So you finally decided to reap the rewards of all the time you’ve spent building a successful retail business. You’ve determined it’s time to sell. Now comes the most important decision of your life - how to maximize your assets and convert them to the highest possible return, being sure you’re exiting in high style.
There are typically two choices, one of which is to sell your store as a “going concern” with inventory intact and leave it running in the trusty hands of new owners. Alternatively, convert your assets and inventory into cash through a professionally conducted sales event, and then close the doors.
If you first want to explore the possibilities of a sale where the business continues normal operations, there are several critical steps:
- Compile yearly financial records.
- Compile annual tax returns.
- Set a realistic price.
The big challenge here is not to set a price that is too high. Most buyers will want to pay less than the original cost of your inventory and will pay minimally for the furniture, fixtures and equipment. In the jewelry business, very little consideration is typically given to goodwill (the value of your existing customer base and your brand equity). It is advisable to speak with a business broker or accountant experienced in these matters to help set a fair value for your business.
The major difficulty you will encounter in selling your store as a going concern is the lack of qualified buyers. Many buyers do not have adequate financing and may want the seller to hold a note, which could be risky. If the buyer does not continue a successful operation, the note may become worthless. Additionally, many buyers will only offer you a percentage of your cost for the inventory, claiming that they would prefer to invest their resources in fresh inventory of their own choosing. Some stores are just not saleable as an ongoing operation, and many that are saleable may have difficulty finding buyers with cash.
So what are your alternatives? First, separate the store’s assets. Obviously, inventory is the biggest asset. If you could get better than dollar for dollar on cost in cash, you’d surely take it. Then you could sell the store, without inventory, as an ongoing operation. This strategy breaks the impasse of waiting for the perfect buyer to come along and write you a big check.
How do you get better than dollar for dollar for inventory? A professionally conducted sale will often generate as much as 1.25 on the dollar for inventory. This way, you may come close to realizing your annual sales volume in as little as eight to ten weeks. It then becomes easier to find a buyer for the business, having converted your inventory to cash.
Now you start searching for a buyer for the remaining assets, which won’t require as large of a financial investment. Conducting a sale to the public will generate cash quickly, and in most cases results in a much greater return than you would gain by a full sell-out to an interested buyer.
The better you prepare to move on to the next chapter, the more likely you will be to have a storybook ending. When you decide to sell the business, tap into professionals to guide you. Call upon your attorney to draw up the purchase and sale agreement, have your accountant establish values on assets, and make certain that tax implications are considered. Your business broker should help coordinate the efforts of these professionals working on your behalf. While negotiating, remember that the best strategy for selling a retail business is to have realistic expectations. Keep an open mind about the value of your business, and try not to let emotions enter into the equation. Thoughtfully evaluate all prospective buyers, and keep an open mind.
If you decide to liquidate because you can’t find a qualified buyer or would rather make a clean break, look for a professional jewelry consulting company with a successful track record and solid references. Ask how long they have they been in business and how many sales they have run? Can they supply additional merchandise that is priced right and of the same quality as your existing goods to jump-start the sale (a very effective, but often overlooked benefit of using a consultant)? What is the background of the professionals who will be involved in your liquidation? You only have one opportunity for a grand exit, so take the time to select the right professional partner for your situation.
Bottom line, it’s important to evaluate your options, choose the path that will take you where you want to go, and ideally provide the strongest return on your investment. Most of us are emotionally attached to our businesses, and it can be hard to let go. However, doing your homework, getting professional help, and carefully weighing the options will help ensure you’re exiting in high style, just the way you always planned it.
Bob Epstein is CEO of Silverman Consultants, LLC. Offering a legacy in sales strategies for jewelers since 1945, Silverman Consultants provides guidance to store owners seeking to turn around a business, sell off unwanted inventory, or liquidate an entire store. With offices located in Charleston, South Carolina; New York, New York; and Saskatoon, Canada; the company helps jewelry store owners and chains formulate strategies designed to maximize revenue in times of transition, whether due to retirement, store closing, or simply when needing a boost in sales. For more information, visit www.silvermanconsultants.com or call Bob direct at 800-347-1500.