How to Sell a Convenience, Newsagent & Post Office Business
10/12/2020
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We know selling your business can be a daunting process. With the help of this guide, we can help convenience, newsagent & post office business owners like you, with the whole process.
From valuation advice and how to prepare your business for sale, negotiation tips, to finalising the deal.
No two convenience stores are the same, as they cater to the demand in the area. From newspapers to world foods, these businesses host an exciting range of flexibility in services and stock.
Due to their diverse nature, there are many keen buyers interested in this type of business.
There are over 45,000 of these stores in the UK and together they saw £40 billion in sales last year.
The Association of Convenience Stores found in a recent survey that post offices and convenience stores have been rated 1st and 2nd respectively for having a positive impact on society. Proving not only beneficial for customers, but also the wider community.
With many of these businesses currently up for sale, read on for our top tips on how to make yours stand out.
How to Value a Convenience, Newsagent & Post Office Business
To get a holistic and accurate valuation of your business, you must combine its assets and its goodwill attributes.
Although there will be many similarities in assets between these types of businesses, depending on what services your store offers, your business’ assets will differ.
Let’s look at typical assets found in a newsagent’s valuation:
- Point of Sales system
- Equipment: a mobile top-up terminal, a lottery terminal, a courier terminal, hot drinks dispenser
- Stock: food, beverages, stationery, books, toys
- Fixtures: shelves, speakers, cash desk, CCTV
- Property value, if owning and selling the freehold
It is important to assess the age and condition of your assets honestly, for an accurate valuation. Having higher-quality assets means the buyer does not need to worry about replacing any items soon, therefore providing better value for money.
Note, don’t invest in brand new equipment just before the sale as you will struggle to regain the money in the sale price.
It is more difficult to calculate the goodwill value of a business, but it’s just as important.
When estimating your store’s goodwill value, it’s important to consider the following (using a post office as an example):
- The working capacity of your post office. To gather this information, calculate an average from the size and number of transactions per customer per day. We suggest gathering data from the last two years of trading.
- Customer reputation. This is crucial for a post office business, as they are often a pillar of a community.
We understand that it is natural to have an emotional attachment to your business. Especially in this sector, as the stores have often been involved in the same family for generations. Therefore, it can make it difficult for you to provide an objective valuation.
For this reason, to obtain an accurate price, we recommend seeking advice from a business broker.
At Intelligent, we have a dedicated expert team with years of experience in calculating the value of hundreds of convenience, newsagent & post office businesses.
We use a tailored approach depending on the business’s characteristics but using the same basic formula as shown below:
Adjusted Net Profit
This calculation takes into consideration any exceptional costs that the business has incurred. These exceptional costs are not considered part of the normal course of business and should therefore be excluded
Market Multiple
We analyse buyer behaviour and transactions regionally and nationally. We overlay our experience, sector knowledge and understanding of market trends to provide a real time market multiple
Assets & Liabilities
An asset is something that the business owns and is a key factor in determining the businesses value. These include such things as property, stock and equipment. A liability is the opposite of an asset and includes things such as loans, tax and mortgages
Use Our FREE Business Valuation Calculator for an Instant Valuation
Preparing your Business for Sale
It is important you are prepared for your sale. To do this, we recommend you have all the necessary information in advance. It also means you will be prepared for any questions an interested buyer may have. Making you appear more professional and confident.
But there’s more…
In preparing for the sale, you should also fix any problems in your business. This will ensure you achieve the best possible price.
Read on to learn about key actions you should take when preparing your convenience, newsagent & post office business for sale.
Maintenance & Repair
Undertaking any maintenance and repair work is a simple yet effective way to increase the value of your business.
Conducting repair work before the sale will save the buyer significant hassle and hence, make your business a more attractive option.
But remember, although repairs and maintenance are essential, don’t carry out a refurbishment or invest in brand new expensive equipment just before your sale.
The buyer may want to alter the premises to suit their business needs. Similarly, you won’t recover the money spent on new equipment in the sale price.
Review your Finances & Documents
It is recommended to have at least three years of financial statements prepared, ready to show interested parties. This usually happens at the enquiry stage (click here for an in-depth guide on enquiries).
Providing this overview of your company’s financial health will help the buyer to decide if the business is suitable for their needs.
