David Brown: Is your Business Ready To Sell?

The Key is to Know what buyers will look for.

BY DAVID BROWN

Published in the June 2013 issue

Unless there is a succession plan in place it is highly likely, at some stage, you are going to want to sell your store or stores.

Often, this process can end in tears for store owners, as the asset they believe they had built up over a long period of time can turn out to be little more than a millstone around the neck. The main error that is made is the assumption that the assets on the balance sheet are genuine assets in the eyes of the buyer, and this isn’t always the case.

Often the biggest asset from a financial year-end perspective is the inventory of the business — but this is only for tax or accountancy purposes. A real assessment for many stores finds this asset to be dated and worth less, and the price of the business upon sale can reflect this. Hidden or intangible assets such as the store’s database or perhaps some intangible liabilities, such as the store’s lease obligations, can be a more accurate assessment of the real value upon selling.

If you plan to sell in the next five years, there are steps that need to be considered now:

1 Find your sweet spot. What is your business known for? What do you do well? What do your customers value? Once you’ve determined this, you may well have a point of difference a buyer would be prepared to pay for. Make sure this skill set doesn’t rest only with you, however, or it will walk out the door when you leave the business.

2 Be cash positive. Nothing speaks louder to a buyer than a cash-positive business. Can you be paid an upfront deposit for your services, particularly custom work, that you aren’t currently asking for?

3 Hire a sales team. A buyer wants to know that the business is not all about you. If you can’t go away for a month and have your business function efficiently, then it’s questionable whether you have any real value to offer.

4 Incentivize your best staff. If there is a strong knowledge base being retained from long-term experienced staff then this widens the number of potential buyers to include those who don’t have any previous jewelry experience. This will be a considerably larger market than just those who are jewelers.

5 Find a good broker. Ask for testimonials and speak to other business owners who have sold their business with this person. They will be charging a sizeable sum so make sure you get your money’s worth!

6 Too often business owners don’t like to publicize the sale of their business for fear of creating uncertainty among the staff. Guess what? If you don’t tell anyone you won’t sell your business! The fewer who know, the fewer who could potentially buy. I have heard countless stories of business owners being told by other parties that they would have been interested in the store had they known it were for sale. The more interested parties the better the price.

7 Look for the fine print in any offers — most have conditions. Work out their true cost. Do they require you to leave money in? Are you expected to stay on for a period of to help out?

8 Beware of due diligence. Don’t pop the champagne corks just yet! Often, an offer will include requests for further information. Expect a price renegotiation or even a request to back out during this process. The deal is never done until it is unconditional! Of course this will vary depending on your local laws, and you should definitely secure the services of a good attorney for this process.

David Brown is president of the Edge Retail Academy, an organization devoted to the ongoing measurement and growth of jewelry store performance and profitability. For further information about the Academy’s management mentoring and industry benchmarking reports contact inquiries@edgeretailacademy.com or Phone toll free (877) 5698657