How to Sell a Consignment Business
A consignment business often provides a "win win" scenario for the consignment shop owner, her consigners and customers. Like other businesses, evolving markets and changing personal responsibilities can eventually lead to the owner's decision to sell the business. As the business owner, communicate clear reasons for the business sale to forestall potentially damaging business community rumors. Operate your consignment business with your customary care to ensure it remains viable while you find a buyer.
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Things You'll Need
- Business bills to be paid
- Business financial operations data
- Customer mailing list
- Consigner list
- List of regional consignment shop owners' groups
- "Business for Sale" ad copy
Instructions
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Prepare the consignment business for sale. A potential buyer may view a well-organized business more favorably than one that appears carelessly operated. Spruce up your sales floor displays, tidy up your business office and remove clutter from your counters and storage areas. Ensure that your consignment records and bookkeeping system entries are current. Verify that expenses such as rent, advertising and utilities are paid to the current month as well.
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Document a realistic asking price. Business valuation, and subsequent asking price determination, are highly subjective processes. SCORE, or the Service Corps. of Retired Executives, recommends you consider the business's marketplace standing when setting a price. For example, your business's higher-than-average profit margin may lead to an increased asking price. Contractual payment terms can also affect your final sale revenue. In 2010, SCORE notes that cash transactions typically net 60 to 80 percent of the proceeds derived from a financed transaction. Ask your accountant to assist in the business valuation process.
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Approach customer and consigner prospects. Examine your customer mailing list for enthusiastic shoppers who may make good business owners. Peruse your consigner list, and identify consigners who have expressed an ongoing interest in your consignment-shop operations. Prepare a business information sheet that provides a business snapshot but does not include price information. Open a discussion with each prospect, and present your business overview if she appears receptive.
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Network with your business groups. Contact regional consignment shop owners' groups, and place a "Business for Sale" ad in groups' print or online newsletters. Speak with business and civic organizations to identify entrepreneurs interested in additional business opportunities. Talk with your city's Chamber of Commerce frequently, as chamber staffers often receive advance notice of business-related developments. Locate your chamber through the United States Chamber of Commerce.
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Contact a regional business broker. A business broker can help you find and pre-screen buyer prospects and handle all purchase negotiations. Your skilled broker can diffuse potentially volatile disagreements before they become deal killers. A business broker often receives a small monthly service fee plus a percentage of the final transaction figure. Consult with a regional business broker and determine if her services represent a good value.
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Review offers with your accountant and attorney. Prepare a list of questions about each formal offer you receive. Questions can relate to the offered price compared to your business valuation figure, the assets to be included or excluded and other topics. Discuss financially oriented questions with your accountant, and ask your attorney to review each offer's language and terms. Select an offer based on your advisers' assessments and recommendations.
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Transfer assets and assist with the transition. Work with your buyer, accountant, attorney and business broker, if applicable, to effect a smooth transaction. Transfer assets in accordance with the purchase agreement. Some contracts spell out a period of time during which the seller provides the new owner with operations expertise. Fulfill this part of the agreement if applicable, and consider offering assistance even if you are not required to do so.
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