Selling a Retail Business
Anne Brown asked:
Owning a retail business can be a great experience for an entrepreneur. Selling a retail business, however, can be tricky if not approached with the right strategy.
This article will briefly look at some unique characteristics to think about if you would like to sell your retail business.
Financial performance
Like all other businesses for sale, it is important to demonstrate to a buyer the financial viability of a retail store for sale. Many stores operate as cash businesses and find that they cannot find a buyer when the time comes to sell. Having well documented records and a trend that shows increasing success year over year is a major step to successfully sell a store.
The lease
A buyer will be incredibly interested in the lease terms of the retail outlet you would like to sell. Some things that buyers find important are:
- the length of the term of the lease (longer is better),
- option(s) to renew the lease,
- lease rate,
- what is included in the lease (TMI, etc)
- general provisions governing the relationship between lessee and lessor
How seasonal is the business?
Selling a retail business in January after the busy Holiday rush may be more challenging than selling it in the summer. The busy period for a retail store is usually the Fall/Winter period. Selling the business in the summer could give the new owner the advantage of taking over just as it gets busier. This could be a great selling point.
Is the business a franchise operation?
Selling a retail store that is a franchise operation means that the buyer will probably need to get approval of the franchisor in order for the sale to go through. This is usually a straightforward process but it could add an unexpected layer of complexity.
Does the store require renovations?
If you are serious about selling your business, you should make sure that the store presents well. Not only is this important for customers, it is also important to potential buyers. A store that is dated and looks worn may require leasehold improvements and capital expenditures from the buyer. Having a well presented retail business can make your store shine in the eyes of an investor.
How secure are your supplier relationships?
A buyer of a retail business for sale would also be interested to understand how secure your supply of good is. Do you have contracts in place with reputable suppliers? Will the vendors be interested in continuing business with the new owner at the same terms?
Inventory
No discussion about selling a retail business is complete without mentioning inventory. A business buyer is concerned with a few things with respect to store inventory:
- what level of inventory does the business need to carry (inventory is a use of cash),
- are you selling the existing inventory in the sale (or in addition to)
- what condition is the inventory in
- Do you have any old, damaged or unsellable inventory? If so, a buyer will probably not want to purchase this.
Location
The Location for a retail business is extremely critical. If you would like to sell your business, think about your business location and how it will appeal to potential buyers?
- Is it in a growing or declining area
- Is it in a busy new Toronto mall or a shoddy old strip plaza with little traffic?
- Does your signage present well? Can it be seen effectively from the passing traffic?
Be honest with yourself when you go to sell. If you were in the market to buy a business, how does yours compare to other similar businesses listed? Talk to a reputable business broker to get a frank assessment of the price range that your retail business can sell for.
Life Insurance Quotes
Owning a retail business can be a great experience for an entrepreneur. Selling a retail business, however, can be tricky if not approached with the right strategy.
This article will briefly look at some unique characteristics to think about if you would like to sell your retail business.
Financial performance
Like all other businesses for sale, it is important to demonstrate to a buyer the financial viability of a retail store for sale. Many stores operate as cash businesses and find that they cannot find a buyer when the time comes to sell. Having well documented records and a trend that shows increasing success year over year is a major step to successfully sell a store.
The lease
A buyer will be incredibly interested in the lease terms of the retail outlet you would like to sell. Some things that buyers find important are:
- the length of the term of the lease (longer is better),
- option(s) to renew the lease,
- lease rate,
- what is included in the lease (TMI, etc)
- general provisions governing the relationship between lessee and lessor
How seasonal is the business?
Selling a retail business in January after the busy Holiday rush may be more challenging than selling it in the summer. The busy period for a retail store is usually the Fall/Winter period. Selling the business in the summer could give the new owner the advantage of taking over just as it gets busier. This could be a great selling point.
Is the business a franchise operation?
Selling a retail store that is a franchise operation means that the buyer will probably need to get approval of the franchisor in order for the sale to go through. This is usually a straightforward process but it could add an unexpected layer of complexity.
Does the store require renovations?
If you are serious about selling your business, you should make sure that the store presents well. Not only is this important for customers, it is also important to potential buyers. A store that is dated and looks worn may require leasehold improvements and capital expenditures from the buyer. Having a well presented retail business can make your store shine in the eyes of an investor.
How secure are your supplier relationships?
