5 Tips For Preparing Your Retail Business For Sale

Preparing a retail business for sale takes time. There is important work to do long before you list the business with a broker of place your first advertisement. By undertaking preparatory work well in advance, the business sale process will be smoother and the outcome more rewarding.

Here are five essential tips for preparing any retail business for sale. While these tips will not guarantee a sale at the right price and with the timing you want, they will position you and the business for the best possible outcome.

Drive profitability. The sale price off the business will usually be a multiple of profitability over the previous year. If you have enough time, trim costs and do everything possible to drive sales. Every dollar you can add to EBIT (earnings before interest and tax) adds multiple dollars to the selling price of the business.

Be ruthless with expenses. Remember that you are running the business for the incoming owner and not for yourself.

Tidy up. From inside the store to the office, tidy the business, make it more presentable and attractive. Tidy the paperwork. Tidy the employees. Ensure that everything a prospective purchaser will see is attractive and appealing.

Get all of your paperwork in order. Work with your accounts people to get all business paperwork up to date so that any question can be answered and any figure verified. The more easily you can answer financial questions the more your claims about the performance of the business will be trusted.

Ensure that your retail store lease has plenty of time left to run. If there is not much time then the p[rice will be affected.

Make the business desirable. Review all operational processes and eliminate any which are unique to current management. Make the business as simple as possible to operate with any new employees. A business which relies on existing employees or, worse still, the owner, will be considerably harder to sell.

In reviewing the current operation, look at all customer relationships. Are there any which rely on current owner or management personal knowledge or experience. If so, these will need to be addressed.

Develop a business plan focused on growth. People buy a business because of the potential. While they may have growth ideas, it could make the business far more saleable if the homework has been done a growth plan developed to show what upside is achievable and how.

In developing the business plan, work through big dreams for the business. It will be important to show that the retail store for sale is bigger, better and has more potential than the retail store they may be looking at.

The more time you invest in preparing your business for sale the better the outcome you are likely to achieve. Sallow yourself the time necessary to ensure that the business delivers the dream price you want.

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Internet Business For Sale By Owner – Making a Safe Purchase

When looking into an internet business for sale by owner, there are a number of things that you can do to minimize your risk. A lot of people make the mistake of thinking that because they are not buying a physical location that the risk of running into problems is minimal. The truth is that because a majority of your purchase is digital, your risk is actually much higher. Fortunately, there are a number of steps that you can do to make the entire purchase process much safer. If you are interested in purchasing an internet business for sale by owner, then here are a few things to consider.

1. Gathering Pre-Sale Data

The first thing that you need to think about is how you are going to gather data. It doesn’t matter if you are purchasing a single website or an entire network of inter-linked sites, the numbers always set the price. In order to make a safe purchase, it is essential that you are allowed to access all of the data that you need. This can be problematic when trying to buy an internet business for sale by the owner. Some will try to simply give you the information that you request, however you need to be able to verify it. The only way to do this is by getting direct access to it. If the owner won’t let you see the same information that they see, it will be impossible for you to get the full picture of the situation, which leaves you at a terrible disadvantage.

2. Always Consult a Lawyer

Another thing to consider is using a lawyer. In order to make your purchase as safe as possible, it is a huge benefit to have your own lawyer throughout the entire process. This not only scares away anyone who intentionally misrepresents what they are selling, but it also ensures that you receive everything that you need. Business lawyers, especially ones with experience in internet business sales, already know what you should be receiving in terms of digital and intellectual property. They can also ensure that all of the correct paperwork and documentation is signed at the time of sale. Even if you don’t want to pay a lawyer to be at your side through the entire process, you should at least have one look over all of the final paperwork before the transaction is completed.

3. Use an Online Business Broker

There are a growing number of companies that focus solely on brokering deals related to online businesses. Just because you see a listing entitled “Internet Business For Sale By Owner” doesn’t mean that you will necessarily be dealing with the owner. They could use these types of brokerages to do everything for them. These agents act very similar to a real estate agent and will make the sale on behalf of the owner. In the perfect scenario, you will deal with both a business broker as well as your own attorney.

