Gaining Buyer Confidence:
Four Tips to Help Sell Your Gas Station
an article by Steven Larkin
The past 12 months has seen Village Pantryincrease our store base by 27 percent
and even in this troubled economic climate, our company continues to seek acquisition
opportunities. Headquartered out of Indianapolis, our convenience store chain
is predominantly based within Indiana, but has expanded into Ohio and Michigan.
Currently, acquisition opportunities are being sought within Illinois, Indiana,
Kentucky, Ohio, and Michigan.
Because we have been in expansion mode recently, we are constantly being presented
with acquisition opportunities, but are oftentimes challenged by some owner’s
lack of preparation to help us value and properly assess their business. I can
tell you from personal experience that the ability of an owner to demonstrate
effective management of the sale of their company directly correlates to the Buyer’s confidence in making an offer.
With that said, to achieve a Buyer’s confidence and help sell your gas station
or convenience store, I recommend all potential Sellers heed the following four
pieces of advice:
I - Gather Store Level Profit and Loss Statements for the Past Three Years
Let’s face the facts, accountants need data to digest and help determine a value
of the acquisition. A Seller’s investment to prepare an accurate, concise financial
report reaps the reward of gaining the Buyer’s confidence and ability to expedite
his response. My recommendation is to format the data into easily readable Excel
files and to translate proprietary financial software reports into Excel. A
Seller should not want a prospective Buyer to be responsible for converting the
financial data, as important information may be lost in translation.
II - Take Digital Photos and Summarize Store Level Facts
An old adage is, “If you are selling then you need to be marketing”. Basic marketing
data should include: complete store street address, lot size, building size,
age of building, and ownership type (Fee Simple or lease/terms). Also digital
photographs of the site should be taken from the street of the building exterior,
signs, and interior sales area. Extra credit is given for owners who utilize
a web based aerial photo site (e.g. Google Earth) to help the buyer better understand
the market and trade area.
Some of the best thorough marketing packages are
by owners who have duplicated residential information sheets which are often found in front of a listed home.
This format is well known and intuitive to anyone who has bought a home so the extension into a business format
is easy to follow.
If you are a Seller that is likely to struggle with utilizing technology, one suggestion would be to visit with the
local high school journalism teacher to obtain the name of a student who knows how to communicate via a hand held device.
For a small price these students shine in creating a desktop publishing
marketing piece.
III – Provide an Overview of all Contracts
Preparing a “Contract Fact Sheet” that addresses key decision making information
for a potential buyer builds credibility and confidence. The Fact Sheet should
include: Name of Vendor, Product(s), Start and End Dates of Contract, Ability
of Early Exit (and at what expense), Status of Actual Performance against Contract
Requirements.
IV - Demonstrate the Management of Environmental Liabilities
Demonstrating the owner’s management of environmental issues, warts included,
provides a Buyer with a benchmark of a well run company. Companies which are
tracking down information, unable to produce evidence of performing state required
inspections, or represent their insurance policy as “fully transferable”; sets
off alarm bells to a potential Buyer. This in turn results in hesitation in
pursuing the acquisition.
I suggest creating a binder documenting fuel equipment
type, age, quantity, maintenance/repair/replacement records, inspections, known environmental
issues, and remediation status. For as prominent the environmental
issue is for the convenience store sector, the number of owners who do
not have a systematic recording process to manage these required reports is surprising.
Conclusion
Sellers need to be proactive with marketing their business and understand the
methodology a Buyer will utilize to value a business. It is important that Sellers
be highly inquisitive of a Buyer’s valuation methodology and decision making
process. Know who the decision makers are and know their standard method of
purchase payment. It’s easy to make the asking price the focal point of discussions,
but an offer can be better evaluated if the Seller learns the Buyer’s acquisition
process.
Conversely the Buyer is bettered poised to make an offer
if the Seller demonstrates a full understanding of the acquisition process and
takes steps enabling the Buyer to understand the opportunity. Ultimately the
best price will come from a Buyer who has gained confidence in what the Seller
is offering for purchase. The Buyer’s team needs to be able to confidently recommend
to their management the purchase of the company. The Seller who starts from
the onset to gain the Buyer team’s confidence is positioned to gain advocates
for the purchase.
---------------
Steven Larkin has over 20 years experience in the real
estate industry. He has previously held positions at NTW, Payless Shoe Source,
EB Games, and Starbucks Coffee. Steven is currently the Vice President of real
estate at Village
Pantry, a 200-plus convenience store chain headquartered in Indianapolis, IN.
He can be reached via email at slarkin@vpstores.com.
