Buying a Cell Phone Store

Question:
I have noticed an extraordinary amount of cell phone stores for sale lately here in Southern California at very low prices considering the money that they supposedly make. Do you think that perhaps cell phone stores are oversaturated and the owners are trying to bail out now while they can still show good revenues on the books? It just seems curious that the owners would sell so low.

Answer:
Interestingly enough, over the past year, I have received a lot of client inquiries regarding mobile phone stores. While they can be profitable, you hit the issues dead-on: the competition is fierce. In fact, it’s not unusual to see up to three stores in one large strip plaza.

I was in a large South Florida mall a few weeks back and counted six separate kiosks – incredible. Now, one could easily say that there’s ample business to support it, and they’d be right. The bigger issue I believe is that with such enormous competitive pressure, what opportunities exist to grow the business? The landlords use the “out” that they are different businesses in that one may be Cingular, another Verizon, and a third T-Mobile or a generic seller.

The multiples are simply not high because there are so many on the market, and there’s a lot of competition. The ones that seem to be especially profitable are those that offer a service component, and you don’t see too many of them. I’m not certain why but I do know there is one in my town that sells one of the major programs but offers service on all brands and the store is always packed with customers. I saw the owner pulling out the other day in a new Mercedes sedan so they must be doing pretty well.

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