A buyer of a retail business for sale would also be interested to understand how secure your supply of good is. Do you have contracts in place with reputable suppliers? Will the vendors be interested in continuing business with the new owner at the same terms?
Inventory
No discussion about selling a retail business is complete without mentioning inventory. A business buyer is concerned with a few things with respect to store inventory:
- what level of inventory does the business need to carry (inventory is a use of cash),
- are you selling the existing inventory in the sale (or in addition to)
- what condition is the inventory in
- Do you have any old, damaged or unsellable inventory? If so, a buyer will probably not want to purchase this.
Location
The Location for a retail business is extremely critical. If you would like to sell your business, think about your business location and how it will appeal to potential buyers?
- Is it in a growing or declining area
- Is it in a busy new Toronto mall or a shoddy old strip plaza with little traffic?
- Does your signage present well? Can it be seen effectively from the passing traffic?
Be honest with yourself when you go to sell. If you were in the market to buy a business, how does yours compare to other similar businesses listed? Talk to a reputable business broker to get a frank assessment of the price range that your retail business can sell for.
Life Insurance Quotes
Planning to Sell a Business
Anne Brown asked:
Many times, business owners make the decision to sell a business and too quickly dive into a listing arrangement without considering all of the consequences.
As a business owner looking to sell a business, here are a couple of issues to keep in mind if you want to sell your company quickly and at a good price.
Deal with a professional
As a business seller it is in your best interest to deal with a business broker, intermediary or specialist that focuses on the selling of businesses. Oftentimes, owners list their companies for sale with an individual who normally focuses on residential real estate and are disappointed when their business doesn’t sell. If you want to sell a business, it’s better to deal with a specialist.
Selling a business requires a unique skill set and the process is much different than selling a piece of real estate. For instance, business sales are usually kept confidential so dealing with a business sales specialist will benefit you by working with a professional that has an existing network of potential buyers interested specifically in businesses for sale. There is also more technical expertise required (example – business valuation for the purpose to sell a business is much different than determining the value for a piece of real estate, the negotiation is usually much more involved, there are typically more deal terms to be negotiated, due diligence must be managed and the overall transition facilitated). If you are looking to sell a business please choose to deal with a professional that specializes in business sales.
Declare your income
Too often, business owners don’t ‘declare’ a portion of their business income in order to have a lower tax bill. This is highly unadvisable. For starters, CCRA would not be too happy if they discovered such activity. Secondly, from a purely economic point of view, it costs you, as a business owner, in the long run when you go to sell a business. For instance, suppose you decide not to declare $10,000 in earnings and keep this instead as cash ‘off the books’. If your overall small business tax rate was 23% you would be saving about $2,300 in taxes. Alternatively, supposing you did declare the full amount you would pay $2,300 in taxes and be left with $7,700 in ‘declared’ income. However, supposing your business was valued at 2x earnings you would be gaining $15,400 in supportable business valuation when the day came to sell the business.
The point is that it may seem appealing in the short-run to cheat and not declare income but it really does pay to be honest. Businesses with undeclared earnings are much more difficult to sell and much more difficult to justify a valuation on. Business buyers always like to see properly documented and supportable earnings.
Do some analysis on your business
When you decide to sell a business, it is important to be able to tell a narrative to potential buyers about your business. Do some analysis and try to anticipate what an interested buyer might ask you. For instance, if profit margins have been decreasing, find out why. If sales have been decreasing, get to the root of it. Perhaps you had a period where you lost a staff member and have since resolved the situation.
Find out the story behind the numbers to paint an accurate picture to a buyer. Remember that no business is perfect and most reasonable buyers don’t expect it to be. Don’t try to gloss over any blemishes your business may have. Be forthright. Buyers expect you to be honest and if you’re not then that would raise a red flag that could potentially de-rail a deal.
Life Insurance Quotes
Many times, business owners make the decision to sell a business and too quickly dive into a listing arrangement without considering all of the consequences.
As a business owner looking to sell a business, here are a couple of issues to keep in mind if you want to sell your company quickly and at a good price.
Deal with a professional
As a business seller it is in your best interest to deal with a business broker, intermediary or specialist that focuses on the selling of businesses. Oftentimes, owners list their companies for sale with an individual who normally focuses on residential real estate and are disappointed when their business doesn’t sell. If you want to sell a business, it’s better to deal with a specialist.
