How to Sell a Small Retail Business – Small retail business owners may have occasion to sell their retail store such as retirement, divorce, new employment opportunity or investment opportunity, or to enter into another business venture different from their current retail establishment.
To sell a small retail business, the owner will have to value their retail business, get it ready for sale, consult a professional business broker, advertise their small business for sale and qualify potential buyers.
- Value your small retail business. You can use different means to determine the value of your small retail business such as: sales of comparable businesses, the rule of thumb method and present to future value formula.Comparable sales can be found in trade publications and in the business section of your local newspaper. In addition, being a member of the local business community, you can ask wholesalers that supply your small retail business if there have been recent sales. The rule of thumb method is the quickest way to determine the value of your business; simply take your annual positive cash and multiply it by four. If your business generates $75,000 per year, its value is 4 times $75,000 or $300,000. Lastly, you can use the present to future value formula which you take the present value (the amount of earnings from last year to present) and multiply it by the projected rate of growth. If your business generated $50,000 and grows by 4 percent annually, multiply $50,000 by 4 percent, and you’ll arrive at the value one year from now. Repeat this for a 10-year period.
- Consult a professional business broker. A business broker is a professional who evaluates and represents business buyers and sellers. Much like a real estate broker, they assist the buyer or seller in the process of buying a business and advise them of the risk, the return, and sustainability of the business. Contact a local business broker to inquire about their fee and what services they provide. They are often very experienced in knowing how to sell a business including but not limited to: readying the business for sale, valuing the business, negotiating sale terms and transferring licenses and/or permits to the buyer.
- Advertise your small retail business for sale. A professional business broker can assist you in selling your small retail business, but in addition, you may wish to advertise it for sale as well. Take out ads in trade publications, speak to your local Chamber of Commerce, attend trade shows to meet individuals who are entering into the retail business, and advertise in your local newspaper and social networking and listing websites.
- Qualify your small retail business buyer. Once you have a potential buyer, you will want to qualify them. You may wish to ask them for financial statements and/or financing documents (if they are taking out a business loan) and ask them about their professional experience. Many retail business selling transactions include a provision or clause that allows the buyer or seller to rescind the sale should certain circumstances arise such as sudden change in zoning laws or they are unable to properly manage the business—especially those transactions that are owner-financed.