Factors to consider when buying a dealership...

...my current dealer is thinking of selling his dealership this year. He and his wife are in their early 70's. The dealership is located in Michigan and they have relationships with Hitzer and Keystoker. I was wondering what a typical dealership would cost and whether or not from a biz perspective, if coal stove dealerships are good investments or not. I know a lot depends on his installed base, how many of that installed base purchase coal from him, potential clients ready to buy and the demand in the area for coal stoves. Are there any dealers in this forum that can comment? I would like to know what is involved in making an assessment on the value and whether current dealers here like trend of the biz and what headaches they come across from customers to manufacturers.

Hi Dave, I've been a dealer for woodstoves so I might have a few insights.

I would be very concerned about how secure the supply of coal is for the dealer to sell. What the profit margin is and the capital outlay needed to secure a year's supply for store to sell to their customers.

The stoves and other products for sale, are there territory contracts in place that will prevent a new, flashy store from opening nearby with the same product line and pulling all the bussines to them??

Just the first few concerns that came to mind, is it snowing there yet?

Greg L

LsFarm wrote:
I would be very concerned about how secure the supply of coal is for the dealer to sell.

At this point it's not a problem if you have the cash to purchase all you need in the summer. If you can't do that you run the risk of a)not getting any b) paying a lot for it.

As mentioned above you need storage and a years supply will take up quite a bit. If you can't afford the outlay for the coal I'd suggest it wouldn't be a feasible adventure.Ideally you'd want to buy in bulk and bag yourself and/or sell in bulk. That would require additional capital for loader/certified scale/ etc. If you don't have a coal supply then I think it would be hard to sell the stoves.. besides the coal is where the money is at. You only sell someone a stove once, a few maybe a couple...

It's one of those things that if you have the cash it could pay off very well in the long run. That's one of the reasons I don't have too much worries about competition popping up out of the blue, the lift you need costs more than the truck.... Then you need to know how to operate it correctly, by that I mean use it so you don't kill yourself or anyone else. This isn't a job you can just let anyone do, they need to be trained and finding people willing to do this job that I would trust are few and far between.

I would think that there must be a wholesale coal supplier that is bringing in rail-car loads of coal and bagging it on site. Southwestern Michigan is a long way to truck bagged coal from NE PA .

Dave: if you are interested in this business, not only get a good accountant to look at the books and tax returns, but also get a customer list and interview a few of them about their future needs. You may find that there is not a great financial future for the business.

On the upside, if there is a good secure source for coal, and a happy customer base then the income may be stable. And with the current price increases in other forms of fuel, including alternative fuels like wood pellets and dry corn there should be, with some advertising, some additional stove and coal sales in the future.

Just more rambling thoughts.. Greg L

Thanks Al and Coalman. Yes, it is snowin and blowin here...30 mph with a gust or 2 over 45. Al, my dealer who is thinking of selling gets a couple of tractor trailer loads of bagged coal every year. He has no problem getting it. He orders in late August for his current customers winter needs and an additional amount that goes with each stove he sells. He told me yesterday not to worry about coal shortages unless something huge happens. He talks to his supplier all the time and knows a guy fairly well there that he has had a good biz relationship with over the years and he is the one assuring him of a supply of coal. Price is the real unknown but it should always be cheaper than oil/natural gas. I don't know what has gotten into me but since I got my insert in '04, I'm obsessed with anthracite fuel and the stoves that burn them! I am in sales now and I'm sure I could convince folks to antie up the $'s for a stove and the coal. Not only from a savings standpoint but the satisfaction of sticking it to the oil folks. Installation is not my forte but I'm sure I could find a person to do that. As far as the financials go, I've already thought about it and have a guy that is a tax attorney/CPA. He could handle the value of the biz equation. I would need a place for storage like Coalman indicated but again, I may be able to do that on my property. I live on a very busy street but not sure yet on zoning issues. Anywho, keep the thoughts and comments coming!!!

Dave,

IMHO the stove business is good IF and only IF you can install. You need capable, knowledgeable and in the state of Michigan licensed installation. I am speaking from experience, most homeowners will not be willing to do it themselves. If you want to make a living selling stoves & coal, you will need a store front, do not sell from your home. You must be able to deliver as well as have coal available for pick up.

Just my opinion, take it for what it is worth.

MLou