If you want to venture into business, you have two choices; start a new business or purchase an existing one. Buying an up-and-running business may be the best decision because banks and other lenders prefer giving loans to businesses with proven credit and success records. A retail business would be the best choice as you start up. According to Statista, the retail market generated sales of over $27 trillion in 2022 and is expected to reach $30 trillion by 2024. With that said, here is how to buy a retail store.
Determine Your Retail Store Type
You must understand passion before you learn how to buy a retail store. There are thousands of items you can sell in a retail store. And these items are what set the differences in the retail business. As such, you need to choose something that you are passionate about.
You’ll be spending the whole day in your new store. And the customers you’ll deal with are the people who love your choice of items. So, if you have always loved swimming, your ideal businesses are pool supply stores. Once you choose something you are passionate about, you’ll take time to research and understand the item features to guide the customers well.
You can also sell items you have never used, like the eye glass. But ensure you have optical and ophthalmology knowledge before buying an eye glass store. You can also choose products from the industry you’ve worked with before. This will give you peace of mind as you learn how to run the business faster than navigating a sector that’s new to you.
As that’s the case, if you have worked in the locksmith industry, you may sell new door locks and keys as you repair old ones. But note that running a business can be challenging because, as an employee, you understand the basics. But as a business owner, you’ll face and learn the most advanced details as you go.
Search Your Preferred Business
Learning how to buy a retail store is simple if you understand your passion. So, start searching for listed businesses. Nowadays, everything is advertised online because it’s the cheapest way to reach customers. So, most businesses will be listed online, including the social media pages.
However, Socially Buzz advises being careful with social media because of scammers. To avoid getting scammed, check for the listed business’s physical location and research more about its operations. You can confirm its website, all social media pages, and customer reviews. Because scammers can use any details to lure you, pick the business contacts and confirm with the owner.
Another popular business advertisement method is the billboard; you can drive along the neighborhood and check for any business advertised on sale. This is the most straightforward way because you’re less likely to deal with scammers. Billboard companies deal with the actual owners and analyze details before advertising their products or businesses.
Some businesses can use the signage to reach potential customers. For instance, you can see antique store signs by the roadside with additional information like “on sale” and contact details included. TV advertisements are the traditional and most convenient way to reach potential customers. If by any chance you see your preferred retail shop advertised for sale on TV, you can contact the owner.
Do Your Due Diligence
After contacting the owner, gathering information about the business is another crucial step on how to buy a retail store. Schedule with the owner a day to visit the shop and let them show you the records as you discuss details. The first thing you should check is the business registration certificates.
Ensure the business has been legally running and confirm the owner’s details. Confirm the business name on the registration document, owner details like the name, and other personal identification details. If you are dealing with a middleman, ensure you have precise details about their reputation, but you must meet the owner before doing transactions.
Review the business’s tax receipts of the past few years to learn how the business has been growing. A business that has been steadily increasing its sales is worth buying. But if you learn the sales have been declining through tax records, inquire about the reason. For things like poor management, you choose to buy and change how things used to operate.
Suppose you learn the business sales declined due to factors you’ve no idea how to resolve; quit the deal. Review the list of their customers and vendors and learn how often they purchase or supply their items. For example, if it’s a blinds-selling shop, check the invoices of the blinds company that supplies them and learn how regularly they deliver their goods.
If goods are delivered regularly, the business is making good sales. Also, fast-moving products is one crucial thing you must confirm if you’re buying a flower shop. Insurance details can also hint at how the business has been operating. A higher insurance premium indicates that the business has items that give high returns.
The last thing to know is the reason the owner is selling the business. Is it simply because they couldn’t make a profit, or are they ready to retire? Also, ask if you can work with the existing employees. The existing employees may have enough experience to guide you on some basics.
Contact an Experienced Attorney
Business laws are substantial parts of the legal profession. So, you must have an experienced attorney to help you understand the necessary law for running your preferred business. The attorney will also guide you on how to buy a retail store if this is your first time doing the process. For instance, they can recommend to you a good appraiser.
An attorney experienced in buying and selling small businesses like a fencing supply store has the knowledge to advise you on the basics. They can advise whether the area you want to run the business is ideal for making profits. An attorney will also guide you on the tricks to perform due diligence as you enter the second phase to dig deeper into details.
You will need an experienced attorney when making agreements with the business associates. They help you draw the sale paperwork and present them to relevant authorities. An attorney will help you sign contracts with the current employees if they agree to work with you. You can also edit the contract details with the help of an attorney.