Selling a business requires a unique skill set and the process is much different than selling a piece of real estate. For instance, business sales are usually kept confidential so dealing with a business sales specialist will benefit you by working with a professional that has an existing network of potential buyers interested specifically in businesses for sale. There is also more technical expertise required (example – business valuation for the purpose to sell a business is much different than determining the value for a piece of real estate, the negotiation is usually much more involved, there are typically more deal terms to be negotiated, due diligence must be managed and the overall transition facilitated). If you are looking to sell a business please choose to deal with a professional that specializes in business sales.
Declare your income
Too often, business owners don’t ‘declare’ a portion of their business income in order to have a lower tax bill. This is highly unadvisable. For starters, CCRA would not be too happy if they discovered such activity. Secondly, from a purely economic point of view, it costs you, as a business owner, in the long run when you go to sell a business. For instance, suppose you decide not to declare $10,000 in earnings and keep this instead as cash ‘off the books’. If your overall small business tax rate was 23% you would be saving about $2,300 in taxes. Alternatively, supposing you did declare the full amount you would pay $2,300 in taxes and be left with $7,700 in ‘declared’ income. However, supposing your business was valued at 2x earnings you would be gaining $15,400 in supportable business valuation when the day came to sell the business.
The point is that it may seem appealing in the short-run to cheat and not declare income but it really does pay to be honest. Businesses with undeclared earnings are much more difficult to sell and much more difficult to justify a valuation on. Business buyers always like to see properly documented and supportable earnings.
Do some analysis on your business
When you decide to sell a business, it is important to be able to tell a narrative to potential buyers about your business. Do some analysis and try to anticipate what an interested buyer might ask you. For instance, if profit margins have been decreasing, find out why. If sales have been decreasing, get to the root of it. Perhaps you had a period where you lost a staff member and have since resolved the situation.
Find out the story behind the numbers to paint an accurate picture to a buyer. Remember that no business is perfect and most reasonable buyers don’t expect it to be. Don’t try to gloss over any blemishes your business may have. Be forthright. Buyers expect you to be honest and if you’re not then that would raise a red flag that could potentially de-rail a deal.
Life Insurance Quotes
Selling a Business in Southern Ontario
Anne Brown asked:
If you are a business owner in Southern Ontario thinking about selling a business, the issue of ‘timing’ may interest you. Company owners often put off a decision to sell a business due to ‘bad timing’ of one sort or the other (example – the economy has slowed, new staff need to be trained, just acquired a new complex account, etc.) The decision to sell a company is an important one and clearly prudence with respect to timing must be taken. However, there is a grey area between thinking that the timing to sell a small business is off compared to finding reasons not to sell. The purpose of this article is to de-bunk a main reason that business owners cite as to why they think it’s not a good time to sell and also to explain why now is a good time to sell if you have a strong, profitable business.
Selling a business does certainly require preparation and foresight. The successful business seller will have taken several steps to ensure that they are able to find a buyer interested in their venture and that their business presents well. Doing things like claiming all of your earnings, maintaining proper records, increasing sales and improving business operations contribute significantly to selling a business successfully. The trouble, however, is that some business owners neglect to take the necessary steps to sell their businesses and then cite the “slow economy”, “new staff”, etc. as the reason that they won’t or can’t sell their business. The reality is that it is never a 100% ‘ideal’ time to sell – there is always something that is not quite perfect prior to listing a business for sale (example - revenue might be off for the latest quarter, the economy may have softened, a key staff member may have resigned, and so on.) The point is that selling a business is a long term decision that requires forethought. Decisions must not be knee-jerk otherwise you, as a business owner, may never sell your business at all.
Sell a business in a challenging business environment
The other issue to consider is that of perspective when you are selling a business. For instance, some people look at a situation and only see how the negative might affect them while others see opportunities. For instance, consider the economy of southern Ontario. The economy has traditionally been a manufacturing-centred area stretching from Toronto (GTA) to Mississauga, Oakville, Burlington, Hamilton, St. Catharines through to Niagara Falls. This QEW corridor is the home to countless factories, machine shops, steel companies and many other types of manufacturing companies. When the economy softens this sector is usually impacted much harder. Jobs are lost, exports decline, and so on. Clearly this is not an optimal situation. However, as a business seller you must remember that Ontario’s economy is now a modern, integrated service-based economy that has evolved greatly from the manufacturing roots. Economic downturns usually mean an increased level of unemployment as well. Consider that many workers look to buy a business when they lose their jobs. Buying a business is a clear option for many downsized workers so the potential pool of business buyers can increase in this scenario.
