irreverent, thought-provoking analysis of the industry-- with an
occasional guest columnist.
Don't Close Your Store, Sell It!
Because almost all stores can
David Larson (October 18, 2010)
(Editorís Note: Over the
years CLN has seen numerous successful independent stores
close. Why? The owners wanted to retire, their kids were following
their own career paths, and the owners didnít know how to sell their
stores. So CLN asked David to write the article below. David
has been helping our industryís independent retailers sell their
businesses for more than 30 years.)
Maximize your return on your
You can always close your store,
but why would you if you can achieve a much higher return on your
investment than its liquidation value?
When you liquidate, you would
normally end up with only 65%-80% of your inventory cost after the
six- to eight-week process when you factor in average monthly
In selling your business you
take the guesswork out of what you will get and can move forward
knowing that what you have built will continue.
When the time comes and you want
to retire, for the sake of your finances, for your employees, and
for your community, together letís find a qualified buyer.
The worst thing that can happen
is, after years of building and running a business, the end result
is closing it. That will have a negative impact on your finances Ė
and your emotions.
The truth is, almost all stores
can be sold; the secret is finding the right buyer to match up with
Why are you selling?
If you are retiring Ė thatís
If there are sales and profit
problems and you would prefer to keep your business, letís review
the options and opportunities before you move forward.
Before you put your store up
Clean up your store: get rid of
the clutter and old, unused fixtures.
Close out old, shop-worn
products. (If you wait and the potential buyers are exposed to them,
it will cost you on the overall price.)
Get your files up to date
Put together at least the last
three years of financial documents; most lenders will need these in
working with the prospect.
Inform your employees. We canít
sell your business unless we can let people know itís for sale. Most
new owners will retain your staff.
The selling process
Coming up with a price for your
inventory: Most stores are sold via a retail inventory less a
discount percentage to determine cost. This number is normally close
to your actual gross margin percentage.
Fixture and blue-sky value: This
is normally based on the profitability of the business and the
condition of the fixtures.
Financial numbers: We would
review all of your expenses and eliminate ones that are unique to
your operations and then put together the investment package and
projections for a new owner based on normal lender requirements.
Building lease or purchase: If
you own the building, then you need to decide what you want to do;
you may want to offer both options. If you lease the building, then
we need to contact the landlord for lease terms for a new owner.
Advertising your business
Almost 100% of the prospects
live in your trade area.
Place your ad in the paper with
your store name (donít mess with business opportunities; that never
gets the results). If you are retiring, include that in the ad.
If you want my help, you would
put my name and phone number as the contact. Using my services or
someone elseís to qualify prospects before any financial information
is given out (except estimated equity requirements) will certainly
make the process easier for you.
Davidís services include A) Selling a business (qualifying
prospects, buy/sell agreements, etc.); B) Buying a business
(opportunity review, sales/financial projections, etc.); C)
Lease analysis and negotiation; D) Bank packages; E)
Cash flow analysis; F) Financial analysis and planning; G)
Business plans; H) Merchandising assistance; and I)
Fixture and Merchandise Points. To contact David, call 763-427-3545,
firstname.lastname@example.org or write to 1000 38th Lane, Anoka MN 55303.