Sell or just shut down? Here’s how to tell

value as any of the above is the aspect of your brand equity. As elusive as it may sound, in the case of most jewelry businesses, the store is the brand in itself. If you’ve been a valued jeweler and you’ve maintained your position in the market for a period of time, if there’s strong local awareness of you, then your store would be considered a retail brand in your local market. 

Brand value is not unique to chains that have a central marketing function and a powerful image machine at work.  A prominent jeweler on Main Street in a relatively small city or town, also enjoys this--you’re trusted in the local community, you’ve enjoyed longevity, you stock a great assortment and mix of brands, and you offer a high level of customer service--this all contributes to your unique brand equity, and if properly packaged and communicated to the potential buyer, becomes meaningful in the context of a sale.

When should I be thinking about selling in the first place?
For many jewelry store owners, very often a catalyst for evaluating the business is when the lease is coming to an end, but you really shouldn’t leave it until then. Sometimes an owner won’t want to renew a lease because it means a multi-year commitment. With retirement a few years away and the possibility that the business might not operate for much longer, most owners will be reluctant to lock themselves in that way. Or, alternatively, the landlord might seek a significant rent increase so that the economics of the store are no longer tenable. All of these factors taken separately or together can be a catalyst to wind down a business or look for a buyer.

Therefore, when there’s still a meaningful amount of time left on the lease, it’s very smart to take a proactive approach and get in front of a potential sale. That’s when the new owner can still benefit from your location, particularly if the location is desirable and the lease terms are favorable. This adds meaningful value to the business you’re selling, reducing uncertainty and assuring some continuity for a potential buyer, increasing the likelihood that you’ll get to a transaction. As a rule of thumb, try to think three to five years ahead of your lease ending. 

The importance of clear bookkeeping in presenting your business for sale
Having accurate and well-prepared financial reports enhances your ability to consummate a transaction. It makes the buyer comfortable to see, through well-kept books, how your business has performed.  A consistent set of financials that have been reviewed by an accountant is so important that it can make or break a deal. That’s another factor to get ahead of, well before you think you need to do so.

A jewelry business, just as any other business for sale, has to be merchandised properly.  Identifying and zeroing in on buyers whose culture will meld with yours and who are likely to pay most for your company and then packaging it to potential buyer according to each’s  specific needs and priorities will help to maximize value. If you hire an advisor to sell your business, they should be able to help you with much of this.

Beyond that, your advisor will help you maintain your objectivity throughout the negotiations-- minimize the emotion that goes along with any sale of a privately or family-held business, allow you to continue to run your business during what could be a time-consuming process and coordinate the other professionals, such as your attorney and accountant, while advocating for you at the negotiating table.     

Lastly, how do you know if it’s less a question of a sale and more of a wind down?

Again, an advisor should help with this assessment because you might be too close to take an objective view.  But, in general, if your operating costs are high, sales have been flat or declining, margins have been challenged or if you don’t have exclusive rights to any proprietary brand in your market your business will be far less attractive to any successor, whether from the outside or in your immediate circle. 

In this as in all cases, there are many choices. The key is to get an objective assessment, early enough in the game, so that your options remain as broad as possible. That way, you won’t be forced into the default of simply closing your doors.

Howard Feller is a partner at MMG Advisors, an investment banking, strategic and financial advisory firm servicing the retail, fashion, textile, jewelry and beauty sectors. He can be reached at H.Feller@mmgus.com.