Many bridal shop owners are receiving excellent valuations and selling for fair market value. This guide is for bridal shop owners who are interested in determining their bridal shop’s value on the market and selling as a part of their overall exit strategy.
About Bridal Shops in The United States
Bridal shops primarily provide bridal wear for soon-to-be brides and bridesmaids. Many also provide additional services, including but far from limited to hemming, lengthening, shortening, and other basic alterations. Here are the most recent industry numbers (and projections) for bridal shops in the United States:
- There are approximately 5,600 bridal shops in the U.S.
- There was a -5.1% annual growth for bridal shops from 2018 to 2023
- Bridal shops generate $2.1 billion in annual revenue
- The annual profit for bridal shops is $128.3 million
- Experts predict a sizable increase in annual growth (0.5%) from 2023 to 2028
Although there are challenges within the industry such as increased competition and declining marriage rates, the bridal industry remains filled with growth potential. Notably, bridal shops that are accommodating to the increased demand for unique gown styles that differ from the traditional white gown are performing much better than the competition.
How to Value a Bridal Shop
A market approach (rather than an asset-based or income-based approach) is recommended for bridal shop owners who are planning their exit strategy. This approach uses your seller’s discretionary earnings (SDE) that your broker calculates and rule of thumb data for the bridal industry. The most current industry rule of thumb data is:
- Bridal shops sold between 2.24 and 2.93 times the Seller’s Discretionary Earnings (SDE)
- Bridal shops sold between 3.04 and 4.24 times the Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)
- Bridal shops sold between 0.44 and 0.45 times the annual net sales
There are additional factors that impact your valuation as well, although your financial information is usually the most important when it comes to enticing potential buyers to make fair market offers. Other factors you and your broker should consider include your unique competitive advantage, location, the consistency of your revenue, growth potential, the quality of your wedding gowns, reputation, and work processes, and reason for selling.
A Step-by-Step Guide to Selling Your Bridal Shop
You can sell your bridal shop in eight steps with the assistance of a qualified and experienced business broker. Although the specifics of your sale should be personalized, here are the common steps you can expect and prepare for when planning your exit strategy:
- Choose a qualified business broker
- Determine your bridal shop’s value
- Plan your exit strategy and sales goals
- Prepare your legal and financial documents
- Bring your bridal shop to the market
- Negotiate, plan contingencies, and secure a buyer with a loi
- Complete the due diligence process
- Close the sale and confirm the payment
Choose a Qualified Business Broker
A business broker can assist you throughout the sales process. Without working with a broker, you could face many stressful situations and major setbacks in the sales process. You also risk compromising the confidentiality of the sale, which could have a significant impact on your business operations and subsequently the value of your bridal shop. Therefore, we highly recommend starting the sales process by choosing a qualified business broker you can trust.
Determine Your Bridal Shop’s Value
The first thing your broker will do is review your business details and provide a business valuation (see above). Your company’s value plays a critical role in determining if and when you sell and your asking process. It also provides more negotiating leverage when you can justify your asking price and the bridal shop’s value.
Plan Your Exit Strategy and Sales Goals
Of course, maximizing the sale price is the primary goal for many bridal shop owners. However, there are secondary goals you may want to consider as well, such as minimizing your tax obligations, ensuring the buyer has experience within the bridal industry, and protecting your employees from termination. This stage should also include extensive market research and planning when to sell your bridal shop and the estimated timeline for each step.
Prepare Your Legal and Financial Documents
It helps to prepare all documents needed for the sale in the planning stages before you seek a buyer. This helps ensure a speedy process during negotiations, due diligence, and closing. Some of the documents you may need to collect are:
- Tax returns (3+ years)
- Profit and loss (P&L) statements (3+ years)
- Balance sheets & cash flow statements
- Insurance & lease policies
- Real estate appraisal (if you own the real estate)
- List of inventory
- List of employees
Bring Your Bridal Shop to The Market
As you can notice, much of the work occurs upfront. This makes the process much easier when you finally bring your bridal shop to the market. Remember, you should seek to maintain confidentiality throughout this process. Your broker can help ensure information about the sale is not disclosed before you secure a buyer.
Negotiate, Plan Contingencies, and Secure a Buyer With an LOI
A qualified buyer is one that is able to meet your exit strategy goals. Your broker can lead the charge and work on your behalf to screen offers, negotiate with potential buyers, plan contingencies, and have the buyer you ultimately select to purchase your bridal shop sign a letter of intent (LOI).
Complete The Due Diligence Process
Due diligence refers to steps taken after a signed LOI and before a purchase agreement to confirm that the information provided by the seller is accurate. For the buyer, this involves a review of legal and financial documents, requests for more information about certain topics, and a visit to the bridal shop to review inventory and review daily operations.
Close The Sale and Confirm The Payment
You will then schedule a convenient time to close the sale, during which you will review the purchase agreement, attain final signatures, and confirm the payment has been sent. Of course, you will also need to transfer ownership. This may start during closing but may continue past the closing date. Notably, this includes updates to policy information (insurance, lease, etc.), notifications sent to employees and long-term customers, and providing the buyer with full access to the store.
Consult With an Experienced Business Broker and Receive Your Free Valuation
Are you interested in selling your bridal shop? If so, then contact our business brokerage and consultancy today. There is nothing we enjoy more than working with our clients and seeing them fulfill their exit strategy goals in a stress-free manner. You can get started with a free consultation, during which we can discuss your bridal shop’s value and your exit strategy.
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!