Buying a business: Occasion wear shops
Within all of us is the child-like urge to dress up from time to time. And despite the fact that the work place is getting more casual there are still a number of times in our lives when we indulge that urge.
At weddings, parties, dinners and dances, posh frocks and smart suits are a must. And as most of us don't have these kind of items to hand in our wardrobes we need expert help. Occasion wear businesses where you can buy or hire clothes provide that help.
If you are the sort of person who's dream is to be surrounded by beautiful clothes – even if it's other people who get to wear them – buying an occasion wear business could suit you.
What is it?
An occasion wear business offers exactly what it says on its label: clothes that you are not going to wear everyday. And unlike everyday clothes shops, it isn't designed to attract repeat business and must rely more heavily on word of mouth advertising and a good local reputation. It may, however, be worth taking a look at our guide on how to start a clothes shop, as many of the principles still apply.
To hire out or sell evening and wedding clothing isn't just about dresses and suits. Offering shoes, accessories, ties, waistcoats and even underwear will hopefully make the most of the customers that come into your shop. Being a one-stop shop for the excited bride to be is your stock in trade but good business also comes from her mother, bridesmaids and party guests.
And although you might not expect a bride to come back for another wedding dress in the foreseeable future, evening wear can be a route to a lot of repeat business. If customers like the range you have, they will come back to hire as often as they go to functions – which could be two or three times a week for business events.
But this doesn't make specialisation a bad thing. Obviously, if you just concentrate on one area you will be able to carry more of a selection. This is important when stock takes up space and is expensive but you also want to give your clients a choice.
This is something of a niche business to get into. At the same time, though, it is all about helping people to have a good time. Making someone feel good in what they are wearing is certainly not a bad way to spend the day.
Who is it suited to?
This is an industry that really needs to attract you before you go into it. It is about lifestyle rather than money so you must be the sort of person that will find the satisfaction of finding someone their perfect outfit fulfilling.
Gillian Sturges of Rococo in Melbourne, Derbyshire explained one of the best moments of supplying bridal wear. “One girl came in and she'd tried on about a hundred dresses. When she saw the one she wanted, she actually jumped up and down. It's really great when people find exactly what they want.”
Having said that, these tend to be customers with high demands. Either they've a formal dinner to go to – or it's potentially ‘the most important day of their lives'. Whichever, it's a rare customer that likes the first outfit they try on. Admittedly, this is more the case with women's formal wear than men's but you will need patience for picky clients.
And helping a client to choose something that suits them is not about telling them what to wear. Your opinion isn't the one that counts. While you can guide a customer to a flattering style, telling them that they look like the back end of a bus – even if they do – won't get them to change their mind and will lose you a sale. Tact is also a must.
Finally, you need to be adaptable. It might take up to two hours for a client to chose what they want – particularly if a fitting is involved. But you can't afford to pass up the custom of people who just drop in.
Genevieve Lovegrove of Four Weddings and a Party in Northampton explains, “I have a mixture of appointments and cold callers that can take anything from 15 minutes to two hours. But we to be very flexible as about 70% of our customers pop in rather than make an appointment.” This is also a business that is very much about the personality of the owner so be prepared to inject a lot of you into the business. You don't want to alienate customers with outlandish personal tastes in décor and clothes but you also need to be enthusiastic about your shop – this will come across as you sell.
These tend to be quite personal businesses so you need to look carefully at what you are being offered. Something that has been its owner's pride and joy for the last 20 years might need more work on it that if you just started afresh.
The evaluation of the shop will be based on the stock being passed on, the fixtures and fittings and, most importantly, the good will. But how do you know you're getting value for money? Getting advice from someone already in the trade can be helpful at this point. Other shop owners are usually happy to help as long as you are not in direct competition – try asking someone completely outside your area.
Good will, however, is especially difficult to quantify. Jeremy Hayward, a senior manager at Lloyds TSB, explains the best way, “Look at the business in terms of the strength of its reputation in the local area and its location – is it too near other businesses or too far away from town. And look for evidence of repeat business in the accounts.”
If you are borrowing money from the bank, it will expect to see evidence you have researched the business. Alex Connelly is the director of startups and small businesses at Barclays. He says:
“Show awareness of the size of the market in your area, where any competition lies and therefore how you will market yourself in the area. Then how you are planning to cope with the large levels of stock required and the fairly rapid changes in consumer taste.”
These are largely standard for any retail business but particularly important for a niche industry. You should produce a business plan of these details before you approach the bank.
And it might sound obvious but make sure you really want to go into the business. One transfer agent admitted that occasion wear outlets are difficult to sell because they are so intrinsically linked with their owner.
For example, rather as owners start to look like their dogs and vice versa, so the shop can reflect the tastes and dress sense of the proprietor. How are you to know that if you get rid of the lace and bows a devoted customer base won't follow?
And the agent is fully aware of this. If you show interest, they will really “chase you hard” for a sale. Be prepared for that.
What do you need to know?
Although you will probably have to order in specific items for customers, it's very important to have a good range of stock in. Even if people think they know what they're looking for, it's likely they will still want a choice.
The best way to meet your main suppliers – and to find out which you want to use in the future – is to attend one of the bridal and occasion wear trade shows. Genevieve Lovegrove of Four Weddings and a Party in Northampton, says,
“The main shows are in Harrogate in March and September. I have about eight or nine designers in stock and this is when I go to see what all of them has on offer. This is better than reps coming to visit and you get to compare all the different styles.”