Attorneys with experience in the field can help you negotiate the sale price with the seller. You can benefit by getting better terms because you’ll invest the money you save in your new business. After transfer, they will also help you obtain the necessary licenses as a new business owner. Basically, you need an attorney throughout the process of how to buy a retail store.
Get an Independent Appraiser
An appraiser can also guide you in how to buy a retail store. Appraisers have vast experience calculating business value because they are professionals and deal with various businesses. So, by hiring an appraiser, you will be confident about determining the purchase price.
Take a kitchen cabinets store as an example; the appraiser will add the value of the cabinets the business has in store. Afterward, they’ll add other properties the business owns, like trucks and computers. They will subtract the debts or liabilities once they add all the items and determine the value. The value you’ll get is at least the starting point for determining the business value.
Of course, there are other details that the appraisers look for to calculate the worth. Once you hire an independent appraiser, they’ll guide you on the business value calculation. And afterward, how to buy a retail store with excellent negotiation skills. The seller may also have an appraiser, so they can cooperate to determine the actual worth.
Talk to the Current Employees, Suppliers, and Customers
After determining the business value, take customer contacts and schedule a time to call or visit them in person. Ask them about the retail operations and how they perceive the business. Customers could have a wealth of information about the business’s owner and employees’ characters. This is because, unlike business-to-business sales, retail stores are business-to-customer businesses.
Most of the retail customers come from the neighborhood. So, they can inform about the business reputation and how they would think of it under new ownership. Secondly, speak to the employees and learn about their relationship with the employer. Employees will inform you of the gaps you’ll work on after buying the business.
Lastly, contact the suppliers and learn of their relationship with the shop owner. If most suppliers complain of a delayed payment of the invoices, you’d want to sit with them and make good payment terms after buying the shop. Contacting the suppliers is also essential because you need to know different wholesale prices for the items you’ll buy.
After you have gathered the information from the suppliers, current employees, and the customer, compare it with the value you got. If the information you have gotten does not relate to the value, you need to sit with your attorney and make final decisions. For instance, it’s worth proceeding with the deal if you can lay good terms with the frustrated suppliers. But if you determine the deal isn’t worth it, look for another business to purchase.
Negotiate the Price
Negotiate the buying price based on the information from the attorney, the appraiser, employees, suppliers, customers, and your research about the area. You may get higher profits if the area has a high population with many residential properties. Also, you’ll likely get many customers if the store is in the town or a city.
Luckily, you will learn the information above from the attorney and the appraiser. Ensure you have some extra cash after paying the price because you may need to make some changes in the store to suit your needs. For instance, you can hire architect services to design your new hardware, software, and other networking applications for the business system to run efficiently.
Draw Up the Sale Paperwork
Drawing the sale paperwork is among the final steps as you finalize how to buy a retail store. You can do this with the help of an attorney. The key terms in the business sale agreements are parties because of business assets. You need to list the name of the seller and the buyer in the agreement.
The second thing the attorney will include in the agreement is the assets. All the assets sold with the business, like intellectual property (trademarks, branding, website, business name, and social media accounts), will be listed. Also, stock in store, machinery, and other equipment will be listed in the assets section.
Purchase price and adjustments will also be included in the agreement. The purchase price can be broken into goodwill; intangible assets like business reputation. It can also be broken into stock, which involves all the unsold stock in the store. And finally, it will be broken into a third category of equipment like cars, tools, and computers.
In the agreement, you must also include the contracts. Contracts involve the current employees willing to work with you as their new boss. Contracts can also involve the lease, where the landlord must approve you as a new business buyer and accept to lease their property to you. The last details are the warranties, restraints, and indemnities.
Record the Sale With Business Registration Agency
Your attorney will guide you through transferring ownership by notifying the business registration agency. Usually, you must submit your details and the sale paperwork to the offices for verification. The secretary may also request the business registration certificate, among other documents. You may also pay some fees depending on your state.
Notify the Relevant Parties
Once the business is yours, you must notify the relevant parties that the ownership has changed. For instance, you must visit the Internal Revenue Service(IRS) to get the Employer Identification Number(EIN). The other parties you’ll notify are the banks and other financial institutions. Ensure you maintain good credit and other financial records with them.
The above steps on how to buy a retail store will guide you if you intend to venture into the retail business. Ensure you follow the whole process and involve an attorney from the start. Study the market and calculate the business value with the help of an appraiser and attorney to get the actual buying price. Once you finish the ownership transfer, you can hire a moving company to deliver your office equipment to your new business.