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Buying A Mailbox And Packaging Store That Posts Profits: Tips For Buyers


Buying A Mailbox And Packaging Store

While some retailing ideas that were turned into operating businesses thirty years ago, enjoyed success for awhile and then became obsolete or unpopular (think of video rental stores), others have thrived as the markets they serve have expanded. One good example of an industry that has grown up in the past few decades is the store that provides mailboxes for rent, along with packaging and mailing capabilities and a variety of other services that are useful for individuals and particularly for small businesses.

Millions of Californians have used these services at one time or another. And most of us know of at least one successful company that was aided in its growth by being able to rely on a mail and packaging service rather than incurring the expense of developing in-house capabilities. And as the number of small businesses has expanded throughout the state, these specialty stores also have grown in number, and in size.

Buy Existing Or Start From Scratch

For those interested in getting into this kind of business, one of the first questions to address is whether to start  the business from scratch or purchase an existing company that is providing mailboxes and the services customarily found associated with a mailbox rental facility. There is no right answer to this question because the strategy that works well for one person may not appeal to another. In most cases, people who picture themselves in this kind of enterprise choose to find an operating company that has a complete infrastructure in place, all of the equipment needed, a base of customers, a trade name that is known in its market area, trained employees and a system for handling the business that leads to profitability. The person undecided about which approach, might want to examine the businesses for sale in this industry and also look for suitable retail spaces that can be rented, price out the costs of building a complete business and try to estimate how long it might take before the business is self-sufficient (no more infusion of cash from the owners) and even profitable.

For those who want help setting up the business but don't want to answer to a franchisor or incur franchise fees, there are companies that specialize in building a new company in this industry, even helping the individual get financing to pay for equipment, leasehold improvements, marketing and working capital.

Absentee Or Working Owner

Another issue to be faced is whether to become actively involved in operating the business--perhaps on a day-to-day basis, or to be an absentee owner who depends on staff to take care of customers and oversee the many other functions needed to keep the company running. One way to approach this problem is to conduct some calculations based on average discretionary earnings enjoyed by owners who are actively engaged with the business versus the money collected by those who drop in to the store occasionally but rely on staff, or manager reports to know how well things are going--or if there is a problem. One industry average places the discretionary earnings figure of active owners at  30 to 35 percent of gross revenues. Meanwhile, absentee owners reportedly collect an average of 20 percent of gross. This can suggest a simple calculation:  A company that generates annual sales of $100,000 by offering mailbox rentals and other services will reward an active owner with $10,000 to $15,000 more per year than the absentee owner. The other part of the active-vs-absentee owner calculation recognizes that businesses with owners directly involved in daily operations tend to grow at a faster rate than those operated by managers rather than owners. Because there is little reliable data to quantify the difference in business growth rates in these two different situations, it is difficult to assign a dollar value the active owner will realize, compared to the discretionary earnings of the non-active owner. And while growth of a company usually contributes directly to its value, it is difficult if not impossible to determine how much an active owner is contributing to the value of his or her business compared to the increase in value that might occur with a company owned by someone who is not actively involved.

Like the question about whether to start from scratch or buy an existing business in this industry, the "right" answer depends on the interests and talents of the person whose money will be invested in the company.

Other Profit Potentials In The Business

Most mailbox rental stores do more than simply collect a fee from each individual who can use the store's address to receive mail and packages. Charging for packaging and shipping--both the materials and the service, is a logical extension of the mailbox business, provided there is room in the premises for the needed equipment and supplies. Some operators also offer photo copy and printing services, which can add to the revenues and profits of the business. And there are other services often involved in this business. When you examine a company that provides a full range of mini-businesses--rubber stamps, business cards, fingerprint service, notary public, brokering printing and sign making, document faxing, and selling a selection of office products, greeting cards and gift items--you're looking at a company that may have maxed out its potential.  Some advisors suggest investing in mailbox companies that have the space to add services but have not yet built the business to its full potential.

Value Of A Mailbox And Packaging/Shipping Business

One of the most obvious considerations when planning to buy a mailbox and packaging/shipping business is how much to pay for a company that seems a good candidate for purchase. The industry standard multiple ranges from one-and-one-half to two-and-one-half times average annual (past three years) owner's discretionary earnings. Whether the firm's value should be placed at the top, the bottom or somewhere in the middle of that range, depends on the length of the lease, the location, the condition of the premises and equipment and--perhaps most importantly--terms of the deal. A seller willing to carry-back one third or more of the purchase price with a note at a low rate of interest, is adding to the value of his or her business. By contrast, the owner who requires all cash at close of escrow, will probably have to discount the price to complete that kind of transaction.

As long as the growth trend for small businesses continues in California, enterprises such as mailbox and packaging/shipping stores are expected to benefit. The buyer interested in this industry should look at suitable candidates and incorporate these considerations while conducting the search.

More Info Regarding  How To Buy & Sell Postal Stores:

Mailbox, Shipping Stores For Sale & Wanted To Buy Requests In California:

http://www.bizben.com/business-for-sale/shipping-packaging-postal-mailbox-businesses-for-sale-type-california-ca.php

Business Brokers, Agents Who Assist With Buying And Selling Shipping, Mail Box Stores:

http://www.bizben.com/business-brokers/shipping-packaging-postal-mailbox-businesses-business-brokers.php

Mailbox, Shipping Store Resources To Asssist You With Consulting, Financing, Due Diligence:

http://www.bizben.com/business-resources/shipping-packaging-postal-mailbox-businesses-resources-california-ca.php

Detailed Articles And Blog Posts Regarding Buying And Selling Shipping/Mailbox Stores Businesses:

http://www.bizben.com/blog/shipping-packaging-postal-mailbox-businesses-blog-posts.php

Another Item . . .

Let me know if you need any assistance with either buying, searching for, or sell a California mailbox, shipping service/store - I will point you in the right direction. If you have a specific question about buying and selling a postal store contact me and I will get an answer for you.

Categories: BizBen Blog Contributor, Buying A Business, How To Buy A Business

Contributor:

Peter Siegel, MBA
Areas Served: All Of California
Phone:  925-785-3118 Cell, 925-785-3118 Text
Founder Of BizBen.com (since 1994). I am the Lead Advisor for the ProSell, ProBuy, & ProIntermediary Programs. I consult daily with buyers, sellers, and brokers daily about buying and selling California small to mid-sized businesses. Call 925-785-3118.






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Michael Davidson, Business Broker - Southern California

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