Are you considering selling your arts and crafts store? Despite a recent industry decline, there is still demand for arts and crafts stores as many prospective buyers anticipate an industry resurgence driven by the desire for personal touch with art and sewing supplies and an increasing elderly population. This review discusses the arts and crafts industry in detail and highlights how you can determine your business value and sell for fair market value with the assistance of a business broker.
About The Arts and Crafts Industry
The arts and crafts industry includes a range of business types, from art and sewing supplies to the sale of sporting goods equipment. Here is the most recent data for the arts and crafts industry:
- There are approximately 32,000 arts and crafts stores in the U.S.
- There was a -1.4% annual growth for the arts and crafts industry from 2018 to 2023
- The arts and crafts industry generates $3.9 billion in annual revenue
- The annual profit for the arts and crafts industry is $138.7 million
- Experts predict a further decline in annual growth (-0.6%) from 2023 to 2028
The recent decline in the arts and crafts industry is largely driven by increased demand for online retail stores and discount department stores. However, some experts expect a bounce back in the arts and crafts industry as more people are seeing the value in arts and crafts that have a customized and personal touch. Currently, baby boomers are largely driving sales within the industry.
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Step 1: Receive a Market-Based Business Valuation
A market-based valuation considers rule of thumb data (acquisition multiples) to formulate a general, non-specific valuation for your company. More specifically, market-based valuations look closely at recent sales data within your industry, which are known as “comparables.” Rule of thumb data simply includes calculated averages of industry sales data. Here are the rules of thumb that you should use for your arts and crafts store:
- Arts and crafts stores sold between 2.40 and 3.06 times the Seller’s Discretionary Earnings (SDE)
- Arts and crafts stores sold between 0.42 and 0.46 times the annual net sales
- Arts and crafts stores sold between 3.34 and 4.18 times the Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)
Of course, you will need certain financial information — namely your seller’s discretionary earnings (SDE) and earnings before interest, taxes, depreciation, and amortization (EBITDA). It is important to work with a business broker to determine your arts and crafts store’s value as they understand what should and should not be added back when you calculate your SDE and EBITDA. This ensures the most accurate market-based business valuation possible.
However, although the importance of rule of thumb data and your financial information should not be understated, there is much more that should factor into your valuation. Additionally, your value should include your geographic location, unique competitive advantage, growth potential, and reason for selling. Ultimately, the goal is to arrive at your fair market value (FMV), which refers to the purchase amount for your arts and crafts store that is considered fair based on the current market.
Step 2: Prepare All of The Documents You Will Need
Not properly preparing financial, legal, and operational documents is one of the most common mistakes owners make when selling their business. This can lead to a lack of leverage during negotiations and buyers backing out of offers and LOIs due to sloppy handling of the due diligence process. Therefore, you should take the time before you receive offers to prepare everything you will need.
Your attorney, CPA, and business broker can help you understand which documents you need and where you can get them. This can be a time-exhaustive process if not done properly, which is why we recommend working closely with a business broker who can help you through the process.
Step 3: Allow Your Broker to Find a Qualified Buyer
Selling a business requires confidentiality. Otherwise, your employees and customers may catch wind that you are selling and it could impact business operations and profits. This could compromise the value of your organization and make it harder to sell for fair market value.
Your broker ensures you maintain confidentiality throughout the sales process. They accomplish this by utilizing private networks, databases, and other resources available to them as professionals within the industry. The best brokers have access to thousands of prospective buyers and are, more times than not, able to pair you with a qualified buyer who is willing to pay fair market value.
Step 4: Complete The Due Diligence Process
Once you decide on a buyer and they sign a letter of intent (LOI) establishing their intention to purchase your arts and crafts store (and establishing the purchase price and contingencies), the due diligence stage begins. Due diligence is a necessary step in the sales process where the buyer takes time to ensure all details of the business are accurate and as presented by the seller. If there are any inaccuracies or inconsistencies, or if the seller is unable to provide certain documents that allow the buyer to verify the store’s financial or legal information, then renegotiations may take place. In extreme cases, the buyer could back out of the deal.
Due to this, it is of the utmost importance for you (the seller) to have an established process and timeline for due diligence. As discussed, you should have already prepared all of the financial, legal and operational details you need to sell your arts and crafts store (tax returns, etc.). With proper preparation and a structured process and timeline, you can move quickly through due diligence and get to the closing table faster.
Step 5: Complete The Transfer and Close The Sale
There is still work to be done after due diligence. The closing stage can be a stressful process if you are not adequately prepared. Your business broker, along with your attorney and CPA (if applicable), can help you prepare for the business transfer and sale closing. Specifically, you will need to bring certain documents (i.e. purchase agreement) with you to closing, along with any documents you need to transfer ownership (i.e. insurance information, store lease information).
Receive a Free Business Valuation From Sigma Mergers and Acquisitions
Here at Sigma Mergers and Acquisitions, we understand the importance of knowing your company’s worth before you bring it to the market. This is why we offer free, no-obligation business valuations to help you decide if and when you sell your company. Contact us today 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!