How can I tell if a jewellery store is profitable before I buy it?

A jewellery store can show healthy sales and still earn little for its next owner. The profit sits in a mix of income that behaves differently: stock the owner bought, goods held on memo, repairs, custom orders and seasonal gift buying. A buyer who sees only the total cannot tell which part will carry on. Ask for the records that let you pull them apart.

Owned stock and memo goods

Ask which pieces in the cases belong to the store and which sit there on memo or consignment. Check the supplier contract for how a memo piece is priced when sold and whether the supplier can ask for it back. Ask the seller to show sales and margin for each group. Then ask how much cash the store has tied up in stock it owns.

Repair, custom and gift income

Repair and custom work often brings steady customers through the door, and some of them go on to buy bridal pieces or gifts. Ask how many orders are repeat customers and how far ahead custom work is booked. Bridal sales tend to be larger but less frequent, and gift sales gather around a few weeks of the year. Look at each stream on its own.

Metal costs and the owner’s bench

Gold and silver prices move, and the cost of replacing stock moves with them. Ask how the store sets prices when the metal cost changes, and how it values old stock that was bought earlier. Also find out who does the bench work. If the owner is the goldsmith, the earnings may not cover a hired one, so ask what a replacement would cost.

What to request

• Sales and margin by source, over several years, not a single total.
• A list of memo and consignment pieces with the supplier for each.
• Repair and custom order records, with the repeat customers marked.
• The owner’s duties at the bench, written down hour by hour.