Why the Summer of 2020 Could Be an Excellent Time to Sell or Buy a Retail Business
Retail transactions in the cities, towns, shopping centers, and neighborhoods of the Pacific Northwest are presently at historic lows due to the COVID-19 virus. You likely have to go back to the Great Depression to find a smaller volume of customers frequenting the specialty shops, boutiques, and stores that provide the unique and convenient products required to add flavor and close proximity convenience to the high demand, mass produced products featured at big box stores, groceries, and national retailers.
This described situation is reflective of the present “winter” period of the COVID-19 virus we are experiencing as a community. In winter, you hibernate and mitigate travel into a hostile environment. Following winter, the next season is spring. Spring is a couple of weeks or potentially months on the horizon economically in the Pacific Northwest. Spring is a season of rebirth when leaves return to the trees and flowers emerge from the soil.
It is anticipated that the rebirth of the Pacific Northwest retail economy will occur rapidly and with vitality once the local population is given the “green light” by our government to return to normal. This strong “spring” is anticipated regionally because the area is blessed with multiple robust economic engines (Microsoft, Amazon, Google, Boeing, Starbucks, Nike, Intel, etc.) that have strong balance sheets and a work force that will continue to be employed and accumulate financial resources during and after the COVID-19 situation. In addition, the population in Washington and Oregon is approximately 12 million people or under 4% of the United States, so less is needed to get the local economy back on the road and up to velocity than in other parts of the nation. This foundation of large companies and their employees spending money should successfully fertilize the region and allow it to return to the dynamic, diverse community of retailers that existed before the COVID-19 virus rolled in like a ferocious winter storm in March.
This anticipated evolution of “seasons” over the coming months creates both an opportunity to sell a business at a “fair to premium market” value and to buy a quality business with mitigated risk.
The reason it may be prudent to sell in 2020 is because a business can be properly valued presently. Professional business valuation predominantly focuses on historical performance as documented in annual federal tax returns. The good news related to the timing of the COVID-19 situation is that it occurred in the slow season for a majority of retail businesses (Thanksgiving to New Year’s being the busy season) and after the 2019 calendar year was completed. Business sales in 2021 should be equally possible, but valuation will require a high level of business appraisal acumen and detailed explanations and footnoting for buyers related to non-reoccurring drops in revenues and expenses out of alignment with historical numbers due to the COVID-19 virus. This level of explanation will likely be unnecessary in 2020 since numbers available for the current year are partial year, internal without outside accountability to the IRS, and the memory of the COVID-19 situation is fresh.
The reason the summer or fall of 2020 may be an intelligent time to acquire a retail business is that it is anticipated that the local population will be hungry for social engagement and have an appetite to shop offline when they are provided the opportunity to return to normal commerce activities. In addition, a second half of 2020 retail business acquisition will facilitate the opportunity to have “two Christmas shopping seasons” in 14 – 18 months resulting in a front loading of business profits. It is also anticipated that the Small Business Administration (SBA) will have a strong mandate from Washington DC to pump money into the small business sector resulting in robust business acquisition financing activity by the banking community in the second half of the year.
Fear may exist with some business buyers to enter the retail sector due to the prevalence of online shopping options. Online shopping is a reality and growing annually, but there will always be a place for local retail.
The following are few examples of the brick & mortar retail transactions previously facilitated by IBA and the reasons they remain community shopping favorites:
Convenience and instant acquisition of product are two of the reasons people shop at local merchants. Two “50 Yard Line” location businesses sold by IBA were Fishermen’s Green Market & Deli (https://www.fgmdeli.com/) and City People’s Mercantile (http://citypeoples.com/mercantile/). Both businesses serve a loyal, re-occurring base of customers and are strongly valued in their communities.
Businesses offering products that are unique and/or that require personal evaluation prior to purchase are best provided by local merchants. Three, profitable retail businesses sold by IBA offering products that meet this description are Black Pine Spas (https://blackpinespas.com/), a market leading provider of hot tubs & swim spas, Second Ascent, renamed Ascent Outdoors (https://ascentoutdoors.com/), Seattle’s premier provider of technical outdoor equipment, and Country Village Nutrition Shoppe (https://cvnutrition.com/), Longview, Washington’s preferred shopping venue for organic & natural products.
IBA’s market leading, retail business sale transaction team is commonly regarded as having the most knowledge, experience, and highest professional skill set in the region for this industry sector. Our business brokers serving entrepreneurs in this important segment of the local economy each have the ability to provide a professional opinion of market value, create a robust market for the business in a confidential environment, negotiate a “fair market to premium value” for the business in a competitive marketplace, and successfully facilitate acquisition financing and the deal to closing employing “best practices”. If you are interested in selling a retail business in 2020, we would welcome the opportunity to provide an overview of our services in a safe, clean, confidential environment. All information shared will be held in strict confidence and 100% of our fees are paid on performance upon successful completion of a business sale. If you would like to evaluate our exclusive selection of retail sector business sale listings as a buyer, inquires are equally welcome.
Successful entrepreneurs exist in every community in the Pacific Northwest. I believe one of Seattle’s premier retail visionaries, Howard Schultz, correctly summarized the business opportunity and shopping experience when he said, “You walk into a retail store, whatever it is, and if there’s a sense of entertainment, excitement, and electricity, you wanna be there”.
IBA, the Pacific Northwest’s premier business brokerage firm since 1975, is available as an information resource to the media, business brokerage, mergers & acquisitions, and real estate communities on subjects relevant to the purchase & sale of privately held companies and family owned businesses. IBA is recognized as one of the best business brokerage firms in the nation based on its long track record of successfully negotiating “win-win” business sale transactions in environments of full disclosure employing “best practices”.