What To Consider When Selling Your Retail Business During A Pandemic

Desy Papper

Charley and Kathleen in front of their retail store. Charley L. Dickey IV When Charley Dickey and his wife Kathleen George decided to sell their Colorado retail business, they weren’t anticipating a global pandemic. It was 2018 and the last five years or so had been very profitable. They were both in their mid-60s […]

When Charley Dickey and his wife Kathleen George decided to sell their Colorado retail business, they weren’t anticipating a global pandemic. It was 2018 and the last five years or so had been very profitable. They were both in their mid-60s and decided that the next two years would be a good opportunity for them to retire. Then in 2020, the pandemic occurred. Despite shutdowns, restrictions and global uncertainty, the couple decided to move forward. 

Rustic Mountain Charms is a home décor and tourist shop in Rocky Mountain National Park dependent on seasonal business. Between the 6,500 winter locals and the 30,000 summer second homeowners, cash flow was an important issue. Then in March 2020 they shut down. The odds seemed to be stacked against them.  

“We decided that our business still had value, that the pandemic wasn’t going to devalue our business and we weren’t getting any younger,” Charley explained. And they were right. Within a year, they had been approached by several serious buyers. Charley Dickey shares his journey of how he and his wife Kathleen found the best path to exit their business. 

Maneuvering Through Changed Exit Plans 

Having decided to exit prior to the pandemic, the owners of this retail store had to find their footing in a changed business environment. The couple drew their confidence from their financials. Solid documentation of financials is one of the clearest ways to illustrate the value of your business. Charley states, “for every month that we were open, that month beat our last year for the same period in 2020 following our reopening on May 1, 2020.” 

It was decided the pandemic did not devalue the retail store and to progress with plans of listing their business. They are ready to move into the next stage of their life and enjoy retirement. 

Gauging Demand

Since publishing the listing, the couple have received numerous responses from interested buyers, confirming the hunch that selling despite the pandemic is a move worth pursuing. According to BizBuySell’s Insight Report, entrepreneurs are continuing to search for high-performing businesses. 

Having a business that has thrived or survived through a global economic downturn is akin to owning a gold mine. Essentially, the business has proven its resilience and will likely draw in buyers that are looking for ways to reduce their risk.  

Acting as Their Own Agent

Acting as one’s own agent is not a sustainable pathway for all owners. Many prefer to hire a professional broker to act as a middleman and advice accordingly. There are many benefits of working with a business broker. This couple, however, chose to sell without the help of a broker for several reasons.  

Charley has a background in being a facilitator in previous real estate transactions, which instilled confidence in his ability to evaluate their own business as well as advocate for it. The couple’s initial strategy was to reach out to brokers and realtors in their area.  

Given the unique location of the retail store, plus it being in a tourist town, it experienced dramatic highs and lows, and many brokers suggested to simply sell off their inventory. This was not an opinion the owners agreed with. 

After discussing their options, the couple ultimately chose to leverage Charley’s skills as a businessman. With his background in finance and business consulting, he has already been successful in being the middleman between potential buyers and his wife, the owner. 

Getting the Retail Store Ready for Sale

As many business owners soon realize, the day you buy a small business is also the day you start thinking about exit plans. Throughout Kathleen’s 20-year ownership, she has been finding ways to increase the value of her business.  

Five years prior to starting the process of selling, the couple started growing their profits by increasing their inventory. Keeping the store filled during both the slower and heavier months ensured that it never looked empty. This tactic drove up their sales, resulting in Rustic Mountain Charms nearly doubling their revenue over the last five years. This was by design, as increased profits meant an increased valuation.  

However, Charley still laments upon the missed opportunity of not raising Kathleen’s wages to increase the SDE (seller’s discretionary earnings). SDE is the total financial benefit that a full-time owner-operator can derive from their business on an annual basis and is commonly used during the valuation of a small business. Taking steps to increase it, such as by lowering owner’s wages, may result in a higher valuation. It is a fine balance between taxed profit and payroll taxes. 

Valuing Their Retail Store

Initially, they turned to professional brokers and realtors to conduct a valuation on Rustic Mountain Charms. However, Charley realized that the niche and specificity of the industry meant the valuation would be stronger when done by a local broker. Since the local broker was unavailable, the couple decided to conduct an independent valuation.  

