How to Sell Your Small Retail Business
Selling a retail business requires careful planning to ensure you not only properly transfer your assets to the new owner, but also your obligations. If you have contracts with manufacturers, wholesalers or sales agents, you might not be able to transfer those obligations, potentially thwarting the sale of your brick-and-mortar or online store.
The first step in selling a retail business is to value the company to determine if you can get the asking price you want based on your assets and potential future income. List your hard assets, which includes such things as inventory, real estate, cash, receivables, equipment, supplies, furniture and vehicles. List your intangible assets, such as your name, logo, goodwill and retail contracts. One of the benefits you might offer a buyer is your status as an exclusive or official retailer of a desirable brand.
A business selling price is often based on potential future sales. Gather any historical data you have that shows your income, expenses and profits, such as budgets, bank statements and tax returns. Create a document that shows your last three years’ income and profits. Consider hiring a business broker to help you determine how your mix of sales, expenses and profits can project future earnings. Business brokers are expert at valuing businesses based on their assets and earnings potential, often setting a sale price based on a multiple of earnings. For example, if your business makes a profit of $100,000 per year, a broker might recommend you sell the business for three times earnings, or $300,000.
Review your contracts to determine which will transfer to a new owner. Some contracts will require the new owner to submit to a credit check or other review process. If your buyer purchases your business without this review, you may find that he can’t sell a key product and that you are still legally obligated to fulfill your part of the contract with that manufacturer. Look at all licenses, insurance policies, building codes and your zoning to determine if you have anything grandfathered that won’t transfer to a new owner.
Create your sale offer, dividing the information into several sections. Start with an executive summary that consists of no more than half a page of bottom-line facts, such as what the store sells, how long it’s been in business and what its sales growth and profits have been in recent years. Use the rest of your document to support your claims. Include a section that describes your business, including what you sell, your client base, the competition and the brand you’ve created. Describe your key assets, including your main product line contracts. List your assets and liabilities providing a balance sheet, profit and loss statement and annual budget. Finish with your sales and profit projections and desired selling price.
If you place an ad in the paper that you’re selling, you might send a message to the marketplace you’re struggling or going out of business. Contact your competitors, look for venture capital groups or use a business broker to find potential buyers. Meet with them, respond to their questions and be prepared to respond to counter offers, which might include a lower sales price or owner financing. Divulge your financial information only to trustworthy sources, which might require asking potential buyers to sign non-disclosure documents or to put down earnest money before they begin their due diligence, or in-depth research process.
Once you've sold your retail store, close your company or business or end any obligations you have related to the store. This might include things such as a local business license, state sales tax permit, property taxes, insurance and vendor and supplier contracts. Update your company information on the secretary of state's website or close your corporation. Closing your business is not the same as closing the store, so coordinate your efforts with the new owner to make sure you don't accidentally terminate his licenses, insurance, permits or contracts.