( Side) Business opportunities, work/risk involved and expected returns

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skor99
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( Side) Business opportunities, work/risk involved and expected returns

Post by skor99 »

I have started thinking about side hustles / businesses after retirement. It could still be a few years down the line, but what are the experiences of people in some of the following businesses - how much investment/work/risk is involved and what are the typical earnings/returns ?
I tried to look for such information on the web, but couldn’t find anything good.

I understand that location etc comes into play but am trying to understand ballpark numbers for a typical average location/size business in a MCOL area. Hopefully such information could be valuable to other folks as well.

Average Gas station -

Average Fast food franchise ( not the ones hard to get like Chick FilA)

Average size independent liquor stores

Any other easy to open business ( except restaurants)
hiduplex
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Re: ( Side) Business opportunities, work/risk involved and expected returns

Post by hiduplex »

skor99 wrote: Tue Nov 30, 2021 9:41 am I have started thinking about side hustles / businesses after retirement. It could still be a few years down the line, but what are the experiences of people in some of the following businesses - how much investment/work/risk is involved and what are the typical earnings/returns ?
I tried to look for such information on the web, but couldn’t find anything good.

I understand that location etc comes into play but am trying to understand ballpark numbers for a typical average location/size business in a MCOL area. Hopefully such information could be valuable to other folks as well.

Average Gas station -
I feel like gas stations are a scale of Economics game my grandfather built and operated his own gas station and auto repair shop from the 1960s until the 1980s he sold the 1 station for 100k it was bought up by a family that owned a small chain of gas stations they sold their gas station chain at about 2 million per gas station when you do the math I think the margins are low the competitiveness is high and the corporate chains just really dominate this Market.

Average Fast food franchise ( not the ones hard to get like Chick FilA)
Again I think with these types of businesses it would be a mutu location owner not just one store they would have a high Buy in and they wouldn't want you to just run one store I also feel like with a franchise you surrender your own freedom and your own ability to operate your business how you want to just having a corporate boss again telling you how and what you can do with the illusion that you can make money more so with this than other ways.


Average size independent liquor stores
Booze cigarettes payday Lending pawn shop places like that I think could be pretty lucrative and you could have your own business with that independently but what type of clientele would you be dealing with? would you have a secure facility lots of cameras maybe bullet proof glass or something depending on the neighborhood you're operating out of would you feel comfortable interacting and dealing with these customers. are you knowledgeable enough on managing a place or at least managing the manager that people wouldn't be able to get away with skimming money from you or doing other Shady acts?

Any other easy to open business ( except restaurants)
What I do
I have my own service business but I basically provide technical support from telecom to computers smartphones websites etc.. I have minimal overhead and Capital tied up in it. But it is active work not passive income.

I also owner occupy a rental duplex and I feel that rental properties are a good diversification and Revenue generator. If it's a nice enough place that you're willing to live in it then you should be able to rent it out and find someone who would be willing to stay in it.
hotscot
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Re: ( Side) Business opportunities, work/risk involved and expected returns

Post by hotscot »

I do not like the term 'side hustle'
It's a job. Not a legally questionable or deceptive means of obtaining money.

In saying that.
I 'retired' 8 years ago and then came into contact with an organization that needed my skills. (Science and sales)
They're in Europe but needed someone to navigate the government sales processes in the US.
When the Government National Labs get budget they seek me out. I don't advertise.
Usually 100K pa in my pocket. It's all I need/want.

Average 90 mins a day of actual work
Revenue many millions a year.
hiduplex
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Re: ( Side) Business opportunities, work/risk involved and expected returns

Post by hiduplex »

hotscot wrote: Tue Nov 30, 2021 11:04 am I do not like the term 'side hustle'
It's a job. Not a legally questionable or deceptive means of obtaining money.
I think the side hustles and the grind and this whole hustling culture thing is kind of a sham too it's just a way to pay people less money and give them no benefits it's a part-time job that could be self-employed but uber and some of the other apps the people use for their side hustles are just Silicon Valley scams.
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skor99
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Re: ( Side) Business opportunities, work/risk involved and expected returns

Post by skor99 »

Appreciate the above responses, but would also like to request responses in the context of the businesses I have mentioned, as I ( or most ) people would not have the specific science/sales/technical skills mentioned.
Pretty much anybody can buy a gas station or a fast food franchise and therefore I am looking for average capital needs and average estimated gross/net earnings from those businesses.
broncocountry25
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Re: ( Side) Business opportunities, work/risk involved and expected returns

Post by broncocountry25 »

I think most of those side businesses success comes down to who your daily operator is going to be. I think in theory they sound "easy" but anything with people is not necessarily easy.

