Opinions Wanted Business Opportunities

FramerCat

SGF, Supreme Grumble Framer
I need some advice. I currently have a chain of four frame shops. I am always looking at opportunities to expand, but right now the opportunities are overwhelming. Within the last six months I have bought two shops, one was turned into my fourth location and is my new production facility. The other I bought for equipment, supplies and to transfer the customer base to one of my existing nearby locations. These expenses combined with the recent downturn in business in the local region have kind of sapped the resources that we had available. Now I have five more local frame shops that have approached me in the last month or two about buying them out by the end of the year. All but one of them seem viable and within that magic range that I look for (not so far apart that I can’t easily move between them but not so close together that they would compete with each other).


I believe I could actually talk all of them into just turning over the business in exchange for taking their leases off of their hands. Unfortunately as you know, there are so many expenses to running a frame shop that it may not even be feasible to take them for free. I would also need employees who know what they are doing. Those are currently hard to find, and it seems they would want to get paid. I know this is not the kind of thing that most of you would even consider or advise, but I do have a good amount of experience making these kinds of things work.


Does anybody have any ideas on how I could shoestring or even confidence man this into working? What would you do if you were presented with such an opportunity? I’d love to hear your ideas. If you have concerns I’d listen to them as well. All I ask is no naysaying for the sake of saying nay. I’d like your concerns to be specific and if possible I’d like to hear potential solutions for those concerns.


Thanks,

Ed
 
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i-FRAMER

MGF, Master Grumble Framer
My first impression is that perhaps you are still working in 1 of your 4 businesses. At this stage you should not be. They should all be able to run independently with you floating, advising, assisting etc. However, if you're not then that means that you could go in and work the business to a profitable level while at the same time looking for someone to manage it and take over, so you can go back to your overseer role.

It's all about numbers and what the each location can make. There has to be a minimum profit level for each location and a minimum combined profit level.

I would say it is risky knowing that most shops only generate an income for 1 or 2 people. But not knowing anything about these shops and your own business, would be hard to give any opinion. But i would say if your resources are depleted, then you need to reassess your own current business first, before expanding further.
 

FramerCat

SGF, Supreme Grumble Framer
Thanks i-FRAMER,
Actually I currently work in all four of my shops. I run them like doctors offices with multiple locations. Some customers are looking for my particular set of skills and so they come into the shop nearest them on the day that I am working. If they are not as particular they see my very qualified staff. My specialties are in sales, design and product and technique knowledge. Management is a far lesser aptitude for me and so we have chosen to keep me where I will be of the greatest value. My partner generally does the management.

My thinking on income for multiple location businesses is that I agree that they need to be making enough for at least a little more than one income on top of expenses. One income should cover the employee who will be manning the business and the remainder would be "profit". I do not need to make enough to pay myself as a second full time employee in a single shop when I can pool the "profit" from multiple stores.

Does that all make sense? I know I think a little differently and I have not given you all the information needed to give me some solid and specific advice. Do you think I should "string them along" until the end of the year when my resources may be replenished and they would be in a more desperate situation? I know people don't like that term, but lets be honest, that's what I'd be doing and I don't really have a problem with that.

Ed
 

i-FRAMER

MGF, Master Grumble Framer
Firstly, I would not say i am offering advice just my opinion.
I would never go into anything without a good buffer.
You need to remember while it may be okay if 1 shop suffers a little bit for a month or 2, but if all 4or 5 do, then that can turn the situation around drastically and quickly.
Business is business, I would offer rock bottom. Start at the price that you would think you could not turn down. They will likely come back with a counter offer and then wait if you have time and need to build your capital up again. Remember they are the ones wanting to sell and Picture framing businesses can be had to sell. You have 5 on the market. You have the upper hand.
 

Starving Artist

CGF, Certified Grumble Framer
When you talk to "A business real estate agent" --he is going to tell you the value in a picture frame business is the owner, not the equipment or customer list. We did the same thing and found that when you are there the business will grow, but unless you have a very strong manager in each location you will not get the returns needed to grow the business. If these other businesses are local, then you don't need to purchase to get new customers. Your business plan should just be to increase your exposure in the market and let their customers find you. The best thing our customer lists purchased was to get the customer in the door. When we purchases a business we had them send a letter to everyone on the mailing list that you are now the place to get quality picture framing. That is all the other shops have to sell. A person on their mailing list is not a customer until they purchase from you.
 

i-FRAMER

MGF, Master Grumble Framer
With regards to location, you say that not so far apart or close together. Have you considered just looking at the furtherest ones from your existing stores. Therefore if the framers in-between close, customers are more likely to gravitate towards one of your other stores. I would certainly be looking at these stores from a tactical location base as well. Why have another store that may only be competing for the same customer base.
 