There’s a myriad of theories on how to value your own business. The couple chose to use the seller’s discretionary earnings (SDE) to arrive at their number. Whether you choose to get a professional valuation or conduct one yourself, Charley emphasizes the need to know your business well to advocate for its true value.  

Charley provided a rationale for how he arrived at his asking price for the retail store and included the process of valuation as well. Communicating to buyers the value of your company went a long way in receiving fair and appropriate offers. 

Creating the Listing

Charley’s strategy while creating the listing was honesty. “I was very blunt. We’re in this pandemic, so I didn’t beat around the bush,” he says. The listing contained details about both the retail store and city it is in, Estes Park, CO. High quality pictures are included, and various unique aspects of Rustic Mountain Charms are highlighted. 

Given the strong financials of the company, the couple have been getting numerous responses to their listing. Without signing an NDA, buyers could see how the business was priced, through a seller’s discretionary income rationale.  

When the couple wrote a narrative and published their listing, they averaged “anywhere from 15 to 18 hits per day during the entire term”, Charley said. Up until the time of this writing, they have seen more than 18 potential buyers, with two candidates looking to make an offer. 

After signing an NDA, candidates are supplied with three years’ worth of tax returns, profit and loss statements, and an asset list. Charley made sure to include both soft and hard assets to help potential buyers understand exactly what they were getting. 

Finding and Qualifying Buyers

Initially, the couple looked for a buyer by checking with family, friends, and employees, in that order. When that yielded no results, the couple turned to brokers and realtors in their area, familiar with the local economy. When that turned up less than ideal results, the couple took matters into their own hands and started interviewing candidates themselves. 

Creating an Attractive Listing

A listing that contains detailed photos of the store was a big part of attracting buyers. Having strong financials was another major factor. Charley comments, “Had we not been shut down, our numbers would have continued to be better than the previous year [2019] because we’re getting more traffic. We’ve been growing constantly for over five years, and there’s no reason to believe that we won’t continue that on.” 

Filtering Through a Myriad of Buyers

With an influx of people responding to listings, the couple came up with a system to qualify interested buyers. After signing an NDA, Charley would send them relevant financial information and give them a week or two to review it. After that, he would schedule a phone call with the interested buyer. If that went well, an in-person socially distant tour of the store could be scheduled. This series of conversations and meetings worked well for the couple, helping them filter out interested buyers from those still in their first stages of exploration.  

As they met each new candidate, they used a paid public records search service to receive limited information about them. “I’ve used it extensively for every single person,” Charley says. “It’s been critical, especially when you’re looking to do owner financing. I research everybody that responds.”  

Qualifying buyers was tough for Charley. In an ideal world, he would’ve been able to run background checks on candidates that would have given the couple unfettered confidence in offering owner financing. Instead, the couple had to rely on whatever information Charley could find and their own intuition, developed through spending years in the industry.   

Offering Owner Financing

The couple chose to offer owner financing to interested parties. “If you offer owner financing,” Charley explains, “you will get a larger choice of folks to talk to. Owner financing isn’t all that bad if you have a reliable candidate with good credit. It mitigates the liabilities that you have on the seller at that point.”  

Offering owner financing means some level of involvement for those selling the business. The couple don’t plan on moving away from Estes Park, CO, so they are also offering to stay on in consulting capacities for the first several months to ease the new owners into their acquisition. 

Utilizing Government Programs

In response to the coronavirus pandemic, the United States Federal Government introduced various programs to help small businesses. “I applied for every single one I could,” Charley says. The couple applied for the first Paycheck Protection Program (PPP) and got an estimated $30,000. They also applied for a local grant, a low-interest loan, and the second draw of PPP. The combination of these grants helped keep Rustic Mountain Charms afloat through the pandemic. 

 Advice for Small Business Owners

For owners asking, ‘is now a good time to sell my business?’, one place to look might be your financials. From Charley’s perspective, “if your business is not making it during Covid, this is probably not the time to sell it. It’s probably better to hunker down for a year and then look at selling it. It’s gotta be a profitable business or else it’s not going to be appealing, period.”  

He also stresses the importance of knowing your business inside and out. You should be a strong advocate for your business; understand the intricacies of valuations and negotiate with candidates. If you have some difficulty dealing with those kinds of things, hire a broker or realtor.  

As for Charley and Kathleen, they are ready to hop in their RV, travel around the United States and enjoy their retirement.

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