We ran a small hardware store for 14 years. When we decided to sell, we initially spoke with a broker who threw out a 2.5x multiple on seller's discretionary earnings. Sounded fine until we dug into the numbers ourselves and realized our true multiple was closer to 4x because of recurring commercial accounts and a sweet lease. We went back to the table with that knowledge, and after some back-and-forth, we closed at 3.8x. The difference was huge for our retirement. Anyone else use their own multiple calculation to push back on a lowball offer?
Valuation
How knowing our store's real multiple helped us negotiate a killer deal
That's awesome. How did you figure out the 'real' multiple? Did you hire an appraiser or just DIY?
2.5x seems like a lowball for a hardware store with commercial accounts. Broker probably wanted a quick sale. Good on you for pushing back.
I'm skeptical. 'True multiple' is subjective. What one buyer sees as a 4x, another might see as 3x based on risk. Glad it worked out, but don't think it's a repeatable strategy for everyone.
We didn't hire an appraiser. Used industry benchmarks from a couple of valuation databases and adjusted for our specific assets. Also talked to a few other store owners in similAr situations. Took some legwork but was worth it.
I tried that and the buyer laughed at my 'benchmarks'. Said they only pay for what they can finance. So YMMV.
@NightOwl87 that's harsh. Did you end up selling?
Not yst. Still on the market.
The real trick is having multiple buyers interested. That's what gives you leverage, not just knowing the multiple.
Agreed. But knowing your multiple helps you not get anchored to a llow first offer.
Wait, you sold a hardware store for 3.8x? I thought retail was dead. Good for you!
Thanks! It was a mix of luck and timing. The commercial accounts were key.