am sure if you kept pressing him he would show you information. He must have it somewhere.
    Altohombre, Nov 29, 2008
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  7. Rcpilot

    JAG107

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    Wow that's a big career change! Well, we're losing a few LFS around here in southern cal with the slumping economy, but I don't know what it's like in Denver. I wish you the best of luck. I think the others are right, get as much sales and financial info as possible. If you go through with it, I'd suggest hooking up with ORA and stocking their awesome tank bred clowns and dottybacks, then you're in the door for all their top notch aquacultured corals! To me, getting out of construction and being self employed, supporting my hobby and making a living at it would be THE American dream! Hey if it fails, maybe you could get a bailout from Congress! ;)
    JAG107, Nov 29, 2008
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  8. Rcpilot

    bullitt21

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    i have been thinking about the same thing for three years.our lfs only cares about his lizards.he only has fw tanks and they are always cloudy.i go about 50 miles to another fs and he has everything.he say's he gets alot of customers from are area that say the same thing.the funny thing about it is he only does about 10% business with the lizards,snake and stuff like that.the rest is in fw and sw fish and his store is always busy.so i say go for it and hope you do well.but keep the business part away from your personal finances and you will be ok.good luck and tell me how it goes so i can talk the wife into the same deal..
    bullitt21, Nov 29, 2008
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  9. Rcpilot

    Bifferwine I am a girl Moderator

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    Letting your wife be the main person in the beginning would be risky, not because I don't think she knows what she's doing (for all I know, she's a pro), but because that is the time when you are going to get people coming into the store for the first time, and they'll decide, from that one encounter, if they are going to come back or not. If it was my store, I'd want to be there full time in the beginning so that I could be sure to give the best service possible, and let new customers get to know me. That way there's a much better chance of them coming back.
    Bifferwine, Nov 29, 2008
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  10. Rcpilot

    Oscarsdad608

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    +1 Biffer
    Oscarsdad608, Nov 29, 2008
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  11. Rcpilot

    RyanG ^*Eternal Dumbass*^

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    Its a risky investment but it could be very rewarding...it could also make you bitter. I would take his books to an independant CPA and have him/her give them a thourough looking at.
    RyanG, Nov 29, 2008
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  12. Rcpilot

    Rcpilot

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    Excellent point Biff. +2

    I DO need to see the guys finances. I know that. But I'm not sure he has them in order. I want to know expenses, overhead, profit, losses, taxes, etc. for the past 3-5yrs. Thats the only way to know for sure if it's worth the risk.
    Rcpilot, Nov 29, 2008
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  13. Rcpilot

    SSalty Team Liquid Force

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    What I would hate about owning a fish store is the un-known of when you leave for the day. Who knows what could happen when you are asleep at night. A power outage could wipe out the whole store. Also, who do you trust when you go on vacation? Taking care of that many tanks is worse than babysitting numerous children. Just like any business, there are risks. I meen I am worried when I leave my 55 gallon for a weekend or when I am on vacation. I couldn't imagine leaving a fish store full of tanks when I am gone for the weekend or vacation. I am best friends with the owner of the LFS and the above variables are what gets him.

    Also, what would you have in plan for employee's?

    If you have the time than go for it.
    Last edited: Nov 29, 2008
    SSalty, Nov 29, 2008
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  14. Rcpilot

    Rcpilot

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    I don't think I would hire outside employees right away. I'd most likely run it by myself and with the help of my wife for the first 1yr or 2yrs. If I manage to make it that long, I would hope it was profitable enough to hire some help -- at least some part-time help.

    I wouldn't be able to take any vacations for a few years, but I'm okay with that. Anyone who has a business will tell you they were "married" to it for the first few years. You HAVE to be dedicated to it and make those sacrifices if you want an honest chance at success. Vacations can come later.

    As for power outages:
    I think I can insure the livestock. I'll have to check into that.
    I would consider an emergency generator down the road, but I don't think I could afford to do that right away. No business is without risk.
    Rcpilot, Nov 29, 2008
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  15. Rcpilot

    RyanG ^*Eternal Dumbass*^

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    RC if you are taking out a small business loan for 50 grand anyways take out the extra 5 grand and get a natural gas powered emergency generator. Kick on instantly if the power fails.
    RyanG, Nov 29, 2008
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  16. Rcpilot

    yote Ceritfied Mantis Hunter Moderator

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    Dont know about Co. But here,you cant get insurance on fish and other related stuff.So thats something else to think about.
    yote, Nov 29, 2008
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  17. Rcpilot

    SSalty Team Liquid Force

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    Yup, that is exactly why I stated those risks in my first post. At my buddies store he can't either.
    SSalty, Nov 29, 2008
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  18. Rcpilot

    naperenterprise Likes it here...

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    You should do it! You only live once my friend...

    Sounds like a very interesting opportunity. How many customers comes in the store if you were there visiting for an hour?

    I think if you do this, you need to close for a few weeks, clean up the place, restock, revamp, come up with a different and better twist to the established success, and then have a grand re-opening.

    While shut down SPEND $$$ on advertising, newspaper, radio, TV, what ever, get the word out about the grand opening, and BOOM, launch your baby...
    naperenterprise, Nov 29, 2008
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  19. Rcpilot

    Altohombre The Tennis Pro Reefer

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    You gotta change the name to make it seem different unless the past owner was well respected and people associate with that name. Any ideas?
    Altohombre, Nov 29, 2008
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  20. Rcpilot

    Rcpilot

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    I've just become the recipient of some VERY interesting information. Not exactly what I wanted to hear, but I just saved myself $50 thousand bucks. :mrgreen:

    Here's the skinny:
    The company is called Sherman Tank. Sherman tank has been in business around the Denver area for roughly 40yrs. Several different locations, but always as Sherman Tank.

    The guy outright told me that, "You don't want my name associated with the store after you purchase it. I owe suppliers money and you'll never get any credit to buy inventory from them if you keep my name."

    Fair enough.

    Then he tells me he will not sign a "No Compete" clause. I ask him why. His answer,
    "I have a warehouse full of hardware. I've got enough tanks and pumps etc.. to build 2 more stores like this. If you buy this one, I will set up another store with a portion of my remaining inventory and sell that one too. I want OUT of the fish business and I want to get rid of all my equipment that I've accumulated over the last 40+yrs. So, I'll probably set up 2 more stores similar to this and sell them at a modest profit. At that point, I will have paid off my suppliers and I can walk away debt free with a few bucks in my pocket."

    Here's what I see:
    He won't sign a No Compete clause and he doesn't want to give up his name because he knows damn well that he's going to take that name (known in this area for over 40yrs) and set up 2 more stores. Those stores will be named...... what else? Sherman Tank.

    Then I'm stuck with $25,000 worth of used equipment and no name or reputation. I don't have the Sherman Tank name or phone number. I don't have the logo. All his customers will flock to his new stores---regardless of where they are. I'm just Joe Fuckstick with a fish store at 84th & Sheridan. :shock:

    Whats he got?
    $25,000 worth of working capital.

    It's not worth it. If I am going into debt $50,000 for a LFS I'll do it on my own and not bother purchasing his "skeletons" and not deal with his used equipment.
    Rcpilot, Nov 29, 2008
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