Thread: Sand paper man is closing

Originally Posted by Mobyturns

One of the benefits of a free enterprise system. Same has occurred with deregulation of many once highly regulated markets supposedly to promote competition.
We have seen retailers, who are actually resellers, fail as their margins disappear because they have little control over the pricing structures.

Almost all areas of business are now dominated by a small number of firms - oligopolies or even monopolies.

They are often called “category killers” and their primary business objective is to kill smaller competitors. They talk about vigorous competition, but it is just talk. Staff openly walk around smaller competitors with their clipboards noting prices - price matching? Or threatening behaviour - “you have the temerity to compete on price and we will squash you!”

Their marketing is designed to impart the illusion of competition.

Originally Posted by GraemeCook

Almost all areas of business are now dominated by a small number of firms - oligopolies or even monopolies.

They are often called “category killers” and their primary business objective is to kill smaller competitors. They talk about vigorous competition, but it is just talk. Staff openly walk around smaller competitors with their clipboards noting prices - price matching? Or threatening behaviour - “you have the temerity to compete on price and we will squash you!”

Their marketing is designed to impart the illusion of competition.

That’s sounds just like the “Wall mart effect” that wiped out small business in America.

Cheers Matt.

That is why we desperately need the Mum & Dad businesses that provide excellent service, with exceptional knowledge and advice because they actually have considerable experience in the market / trade. It is well worth the small price premium to receive that support.

We all know the (lack of) depth of knowledge available in the larger tool retailers.

When trying to sell a small business as a going concern the stock on hand is one component of the price, but so is customer "goodwill" which is very hard to put a value on. The seller assumes that all existing customers will stay with the business, and puts a considerable value on this. In reality, "goodwill" can simply evaporate in no time if customers don't take to the new owners. A few years ago we had a coffee shop/restaurant in the village which was THE place to go. Owned by a local for many years, always packed out, customers queued up outside waiting for a table, definitely the place to mingle. I'm sure the owner had plenty of healthy turnover data, customer "goodwill" was off the charts, and he eventually sold up to move on and do other things. For whatever reason, the new owners didn't click with the locals (prices went up, serving sizes went down...), and within 3 months the entire local clique had relocated to a new cafe over the road. Within 12 months the previous centre of village life was virtually empty, back on the market, it took over a year to sell (likely for a fraction of what had been paid for it), closed down completely, and later re-opened as a new (and very popular) Thai restaurant. The punters can be VERY fickle !

Originally Posted by Simplicity

That’s sounds just like the “Wall mart effect” that wiped out small business in America.

Absolutely, Matt.

The term "category killer" was created by a professor at the Harvard Business School c.1980 after examining the effect on neighbourhoods from the opening of a Walmart.

Originally Posted by Mr Brush

When trying to sell a small business as a going concern the stock on hand is one component of the price, but so is customer "goodwill" which is very hard to put a value on. ...

The punters can be VERY fickle !

With a lot of businesses the biggest asset, by far, is goodwill.

I was a customer of a very busy coffee shop and cafe that had a similar fate. It was started by an "absolute coffee nerd" with a pre-WW1 coffee roaster and they roasted coffee most mornings - cafe smelled wonderful! It quickly evolved into four inter-related businesses.
* Wholesale business selling beans and ground coffee to cafes, restaurants and specialty stores,
* Retail sales of beans and ground coffee,
* Wholesale and retail sales of specialty teas, and
* Coffee shop - a very busy little cafe.

Then the owner wanted to retire and split the business into two and sold both halves.

The wholesale coffee business was sold to one gentleman who moved it to an industrial estate.
The tea business, retail coffee and the coffee shop/cafe was sold to someone else.
Both were thriving businesses and, I presume, included healthy allowances for goodwill.

Now, the wholesale coffee business is thriving. The owner tells me that, unexpectedly, many of the retail coffee customers approached him and he then established a retail delivery service. His business's goodwill has undoubtedly grown.

The cafe is still existent but with very few customers, all of the old staff have left and the retail coffee sales and the tea businesses have disappeared. Their cafe coffee tastes like a supermarket blend. Their goodwill must now be a negative number - so sad. Every time I pass the cafe I expect to see a closed sign!

The punters can be very discerning. Some owners are in the wrong business.

One of the issues we have in selling our business is that goodwill is not worth very much.
We are not like your local garage where you supported the local mechanic and his crew and built up generations of loyal customers and goodwill. Back in the day you did not venture anywhere else.
Since the start of the internet this has changed the way people shop.
They are always looking for the cheaper price so no loyalty there.
We do have a good following but if we were not around then our customer base will shop elsewhere.
As mentioned above we also do have a good local following , but I do know that there is a very fickle part that do shop around for that extra $ cheaper.
When we do retire and they don't have easy access to our shop and have to do all their shopping online then maybe they will realise how good that actually had our service and advice we freely gave to them.

Businesses like yours, Jim, are not appreciated until you are gone and then Jo-Blo bellyaches like hell.

Originally Posted by Jim Carroll

One of the issues we have in selling our business is that goodwill is not worth very much.

Au contraire, Jim.

You are the goodwill, and you are retiring; not being sold with the business.

I hope for your sake Jim that you do get your wishes and can sell but I also hope the new owner continues the same business model. I also hope they keep the shopfront where it is. Always good to be able to drive 15 minutes and pick up those few "necessities".