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Issue 9
| I want a bargain |
“I want a bargain”
We are often told this, in fact at our seminars, quite a few people come up and say “Look, when there is a bargain available – let me know and I’ll buy it”
Do you know what?
The hardest business to sell is a “bargain”.
Why?
Because the prospective buyers spend a lot of time assessing the business, as there is always a reason for it's low price in the market, and this creates uncertainty in the buyers mind. The result is they usually don't buy because they are too afraid to take a chance.
They then complain bitterly that everything else is too expensive compared to the bargain – it maybe too expensive for them but it doesn’t mean it’s overpriced – just that it does not fit their budget. The bargain, the one they could afford, they wouldn’t buy because they were afraid to take a chance.
Just recently we had such a “bargain” it was priced competitively to start with and then the owners decided to reduce the price by $100,000 because the landlord was not too sure about his intentions when the lease expired in 12 months time. He wanted to think about redeveloping the shop in a few years time or maybe selling it and would be prepared to give a long lease even a 5 x 5 (that is a five year lease with a five year option).
And here’s the “BUT”.
But he wanted to put in a “demolition clause” in the lease, which meant that at any time during the term of the lease he could ask the newsagent to relocate for the duration of the demolition and rebuilding. Then the newsagent would have a totally new shop to move back into under the same terms. The move, if it happened, may take 6 months and then again, may not happen.
Because of this uncertainty, the newsagent was prepared to reduce his price by $100,000 to compensate the buyer for this.
Each prospective buyer was told of the “problem” and each was told how to “fix it”, but none were prepared to take a chance.
Now that the newsagent has been able to secure the future of the business he has put the price back up – so the window of opportunity to bag a bargain has now gone.
By the way, “demolition clauses” are now routinely put into most leases – there is a large shopping centre just being built that has “demolition clauses” in all their leases.
This is not an isolated story – we had another forced sale where for health and financial reasons a newsagent lowered his price by $150,000 to only $65,000 total price. We could not get a buyer – they were all spending all of their time analyzing what was wrong instead of seeing the opportunity and taking it.
A neighboring newsagent bought the business for the reduced price and sold it after 12 months for over $350,000 – not a bad result in 12 months to have a profit of $135,000 PLUS $83,000 that was the net income that it was made during the year.
It seems whenever opportunity knocks, the buyer is too scared to answer the door. So
how can you be the one that does get the next bargain?
The answer is simple: you have to do your homework and understand the value of the business and you can only do that if you look at all newsagencies in your budget range together with those a little above and below it. You will quickly see which are “bargains” and which are not. Look for opportunities not obstacles.
Contact us and we will happily answer all your questions.
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