Wasn't targeting this space, but an interesting opportunity that's a great fit for my wife has come up, so we're exploring this a little bit more. I'm wondering if any folks have experience looking into & buying a retail business. Some early questions that come to mind are:
- How do you value something like this? They've listed at like a 4x EBITDA multiple which feels very high. But I'm not sure what the right range should be?
- Any unique financing arrangements to consider? Broker has said so far they are not interested in seller financing. I'd probably want to push harder for that, unless there are other creative suggestions from the group!
- What other risks/considerations should I be thinking about? The business has been around for multiple generations, so is well known in the community which gives us some comfort about its ability to keep going.
Experience buying brick & mortar retail?
by a searcher from The University of Chicago - Booth School of Business
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Depending on what the cash flow would support and how easy it would be for you to transition into the business might determine what type of seller financing might be required, if any. If you have good experience in this or a very relatable industry, seller financing becomes less important. However, if you are paying on the higher side, then one way to take risk off the table is to use some seller financing and put some reps and warranties in place to protect you if there is a drop in revenue or cash flow going forward.
I would look very hard at all competitors that exist for the products this business sells, especially potential online competitors. How necessary is it for people to buy this businesses products in-store going forward? Are there strong competitors online or elsewhere that pose a risk? Is there an opportunity to potentially expand revenues because the company is not taking advantage now of online sales.
Lastly, I would be sure to understand the employees and what is required to run the business. Just about all business owners are talking about how hard it is to find quality employees. You want to be sure the business has sustainable employees or you can attract employees to work the business, especially if it provides extended hours like many retailers require including nights and weekends. Those are roles that appear to be harder and harder to fill.
If you need any assistance assessing the business from a lending perspective, we would be more than happy to help. You can reach me here or directly at --@----.com Good luck.