FramerCat

SGF, Supreme Grumble Framer
Thanks Starving Artist, I agree with you. A lot of times we acquire other shops just to get their assets including customer database to bring their customers to our existing locations.

Yes i-FRAMER, I am considering that possibility. There are definitely some that I am considering harder than others.

Ed
 

David Waldmann

SGF, Supreme Grumble Framer
My thinking on income for multiple location businesses is that I agree that they need to be making enough for at least a little more than one income on top of expenses. One income should cover the employee who will be manning the business and the remainder would be "profit". I do not need to make enough to pay myself as a second full time employee in a single shop when I can pool the "profit" from multiple stores.
I haven't yet read the rest of the responses, but here's my take at this time.

I think the above reasoning is sound, IF you have a person in place who can run the day-to-day. Reliably.

Do you think I should "string them along" until the end of the year when my resources may be replenished and they would be in a more desperate situation?
I agree with the former (your resources), but if they are already offering you the business gratis (less the lease), how much more can they give? If I were in their situation, I think I would take a chance on getting sued versus breaking my lease and stop losing money.

Final thought - with multiple businesses, you need to have things arranged (people trained, systems in place) so that you can leave for a month unannounced and everything continues without a hitch. Especially if you are talking about a potential 8 locations/businesses. However, based on my observation of you, by your posts, you are well suited for this type endeavor.
 

DVieau2

PFG, Picture Framing God
At one time I ran three photo stores. I was miserable. I just didn't have the resources ($$$$$$$) in place to professionally manage. I had a great crew but that wasn't enough. As the leases expired I retrenched and eventually ran one store with sales growth that almost equaled three stores. This was when the photo biz was a good business to be in.

As the business model for photo collapsed I could have picked up numerous operations who just wanted out.

It's a big subject but I see the traditional frame shop with a retail location as seriously seriously challenged.

Doug
 

FramerCat

SGF, Supreme Grumble Framer
Doug, I think you understand my position perfectly. Your thoughts on this are extremely valuable to me. Thank you for your input.

Ed
 

tedh

SPFG, Supreme Picture Framing God
Frame shops are closing here, and I'm surprised at the volume.

But the reasons are many:

- natural retirements
- online competition
- declining supplier base and competition, leading to a slowing of innovation
- changing customer demographics
- increasing costs from suppliers
- big box framers and big box wall art
- seriously declining art suppliers
- lowering of middle class spending ability

Makes me wonder why I'm still here. All around here they've either quit, or gone back to home-based from retail.

Anyone have any good news? Any new entrants?
 

Ylva

Forum Support Team
Staff member
Would you actively look to expand at this point? As in, if this didn't come along, would you be looking? Would you in the next few years?

The shops you have taken over, how well did that work out? Do you expect this one to be better, same, or less?

Would it be in an area that you otherwise would not cover? What is unique to that area?

Is there one of your shops that at this point has a very strong manager and who could run at least one location very comfortably? That would free up some of your time to spend at a new location.
 

Paul Cascio

SGF, Supreme Grumble Framer
Ed, considering your current situation, I think such a move would be too high risk at this time. I understand you do not want to miss opportunities, and I agree with that, but I would want to spread the risk rather than rolling the dice, possibly biting off too much, and placing your entire framing empire at risk.

Instead, I would try to form joint ventures with the existing owners (you have plenty to choose from, and you're holding the cards) that lets them benefit from your proven formula and valuable name, thus giving them a renewed chance to be successful, and remain in the business. (I'm guessing that mostly those who are failing want to get out.)

You benefit by getting experienced operators in place, who will retain responsibility for the operating expenses, contribute more advertising dollars to promote the new name, and a portion of revenues that exceed the previous levels. You'll also get control over all major decisions, and if it's mutually agreeable, an option to purchase, or at least the right of first refusal. You give up some profit in exchange for those benefits. But you substantially reduce risk without losing opportunity.
 

FramerCat

SGF, Supreme Grumble Framer
Ylva, I wouldn't be looking at opening a new shop from scratch but I do actively look into filling the void of a closing shop if I think it has potential. It does take some time for new acquisitions to start to pull their weight and that's the real expense of one of these take overs, especially with the uncertainty of the current local economy. All of these potential investments are outside of my current area of influence. My Ellicott City shop is basically self sufficient and my Timonium shop probably could be.

Paul, I knew there was a reason you are one of the industry's most respected educators. That is a very good idea. I know that won't be possible with one of the shops but I could definitely look into that potential for the others. It sure doesn't hurt to ask. Thanks, great idea.

Ed
 

David Waldmann

SGF, Supreme Grumble Framer
Frame shops are closing here, and I'm surprised at the volume.

