Hardware stores are the heart and soul of the DIYers, construction workers and homeowners that like getting their hands dirty. You as a hardware store owner have a passion for getting your hands dirty and enjoy the fruits of your labor, so you decided to open a hardware store to share your passion and help others find their passion as well. You as a business owner still believe in personal experience to make sure that your customers are happy and have the necessary tools to finish their projects
You have taken pride and the necessary steps that makes your hardware store, is the best around. You know most of the people that come into your store by name and you have been doing this for so long that you could run the business with your eyes closed, but at the end of the days, you have started to wonder to yourself, how much is my hardware store worth? A broker can help you find the answer to that question, but understanding the process is always beneficial to you as an owner. After all, your objective is to receive the maximum value for it, and in order to do that, you must first look at the many variables that come into consideration when looking at the possibility of selling your hardware store.
In order to show you the different variables, we have taken data from the last decade of all the hardware stores sold in the United States that met our criteria, and broken it down for your further review in order for you to make a solid decision on the sale of your business.
What is your hardware store worth?
The value of your hardware store is correlative to your individual business, the market and what potential buyers are willing to pay. hardware stores offer a specific product, so being a quality shop, that carries quality pieces that mainstream population can afford, gives you as the business owner the chance to ask for a higher sales price. So while you are trying to figure out how much your business is worth, here are some questions that should be answered before trying to value the price of your business.
- 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?
What makes a hardware business worth more?
When a buyer looks at purchasing your business, they are basically looking at their rate of return on their investment. So when will they recover what they have spent on the business? In order to show the prospective buyer that their ROI will be high and their relative risk will be low, you should have the a few key characteristics associated with your hardware store.
And while it is true that the profit and sales are considered very important aspects when considering to purchase a business, they are not the only factors that can add or decrease value the value of your business. The following characteristics will give your business better value.
- 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
What does the average hardware store sell for?
Looking at the graph, the broken down the data that we analyzed, which consisted of businesses that range in the $50 thousand to the $10 million valuation range. And these businesses can sell for as much as billions of dollars or as little as a few thousand. You can clearly see the average of hardware business sold in the last year in the United States is at 2.88 times earnings, with the average sale price coming in at $520,440. However, to have a clear understanding you also have to look at the median sale at $320,000 and the most frequent sale was at $300,000, which play as a factor in your valuation. All this information is a bit overwhelming without being broken down, so later in this article, we will break down these numbers and give you the information needed to be able to start the selling process.
What is the most frequent deal size?
It becomes harder to pinpoint the exact answer to this question because of the fluctuation of the market and trends. But of the data that was collected, the most frequently sized deal is the 0-$250k range, although, there has been close to the same amount of sales in other categories as well.
For example in 2015 there was 1 hardware store sold and that was in the $250-500k range, but in 2014 there were 5 hardware stores sold in the $0-250 and the $250-500k range combined. But no need to worry if your business does not fall into either of those valuation ranges, there is a buyer for every business, finding that buyer is the key. And in order to find that buyer, we suggest finding the right broker to help.
Is the hardware store market getting bigger?
There will always be the fluctuations in the market and trends, keeping in mind that the DIY fad is extremely popular and as we grow as a country we will need homes, apartments and buildings built and kept up,which will inturn keep a need for hardware stores. But regardless of the fluctuations, being able to keep your business stable during those times will give future buyers the assurance that your hardware store is a good investment and buy.
Are bigger businesses worth more?
Generally speaking, yes, the bigger your business is, the more that it is worth. Take a look at the image below, as there is an increase in revenue, your multiple becomes higher, which helps generate a better return on your personal investment.
To help you understand the graph a little better, look at the multiple from 2015 for the valuation price range of $1-2 million range, here the average multiple lands right at 5.48, with a total of 1 hardware store sold, however when you look at the $250-500k range in 2014 your multiple drops down to 4.23, with 1 hardware store sold. In this situation, both ranges have had 1 store sold but the larger valuated business is worth more.
What states have the most 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? California holds the win for the most amount of hardware stores sold. Keep in mind, that California is one of the biggest states in the U.S so naturally there would be more sales completed in the state. But having a business in a smaller state with less sales does not mean that someone isn’t looking to start a business venture in your neck of the woods. Having a broker to help you find a buyer for your hardware store no matter what state you are in, can help you successfully sell your business.
Why would you sell in the first place?
When deciding to sell your business, it can become an overwhelming and difficult decision. Your reasons will always be different from the business owner next door. Maybe you are ready to retire, or you have projects at home that need attending to, and sharing your passion doesn’t give you the time to do yours. Whatever your reason is, be sure that you have the necessary knowledge and tools to get the value out of your business that you are looking for.
How long will it take to sell your hardware store?
There is not one set timeline for the sale of any business. The variables of the individual business and terms of the sale will define how long it will take to sell. Do keep in mind that generally speaking, the larger the deal (over $1 million) take longer to sell, over the smaller deal (under $200k) because of the complexity of the business, in addition to the risk of purchasing a company that large for the buyer. And try to remember, that your individual business will always sell at a different pace than other hardware stores, and being patient is an essential part in selling.
What is the process of selling your hardware store?
Our step by step process will help you become more confident, when you decide to sell your hardware store. Many business owners forget or overlook essential steps in the selling process and sometimes become confused and lost throughout the process. Doing each and everyone one of these steps will help guide you to the maximum profit of the sale of your business. If you have questions or concerns about your business’ value or the process in itself please contact us and we will be happy to help.
Who will buy your business?
Finding a buyer can be frustrating and feel like a never ending search, but finding one is essential for the sale of your business. Tuck that frustration and fear aside because there are many options and possibilities. Buyers can range from first time buyers, experienced entrepreneurs, or private equity companies. No matter what the size or maturity of your business there is a buyer for your business, and we can help you find them.
After reading this article and understanding the necessary steps and processes that come along with the sale of your hardware store, and you’ve decided that selling your business is the right decision, we encourage you to have your hardware store valuated by a professional broker, this will ensure that you are receiving maximum value for your business. We understand that your hardware store is your everything, and we always keep that in mind, when valuing your business. So when trying to answer that question of what is your business worth, comparing it to the business in the next town over, will not get you the exact answers you seek. When you are ready to take the first step, we will be more than happy to help you find the true value of your business, and can help accelerate the sale, by helping you find the right buyer as well. Feel free to fill out our valuation form and get started right away.