We are grateful to work with many people before they buy a retail business. Over the years, we have curated advice for buyers. Recently, we have seen an increase in acquisitions. here’s our fresh advice:
Local retail businesses are appealing, and, looking out in the market, there are some excellent opportunities.
A common question we are asked by people who find me through this blog is what should I ask for when looking at buying a shop?
The question itself, when asked, indicates how green a prospective purchaser is when it comes to purchasing a business. Our first advice is that they better understand the retail business of today, to understand what they could be buying into.
Here is an updated list of data we suggest prospective local 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 list of add-backs used to achieve a profit figure on which the asking price is based.
- Tax returns for the same two years. While note always appropriate given business structures, they can provide a cross check with the accountant P&L.
- Sales data reports, for the last two years, from the POS software in use – to verify the income claim. This source data is key.
- Sales data reports from the other sources to verify the income claim.
- BAS forms to confirm data in the P&L.
- A list of all inventory in the business including the purchase price and date last sold for each item. And, copies of invoices from which you can randomly select to verify.
- A copy of the shop lease.
- A copy of any leases the vendor expects you to take on board.
- A list of all forward orders placed on behalf of the business.
- A list of all employees: name, hourly rate, nature of employment, start date, accrued leave and accrued long service leave.
This is good basic information, a starting point, which will enable any purchaser to undertake reasonable assessment of a business.
Our advice to retailers looking to sell who may be concerned about this list is: think about it now and focus on your business so the data we have listed looks good. The time to prepare your shop for sale is every day you are in the business.
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.
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.