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Creative Leisure News
306 Parker Circle
Lawrence, KS 66049
Phone: 785-760-5071
Email: mike@clnonline.com

 

 


Your Business Commentary

Mike's often irreverent, thought-provoking analysis of the industry-- with an occasional guest columnist.

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Don't Close Your Store, Sell It!

Because almost all stores can be sold.

by David Larson (October 18, 2010)

(Editorís Note: Over the years CLN has seen numerous successful independent stores close. Why? The owners wanted to retire, their kids were following their own career paths, and the owners didnít know how to sell their stores. So CLN asked David to write the article below. David has been helping our industryís independent retailers sell their businesses for more than 30 years.)

Maximize your return on your investment

You can always close your store, but why would you if you can achieve a much higher return on your investment than its liquidation value?

When you liquidate, you would normally end up with only 65%-80% of your inventory cost after the six- to eight-week process when you factor in average monthly operating costs.

In selling your business you take the guesswork out of what you will get and can move forward knowing that what you have built will continue.

When the time comes and you want to retire, for the sake of your finances, for your employees, and for your community, together letís find a qualified buyer.

The worst thing that can happen is, after years of building and running a business, the end result is closing it. That will have a negative impact on your finances Ė and your emotions.

The truth is, almost all stores can be sold; the secret is finding the right buyer to match up with the opportunity.

Why are you selling?

If you are retiring Ė thatís great.

If there are sales and profit problems and you would prefer to keep your business, letís review the options and opportunities before you move forward.

Before you put your store up for sale

Clean up your store: get rid of the clutter and old, unused fixtures.

Close out old, shop-worn products. (If you wait and the potential buyers are exposed to them, it will cost you on the overall price.)

Get your files up to date

Put together at least the last three years of financial documents; most lenders will need these in working with the prospect.

Inform your employees. We canít sell your business unless we can let people know itís for sale. Most new owners will retain your staff.

The selling process

Coming up with a price for your inventory: Most stores are sold via a retail inventory less a discount percentage to determine cost. This number is normally close to your actual gross margin percentage.

Fixture and blue-sky value: This is normally based on the profitability of the business and the condition of the fixtures.

Financial numbers: We would review all of your expenses and eliminate ones that are unique to your operations and then put together the investment package and projections for a new owner based on normal lender requirements.

Building lease or purchase: If you own the building, then you need to decide what you want to do; you may want to offer both options. If you lease the building, then we need to contact the landlord for lease terms for a new owner.

Advertising your business

Almost 100% of the prospects live in your trade area.

Place your ad in the paper with your store name (donít mess with business opportunities; that never gets the results). If you are retiring, include that in the ad.

If you want my help, you would put my name and phone number as the contact. Using my services or someone elseís to qualify prospects before any financial information is given out (except estimated equity requirements) will certainly make the process easier for you.

Note:  Davidís services include A) Selling a business (qualifying prospects, buy/sell agreements, etc.); B) Buying a business (opportunity review, sales/financial projections, etc.); C) Lease analysis and negotiation; D) Bank packages; E) Cash flow analysis; F) Financial analysis and planning; G) Business plans; H) Merchandising assistance; and I) Fixture and Merchandise Points. To contact David, call 763-427-3545, email mndavid@comcast.net or write to 1000 38th Lane, Anoka MN 55303.

xxx

 

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