How can I tell if a consignment store for sale is profitable?

A consignment store can show impressive sales and still earn little, because much of each sale is owed to the consignor. The profit question is about what the store keeps, what it costs to keep it, and whether the owner’s own labour is hidden in the result. Ask for the records, read them with your accountant, and treat a seller’s summary as a starting point only.

Commission, not gross sales

Ask for a report that splits total sales into the consignor share and the store share. The store share is the real revenue. Check whether the books record consigned sales gross or net, and whether any items the store owns outright are mixed in. Without that split, two stores with the same headline sales can have very different results. Your accountant can tell you how to read it.

Sell-through and aged stock

A store earns when items sell. Ask how the owner tracks what comes in and what sells, how long items stay on the floor, and what happens to those that do not sell. Look for a clear markdown routine and a clear rule for returning items to consignors or donating them. A crowded back room of unsold goods can signal weak intake decisions. What should I check before buying a business? is a useful companion check.

Payouts and cash

Consignors are owed their share once an item sells. Ask for the consignor ledger and compare the amount owed with the cash in the bank. If the store has been using consignor money to pay its own bills, ask your lawyer what that means. Also ask whether payouts are made on a regular schedule and whether anyone has disputed an amount.

The owner’s unpaid hours

Many consignment owners do the intake, pricing, tagging and customer service themselves. Ask how many hours a week the owner works and which tasks they do. If you would need to hire someone to replace that time, the profit you inherit is lower than the one on paper. Ask your accountant to adjust for it.