Almost every household in the country will visit a hardware store
at least one a year. This potential for business is one of the reasons
that a hardware store has always been one of the more popular businesses
that an owner can start or buy.
The generic hardware store exists
in the mind’s eye as a retail store that a person can go to and buy
just the right nut and bolt or the odd sized screw. This mythical store
is run by knowledgeable people who can answer almost anything that has
to do with home repair. This is what the public has come to expect when
visiting a hardware store. Some chain store outlets have gotten away
from the help side of hardware stores and just sale products off the
shelf. Getting answers to questions in these stores is not what the
hardware store visit is about. The great help of the old type hardware
store is missing. Except in those stores that are run the old fashion
way and continue to prosper as their customers are repeat customers and
would not think about going somewhere else to shop. Two franchises that
carry on this tradition are True Value and Ace Hardware associated
stores.
True Value stores
True Value is the third
largest co-op in the hardware business. True Value is a cooperative that
allows the store owner who is a member to buy merchandise at reduced
prices since this group can make large wholesale purchases. The store
owners can also enjoy the advantage of group advertising buys. Being
able to buy at the large volume prices makes the advantage a significant
profit maker. Group advertising can also reduce the cost of getting
customers into the store.
The average True Value store investment
The
average investment in a True Value store works out to about $35 a
square foot for inventory. The fixtures or equipment will come in at
about $8 a square foot. The start up cost can vary by area of the
country, but the average is about $4 a square foot. The additional cost
to become a True Value store can be found by contacting True Value
corporate.
Ace Hardware stores
Ace Hardware is the
largest hardware co-op Like True Value it offers members the capability
to buy merchandise through the co-op at reduced prices and thereby make
more profit from sales. They also offer the advantage of group
advertising which reduces the cost of getting customers through the
doors.
Group buying of the co-op saves all of the member’s money
as the co-op gets better pricing due to large volume buying. This
savings is then passed on to the members and allows them to make more
money.
Ace Hardware Investment Structure
The Ace
membership application is about $5000 Initial stock ownership is another
$5000. Liquid capital needed to start a store is $250,000 with a loan
from Ace of an additional amount of $390,000 to $740,000, which depends
on the store size. The total investment is between $650,000 and one
million dollars.Land and building cost are not included in this pricing.
The Ace investment numbers are based on a 12,000
square foot store. Dollar amounts are for fixtures, inventory, office
equipment, computer system and operating costs.
Other factors that will help the owner
Both
of these hardware operations offer the owner training and seminars,
which are designed to help the store grow. Suggestions for operating the
store more efficiently can be taken in and used to good effect. Special
purchases that include a targeted advertising campaign will attract
customers into the store. The staff’s helpful attitude will impress the
customers and insure they will come again.
Buying a local hardware store
Local
stores that are affiliated or not do come to market every now and then
for purchase. The owner may be willing to deal very favorably in order
to make the sale. Contact a business broker or look up businesses that
are for sale listed on the Internet. A good business broker may be wise
to contact, as these pros are very good sources of current information.
If an existing business is for sale, the price may be excellent due to
the store being established. A store with cash flow is always a business
to be considered. Customer habits are in the favor of the new owner as
long as the service stays the same or gets better. If you are going to
make some significant changes, make sure they are well thought out
before putting them into practice. If there is a strong benefit to the
customers, they will probably be met with enthusiasm.
An old owner
may be willing to help with the financing of the business. In most
cases the price of the business will increase some and will have to be
negotiated as part of the sales contract. The other way to get the
needed money is to see if a business lender would be willing to give you
the needed loan. Many of these money lenders are easily found on the
Internet.
Conclusions
The hardware business is one
business that has a variety to customers that need what the store is
offering. Every person of age is a possible customer. This large
potential customer base is what will make a new hardware store quickly
grow and in the right location become profitable. . As with all retail
stores location is important. Name recognition is also very helpful
which is why the two co-ops have so many members. Customers will come to
a store with a familiar name.
Friendly, helpful and knowledgeable
staff is critical if you want to stand out from the box stores. Their
pricing will be competitive to yours, so you have to beat them by having
better help. If you try to compete on price alone, you will be fighting
a losing battle. Store hours are also important in this business. Early
openings are almost a necessity of the business. People like to get up
and get started on projects.