Which is better for you?

The Choices

You might be interested in this industry because you have the opportunity to purchase an existing game store. If you have read my introduction to this column, you know that’s how I found myself a retailer. I had considered opening a game store for several years, so when a chance came along for me to jump in, I took it. I never regretted it.

If the opportunity to buy a store comes your way while you’re planning your entry into the industry, I recommend that you seriously consider a purchase before you commit to opening your own store from scratch. With planning and awareness, you can overcome most of the negative points to buying an existing store, leaving you with nothing but the good side.

This discussion is a comparison showing how buying and opening differ. It doesn’t discuss due diligence, partnerships, analyzing sales records or other issues. That subject’s not even on the schedule at present, but it might be worth adding. You tell me.

Advantages

Opening a store offers only a few advantages, but those benefits are fundamental and significant.

Cash-Flow

The main advantage is money. While purchase prices vary, you can often purchase a store for not much more than the cost to open a new one. You still need a capital reserve to remain open, but you have an advantage.

When opening a new store, you might have several months pass between signing your lease (and thus paying rent and repaying a loan) before you open your doors and begin collecting sales. When you buy, you can open your door the same day. That puts money in your pocket sooner, and that saves you interest on your loans and lets you get maximum use out of that lease.

Furthermore, sales levels at an existing store are likely to be significantly higher than a brand-new store, even if the existing store has suffered a loss of sales over time. You might reach your break-even in 3 months instead of a year. The difference could reduce your need capital reserve by tens of thousands of dollars.

Easier Financing

It might be easier to obtain financing to purchase an existing business, especially if the business you’re buying has a good credit history. Also, the seller might be willing to finance the purchase. If he does, you merely have to meet his credit requirements, and those are likely to be more lenient than a bank’s requirements.

Business Relationships

You’ll already have accounts in place for utilities, credit card processing, and other business needs. In the case of most of these accounts, you’ll be able to simply notify the company of the new information. Nearly all they care about is making sure they have your name and billing information.

Unfortunately, the largest and most important accounts—your game distributors—will treat your account as totally new. You’ll have to reapply for credit and most of them will insist on putting you on a COD basis until you establish a history. You can compensate somewhat if you have a business credit card, which will allow you to defer payment and avoid COD charges.

Despite this paperwork difficulty, the distributor knows your store. Your sales reps can make purchasing recommendations based on previous sales history. Learn to tell which sales reps you can trust and which are simply out to make a sales goal.

Staff

The store might have staff you wish to keep. Even if you choose not to retain any of the old crew, you might already have volunteers in place to promote various game lines. It’s possible that you can negotiate for the old owner to work for a time as part of the purchase agreement. Having the former owner around could make the adjustment easier for the customers.

Disadvantages

The disadvantages of opening your own store are more numerous than the advantages. One thing common to most of these disadvantages is a restricted range of choices. Opening is definitely the better choice if you want total and immediate control over your store.

Location

At least initially, you’re stuck with the seller’s choice of location. You can bypass that restriction by not agreeing to a lease assignment (in which the seller essentially has you take over the lease for him) or by timing the purchase to coincide with the end of a lease. If you choose this route, you must have your new location up and ready to go or you’ll lose considerable sales and customer confidence during the down time.

Along with the location comes the existing lease. The seller could have signed a horrible lease, and you don’t want to find that out the hard way when the landlord asks you for $6,000 in CAM charges at the end of the year. If you do accept a lease assignment, scrutinize the lease carefully. It might be better for you to approach the landlord independently and ask for a new lease.

Reputation

Until you build your own reputation among the customer base, you’re stuck with all the good and bad reputation the previous owner established. If the store has a reputation for cheating players, you have it now. If customers associate it with bad customer service, you’re stuck with that poor image. It might take a year or more for you to establish a different reputation.

Image

Until you deliberately make changes, you’re using another owner’s selection for your fixtures, uniforms, paint scheme, signage, etc. If you have to change all of these things to make them the way you want them, you might not have saved as much money as you thought. Making changes immediately might alienate some of the existing customers.

Product Selection

The existing store might have product lines you don’t plan to support. Liquidating those lines might cost you some of your existing customers. The liquidation will also take time away from other projects.

Buying a store isn’t easy by a long shot. Easier than opening a new one—maybe.