If you set up good systems and align the GM of whatever you run to be incentivized to go above and beyond with some sort of upside for them I think it is key.

We haven't done one of these...yet. But instead have started with businesses that require low capital investment but have high margins. I sell real estate on the side and my wife does bookkeeping on the side. We use my extra income to invest and hers to pay for a new expense daycare! We also have 2 rental properties.

I think for the right person and opportunity all those can be profitable. With the internet you can deep dive into each individual business idea and find a ton of good help.

Before you do that just make sure its something that aligns with your overall goals, because it will take up more of your time.
make_a_better_world
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Re: ( Side) Business opportunities, work/risk involved and expected returns

Post by make_a_better_world »

Out of all you listed, I like gas station the least. But I would love a charging station and this is what I would look into. I think it's important to focus on where the market is going.
adamthesmythe
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Re: ( Side) Business opportunities, work/risk involved and expected returns

Post by adamthesmythe »

skor99 wrote: Tue Nov 30, 2021 9:41 am I have started thinking about side hustles / businesses after retirement. It could still be a few years down the line, but what are the experiences of people in some of the following businesses - how much investment/work/risk is involved and what are the typical earnings/returns ?
I tried to look for such information on the web, but couldn’t find anything good.

I understand that location etc comes into play but am trying to understand ballpark numbers for a typical average location/size business in a MCOL area. Hopefully such information could be valuable to other folks as well.

Average Gas station -

Average Fast food franchise ( not the ones hard to get like Chick FilA)

Average size independent liquor stores

Any other easy to open business ( except restaurants)
1. I'm pretty sure gas stations are not easy to open (permits?)

2. Liquor stores need licenses (difficult or limited).

3. This is a particularly hard time to hire and retain low-pay workers for fast food.

4. For many of us, the best opportunity for side income is where we have particular and difficult to find knowledge or expertise. That is, related to our day jobs. Then the question becomes whether more can be made by being better/ more committed to our day job or by going outside.
Topic Author
skor99
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Re: ( Side) Business opportunities, work/risk involved and expected returns

Post by skor99 »

adamthesmythe wrote: Tue Nov 30, 2021 12:53 pm [quote=skor99 post_id=6356449 time=<a href="tel:1638286887">1638286887</a> user_id=122440]
I have started thinking about side hustles / businesses after retirement. It could still be a few years down the line, but what are the experiences of people in some of the following businesses - how much investment/work/risk is involved and what are the typical earnings/returns ?
I tried to look for such information on the web, but couldn’t find anything good.

I understand that location etc comes into play but am trying to understand ballpark numbers for a typical average location/size business in a MCOL area. Hopefully such information could be valuable to other folks as well.

Average Gas station -

Average Fast food franchise ( not the ones hard to get like Chick FilA)

Average size independent liquor stores

Any other easy to open business ( except restaurants)
1. I'm pretty sure gas stations are not easy to open (permits?)

2. Liquor stores need licenses (difficult or limited).

3. This is a particularly hard time to hire and retain low-pay workers for fast food.

4. For many of us, the best opportunity for side income is where we have particular and difficult to find knowledge or expertise. That is, related to our day jobs. Then the question becomes whether more can be made by being better/ more committed to our day job or by going outside.
[/quote]

Buying existing gas stations/liquor stores would have the needed licenses and permits. My question is how much money do you need to buy an average gas station/ liquor store and how much can somebody make ?
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Sandtrap
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Re: ( Side) Business opportunities, work/risk involved and expected returns

Post by Sandtrap »

skor99 wrote: Tue Nov 30, 2021 9:41 am I have started thinking about side hustles / businesses after retirement. It could still be a few years down the line, but what are the experiences of people in some of the following businesses - how much investment/work/risk is involved and what are the typical earnings/returns ?
I tried to look for such information on the web, but couldn’t find anything good.

