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Key Considerations Before Selling Your Retail Business

Updated: May 9

The UK high street has faced significant challenges due to increased competition from online retailers. Many well-known high street brands, such as Jessops, HMV, and Blockbuster, have closed their doors due to the growing preference for online shopping.


Despite this trend, small independent retail businesses that have little or no need to adapt to eCommerce continue to thrive. What are the key factors driving profitability for these retail businesses?


Profits

The overall profitability of retail businesses is driven by sales volumes. The level of turnover varies depending on the type of retailer and the products or services offered. For example, a clothing retailer may have high sales volume with lower-value items, whereas a jewellery shop may have lower sales but higher margins per item.


Assets

The quality of assets is crucial in determining the value for a potential buyer. Intangible assets such as brand reputation, intellectual property, and customer relationships also play a significant role in the value of a retail business. Many small retail businesses can establish a strong local brand presence over time.


Repeat Business

Building strong customer relationships and providing exceptional experiences encourage repeat business. Many customers prefer to support local businesses, even if similar products are available at lower prices elsewhere.


Staff

The reliance on specific individuals for customer relationships can pose a risk for retail businesses. Buyers assess whether the business can sustain itself without key personnel.


Location

The location of a retail business is a critical factor in its valuation. For instance, companies like Kwikfit strategically position their sites on major routes and in out-of-town areas to reinforce their brand and make their services easily accessible. Prime locations in busy shopping centers like Westfield or Lakeside benefit from high foot traffic, although rental costs may be substantial and need careful consideration by potential buyers.

Understanding these drivers of profitability can help retail business owners and potential buyers make informed decisions about their ventures.



CLICK HERE for information about selling a retail business.


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