Selling a business like a liquor store can be a difficult and often personal process. Business owners can treat their business like a child they brought into the world, making it hard to let go. Owners want to see the business they created thrive even if they no longer own it, which is why finding the right buyer is so important.
Finding the right buyer can be a difficult task. However, as a business broker, I have helped dozens of liquor store owners sell their business, and there are a few steps you can take to make the process easier while ensuring buyers see value in your store.
When Is It Time to Sell?
Ideally, plan your exit one-to-two years in advance while continuing to grow your business. You should contact a broker to explore your options well in advance of the sale of your store. Many business owners think that is way too early to engage a broker, but a professional business broker will appreciate the planning.
In my experience, many liquor store owners tend to overvalue their business, leading to some difficult lessons about the selling of a liquor store. When you think every day about selling your business, you may have already checked what other liquor stores are selling for. Just because another store sold for a certain amount does not necessarily mean you will get the same value.
Putting your store on the market with at least two years of positive growth will be more appealing, more valuable and easier to sell.
Determine the Sales Price
When determining the selling price, we look at several different variables. These include financials, the owner’s role in the business, how many hours they work a week, the experience of the management team, the quality of the assets and how the business is trending, year-over-year.
When it comes to your financials you should have at least the last three years of income statements, balance sheets and corresponding tax returns. A buyer will look at this information to see if the business is profitable.
A profitable business will typically be valued based on the seller’s discretionary earnings. These earnings are the pre-tax and pre-interest profits before non-cash expenses, one-time investments and any non-related income expenses. Having detailed books and records with “verifiable” discretionary earnings, the more value you will get for your business.
Look at what comparable liquor stores have sold for to help you decide on an attainable asking price. Keeping in mind of course this is simply the asking price and the final sales price can vary. To achieve the highest results the more attractive you make your business, the more potential buyers you’ll attract, the higher sales price you’ll receive in the end.
Maintain Your Equipment
To receive proper value for your business you must maintain high standards. Make sure your store is clean. You don’t want a potential buyer turned off because you didn’t replace stained ceiling tiles, clean your taps, dust your wine bottles or have your shelves fully stocked.
Additionally, a buyer is not going to pay top dollar for a business requiring thousands of dollars in repairs. If something is broken, fix it before you show your business. You don’t need to invest in new coolers, you just need to maintain your equipment. If a piece of equipment is on the verge of breaking, disclose this information to the buyer so you don’t have issues after closing.
Manage Your Online Presence
Buyers doing their due diligence on your business can easily gauge the perception of your store through online reviews. Managing your reputation online is important. Obtain new 5-star reviews. Good reviews go a long way in solidifying the goodwill associated with your liquor store.
The goal of this process is to bolster your positive reviews while driving down any old negative reviews, if any. Businesses with negative reviews are not appealing to buyers. If you have any PR issues, I highly recommend fixing common complaints — such as out-of-stock merchandise, or dirty floors — before a potential buyer brings them up.
Again, this is why planning an exit is important. Having one to two years since your last batch of negative reviews can help you sell your business faster and for more money.
Selling your store can be a complex process. Follow these tips as you are planning your sale to position your business for the best possible evaluation and sale.
Brian Bond is the principal of Strategic Business Brokers Group, a brokerage firm in Scottsdale, AZ, that has helped business owners sell their business across Arizona. Bond has been named “Broker of the Year” by the Arizona Business Broker Association.