I understand that location etc comes into play but am trying to understand ballpark numbers for a typical average location/size business in a MCOL area. Hopefully such information could be valuable to other folks as well.
1
Average Gas station -
2
Average Fast food franchise ( not the ones hard to get like Chick FilA)
3
Average size independent liquor stores
4
Any other easy to open business ( except restaurants)
Questions:
a) How much do you have to invest?
b) Do you have to take a business loan?
c) Do you have sole proprietorship business experience?
d) Are you currently employed full time and are looking for this in addition to it?
e) Would you have adequate (substantial) working capital in addition to initial buy/build/purchase and start up costs?
f) Do you have experience with employees as an "employer"?
g) How many hours per week can you devote to this endeavor? (willing?)
h) How many days per week can you devote to this endeavor? (willing?)

Per your items:

1. Gas stations are cheap if they are close to the end of their overhaul dates (they have a lifestpan) and are not turning a profit.
a) Profitable gas stations are rarely for sale.
b) You need to be able to devote 24/7 100% to get this off the ground if new or to turn it around if used.
c) Do you have $3-500k??

2. Fast Food Franchises. IE: Little Caesar's Pizza, require new owners to go through their courses in every position in the store as well as owner to ensure success. Franchises do not want badly run businesses to represent their brand.
a) Franchises have a lifespan. IE: some need to be overhauled and renovated every 4-7 years as part of the franchise agreement.
b) Franchises are for sale. Profitable ones cost more.
c) New Franchises can be built and then opened in new locations.
d) You must be able to devote all of your waking and sleeping hours to this effort. (business person).
d) Do you have $3-500k?

3. Operating liquor / convenience stores do rarely come up for sale. Building a new one is something else.
a) You absolutely must devote 24/7 to get this business off the ground if new, or turn it around if used, or keep from being embezzled, etc, when running.
b) Do you have $3-500k? for this.

4. The word "easy" and "profitable business" as a sole proprietor, owner, are oxymorons and contradictory.

5. Returns:
a) It can take from 3-5 years for a business to break even on it's initial build and start up.
b) Returns can go from "loss" to "break even" to "profitable" over that time. It will fluctuate.
(thus, "deep pockets" are needed)
c) Often, the businesses you mention go from "making a living" when owning one (such as in a franchise), to profitable when you have 3 or more. IE: Arby's, Little Caesars Pizza, etc, etc. The profits come when it pyramids as in many businesses.

Read "Millionaire Next Door". While many have achieved substantial wealth, the path to that is far harder with complete and total commitment compared to that of an employee (relatively speaking with the dissssclaimer for exceptions).

Note: Owning a business entails the following:
1. When an employee does not show up for work or calls in for some reason, you have to be there.
2. When it is the end of the day or shift and $$$ needs to get into the safe from the register. . . who can you trust?
3. When the pizzas are regularly coming out burned and customers are not buying, you have to be there, all day and night.
4. The gas or diesel tanker delivers at certain times, etc, and you have to be there on their schedule.
5. In a franchise, the main office is your boss, your success is their bottom line (skim).

Note: If owning and managing and so forth, a profitable business, then one has to have the mindset, total commitment, and 100% devotion in time, to that business to succeed, as a businessman.

Note: 99% of new business ventures (of the tangible type you mention, also the examples in "millionaire next door", go broke in 3-5 years and leave the owners in debt.(statistic)

The "middle ground" might be investing in consulting or some other tangent to the skillsets or employee tasks, etc, that you already have where you can control, money, time, effort, within your own limitations.

j :D
dis laimer: there are zillions of paths and zillions of opinonions on zillions of things by zillions of people, this is just one.
Last edited by Sandtrap on Tue Nov 30, 2021 6:57 pm, edited 1 time in total.
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unclescrooge
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Re: ( Side) Business opportunities, work/risk involved and expected returns

Post by unclescrooge »

@sandtrap

Great write up.

