When buying or selling a convenience store, considering the key steps to achieving a successful sale upfront can help prevent problems at closing.
Remember that acquiring a convenience store isn’t as simple as going to a store and buying something off the shelf. And if you are divesting a convenience store, it is not like selling a car or a house. Selling a business is a complex process.
Here are a few of the top items you will want to pay attention to before you engage in a sale.
When Buying A Convenience Store
Be prepared to kiss a lot of frogs. You may have to look at a lot of stores to find the right one for you. Some won’t take much time to toss out. Others, as you whittle down the list, will require much deeper investigation.
There is no such thing as a perfect business because all businesses have warts. Your goal is to find the one that comes as close as possible to your ideal situation and has an upside. If there is no upside, then don’t buy it.
Once you have determined which store or stores you are interested in buying, be sure to do your due diligence. By due diligence I am referring to checking the income and expense statements of the business. Have the numbers been prepared by the owner’s accountant or were you just given an excel sheet where the numbers could have been manipulated? If it is a single store, get a copy of the tax return to compare the income and expense statements as to what they told the IRS the sales were. If they don’t match, then there is a good chance the store isn’t making the amount of money the seller told you it was making.
Evaluate the status of the store’s environmental condition. Are there any outstanding environmental issues that you would be assuming? What are the ages of the tanks and are there any new requirements forthcoming from the state that will cost additional money that you may be liable for?
Check with the local and state authorities to see if there are any changes planned for construction or changing of the roadways that will affect the convenience store.
Be sure to get an ALTA (American Land Title Association) survey, which will tell you what you are buying and if there are any encroachment issues. (It is not uncommon for the price sign of a store or the tanks to be located on state property because the road was expanded and now part of the store is on state property).
Find out if there is a fuel agreement with a jobber, and if so, are you agreeable with the terms of the agreement and is it assumable or do you need to sign a new agreement?
When purchasing the inventory make sure you are only buying inventory that is not out of date and that you’re not buying inventory that you don’t want to sell in your store.
When Selling A Convenience Store
To ensure you are getting full value from the store you are selling, the first thing is to find out what the store is worth. The No. 1 mistake business owners make is attempting to sell a convenience store without knowing the store’s worth.
What you need is a market valuation — not a real estate appraisal — from an industry expert who sells convenience stores. Do not price the store based on what you read or what you heard someone else got for their stores. Each store is valued differently. Most people know what their cars and homes are worth but valuing a convenience store’s worth is more difficult to determine.
Do your due diligence on your store or stores as if you were a buyer. Check the title work of the real estate to see if there are any outstanding liens or blemishes. Are there any environmental issues that are outstanding? What is the condition of the tanks? Do you have a current survey of the property? Are there any outstanding legal or employee issues that would affect the sale of the property? Do you have a fuel agreement that is assumable? If the store is branded, how much time is left on your obligation to the brand in case the new owner wants to change the brand?
Make sure all your financial numbers for the store are correct. Nothing will kill a sale faster than giving a buyer incorrect numbers.
List the assets that will be included in the sale of the store. The last thing you want is a misunderstanding as to what is being sold.
Find someone to represent you as an intermediary who is knowledgeable about the c-store business, whether it be a business broker or an investment banker, because the process is too involved to attempt to do on your own. There is a reason celebrities and sports stars use intermediaries, and that is because they help them get more money for the sale.
If any readers are interested in a sample copy of a due diligence list, contact me at the email below.
Terry Monroe is the president and founder of American Business Brokers & Advisors and has been involved in the sale of more than 880 businesses and worked with over 1,000 buyers and sellers in the buying and selling of convenience stores. He can be reached at [email protected]. For more visit www.terrymonroe.com.
