Business Valuation for Buying a Hardware Store
Are you looking into purchasing a hardware store? If so, a business valuation for buying a hardware store should be one of your first steps. A hardware store valuation will help you understand the value of a hardware store before purchasing. Receiving a hardware store valuation will provide you with the information you need to succeed in your business.
Peak Business Valuation, business appraiser, values businesses nationwide every year. We work with prospective business owners to help them make better decisions in the buying process. As such, we are happy to provide you with an expert valuation. We can also help you understand how to value a hardware store. Start by scheduling a free consultation with Peak today!
What is a Business Valuation for a Hardware Store?
A hardware store valuation is an analysis of the fair market value of a business. Business appraisers use financial documents to determine the value of a hardware store. A business valuation for buying a hardware store will also analyze the risks and opportunities of a hardware store. Knowing the worth of a hardware store is important if you are in the buying market. See How to Value a Hardware Store to learn more.
Hardware Store Valuation Methods
During a hardware store valuation, business appraisers will use different valuation methods to complete their valuation. Each business is unique and has different needs. By using a combination of valuation techniques, valuation professionals can account for unique aspects of a hardware store. Below we outline the most common valuation approaches.
The income approach uses the future earning potential of a hardware store to determine its value. By using this approach, valuation professionals can also account for risk in income projections. See How to Value a Hardware Store to learn more.
The market approach values a business in comparison to other similar businesses. Business appraisers use valuation multiples applicable to the industry when using the market approach. Read Valuation Multiples for a Hardware Store for more information.
The asset approach values a business according to the value of its assets. This approach is typically less used but is useful for asset-heavy businesses.
Negotiating a Fair Purchase Price for a Hardware Store
If you are buying a hardware store, negotiating a favorable purchase price is an essential step. Negotiating a fair purchase price will help you get the most out of the purchase of a hardware store. Using a valuation for buying a hardware store during negotiations will help you avoid overpaying. It will also help you identify a realistic range that you should be willing to pay for a specific hardware store. In addition, understanding key risks and value drivers can help you make more informed decisions.
Building a Strong Hardware Store Business Plan
After you purchase a hardware store, an effective business plan will help maximize the value of your store. A hardware store valuation also identifies value drivers and risks in addition to the market value. Using a hardware store valuation when creating a business plan is a good strategy to minimize risk and implement value drivers. Check out Using a Business Valuation for a Business Plan to learn more.
Understanding Opportunities of a Hardware Store
A valuation for buying a hardware store identifies opportunities and key value drivers in a hardware store. This helps business owners understand areas for improvement in their business. Capitalizing on opportunities in a hardware store maximizes the value of a store. Some opportunities and value drivers for a hardware store are:
Lack of Major Players:
The hardware store industry lacks the presence of large corporations that dominate the market. Per IBIS World, Ace Hardware holds the largest market share at 1.9%.
Innovation:
Hardware stores can take advantage of innovative products and technologies to create value. For example, eco-friendly offerings and cordless power tools attract new and diverse customers.
Diverse Product & Service Offerings:
In addition to innovative products, having a diverse product line tends to attract a wider range of customers. Offering services like electrical installation or plumbing can also increase the value of a hardware store.
E-commerce Presence:
In an increasingly digital age, consumers like to shop at stores with a strong online presence. Good websites and online shopping abilities increase the value of a hardware store.
Peak Business Valuation can help you identify key value drivers in a hardware store. Getting a valuation for buying a hardware store from Peak will also help you implement these value drivers. Peak’s team of valuation experts can help you increase the value of a hardware store before and after purchase. Schedule a free consultation with Peak now to get started!
Identifying Risks of Buying a Hardware Store
Not only will a hardware store valuation identify opportunities, but it will identify risks as well. A key aspect of maximizing the value of a business is minimizing potential risks. With a hardware store valuation, you can understand both the risks and opportunities involved in owning a store. Typical risks for a hardware store include:
Economic Fluctuations: A high percentage of hardware store sales come from DIY projects and home renovations. Many consumers only choose to take on these projects when they have more disposable income.
Big-Box Retailers: Big-box retailers such as Amazon and Walmart threaten traditional hardware stores by offering comparable substitutes. They also create price competition, decreasing the profit margins of hardware stores.
Government Regulations: Hardware stores are subject to a variety of government regulations. These include safety laws and regulations on different products. Hardware stores may encounter roadblocks or additional costs when addressing these regulations.
Competition: While there aren’t any major players in the industry, most markets have a high saturation of stores. This creates high competition for customers and drives profits down.
Securing Financing for Buying a Hardware Store
Buying a business is expensive and typically requires external financing. The Small Business Association (SBA) offers favorable loans for small business owners. These loans have aspects such as low interest rates, low down payments, and long repayment terms. Peak works with over 90 SBA lenders across the country and can connect you with an SBA lender that is right for you.
In many cases, SBA loans require a business valuation as part of the underwriting process. With a valuation for buying a hardware store from Peak, you can prepare for an SBA loan application. Peak has years of experience helping small business owners and lenders with an SBA business valuation. Reach out today to start the valuation process. Check out SBA Loans for Hardware Stores to learn more.
Obtaining a Hardware Store Valuation Report
As part of a valuation for buying a hardware store, you will receive a valuation report. This report contains the market value of a hardware store. It also analyzes a hardware store’s strengths, weaknesses, opportunities, and risks. Using the valuation report in your decision-making process will help you make better business decisions.
Conclusion
If you are interested in buying a hardware store, you must adequately understand the true value of the store before proceeding. With a valuation for buying a hardware store, you can do exactly that. You can also understand how to maximize the value of a hardware store moving forward. Knowing how to value a hardware store is also important to your buying process.
Peak Business Valuation is a professional business appraiser that can provide you with an expert hardware store valuation. Peak’s team of valuation professionals can help you understand the worth of a hardware store and understand the valuation report. Using the information provided in the valuation report can help you create a strong business plan and negotiate a fair purchase price. Start today by scheduling a free consultation with Peak Business Valuation below!