I've found the best side hustle for passive owners is the stock market.
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Re: ( Side) Business opportunities, work/risk involved and expected returns

Post by Jack FFR1846 »

I didn't own, but some of us had permission to leave our cars at a gas station to car pool. While waiting for my co-workers, I'd talk with the owner who was behind the counter. He had a lot of his own money into buying the station. He told me that working there was the worst job he's ever had. A year later, he had sold to someone else. I actually worked at a couple gas stations.

Things you will need to be concerned about. Finding anyone to work. Filling in when people assigned to work don't show up. Understand that these people will sometimes decide they need to leave and simply leave. Not locking the door. Not putting the cash register money into the safe. Theft is constant from both customers and workers, especially if there's a convenience store attached. Gas theft is even possible. I know how to steal gas from a self serve and no, I won't tell you how and no, I don't do it myself. To shut off the annoying commercials on the pumps, push the right side buttons. #2 from the top and #3 from the top.

To me, "side hustle" is the new, cool word for part time job.
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Sandtrap
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Re: ( Side) Business opportunities, work/risk involved and expected returns

Post by Sandtrap »

unclescrooge wrote: Tue Nov 30, 2021 6:55 pm @sandtrap

Great write up.

I've found the best side hustle for passive owners is the stock market.
Well said!

j :D
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wordsmith11
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Re: ( Side) Business opportunities, work/risk involved and expected returns

Post by wordsmith11 »

Sandtrap wrote: Tue Nov 30, 2021 8:15 pm
unclescrooge wrote: Tue Nov 30, 2021 6:55 pm @sandtrap

Great write up.

I've found the best side hustle for passive owners is the stock market.
Well said!

j :D
+1

What I do not understand and am curious about is if a small/medium B or C level franchise requires an individual to have liquid capital of $300-$500k just to start (or comparable assets to borrow against) wouldn't it be better/safer/more pleasant to simply do whatever was done to acquire said capital and keep doing it? Solo franchising seems like endless work + endless stress + cash drain + probable risk of failure. I assume I'm missing something or else there wouldn't be so many B and C level franchises everywhere!
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Re: ( Side) Business opportunities, work/risk involved and expected returns

Post by bhsince87 »

I've been looking for a good low-risk, medium-reward business for 20 + years.

I haven't found one yet. But I'll follow this, in case a unicorn appears.
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Re: ( Side) Business opportunities, work/risk involved and expected returns

Post by cchrissyy »

we had a similar post just a couple months ago, maybe you will like to read it
viewtopic.php?f=10&t=358032

i don't know why you think any small business is "easy to open". good luck in your research!
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StevieG72
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Re: ( Side) Business opportunities, work/risk involved and expected returns

Post by StevieG72 »

None of the options you mentioned strike me as a good idea to tackle in retirement.

All of those options will require a lot of time and effort on your part. Essentially you are asking about a second career, not retirement with the options you mentioned.
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smitcat
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Re: ( Side) Business opportunities, work/risk involved and expected returns

Post by smitcat »

bhsince87 wrote: Tue Nov 30, 2021 10:40 pm I've been looking for a good low-risk, medium-reward business for 20 + years.

I haven't found one yet. But I'll follow this, in case a unicorn appears.
Three questions please regarding your small business search....
What are your criteria/parameters?
Which ones have made your 'reject' list so far?
Where methods are you utilizing in your search?
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Sandtrap
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Re: ( Side) Business opportunities, work/risk involved and expected returns

Post by Sandtrap »

wordsmith11 wrote: Tue Nov 30, 2021 9:53 pm
Sandtrap wrote: Tue Nov 30, 2021 8:15 pm
unclescrooge wrote: Tue Nov 30, 2021 6:55 pm @sandtrap

Great write up.

I've found the best side hustle for passive owners is the stock market.
Well said!

j :D
+1

What I do not understand and am curious about is if a small/medium B or C level franchise requires an individual to have liquid capital of $300-$500k just to start (or comparable assets to borrow against) wouldn't it be better/safer/more pleasant to simply do whatever was done to acquire said capital and keep doing it? Solo franchising seems like endless work + endless stress + cash drain + probable risk of failure. I assume I'm missing something or else there wouldn't be so many B and C level franchises everywhere!
A long time ago. . in a land far away. . .

