What Would My Success Rate Be In Taking Over A Consignment Shop?

Question

This ladies clothing consignment shop has been run by the same lady for 10 years now. She approached me today and said she is ill and is forced to give up her shop. She wants someone who can buy the shop and keep up the good name that she has created in this town...it's a brand name ladies only shop, in the downtown area and in a busy area. It's a very tiny shop with 2 little change rooms, cozy and clean. She claims I could make $30,000 a year after rent ($600 a month) is paid...she will sell the computer system, all existing merchandise and introduce me to 500 of her clients and help to get set up. I did not ask the price for now but I'm guessing it would be around $8,000 or in that ballpark. So, I guess I'm wondering if this could be a profitable business and if $30,000 bring home pay is realistic in operating this type of business. Anyone have any ideas? Suggestions? Thoughts? I am returning back to work after having a baby and would love to entertain the thought of owning a small business. My husband brings home our main money so this would be a side business - BUT I don't want to lose money in the process. Thanks. :)

Answer 1

My closest friend has a consignment shop, same location 10 years, with four full time employees, 2500 sq feet of space and she supports her family with it!  The shop is wonderful.  She has nice soft music playing, candles safely burning, she decorates for holidays, has wonderful little themed sales (Christmas in July, she plays Christmas music, wears a Santa hat, puts up a tree, etc.).  She is a member of a national resale shop owners association and there are actually bus loads of ladies who come to her shop on some sort of resale shop tour event regularly.  Her motto is "if you don't like what's in your closet, come check out what's in mine" and she calls the shop "Susie's Closet".  

You need to have a look at the books.  If you don't feel comfortable analyzing them, get an accountant to help you.  Her rent is very cheap.  Will you be able to keep the same lease?  Don't forget to budget for advertising too! You may not make any money for awhile during the transition too.

Have you gone into the shop at different times or even sat in the parking lot? Does she get a lot of walk in traffic?

Personally, I think it would be great business to have especially for a new mom.  You could carve out a little space for the baby to sleep/play until the baby is toddler/preschool age.  Maybe even add some children's clothing and work the new mom market.  

I say go for it!  Good Luck!!

Answer 2

.    I like it but protect yourself.  Give yourself a 6 month period where you are not yet the owner.  You split all profits 50-50 with the current owner.  She pays all expenses.  You run the business.  I think your profit margin will be much much less than she is indicating. But it could be a fun business for you.  

You pay her some upfront money to enter into this "6 month option" agreement.  If she doesn't agree, the business is losing money and she doesn't want you to see that.