There are a number of different ways that you can minimize your risk when purchasing an internet business directly from the owner. By relying on accurate data and utilizing either a lawyer or an online business brokerage, your risk will be next to zero. There is no reason to fear opportunities labeled as “internet business for sale by owner” as long as you protect yourself throughout the process.

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Take Care of Physical Assets Before Putting Business for Sale

No body wants to sell a business that he has nurtured with his time, money and hard work. However, many times, business owners are forced to sell their business due to certain unavoidable circumstances of financial issues. The even worse part is that the process of selling a business can sometimes be very difficult. The first difficulty you come across before putting your business for sale is evaluation of its fair value.

There is so much preparation to do before putting a business for sale that it is often hard to decide the starting point. Preparing a list of tangible assets and classifying the ones that can be included in the sale can be a good place to start.

Among the tangible assets, real estate being the most important physical property usually needs the maximum attention. In addition to real estate, other major tangible assets, include vehicles, office equipments, operating equipments, and inventories. All of these assets may or may not exist in every business, but making a clear list of assets for sale will make things transparent between you and the buyer. Buyer will also get a clear idea about the things he is getting in return of his investment.

Real estate, office building, and land are usually the most important parts of any business. The location of business plays a major role in deciding the value of any business and therefore you can choose to treat real estate as a part of the business or can sell it as a completely independent entity. You may also choose to sell only the business while keeping the office premises under your control. In such cases, the buyer has the option to move the business to a new location.

Having all the office equipments in a proper working condition means the business needs no immediate investments in terms of infrastructure. This brings in a positive response for your business. Equipments that need upgrades and maintenance should be taken care of before putting your business for sale. If everything looks nice at the first appearance, it will definitely add value to your business.

Calculating the value of inventories is also an inseparable part of any business. It is advisable to divide the inventories on the basis of their current state – raw materials, half-made products, and finished products. It is better to keep away goods that are damaged or expired.

Sorting out the tangible assets before you put your business for sale also helps you avoid any sort of discrepancies in the future. It will also help you identify what remains with you after the selling process is over. At the same time, it gives the buyer an idea about what he is getting in return of his hard-earned money.

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What a “Business For Sale” Really Means

Having a business for sale can mean a lot of things – more than people might think. How does one business value compare to another, and how to arrive at that value? Because there are many types of businesses that exist for many different industries, it stands to reason there are numerous ways of approaching the process to find the value.

There are the three main approaches to value, which are the income approach, the market approach, and the asset approach. There are variations of these approaches, and combinations of them, and things which must be looked at because each and every business will have variations of what gives the business worth, and some of these differences are substantial.

First we must identify the type of sale: stock sale or asset sale. A stock sale is the sale of the company stock; the buyer is buying the company based upon the value of its stock, which represents everything in the business: earning power, equipment, goodwill, liabilities, etc. In an asset sale, the buyer is buying the company assets and capital which enable the company to make profits, but is not necessarily assuming any liabilities with the purchase. Most small businesses for sale are sold as an “asset sale”.

Our question, when selling a business or buying a business, is this: what are the assets considered to arrive at an accurate value? Here we will look at some of the most common.

1. FF and E: This abbreviation stands for furniture, fixtures, and equipment. These are the tangible assets used by the business to operate and make money. All businesses (with a few exceptions) will have some amount of FF&E. The value of these can vary greatly, but in most cases the value is included in the value as determined by the income.

2. Leaseholds: the leasehold is the lease agreement between the owner of the property and the business that rents the property. The agreed upon leased space typically goes with the sale of the business. This can be a significant value, especially if there is an under market rate currently charged and the lessor is obligated to continue with the current terms.