The financial documents you will need are as follows:
- Cash flow
- Profit and loss
- Balance sheets
The buyer’s due diligence will show any falsehoods within your business’s finances, so make sure you’re as accurate as possible.
Other important documents to gather include:
- A list of all assets, such as fixtures, fittings, and equipment
- Up to date hygiene certificates
- Other legal documentation, which may include leases, insurance, licences, and other permits that should all be fully compliant and up to date
- Incorporation documents
- Management structure
- Employment contracts, which should be reviewed by yourself for the buyer’s convenience and to guarantee a strong staff team will be in place
- Stockist information, to demonstrate you have secure stockist relationships already in place
Hygiene & Cleanliness
Hygiene is a top priority for potential buyers. It is crucial to ensure the highest standards to maintain buyer interest.
This is especially important in stores which provide food and beverages. Fortunately, this is a potential problem which is relatively simple and affordable to solve.
Review Your Operations & Management Structure
It is important to have an organised business structure, especially as often newsagent’s and post office owners are heavily involved with the day-to-day running of their business.
Having a clear operation and management structure makes your business more attractive to a wider audience. This is because some buyers are only interested in businesses which can be operated from a distance.
To achieve this, you might consider asking your current managers to take on more day-to-day responsibilities.
Negotiating the Sale
If you have an interested buyer, after enquiries and viewings have been made, you will progress into the negotiation stage.
It is at this point where you will discuss what’s included in the sale. Having the necessary documents ready will help to ensure efficient negotiations.
Naturally, the buyer will be inquisitive but remember, this is a two-way process. You should also be assessing their potential and capacity to run a convenience, newsagents, or post office business successfully.
These agreements will be formalised in a ‘Heads of Terms’ or ‘Letters of Intent’ document. Included will be your final sale price, the sale’s terms, and a thorough itinerary of everything included in the price. This is signed by both parties.
This is essentially finalising the sale, although it is not legally binding at this point.
Payment
You must then decide on a payment procedure.
You have two main options here. Your buyer may be able to pay in a lump sum, or you could offer a payment plan, with a larger total sale price. This is referred to as owner or seller financing.
Importantly, ensure you enquire about specific protective legal advice as you could be at risk of a buyer default.
Don’t know where to seek quality legal advice? We can help with that.
Using an Intelligent trusted partner, you’ll save time and money. Sellers complete on average 4 weeks earlier than the industry standard and our negotiated savings are passed on in full.
After this, the buyer and their team will then carry out the necessary due diligence checks.
You can read about this in our in-depth guide, but it essentially involves scrutinising your premises, finances, assets, liabilities, clientele and reputation, as well as external threats and competition.
Finalising the Sale
You’ve made it, the final stage of selling your business!
A successful due diligence check will allow the buyer to commit to a final, legally-binding ‘Purchase of Business Agreement’. This will be similar to the ‘Heads of Terms’ or ‘Letters of Intent’ document from the negotiation stage.
However, any issues which may arise during due diligence would usually lead to renegotiation of the price and/or terms of sale.
In a worst-case scenario, the buyer may drop out of the deal completely. Therefore, you must be completely honest throughout the entire selling process.
You will need to obtain any necessary permissions from landlords and banks for the transfer of premises, equipment, and liabilities.
Once these documents are finalised and the money is transferred, you will have officially sold your business.
Congratulations!
One final thing.
Wondering about the business handover?
You can choose either an immediate or transitional handover.
An immediate handover is when you have a sudden shift of ownership and management of the business. From this point, the new owner would be responsible for operations. The seller has no more involvement.
Alternatively, you may opt for a transitional handover. This allows for a smoother exchange of ownership.
The terms of this handover are up to you and the new buyer. Usually, the seller will stay on for a transitional period of a couple of weeks or months.
We recommend conducting a transitional handover wherever possible. It is more attractive to buyers and is more likely to result in successful new ownership.
There it is, your guide to selling a convenience, newsagent & post office business.
It may seem like hard work, but with a little preparation and planning, you can achieve the best possible price for your business.
By selling with Intelligent, we will take away the stress of selling so that you can focus on your business instead.
Our dedicated expert team will work hard to fully understand your business and what makes it unique, giving you peace of mind.
Click Here to Use Our FREE Business Valuation Tool
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At Intelligent, all of our experts use a specific formula that will give you a free and highly accurate baseline valuation so that you've got a figure to work with that most realistically resembles the value of your business.