It costed a MacDonald's owner 1 million over a long period of time to pay for a MacDonald's franchise. That meant build, operative, skim, etc.
The MacDonald's company was very selective about location, basically the owner took wherever location they could best get. The franchise was very very strict about standards and turning a profit, and mostly guaranteed that the owner would get a handsome profit over time. Owners had to graduate from "Hamberger University". Owners worked harder than all the employees put together and extremely long hours, stress, effort, etc. Some made a fortune, others did not.

Over a long period, our company built about 21 franchises (various), closed down and disassembled about 6 of them, and watched owners pour fortunes into the business venture, some with good results, some with not so good results (lost everything and ended up in debt).

Sometimes it can end up very well, if the location (mall food court), or busy growing city with a "Panda's Express" on a good location with ample parking and a drive through, but, at least in my experience, I've never seen any owner not working the equiv. of 3 jobs 24/7, at least in the beginning for a long time. (certainly not a "side business" or passive or easy).

The owners that did well had: deep cash reserves and other income streams, and also very deep prior experience in franchises and executive level business experience, and. . .were very highly motivated.

j :D
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smitcat
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Re: ( Side) Business opportunities, work/risk involved and expected returns

Post by smitcat »

wordsmith11 wrote: Tue Nov 30, 2021 9:53 pm
Sandtrap wrote: Tue Nov 30, 2021 8:15 pm
unclescrooge wrote: Tue Nov 30, 2021 6:55 pm @sandtrap

Great write up.

I've found the best side hustle for passive owners is the stock market.
Well said!

j :D
+1

What I do not understand and am curious about is if a small/medium B or C level franchise requires an individual to have liquid capital of $300-$500k just to start (or comparable assets to borrow against) wouldn't it be better/safer/more pleasant to simply do whatever was done to acquire said capital and keep doing it? Solo franchising seems like endless work + endless stress + cash drain + probable risk of failure. I assume I'm missing something or else there wouldn't be so many B and C level franchises everywhere!
Like anything in life there are various results from the very worst to the best.
Is it safer to rely on a job which may or may not have stress, be safe or even exist in the future?
Our experiences favored the small business in most every way- flexible time, better return, and when we retired last year the sale of the business's was an additional perk.
YMMV
smitcat
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Re: ( Side) Business opportunities, work/risk involved and expected returns

Post by smitcat »

skor99 wrote: Tue Nov 30, 2021 11:48 am Appreciate the above responses, but would also like to request responses in the context of the businesses I have mentioned, as I ( or most ) people would not have the specific science/sales/technical skills mentioned.
Pretty much anybody can buy a gas station or a fast food franchise and therefore I am looking for average capital needs and average estimated gross/net earnings from those businesses.
"I am looking for average capital needs and average estimated gross/net earnings from those businesses."
You can search them out with online sites like 'bizbuysell' (dot) com
And/or you can search yourself with these methods:
- thru your local SBD office
- thru your local SCORE
- sometimes with local active Chamber of commerce
- some college courses
- sometimes with interactive programs at local unemployment office
smitcat
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Re: ( Side) Business opportunities, work/risk involved and expected returns

Post by smitcat »

skor99 wrote: Tue Nov 30, 2021 6:26 pm
adamthesmythe wrote: Tue Nov 30, 2021 12:53 pm [quote=skor99 post_id=6356449 time=<a href="tel:1638286887">1638286887</a> user_id=122440]
I have started thinking about side hustles / businesses after retirement. It could still be a few years down the line, but what are the experiences of people in some of the following businesses - how much investment/work/risk is involved and what are the typical earnings/returns ?
I tried to look for such information on the web, but couldn’t find anything good.

I understand that location etc comes into play but am trying to understand ballpark numbers for a typical average location/size business in a MCOL area. Hopefully such information could be valuable to other folks as well.

Average Gas station -

Average Fast food franchise ( not the ones hard to get like Chick FilA)

Average size independent liquor stores

Any other easy to open business ( except restaurants)
1. I'm pretty sure gas stations are not easy to open (permits?)

