Opening a Paint Your Own Pottery or Contemporary Studio
Part Seven - Buying an Existing Paint Your Own Pottery Studio
By Connie Speer - The Pottery Consultant
Thinking about buying someone else’s studio?
Read on – it may or may not be a good idea.
Occasionally someone who wants to open a paint your own pottery studio runs across an opportunity to buy an existing studio. They think it would be a great way to facilitate the process and bypass all the hassle of scouting locations, build outs, researching and buying all fixtures, equipment supplies and the myriad of other issues.
If you are considering buying an existing paint your own pottery studio, these are things you need to know and be aware of before signing on the dotted line.
What the studio is worth- How do you know?
A seller can claim anything in terms of how much the studio grosses each year. And you have to know the gross sales and expenses AND the net. You will most likely have to sign a non-disclosure agreement before you can see their financials. The financials should be audited and include spreadsheets showing all income and expenses. You should also ask for verification that all taxes have been paid in a timely manner, lest you end up in a nightmare of tax liabilities.
Asking Price -
I’ve seen as little as $10,000 and as high as $150,000. $10,000 might seem like a great deal vs. the possible $80,000 or more to open up your own place, but if all the issues are negative – bad location, new higher lease, old equipment and supplies, no mailing list, then don’t waste the money.
What Are You Buying?
Location- keep in mind all issues as if it was a brand new paint your own pottery studio. Know how much time is left on the lease; it could be going up in price if a new lease will need to be negotiated. The surrounding population and household income of that population are still critical issues for you. Is the strip center going down-hill or is it still strong for the other retailers? Are the best neighbor tenants staying or leaving?
Regarding the assets such as tables, chairs, computer, kilns and other store fixtures, take into consideration these issues:
1) The age and make of the furniture – how is it holding up, does it still look nice or will you have to replace it due to wear and tear or you wanting a new look?
2) The age of the equipment - such as the kilns, dipping vat, kiln furniture and their warranties, repair or replacement. And a very important side bar here has to do with buying the kilns or ANY used kilns and thinking you will put them in your new location elsewhere. This happens more often than you think and my heart sinks when I hear people say this – “I can buy this used kiln. It looks fine and I’m getting such a good discount off rather than buying it new”.
2A) There is a high probability that the kiln will not work in the new location and will have to be rewired. People make this mistake all the time. You order the kiln TO the existing wiring. You don’t buy the kiln and then wire the space TO the kiln. Yes, you still have to do wiring to install the proper copper wire, breaker size and NEMA configuration, but let me give you an example:
If the wiring on the kiln you are buying is 208 Volt, Three Phase and you are going into a new location where the existing wiring is 208 Volt, Single Phase, or 240 Volt, Three Phase or anything else, then you will have to completely rewire the kiln. It is not quite as simple as this, but for now it should give you an idea of the issue. Especially when someone buys a kiln from someone that had it in their home and they think they can put the kiln into a commercial location, then they find out the hard way that it won’t work! Don’t let this happen to you. First find out what the wiring is AS IT CURRENTLY EXISTS, then order the kiln to those specifications.
2B) If you are risking your credit through a business loan, or your home through a home equity loan or an investor’s money (or the many other ways people choose to fund their new business!) and the backbone of this business is the kiln and how it fires all those pieces, do you really want to take a chance in your first year on a piece of equipment that does not have a warranty? I would not.
3) The bisque and color – where did the bisque come from? Was it from a reputable supplier? How long has it been sitting on the shelves gathering dust? How old is the paint? Is it still good or were bottles often left open on tables and dried out? Did they ever pour paint unused by customers back into those bottles? (Awful to think about, but some studios try to get away with this. The paint can get contaminated. I think it is just better to start out giving customers smaller amounts and then giving them more when they need it, rather than letting them serve themselves and wasting too much – but that’s another article!)
The Mailing List – this is probably one of the single most important items in determining what a paint your own pottery studio is worth. If a studio owner has diligently worked at creating and maintaining a current mailing list for snail mail and e-mail, then it increases the value of the studio. But I have heard stories from my customers that the selling owner has a very tiny mailing list or worse, none at all. After 2-3 years, a respectable mailing list that has been maintained should consist of at least a thousand legitimate names and addresses. Less than this and the selling owner wasn’t working very hard to grow that business, and I would seriously doubt un-audited financials that seem to have great numbers.
Other Important Issues -
1) How clean is it? – If the studio looks dirty and/or cluttered, it may have a bad reputation with past customers. Try to talk to existing staff and existing customers. Do they like the studio? Will they stay or come back?
2) How old is the studio? Has it run its course in the community? Have customers stopped coming? Why? Did the present owner continue to offer new bisque designs, new craft trends, new classes and techniques to keep customers interested?
3) Relationship with vendors – Does the present owner have a good relationship with the vendors it buys from? Do they owe any outstanding bills to anyone? If so, you may be required to pay those bills to keep doing business with those needed vendors.
Get the answers to all of the above issues before you make your final decision. You will still need to do business plan, start up budget, cash flow projections, and personal financial statement. You will still need to do EVERYTHING as if you were starting from scratch, but the upside is that you won’t have to do build out.
For studio owners trying to sell their business, this article should also help you get ready to sell it. If you adhere to all of the above points, you should be able to get more.