The sales process may seem overwhelming, but you can simplify the sale of your bait and tackle shop and help ensure success by understanding what to expect and breaking the process into multiple phases. This review from a business broker discusses how to value and sell a bait and tackle shop.
About The Bait and Tackle Industry
Bait and tackle shops primarily retail fishing gear and equipment. However, they may offer much more than fishing supplies. Additionally, many bait and tackle shops sell hunting gear and equipment, camping equipment, and sporting goods and equipment. More than a million Americans fish every year, which has created a sustainable business model for the bait and tackle industry.
How to Value a Bait and Tackle Shop
A market-based valuation is the best way to determine the worth of your bait and tackle shop. This helps determine the actual value that prospective buyers are willing to pay, also known as your fair market value (FMV). You will need your EBITDA, SDE, and the industry multiples (rule of thumb data) to calculate your value with a market approach. The rule of thumb data for bait and tackle shops is as follows:
- Bait and tackle shops sold between 3.62and 4.68 times the Seller’s Discretionary Earnings (SDE)
- Bait and tackle shops sold between 2.56 and 3.27 times the Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)
- Bait and tackle shops sold between 0.42 and 0.7349imes the annual net sales
Of course, your value goes beyond your SDE. Adjustments may apply based on your unique competitive advantage, location, merchandise quality, and other factors. Your broker can help you determine the price value of your bait and tackle shop.
A Step-by-Step Sales Guide for Bait and Tackle Shops
No two bait and tackle shops are the same. Consequently, you should receive a personalized sales strategy from your business broker. However, there are common steps (or phases) you can expect throughout the sale. These phases include:
- Plan and prepare for the sale
- Find prospective buyers and negotiate
- Finalize a deal and receive a signed letter of intent (LOI)
- Allow the buyer to complete the due diligence process
- Sign the purchase agreement and transfer ownership
The sales process may involve many unpredictable complexities along the way. It is best to handle this in stride and take the process one phase at a time. Here is a brief overview of each step, so you can have a better understanding of what to expect and how to prepare.
Phase #1: Plan and Prepare for The Sale
Shop owners who become overwhelmed by the sales process generally do not prepare well. It helps to take time before the sale ever begins to prepare. This can save you a fair amount of headache and stress later on in the sales process.
First, you will need to determine your value (as discussed above). Based on your valuation, you can plan your sales goals and timeline with the assistance of your business broker. Next, you will need to prepare your financial and legal documents. This includes but is not limited to:
- Tax returns (a minimum of three years)
- Profit and loss (P&L) statements
- Inventory and merchandise lists
- Lease information (or real-estate appraisal)
- Insurance policy and information
- Licenses and certificates
- Employee list
Although it may take some effort to collect these documents, you will make the process much easier in the following phases by doing so ahead of time. Your broker, attorney, and CPA can assist and advise you with document collection.
Phase #2: Find Prospective Buyers and Negotiate
The second phase of the process involves finding potential buyers and negotiating the purchase price, contingencies, and more. Keep in mind, selling a bait and tackle shop requires confidentiality. This means you are selling through private channels and in a manner that ensures news of your sale is not leaked publicly. This is one of the reasons working with a business broker is strongly recommended; they are able to leverage private connections, databases, etc. and maintain your confidentiality throughout the sale.
Phase #3: Finalize a Deal and Receive a Signed Letter of Intent (LOI)
During the third phase, you will consider all offers to purchase your bait and tackle shop and decide on the one that is best for you. This may involve further negotiations. Ultimately, this third phase ends with a finalized agreement to purchase your company and a signed letter of intent (LOI).
Phase #4: Allow The Buyer to Complete The Due Diligence Process
The buyer then needs an opportunity to verify your bait and tackle shop’s financial and legal information and learn more about the daily operations of your company. This process is known as due diligence and takes place with every business sale. Your job as the seller is to provide the buyer with requested documents (within reason) in a timely manner. Your broker will also work to help move to close as quickly as possible.
Phase #5: Sign The Purchase Agreement and Transfer Ownership
After due diligence, you and the buyer will schedule a closing date and time, along with everyone else who may attend (attorneys, brokers, financial institutions, etc.). At the closing table, your attorney will review the purchase agreement a final time before the final signatures for both parties are attained. This phase also includes the transfer of ownership, which may include updating legal documents, insurance policies, leases, etc. During this final phase, you will also notify your existing employees and long-term customers.
Contact Our Business Brokerage to Start The Sales Process
We get it. The sales process can seem overwhelming, especially if you do not have professional help working to ensure you receive fair market value. Here at Sigma Mergers and Acquisitions, we have helped hundreds of business owners sell for maximum value and reach their non-financial goals for sale. Schedule a consultation with us if you would like to learn more and get started.
Scot Cockroft is the Owner & President of the #1 ranked Business Brokerage, Business sales and M&A firm in Texas. Scot has been named Named Deal Maker of the Year by Dallas Business Journal.
He is committed to a “different” type of business brokerage firm, one that is NOT about a sales pitch but, rather, results! In short, a business brokerage firm that is committed to performance-based compensation. Scot believes in these principles as well as a candid honesty with clients. His candid style often takes buyers and sellers by surprise, but is often what assures successful connections between the two.
Feel free to reach out!