Good businesses are always in demand
The final point to consider is that not all businesses for sale are the same. Keep that in mind when you see a long list of online business for sale listings that don’t seem to be selling. Business buyers look for strong, stable and profitable businesses. They look for a business for sale that has ‘clean’ books, a history of good operations and one that is truly cared for and priced fairly. These types of businesses are in constant demand. All too often, the business for sale market is flooded with businesses that have failed (or are failing) and the owners list them at a price that is far too high and then expect to attract buyers. The trouble is that not many buyers are in the market for these types of companies (some are, but not many). The point is that even when the economy is soft or if something is not quite 100% with your business (and it never is with any venture), a fundamentally strong company that is profitable and well run should have a very good prospect of selling in any economy.
Talk to a business broker
Selling a business is a big decision to make. Talk to a business broker to discuss some of the many different options that will work best for you.
Health Insurance Quotes
If you are a business owner in Southern Ontario thinking about selling a business, the issue of ‘timing’ may interest you. Company owners often put off a decision to sell a business due to ‘bad timing’ of one sort or the other (example – the economy has slowed, new staff need to be trained, just acquired a new complex account, etc.) The decision to sell a company is an important one and clearly prudence with respect to timing must be taken. However, there is a grey area between thinking that the timing to sell a small business is off compared to finding reasons not to sell. The purpose of this article is to de-bunk a main reason that business owners cite as to why they think it’s not a good time to sell and also to explain why now is a good time to sell if you have a strong, profitable business.
Selling a business does certainly require preparation and foresight. The successful business seller will have taken several steps to ensure that they are able to find a buyer interested in their venture and that their business presents well. Doing things like claiming all of your earnings, maintaining proper records, increasing sales and improving business operations contribute significantly to selling a business successfully. The trouble, however, is that some business owners neglect to take the necessary steps to sell their businesses and then cite the “slow economy”, “new staff”, etc. as the reason that they won’t or can’t sell their business. The reality is that it is never a 100% ‘ideal’ time to sell – there is always something that is not quite perfect prior to listing a business for sale (example - revenue might be off for the latest quarter, the economy may have softened, a key staff member may have resigned, and so on.) The point is that selling a business is a long term decision that requires forethought. Decisions must not be knee-jerk otherwise you, as a business owner, may never sell your business at all.
Sell a business in a challenging business environment
The other issue to consider is that of perspective when you are selling a business. For instance, some people look at a situation and only see how the negative might affect them while others see opportunities. For instance, consider the economy of southern Ontario. The economy has traditionally been a manufacturing-centred area stretching from Toronto (GTA) to Mississauga, Oakville, Burlington, Hamilton, St. Catharines through to Niagara Falls. This QEW corridor is the home to countless factories, machine shops, steel companies and many other types of manufacturing companies. When the economy softens this sector is usually impacted much harder. Jobs are lost, exports decline, and so on. Clearly this is not an optimal situation. However, as a business seller you must remember that Ontario’s economy is now a modern, integrated service-based economy that has evolved greatly from the manufacturing roots. Economic downturns usually mean an increased level of unemployment as well. Consider that many workers look to buy a business when they lose their jobs. Buying a business is a clear option for many downsized workers so the potential pool of business buyers can increase in this scenario.
Good businesses are always in demand
The final point to consider is that not all businesses for sale are the same. Keep that in mind when you see a long list of online business for sale listings that don’t seem to be selling. Business buyers look for strong, stable and profitable businesses. They look for a business for sale that has ‘clean’ books, a history of good operations and one that is truly cared for and priced fairly. These types of businesses are in constant demand. All too often, the business for sale market is flooded with businesses that have failed (or are failing) and the owners list them at a price that is far too high and then expect to attract buyers. The trouble is that not many buyers are in the market for these types of companies (some are, but not many). The point is that even when the economy is soft or if something is not quite 100% with your business (and it never is with any venture), a fundamentally strong company that is profitable and well run should have a very good prospect of selling in any economy.
Talk to a business broker
Selling a business is a big decision to make. Talk to a business broker to discuss some of the many different options that will work best for you.
Health Insurance Quotes