There is a small type of retail business that has a range of every-day items, such as groceries, softs drinks, snacks, magazines and newspapers.
There are many of businesses like these not only in the US but all over the world, and they are particularly common in gas stations, for instance.
But you probably know all of that, especially if you are a convenience store owner that wishes to sell your business, so why am I describing a business that you know more than anyone? Because you have to take a lot of information in consideration before you set your asking price. Here are some information you should be aware before selling your convenience store.
What is your Convenience Store Business Worth?
The very first question you need to ask is probably the most important one. But how am I supposed to know what my business is worth, you might be asking yourself.
To answer that, let’s check these questions:
- What are the sales?
- What is the profit?
- What are the growth trends?
- What is driving new sales and is that sustainable?
- What channels do new customers come from and what is the breakdown of each channel?
- What is your market position?
- Is your Location favorable?
- How reliant is the business on the owner?
- What systems and processes are in place to run the business?
There are many other ways to increase your business valuation such as focusing on creating a chain of other stores, creating a scalable franchising model, and creating a trustworthy brand just like Seven Eleven did. The use of technology is another factor that can contribute directly with your store’s valuation, as there are strategies to engage buyers more via smartphone apps for instance.
What Makes A Convenience Store Business Worth More?
Now that you started analyzing and answering the last questions, which are focused on how your business is valued, you can begin planning on how to make it being worth more with these next metrics:
- Predictable key drivers of new sales
- Stable or growing traffic from diversified sources
- Established suppliers of inventory with backup suppliers in place
- Traffic stats
- High percentage of repeat visitors and repeat sales
- Clean legal history
- Brand with trademark, copyright or legal concerns
- Documented systems and processes
- Growth potential
As explained, investing in your convenience store is always an efficient way to make it worth more. Technology investments improve your valuation since it makes the buyer’s life much easier, but it also helps to engage customers, especially if you make use of smartphone apps to disseminate store information, such as discounts and special offers. If you find cheap and scalable marketing channels, that makes your revenue more predictable and creates a great opportunity for sustainable growth.
What does the average Convenience Store business sell for?
After analyzing all the acquisitions made in the last 10 years, we gathered a lot of interesting data, and the first is the average price a convenience store is sold for in the United States. If you look at the number of deals made in the industry, the average valuation of a convenience store is $377,678, with an average multiple of 3.73 on the earnings. The median or the exact middle of all deals made is $190,000, and the most frequent deal is in the $100,000 range. Since 2005 the total transaction value in this industry was $595,598,892.
But don’t get confused, we are only presenting you the numbers you must be aware of. In the next few topics we will break down these numbers and give you some valuable insights on the market, valuations, multiples and the steps to start your selling process.
What is the most frequent deal size?
As you can see, smaller convenience stores were responsible for the most of the deals made. Analyzing the chart we can also presume that the bigger the business the less the chance of selling it.
In 2014 there were 93 deals among businesses with less than $250k in valuations, as $250k up to $500k the numbers of deals were quite smaller: only 21.
As the market generally ranges into smaller valuations, if you want to get a deal maybe it is best to stick with the market average and have a smaller store.
Is the Convenience Store market getting bigger?
Not exactly. As you can see in the graphic, the yearly transaction value decreased in the last three years, but 2013 numbers were actually slightly bigger than 2012, with a 25% increase. On the other hand, 2012 was quite smaller than 2011 numbers, as 2011 was almost 50% smaller than 2010 — the best year so far in the last decade.
Are bigger businesses worth more?
Our research says that the bigger your business, the higher multiple you will get for your sell. It’s not a rule, but as you can see in the chart that’s the case for most of the convenience stores.
In 2015 the convenience stores that were sold for less than $250,000 had a multiple of 2.13. That number is slightly bigger if you sell it in between the range of $250,000 and $500,000, being 3.01. It’s better, but not maybe not the ideal size.
Businesses valued with $500k up to $1 million had a multiple of 3.86 the last year, while $1 to 2 million had a multiple of 5.28 in the same period of time.
So that means that if you think there is an opportunity to grow your revenue and profits the next year, you should wait to get to more than a million dollar valuation. Still not sure? Take a look at the average multiple. It is estimated in 3.73, close to 550k-1 million average in 2015.
Even though most sales usually occur while a convenience store is worth not more than 250k. In 2014, for an example, there have been 93 sales in that category. All other sales together represented a total of only 34, almost three times smaller.
What states have the most clothing store business deals?
Are you wondering where the most deals were made throughout the country, or if your state has a hot market to sell fast? As you can see if you are located in New Jersey or New York, you may get a lot more offers than if you are in Hawaii or Kentucky, where there were no sales registered in the last few years. But sometimes you can overcome the low number of deals with investors or competitors looking to enter a specific new area, and get lucky with an offer!
Why would you sell in the first place?
The reason to sell always varies from each person. Maybe you are looking for new challenges, businesses and opportunities, or you just want to enjoy your family and retire. Although it can seem tempting to get your hard worked cash, make sure that you are clear on the motives so you don’t regret afterwards.
How long will it take to sell your Convenience Store business?
If you have read all the necessary steps to understand your valuation, and think you have focused on all the topics that make your company worth more, it is maybe time to start the process. Selling your business is a long-term process, and doesn’t happen overnight. Usually companies sell in 12 months, but you can also see deals getting closed in 6 to 9 months depending on the opportunity.
What is the process of selling your Convenience Store business?
This step by step process will help you get less confused when you make sure you are ready and confident to let go of your business, and perform a nice and positive sell. Many entrepreneurs forget about a step, or just don’t have the right guidance to know all the stages necessary and get lost through the process. Don’t forget to go through all of these, and if you have any questions, comment at the end of the article or contact us for more help.
Who will buy your business?
If you are wondering about the buyers that can be interested in your convenience store, don’t worry, there are many options and possibilities. From first time entrepreneurs, to businessmen interested in new opportunities, the chances are that in the industry it may likely be a person who already had a store.
Now that you have looked through our report and seen all the possibilities of selling your convenience store, the first step is to figure how much your business is worth.
If you want to start accelerating your buyout process, fill out our free valuation form and get your business valued today! Leave your comments on any doubts or feedback, we are glad to hear your thoughts!