3. Contract rights: many businesses do business based on ongoing contracts, agreements with other entities to do certain things for certain periods of time. There can be immense value in these agreements, and when someone buys a business he or she is buying the rights to these agreements.

4. Licenses: in certain business sales, licenses do not apply; in others, there can be no business without them. Building contracting is one of them. So is accounting. For a buyer to buy a business, his purchase includes either buying the license to the company or the license to the individual. Often times, the buyer will require the access or availability of the license as a contingent element of the sale.

5. Goodwill: Goodwill is the earnings of a business above and beyond the fair market return of its net tangible assets. In other words, whatever the business makes in excess of its identifiable assets is considered “goodwill” income, where there exists a synergy of all of the assets together. This one can be tricky. Most business owners assume they have goodwill in their business, but goodwill is not always positive; there is such things as “negative” goodwill. If the business makes less than the sum total of its identifiable assets, there exists negative goodwill.

6. Trade secrets: some businesses are all about secrets. The reason the business is in operation may be because of a trade secret, some aspect of a product or service that sets it apart and gives it a market. In a business purchase, these secrets have value and go with the sale.

7. Trade names, telephone numbers, websites, and domain names: some businesses generate business simply because of its name and identifiable aspects. If those were to change, so would the profits. So in buying a business, the buyer will have need of those names and numbers to continue on in business. Of course, in some cases these things would not matter at all, and that is why each one must be approached individually.

8. Works in progress: a construction company may have a multi-million dollar job going on at the time of the sale, which can take months to complete. In case such as this, the buyer would have need of continuing on in the particular job the company was engaged in; for money and for reputation. This is considered a work in progress and has value and therefore is considered an asset and made part of the sale.

9. Business records: the history of a business detailed in documents and spreadsheets must necessarily become part of the business sale. The new owner can make use of records in identifying progress, tracking increased or decreased sales, adjusting expenditures and depreciation rates, etc. When someone purchases a business, they are buying the current operation and all the details that led to it.

10. Real estate: the seller-owned property on which the business does its business is inherent to the operation and therefore the value. There are times when the new buyer needs to move the business to purchase it, but more often the real estate is viewed as a major aspect of the business value, especially if there is equipment attached to the property and buildings suited specifically to the business.

When a business for sale is valued by a professional appraiser, a business broker, or a business owner, more than just the income is considered. Assets, economic values used by the business to produce revenue and profits, are weighed heavily to determine the worth of the business. And they must be considered to understand what a “business for sale” really means to a buyer.

Rhett Kniep is a licensed building contractor and real estate broker. For over a decade he has successfully worked in the real estate investment business, buying and rehabbing and selling investment homes, commercial real estate, and businesses. He enjoys sharing his learned insights in business and property development with others.

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How to Handle Small Business For Sale

When handling a small business for sale, as seller should work on understanding the needs of a buyer and learn how to make that buyer a prospect. This process is called the buyer behavior study, through this; the buyer can be approached and analyzed from differed angles and under different circumstances.

Know facts – what are the things that motivate the buyer, why does he shift interest from one shop to another or from one brand to the other, how does he react to new products introduced to the market or delivered to him? Such questions are essential in knowing the things that interest the buyer. And through the information gathered here, a seller would create and product and promotion strategies.

However, it should also be understood that there is no real defined and tested theory of buyer behavior. Some ideas came from economics, psychology and other theories on social sciences. Many business firms and companies are continually researching on the buyer behavior to increase the possibly of sales with buyers. Yet, any seller would agree that buyers really are some kind of riddles. Despite efforts on selling even small business for sale, one cannot guarantee that a buyer who has first taken interest on it would push through the sale.

Buyers have innumerable desires and needs; all these also vary according to their security and aesthetic needs. And buyers have their own incorruptible way of meeting their needs and desires, just as long as it is within his or her means. If a buyer thinks that what a seller is offering is way far beyond his reach, a sale is then impossible to realize.

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