“Should I buy an IGA Supermarket?”

“We wanted to buy a business that was ‘lockdown proof’, they said. So we’ve decided to go with an IGA supermarket.”

Interesting choice.

The main benefit of buying a supermarket in a COVID world is that it’s an ‘essential service’.

This means it can stay open, when many other businesses are forced to close.

But, the essentials of due diligence before the purchase still apply:

• Purchase price relative to earnings,

• Term of the franchise,

• Term of the lease,

• Allowable opening hours,

• COGS as % of Sales,

• Wages as % of Sales,

• Review Supply Chain,

• Confirm continuity of supply,

• Review supplier terms,

• Demographics of local area,

• Proximity of nearest competitor,

• Check local council for plans re future growth.

And of course, don't forget, the most important of all, be sure to get a Pre-purchase Review to be sure the numbers stack up. A pre-purchase review assesses the costs of running the business, how much you want to live on in your first year, and factors in any financing costs.

It's one thing to buy a business simply because it's 'lockdown proof', but it still needs to be a good investment and provide you with the return you're looking for.

Feel free to get in contact with me.

Peter