She says its best also to have a range of prices as well -to ensure you have something for most pockets. “I have an price range of £200 to £1700. This strikes a good balance between the top end and the more moderately priced.”
With the dress hire side, there are no hard an fast rules as to how often you will need to replace stock. Obviously, you need to keep an eye on changing fashions and update the styles. But you might hire out a dress 15 times and it stays immaculate and popular. Equally, after one hire someone will decide they want to buy it and it will have to be replaced.
Genevieve says she has dresses that she's been hiring out since she opened her shop four years ago. Very few actually wear out. Rotation of stock is something to be judged and monitored month by month.
How much does it cost?
Your biggest initial cost is likely to be the lease or freehold and any stock or fixtures the previous owner is including. The price of the leasehold for Four Weddings and a Party in Northampton included the stock and good will.
Another Cambridgeshire business is on the market — it is similarly inclusive of the fixtures and so on but is for the freehold – so the price will be much higher.
After this, there may be rent and rates to pay. And if you choose to advertise this can be costly too. A yellow pages advert will cost a few thousand a year. If you have an excellent location that is proven to attract enough passing trade then you may not need advertising but this is something you will have to weigh up when you start.
Contrary to what you might expect, however, insurance costs tend to be quite low. Although a stock of designer evening and wedding wear might be worth a lot to replace, thieves are not likely to be tempted by them. A big white wedding dress is not likely to sell well or quickly at the pub on a Friday night – and the premiums should reflect this.
Then there are staff wages. You will probably only need to employ one other during the week with perhaps extra help on Saturdays. And unless you are qualified to do the alterations yourself, you will need a seamstress – probably on a part time basis.
Profit and Costs
|Your biggest and most basic initial cost is the leasehold (or freehold). The bank will potentially lend you 60-70% for the bricks and mortar – although they are unlikely to lend you this much if the lease has less than 20 years to run.|
|Leasehold (incl. goodwill, fittings and stock)|
|Bank potential loan 60%|
|You pay 40%|
|Then what happens after the first year? Here is a rough idea of the profits you might make on a business costing the £70,000 outlined above:|
|Takings per year:|
|One year's rent|
|One year's rates (approx)|
|Miscellaneous incl. staff wages|
|You could earn around 50% profit:|
How much can I earn?
If you hire out or sell eveningwear, the return will be faster than with wedding outfits. A hire price might be £40 to £100 with a deposit of £50 all payable upfront. To buy you might be looking at up to £800 – and more for wedding dresses – but these amounts will be paid in perhaps two instalments, the final one when the dress is finally ready.
As there could be a considerable period of time between the customer walking into the shop and the final payment, take into account you may not get serious capital coming in for several months.
So there is considerable benefit in offering as many additional products as possible. Genevieve Lovegrove says she gets a good turnover in the Autumn months – which are traditionally slow for bridal wear – from her evening wear side, in the run up to the Christmas party season.
People quite often buy hire dresses at a knock down price, which means you'll have had the income from it from the hire and then a sale as well. For example, a customer might buy an ex-hire dress worth £250 for £120 rather than hiring it for £60. That way, it has paid for itself after two outings.
Also, hire is a good source of income because as long as they avoid cigarette or iron burns, dresses are relatively cheap to keep presentable. A dry clean will only cost about £10 and as you will undoubtedly be a good customer, it can probably done overnight. And apparently, its amazing how many of these dresses can be just put in the washing machine – which you can do at home for the price of the electricity.
Location is obviously a make or break factor in your earning potential. If you are in an area with complementary businesses – such as a florist, photographers, shoes and accessories – you could benefit from associated trade.
Also being on a main road visible to passing traffic can bring in a lot of people. One proprietor said being on the route to an airport meant they had a lot of flight attendants making enquiries. And it led to word of mouth advertising, which is perhaps the most important form for this business.
|Here is how to get a rough idea of the profits you might make on a occasion wear business|
|Takings per year:|
|One year's rent|
|One year's rates|
|Miscellaneous incl. staff wages|
|You could earn around 50% profit:|
Tips for success:
- Don't be afraid to ask for help if you need it. The previous owner will probably be more than willing to hand over the business and offer advice. Equally, other shop owners can be helpful telling you about good suppliers and designers – providing they are not in the same area of the country.
- Make sure your administration is very organised – and if it isn't, hire someone who is. A good deal of co-ordination goes into making sure the right garment has arrived, is cleaned, pressed and altered in time for the client picking it up. As word of mouth is likely to be your most important advertising, you can't afford to let people down.
- Be aware that this is more of a buyers market than a sellers market. Businesses are so liked to the personality of the owner that transfer agents do say that they can be on the market for some time. This is to your advantage if you are thinking of buying but remember if you want potentially sell in a few years, this may not be a perfect business.
- Retain enough of the ethos of the old business so as not to alienate the existing customer base but still put your own stamp on it. You might keep the existing name, for example, but alter the décor to suit your taste.
- And the three skills you will need to succeed? Enthusiasm, patience and creativity. This isn't just about selling, it's about wanting people to look their best. For which you will always need creativity, often patience and boundless enthusiasm