Despite many retail businesses suffering throughout the pandemic, is 2022 shaping up to be a great year to sell a retail business? With buyer demand growing, sellers are in an ideal position to negotiate with the many entrepreneurs seeking business ownership.
Businesses are selling at record prices
According to BizBuySell’s Insight Report, business for sale transactions experienced steady growth in the first quarter of 2022, rising 24% over the previous year and just 3.7% shy of Q1 2019, long before COVID-19 shocked the market1. Median sale prices have also continued to sit at record levels, up 6% over the previous year to $345,0001. These statistics, which come from the USA, prove that not only is there a demand to sell, but buyers are willing to pay a premium for businesses that are performing well. We expect a similar movement to take place in the UK over the next couple of years.
So, while many businesses in retail experienced a torrid time over the past two years, some businesses, like zero waste shops, pharmacies or other health stores, have proved invaluable. Therefore, these businesses have become the most sought-after among buyers in this market because they are less likely to be impacted by economic uncertainty. The retail businesses that seem to be performing well in sales often share three common traits:
- they are in great locations,
- have well-trained and skilled employees and
- show great long-term growth potential.
Increased demand for business ownership
It is no secret that with the Great Resignation, more individuals are choosing entrepreneurship over returning to the 9-to-5 job. According to PwC’s Global Workforce Hopes and Fears Survey 2022, one in five workers plan to quit their jobs in 20222 in the pursuit of higher salaries or to start a family-run business. And with all the benefits attached to running your own retail business, like a zero waste shop or a health store, it is easy to understand why the demand for retail businesses is expected to remain strong in 2022.
Zero waste stores are just one example of retail businesses performing exceptionally well in recent times. These businesses are often mainstays in the local community, and capture the ever-growing environmental consciousness of the shopping public. With an increasing number of foods, toiletries, cleaning products and sustainable packaging options they provided a lifeline to many people throughout the pandemic who didn’t want to be in crowded supermarkets. As well as their popular locations and growth potential, these businesses make good levels of turnover and profit, making them the ideal business for first time buyers.
Sellers still have the market advantage
Right now, 2022 has proven itself to be a seller’s market. Over the past two years, many business owners have chosen to wait to sell their businesses. In turn, this has created an imbalance in the market because buyer demand exceeds the supply of available businesses for sale. We can expect median sale prices to continue growing as premium prices are being paid for strong, successful businesses. So, 2022 could be the perfect time to sell your retail business – as the effects of the pandemic fade and more people retire and exit their businesses, the market is expected to become more balanced.
How to maximise your retail business’s sale price
To ensure you succeed in negotiating the sale of your retail business and get the very best deal, it is crucial to have all the necessary skills required to close your sale. Selling a retail business is a process that takes finesse and sensitivity, as well as grit.
If you’re considering putting your retail business on the market, the first step is to carry out a business valuation to calculate the value of your business and determine a starting point for your sale price. At Business Partnership, we recommend you set out clear negotiating goals for selling your business to help you answer critical questions and guide your negotiations when selling. Then put together a negotiation strategy. By being proactive and planning a strategy, you will stay ahead of the curve. Make it clear you are willing to walk away from a deal that isn’t right for you and always try to lead the discussions. This way, you will be in the driver’s seat throughout the sales process.
It is also crucial to ensure you understand and know everything about your accounts. Prospective buyers usually request to see records of three years’ worth of trading, so even if it is a while before you consider selling, make sure your accountant can advise on how best to present statements. Items of interest could be increased profits, a consistent but varied client base, and regular revenue growth.
Finally, when it comes to selling your retail business, believe in yourself! No one will want to buy your business if you are not passionate about it. Keep in mind all your business’s best assets and ask yourself what would be of interest to your prospective buyer. Do not doubt yourself and let the success of the business do the talking.
By following these tips, you should have no problem selling in 2022. For more advice on buying or selling a business, please get in touch with our Regional Partner closest to you.
1BizBuySell, 2022, BizBuySell Insight Report
2 PwC, 2022, Global Workforce Hopes and Fears Survey