How to Sell a Retail Business

Selling a business is a time-intensive and complex process. It requires effective marketing, negotiations with potential buyers, and ensuring the accuracy of all information, all while managing your daily business operations.

It is highly recommended to engage a business broker to assist with the sale. They will communicate with interested parties on your behalf, provide advice on potential challenges, and allow you to focus on continuing to grow your business.

When hiring a broker, it’s crucial to ensure they have practical experience in your industry.

Retail Industry and the Economic Downturn

The retail sector was significantly impacted by the economic downturn, as consumers sharply reduced spending. Many jobs were lost, and both large chains and independent stores shut down – forcing the industry to evolve.

In the past decade, advances in technology have fueled the rise of online shopping and social media marketing, creating global opportunities for small retailers to compete with larger businesses.

For high street shop owners selling their businesses, turnover may now be driven by multiple revenue streams, rather than just from a traditional brick-and-mortar store.

How to Present Information to Potential Buyers

The first key document to prepare is the Sales Memorandum, or Information Memorandum. This document should provide a general overview of your business, including its origin, daily operations, revenue streams, and reasons for selling.

Buyers will require financial information, but it’s important to maintain confidentiality. More detailed financial data can be shared once you have narrowed down the list of serious buyers.

When it comes to financial information, buyers will expect to see:

Complete set of accounts

Lease agreement (if applicable)

Inventory of fixtures, fittings, plant, and equipment

Staff contracts

Recent VAT returns (for VAT-registered businesses)

Details of Hire Purchase or leasing agreements (if applicable)

Valuing Your Retail Business

Before listing your retail business for sale, it’s important to conduct a business valuation to determine its market value. Our in-house valuation team offers a fast, comprehensive service for all types of retail businesses, from florists to online retailers. This service saves you the hassle of turning to external valuation providers.

How Much is My Retail Business Worth?

Valuing your retail business is a crucial step in the sales process. Knowing your business’s value will help you enter negotiations with confidence and ensure you achieve the best possible price. Our team will guide you through the entire process, from valuation to finding a buyer, drawing from our extensive database of over 10,000 interested buyers.

Professional Advisors

Your accountant can assist in preparing the necessary financial documents for the sale. Additionally, you may want to consult tax and legal professionals. When you receive payment for your business, your tax advisor can help you invest the proceeds in a tax-efficient manner. Legal advice will be essential if the buyer requests warranties or indemnities.

Challenges Facing Retail Business Owners That Could Impact the Sale

Cybersecurity: Ensuring website security is critical for online retailers. Protecting customer information and maintaining a secure payment system is essential for preserving consumer trust and loyalty.

Business Rates: Depending on your location, rising business rates may be a concern following recent commercial property revaluations in the UK. While the government is considering reforms, some retailers still struggle with cash flow due to these increases.

Funding: Securing the right funding is often challenging for retailers, especially when dealing with issues like business rate hikes. Alternative funding options, such as merchant cash advances, are becoming more common, but traditional bank loans can be difficult to obtain.

Negotiating with Buyers and the Heads of Terms Agreement

Once you’ve shortlisted potential buyers, you’ll likely find one or two who seem like a good fit. At this point, in-depth negotiations should begin, followed by the buyer’s due diligence process.

This phase involves a detailed review of your business finances to ensure the information provided is accurate. Buyers may request additional warranties or indemnities, which could expose you to legal risk. It’s important to seek professional advice before agreeing to these terms.

The Heads of Terms Agreement summarizes the results of your negotiations. Some parts of the document may be legally binding, but there’s room for further negotiation before the final sales and purchase agreement is signed.