A common question we are asked at our POS software company has nothing to do with software. It is from people considering purchasing a retail business. The question is: what should I ask for when looking at buying a retail shop?
The question itself, when asked, indicates how green a prospective purchaser is when it comes to purchasing a business.
Here is a list of data points we suggest retail business purchasers access from the vendor or their representative:
- P&L from the accountant for the last two years. i.e. not a spreadsheet created for the purpose.
- A good explanation of any add-backs.
- Sales data reports, for the last two years, from the POS software in use – to verify the income claim.
- Sales data reports from the lottery terminal to verify the income claim.
- BAS forms to confirm data in the P&L.
- A list of all inventory to include purchase price and date last sold for each item.
- A copy of the shop lease.
- A copy of any leases the vendor expects you to take on board.
- A list of all employees: name, hourly rate, nature of employment, start date, accrued leave.
This is good basic information that will enable any purchaser to undertake reasonable assessment of a business.
A good business will shine through the numbers just as a business with upside achievable by new owners will shine through.
My advice to vendors looking to sell who are concerned about this list is: think about it now and focus on your business so the data listed looks good.
Every day you make decisions in your business that impact many of the data points listed.
This is why we say every day is your pay day. Run a smart, lean and profit focused business and you will have a good pay day today and a good one when you come to sell.
The most appealing businesses are those that are easier to run and are making money.
The time to focus on that is now.
Sure, a purchaser can turn a business around. They should get the rewards if they are expected to do that for your business.
The price you can sell your business for will be based on what it is making now.
Getting the data ready for the sale of the business could, of itself, help you improve how you run your business.