2. Liquor stores need licenses (difficult or limited).

3. This is a particularly hard time to hire and retain low-pay workers for fast food.

4. For many of us, the best opportunity for side income is where we have particular and difficult to find knowledge or expertise. That is, related to our day jobs. Then the question becomes whether more can be made by being better/ more committed to our day job or by going outside.
Buying existing gas stations/liquor stores would have the needed licenses and permits. My question is how much money do you need to buy an average gas station/ liquor store and how much can somebody make ?
[/quote]

"My question is how much money do you need to buy an average gas station/ liquor store and how much can somebody make ?"
Small business's such as these typically change hands at a 'multiple' of earnings (EBIDA).
In general multiples for gas stations and liquor stores will fall in the 1.5-2.5 range but vary a good deal due to locations, age, and the overall earnings (more earning = higher multiple).
You can search these out in your area but using one of the online sites and/or by working with a business broker.
DoubleComma
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Re: ( Side) Business opportunities, work/risk involved and expected returns

Post by DoubleComma »

Most small businesses sales I’ve seen are based on a multiple of EBIT and maybe add for any existing inventory or critical tooling.

Recently a dry cleaner sold in our town for 7x earning ($900k), the building was retained by the previous owner with a lease option for the new owner. This was purely a financial transaction as there is an existing general manager and staff who manage the day to day. I don’t know if 7x earnings was a good, bad or fair deal but I do know it sold quickly to a retired gentleman looking for a way to diversify.

If the town where our second home is a local burger restaurant was recently listed. I’ve done no due diligence, but according to the listing it was $750k, included the building. This place is very popular and busy when the town is busy (Summer & Winter) it was also worked by the owner plus some part time staff. It’s hard to for me to separate the building value from the business, but I would guess the building was $500k and the business $250. To me this was more about buying a job than a business, but that’s just an outsiders view.
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Re: ( Side) Business opportunities, work/risk involved and expected returns

Post by Sandtrap »

smitcat wrote: Wed Dec 01, 2021 9:24 am
skor99 wrote: Tue Nov 30, 2021 6:26 pm
adamthesmythe wrote: Tue Nov 30, 2021 12:53 pm [quote=skor99 post_id=6356449 time=<a href="tel:1638286887">1638286887</a> user_id=122440]
I have started thinking about side hustles / businesses after retirement. It could still be a few years down the line, but what are the experiences of people in some of the following businesses - how much investment/work/risk is involved and what are the typical earnings/returns ?
I tried to look for such information on the web, but couldn’t find anything good.

I understand that location etc comes into play but am trying to understand ballpark numbers for a typical average location/size business in a MCOL area. Hopefully such information could be valuable to other folks as well.

Average Gas station -

Average Fast food franchise ( not the ones hard to get like Chick FilA)

Average size independent liquor stores

Any other easy to open business ( except restaurants)
1. I'm pretty sure gas stations are not easy to open (permits?)

2. Liquor stores need licenses (difficult or limited).

3. This is a particularly hard time to hire and retain low-pay workers for fast food.

4. For many of us, the best opportunity for side income is where we have particular and difficult to find knowledge or expertise. That is, related to our day jobs. Then the question becomes whether more can be made by being better/ more committed to our day job or by going outside.
Buying existing gas stations/liquor stores would have the needed licenses and permits. My question is how much money do you need to buy an average gas station/ liquor store and how much can somebody make ?
"My question is how much money do you need to buy an average gas station/ liquor store and how much can somebody make ?"
Small business's such as these typically change hands at a 'multiple' of earnings (EBIDA).
In general multiples for gas stations and liquor stores will fall in the 1.5-2.5 range but vary a good deal due to locations, age, and the overall earnings (more earning = higher multiple).
You can search these out in your area but using one of the online sites and/or by working with a business broker.
[/quote]
Exactly!
Well said.

Great info.
j :D
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smitcat
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Re: ( Side) Business opportunities, work/risk involved and expected returns

Post by smitcat »

DoubleComma wrote: Wed Dec 01, 2021 9:35 am Most small businesses sales I’ve seen are based on a multiple of EBIT and maybe add for any existing inventory or critical tooling.

