Last updateWed, 01 Jul 2020 1pm

Retirement Strategies: Knowing when and how to fold ‘em

“I’ve had my store for almost thirty years. It’s been my life. I just don’t know what I’d do with myself if I retire.”

As a sales consultant to independent jewelers for over a quarter of a century, I can’t tell you how many times I’ve heard this refrain or something close to it.

The fact is that making the decision to retire and to sell or close a store is a very emotional one. But it’s the emotion that often gets in the way of making what should be a straight forward business decision. Because their store has been their entire life - often for a period of decades - many owners hold on to their properties and miss the optimum window opportunity to turn their inventory and customer good will into what could be a nice retirement nest egg.

As they approach retirement age, many store owners let their inventory dwindle down to next to nothing. Understandably so, they’ve been reluctant to go out and spend money on new merchandise, so what they do have is old and unwanted. Customer traffic has slowed. The store just isn’t what is used to be.

The advice I give to store owners who are contemplating retirement is to go out at the top of your game. No doubt there’s plenty of emotion surrounding this decision, but there’s a critical point where you can reap the rewards of all the time you spent building your successful retail business.

So, you’ve determined it’s time to retire. Now comes the most important decision of your life... how to maximize your assets and convert them to cash. There are typically two choices, sell your store as a going concern with inventory, or convert your assets into cash through a professionally conducted sale event.

If you first want to explore the possibilities of a sale as a going concern, you’ll want to have up-to-date and accurate tax returns - for the past five years if possible. You’ll want to set a realistic price. Most buyers will want to pay an amount that is far less (30 or 40 cents on the dollar) than the original cost of your inventory and very little for the furniture, fixtures and equipment. Very little consideration is given to goodwill. You may want to speak with a business broker to help in determining a fair value for your business.

The major difficulty with selling your store as a going concern is the lack of qualified buyers. Many buyers do not have adequate financing and may want you to hold a note. The note may become useless if the jeweler does not run a successful operation, meaning you never get paid. Again, many buyers will only offer you a percent of your cost for the inventory, claiming that they would just as soon invest dollars in fresh inventory of their own choosing rather than in your dated stock.

Some stores are just not saleable as going concerns, and many that are have difficulty finding buyers with cash. What are your alternatives? First, separate your store’s assets. Obviously, inventory is the biggest asset. If you could get better than dollar for dollar on cost, in cash, you’d surely take it. Then you could sell the store, without inventory, as a going concern. This strategy breaks the impasse of waiting for the perfect buyer to come along and write you a check for the whole thing.

How do you get better than dollar for dollar for inventory? A professionally conducted retirement and store closing sale will often generate as much as 1.25 on the dollar for inventory and achieve close to your annual volume in as little as 8 to 10 weeks. With a retirement sale you have the opportunity to convert all that customer good will you’ve built up throughout the years into cash. Having an up-to-date customer mailing list is important to be able to communicate directly with your clientele giving them special discounts to get them back into the store one last time.

After your retirement sale, it then will become much easier to find a buyer for the business since you have already converted your inventory to cash and now you are only searching for a buyer for the other remaining assets, which won’t require as large a financial investment. Conducting a retirement and store closing sale to the public will generate cash quickly and in most cases achieve much greater returns than you may achieve by selling to an interested buyer.

The better you prepare for your retirement and exit strategy, the more success you will have. Use all of your resources if you decide to sell the business. Call upon your attorney to draw up the purchase and sale agreement, and have your accountant establish values on assets and make certain that tax implications are considered. Your business broker will help coordinate the efforts of these professionals for you. While negotiating, remember that the best strategy for selling a retail business is to be conservative. Keep an open mind about the worth of your business. Carefully evaluate all prospective buyers.

If you decide to run a retirement and store closing sale because you can’t find a qualified buyer, look for a professional consulting company that has a successful track record and several references. Ask the right questions: How long have they been in business? How many sales have they run? Can they supply additional merchandise that is priced right and of the same quality as your existing goods? What is the background of the professionals that will be involved in your liquidation? You only retire once... you only have this one opportunity to run a successful retirement or store closing sale, so make sure you choose the right professional for your situation.

Bob Epstein is CEO of Silverman Consultants, LLC. Offering a legacy in sales strategies for jewelers since 1945, Silverman Consultants provides guidance to store owners seeking to turn around a business, sell off unwanted inventory, or liquidate an entire store. With offices located in Charleston, South Carolina; New York, New York; and Saskatoon, Canada; the company helps jewelry store owners and chains formulate strategies designed to maximize revenue in times of transition, whether due to retirement, store closing, or simply when needing a boost in sales. For more information, visit www.silvermanconsultants.com or call Bob direct at 800-347-1500.