Growing through acquisition, and moving to better serve customers
Jennifer Gannon Owner, BonaVista Leisurescapes Toronto, Ontario, Canada
After 10 years on a busy city street in the heart of Toronto — near the neighborhoods we’ve been serving for decades, with metered street parking out front of our store — we moved a half mile away, one street south of the main road to a small strip plaza with free parking.
Our overhead went down 15% due to a smaller overall store footprint, but our sales went up over 25%. I think the free parking [and getting] off the main road that has been under construction due to a subway system being built has a lot to do with [sales growth].
We are not planning to expand to another location, as it’s hard to find knowledgeable staff and reasonable real estate in this city.
Finding a strip plaza with other like-minded retailers who serve a similar, affluent demographic is a good move that I wish I had done sooner.
Brian Wasik Owner, Spas of Montana Missoula & Helena, Montana
I haven’t started any of my stores from scratch; I purchased all three of my hot tub stores and my pool store from existing owners. I read an article in *SpaRetailer five or six years ago that talked about dealers having no exit plan. It really got me excited, so I put my name out there. That’s how Jacuzzi and everybody else does it: They can’t get more market share, so they buy somebody. That’s where I got the idea.
In March, I bought a store in Portland that’s three states and about a 10-hour drive from my other stores. I’m dealing with new state laws, brackets and business names. That was a huge headache I didn’t realize going in; you can’t open a bank account without being in person. You have to be prepared for bumps and hurdles. I’ve got advertising money I want to spend, but it’s a market I know nothing about. I do newspaper and commercials in Montana — you’re talking $40,000 to do the ads in Portland that I’m doing in Montana for $5,000. You need to be pretty darn sure things are going to work before you outlay that kind of money.
When you’re evaluating a business to buy, it starts with money. Make sure you can accept the funding. You have to take the hit in the beginning. I’ve looked at businesses that didn’t have enough cash flow — I look at the history on these businesses. You need to see they’re at least flipping the inventory enough times. Some mom-and-pop dealers, even to come in and make changes, the effect of those changes will take too long before you can see enough cash flow to stay afloat. That was a priority on this last deal. I got creative in formulating the deal so that the previous owner still took on some risk.
Other than money, look at what you can bring to the table. What can you do differently and better than before? And will that cost make a difference? [The previous owner] was already running [the Portland store] remotely, but by the end of the third day of me owning it, the store manager said, “Brian, I’ve talked to you more in this week than I’ve talked to him in the last two years.”
Over the next five years, I want to buy more stores. That’s where you can really scale.