Recently a dry cleaner sold in our town for 7x earning ($900k), the building was retained by the previous owner with a lease option for the new owner. This was purely a financial transaction as there is an existing general manager and staff who manage the day to day. I don’t know if 7x earnings was a good, bad or fair deal but I do know it sold quickly to a retired gentleman looking for a way to diversify.

If the town where our second home is a local burger restaurant was recently listed. I’ve done no due diligence, but according to the listing it was $750k, included the building. This place is very popular and busy when the town is busy (Summer & Winter) it was also worked by the owner plus some part time staff. It’s hard to for me to separate the building value from the business, but I would guess the building was $500k and the business $250. To me this was more about buying a job than a business, but that’s just an outsiders view.
"Recently a dry cleaner sold in our town for 7x earning ($900k), the building was retained by the previous owner with a lease option for the new owner. This was purely a financial transaction as there is an existing general manager and staff who manage the day to day. I don’t know if 7x earnings was a good, bad or fair deal but I do know it sold quickly to a retired gentleman looking for a way to diversify."

7X is well above anything we have ever seen for this type of business - perhaps there are some details that were not clear and/or disclosed.
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LiveSimple
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Re: ( Side) Business opportunities, work/risk involved and expected returns

Post by LiveSimple »

I know a friend an electrical engineer, who does part time, electrical, plumbing and handyman job, but all his evenings and weekends are gone.
Should make a decent income for the long hours.
Last edited by LiveSimple on Wed Dec 01, 2021 11:52 am, edited 1 time in total.
Invest when you have the money, sell when you need the money, for real life expenses...
DoubleComma
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Re: ( Side) Business opportunities, work/risk involved and expected returns

Post by DoubleComma »

smitcat wrote: Wed Dec 01, 2021 9:38 am
DoubleComma wrote: Wed Dec 01, 2021 9:35 am Most small businesses sales I’ve seen are based on a multiple of EBIT and maybe add for any existing inventory or critical tooling.

Recently a dry cleaner sold in our town for 7x earning ($900k), the building was retained by the previous owner with a lease option for the new owner. This was purely a financial transaction as there is an existing general manager and staff who manage the day to day. I don’t know if 7x earnings was a good, bad or fair deal but I do know it sold quickly to a retired gentleman looking for a way to diversify.

If the town where our second home is a local burger restaurant was recently listed. I’ve done no due diligence, but according to the listing it was $750k, included the building. This place is very popular and busy when the town is busy (Summer & Winter) it was also worked by the owner plus some part time staff. It’s hard to for me to separate the building value from the business, but I would guess the building was $500k and the business $250. To me this was more about buying a job than a business, but that’s just an outsiders view.
"Recently a dry cleaner sold in our town for 7x earning ($900k), the building was retained by the previous owner with a lease option for the new owner. This was purely a financial transaction as there is an existing general manager and staff who manage the day to day. I don’t know if 7x earnings was a good, bad or fair deal but I do know it sold quickly to a retired gentleman looking for a way to diversify."

7X is well above anything we have ever seen for this type of business - perhaps there are some details that were not clear and/or disclosed.
You could be very right that there is details I don’t know. I know of the opportunity through a family member who is close with the buyer. My gut says most small businesses, where the buyer isn’t buying a job but making an investment, typically sell for 3-4 times ebit.

I shared these examples so the OP could start researching their question a little different. I think most businesses are valued at a multiple of earnings, so the answer to the question about how much to buy XYZ type of business isn't a number, rather a multiple of return. As well in the case of a retailer, one very likely needs to factor in the value of existing inventory and receivables less liability.

Small Business valuation isn’t effortless.
Mike Scott
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Re: ( Side) Business opportunities, work/risk involved and expected returns

Post by Mike Scott »

I would think that simply working for a few more years before retiring would be easier and more profitable than buying into a startup business (unless you run into a one in a life time opportunity). If you are just looking for something to do, perhaps consulting or part time work in your area of expertise without the startup expenses? Buying a job is not on my list of things to do in retirement.

