2018 Presents An Opportune Time For Retailers To Consider Selling Their Business
Contributed by BizBuySell
Brick-and-mortar retailers are proving they are more than capable of holding their own against mega-corporate entities like Amazon and eBay, which currently dominate the online market.
According to BizBuySell’s annual Insights Report, the median revenue for sold retail businesses increased 17 percent from 2016 to 2017, rising to $600,000. Backed by strong financials, retail business owners are asking and receiving more for their business as the median sales price also rose, up 11 percent to $199,500.
Stronger financials can largely be credited to rising economic conditions, making 2017 a good year for business owners. The United States’ gross domestic product grew 3 percent in the third quarter of 2017, and the unemployment rate sits at 4.1 percent. In addition, the recent tax reform package passed by President Trump significantly benefits retail small businesses. While large online retailers also benefit from the favorable environment, a recent BizBuySell poll found only 24 percent of small business retailers view enterprises like Amazon as a threat to their success.
As great as 2017 was, 2018 looks to be an even better time to sell a business. Eighty-four percent of owners believe their business will perform better this year than in 2017, and sellers can expect to receive approximately 93 percent of their original asking price. Steady business growth and a stable economy have retailers confidently entering the for-sale market in search of the best market value for their small business.
How Retailers Can Prepare Their Business For A Seamless For-Sale Market
While retailers may be eager to list their business and cash in on the transaction, there is a right and a wrong way to approach a hot for-sale market.
Entering the market too quickly could actually end up prolonging the sales process with a less than ideal outcome. Inadequate planning may also scare off buyers or even customers and employees, which will ultimately reduce the value of the business.
With diligent preparation and attention to detail, retailers can strengthen the value of their business and improve their company’s position in the market. From digitizing store invoices to optimizing internal workflows, here are several to-do’s prospective sellers should consider before putting their business up for sale:
Prepare Financial Statements In Advance
To attract potential buyers, sellers should compile their business’ financials over the past three to five years so buyers can examine the strength of the business’ cash flow. Advanced preparation also gives sellers an opportunity to strengthen areas that could set off red flags to prospective buyers. The additional time spent preparing gives sellers the chance to improve their business’ “curb appeal” and avoid selling at a less-than-ideal price.
Strengthen The Business’ Value
If owners are disappointed with the market value of their business, there are several things they can do to increase its worth before listing. Developing and promoting intellectual property can drive up business value and differentiate a retailer’s service offerings from others on the market. Other factors, such as highlighting the value of intangible assets (like customer relationships and brand recognition), go a long way in strengthening a business’ worth and attracting a larger pool of buyers.
Identify The Appropriate Time To Sell
While retailers can’t control the fluctuating economy, they can monitor the health of their business and use past revenue to determine an ideal time to sell. If records show a slight decline in sales, retailers may want to hold off on pursuing a business sale and spend time improving their operations to help bolster revenue. Similarly, if sales are strong and the economy is also performing well, now is the perfect opportunity to maximize a business’ sales potential.
Confidence in the small business market is high and sales prices are up from the previous year, making 2018 a prime opportunity for retailers to enter the for-sale market. A strengthening economy is one of many signs that now is a great time to sell, but the unpredictability of market forces makes it hard to predict how long this will last. For retailers even considering listing their business for sale, at least for now, there is no better time than the present to get started.