Anyone have any good news? Any new entrants?
My piece of good news is that there are a surprising number of "younger"* attendees at the WCAF. Whether they can be successful or not is the great unknown, but the GenX/Y/2Ks haven't completely given up on custom framing as a career.

*below retirement-as-a-paying-hobby age. In fact I would say a good number under 35.
 

CB Art & Framing

SGF, Supreme Grumble Framer
I am struggling with the same question. How to move forward...?

Firstly, I don't believe anyone just gives up on a profitable business.
Also, there is no escape the minimun overhead of a retail location and no matter how much we believe we can do better than the previous owners, chance are we won't.

Secondly, I think many of us "oldies" still have to come to terms that our old business model has long gone the way of the Video Rental Store.
It started with Blockbuster (aka "Big Box"), followed by Vidieo on Demand, Netflix etc.


I still believe there is a demand for Wall Decor, Memory Preservation and Photo Display (these are the core of our business).
With our knowledge, customer service skills and commitment there is a future.
But it's time to reboot.
 

David Waldmann

SGF, Supreme Grumble Framer
Firstly, I don't believe anyone just gives up on a profitable business.
Also, there is no escape the minimun overhead of a retail location and no matter how much we believe we can do better than the previous owners, chance are we won't.
Well, it may be a matter of pride, a matter of not knowing all the details, or it may actually be a matter of fact. Let's face it - there are a lot of hangers-on out there that have not:
  • Spent time on The Grumble
  • Gone to trade shows
  • Read trade mags
  • Networked with their peers
  • Continued (if they ever really "started") their education
  • Took non-framing-related business classes
  • "Invested" (either time or money) in a good banker and accountant
  • "Bothered" to get a POS or embrace the internet
  • (I'm sure you can add to the list)
In other words, they just treated their business as an art or a hobby; where you do what you love regardless of whether it's profitable, even if you've fooled yourself into thinking it is profitable.

Bottom line, there's a good chance that a savvy operator has more than a snowball's chance to make a successful takeover.

I guess another question is - why do you want to do this? My company is pretty small. Very small, by "manufacturer" standards. I'm very happy with the way it is; it provides for both me and my employees far beyond my wildest dreams of 30 years ago. However, I do look to continue expanding, primarily so I can better serve our customers, by gaining additional capital to invest back into the company and provide better and more consistent product. However, I don't want to double (maybe over 20 years), because I know that for me, that will mean drastic changes at many levels. We doubled over a period of 4 years, roughly 10 years ago, and it was very stressful for everyone, including our customers. But, everyone is different.

One last(?) thing to consider is that as the owner of all these businesses (or, one larger business, depending how you structure it) any additional profit will be taxed at your highest rate, which also may increase to the next bracket. Further, if the previous owner was taking a salary, and you are not replacing that position, your profit will increase by eliminating that expense. Profit is a good thing, but you have to be aware of the possible consequences.
 

i-FRAMER

MGF, Master Grumble Framer
I would agree with David. I have met many framers who are basically sitting on their hands waiting for customers to walk through the door like the good old days. They would prefer to whinge about how bad things are rather then do something about it.

The other thing with size of business is also spot on. We used to have 2 employees, which not only added to expenses, but stress to make sure there was enough work all the time. After we got rid of out last employee, not only was that $50k back in our pocket, we increased our prices so as not to have the work quantity and sales $ actually went up 50% over the next 2 years.

We realised that we should have down sized years ago to be much better off.
The only down side to that is that it will make it harder to sell our business, as we are the business and can't sell it with staff in place to make it easier for new owners.
 

CB Art & Framing

SGF, Supreme Grumble Framer
I'm enjoying this thread.

Just my take.
During the great recession, many frameshops in my area closed. More recently, may more (some well established larger, some small).
In years past it seemed that you could build up your business and when time came to "cash out" or retire you could typically sell it for maybe $100-$250K (depending on size, profits etc).

What concerns me curently & moving forward, is that pretty much none of these closing business could sell the "business". Alll just got rid of asstes for pennies on the $.
 

i-FRAMER

MGF, Master Grumble Framer
You are spot on CB. My plan is That when i ready to sell to allow 2 years. 2 years of income would have been the asking price. So if it does not sell in the 2 years i look at it as though i got my asking price through keeping it for 2 more years. Then whatever i get will be spending money.
 

David Waldmann

SGF, Supreme Grumble Framer
We realised that we should have down sized years ago to be much better off.
The only down side to that is that it will make it harder to sell our business, as we are the business and can't sell it with staff in place to make it easier for new owners.
Yes - you have to look ahead to your end goal. Will you be happy just* "earning a wage" during your tenure, and selling assets for a fraction of their cost? Or do you want your business to be your Primary Retirement Funding platform?

*my intention is not to minimize that concept. Really, the whole thing about Business is that its primary purpose is to serve the owner. So the end goal is up to the owner.
 
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