My long term passive "business plan" is to buy more VTSAX. I don't consider our small hobby farm a business because businesses are supposed to make money. The hobby farm is more of a mental and physical health and wellness program for us.
smitcat
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Re: ( Side) Business opportunities, work/risk involved and expected returns

Post by smitcat »

DoubleComma wrote: Wed Dec 01, 2021 11:44 am
smitcat wrote: Wed Dec 01, 2021 9:38 am
DoubleComma wrote: Wed Dec 01, 2021 9:35 am Most small businesses sales I’ve seen are based on a multiple of EBIT and maybe add for any existing inventory or critical tooling.

Recently a dry cleaner sold in our town for 7x earning ($900k), the building was retained by the previous owner with a lease option for the new owner. This was purely a financial transaction as there is an existing general manager and staff who manage the day to day. I don’t know if 7x earnings was a good, bad or fair deal but I do know it sold quickly to a retired gentleman looking for a way to diversify.

If the town where our second home is a local burger restaurant was recently listed. I’ve done no due diligence, but according to the listing it was $750k, included the building. This place is very popular and busy when the town is busy (Summer & Winter) it was also worked by the owner plus some part time staff. It’s hard to for me to separate the building value from the business, but I would guess the building was $500k and the business $250. To me this was more about buying a job than a business, but that’s just an outsiders view.
"Recently a dry cleaner sold in our town for 7x earning ($900k), the building was retained by the previous owner with a lease option for the new owner. This was purely a financial transaction as there is an existing general manager and staff who manage the day to day. I don’t know if 7x earnings was a good, bad or fair deal but I do know it sold quickly to a retired gentleman looking for a way to diversify."

7X is well above anything we have ever seen for this type of business - perhaps there are some details that were not clear and/or disclosed.
You could be very right that there is details I don’t know. I know of the opportunity through a family member who is close with the buyer. My gut says most small businesses, where the buyer isn’t buying a job but making an investment, typically sell for 3-4 times ebit.

I shared these examples so the OP could start researching their question a little different. I think most businesses are valued at a multiple of earnings, so the answer to the question about how much to buy XYZ type of business isn't a number, rather a multiple of return. As well in the case of a retailer, one very likely needs to factor in the value of existing inventory and receivables less liability.

Small Business valuation isn’t effortless.
I posted above a few easy ways to research multiples like 'bizbuysell (dot)com".
Never seen a 3 times multiple on such a low earnings(125K) with a fixed brick and mortars business.
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unclescrooge
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Re: ( Side) Business opportunities, work/risk involved and expected returns

Post by unclescrooge »

wordsmith11 wrote: Tue Nov 30, 2021 9:53 pm
Sandtrap wrote: Tue Nov 30, 2021 8:15 pm
unclescrooge wrote: Tue Nov 30, 2021 6:55 pm @sandtrap

Great write up.

I've found the best side hustle for passive owners is the stock market.
Well said!

j :D
+1

What I do not understand and am curious about is if a small/medium B or C level franchise requires an individual to have liquid capital of $300-$500k just to start (or comparable assets to borrow against) wouldn't it be better/safer/more pleasant to simply do whatever was done to acquire said capital and keep doing it? Solo franchising seems like endless work + endless stress + cash drain + probable risk of failure. I assume I'm missing something or else there wouldn't be so many B and C level franchises everywhere!
If you made your money through W2 income, it's not like you can reinvest your excess capital back into your job.

Several years ago, I looked into buying a franchise. I looked at two completely different business (kickboxing and mobile key making). After talking to over two dozen independent franchisee owners I came to the conclusion they had bought minimum-wage jobs.

A wife of an acquaintance bought a franchise to provide IT services for small businesses. She used to work in IT so it was in her wheelhouse. She has also bought herself a job that pays a lot less than she could make elsewhere. It's been 7 years. Still not up to the level of her previous employment.

Two other acquaintances bought into icecream franchises. Both of them sold a few years later at a loss.
A third coworker bought unbranded 3 frozen yogurt shops. He also sold at a loss a few years later.

The only success story I know is someone who bought hotels. He arrived in the US with $500k cash at age 19, worked at the front desk for 5 years and then bought his first motel. He now owns a dozen Marriots & Holiday Inns across the country. It is not passive. He has a staff of several people overseeing everything, who report to him each day, and he has cameras monitoring the office/front desk of each location that he watches for a few hours a day.
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