Selling a Retail Business

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 listed 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 company 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.