Understand where profit is actually earned
For multiple locations, separate store contribution from shared overheads. A strong location can mask another that absorbs cash, while head-office costs may be necessary to support the whole network. Review how those costs are allocated and which would continue under the valuation assumptions.
Reconcile online and in-store sales without counting transfers between channels as extra demand. Product returns, loyalty offers, freight and marketplace fees can change the margin retained. A growth story should describe contribution as well as revenue.
Stock quality matters as much as quantity
Examine ageing, markdowns, obsolete products, consignment stock and supplier return arrangements. Inventory valued at cost may not all be recoverable at that amount. A stock count also needs to distinguish items owned by the business from goods held for others.
Seasonal buying and minimum orders can tie up funds before a selling period. Compare stock levels with the operating cycle and expected demand. The valuation should specify whether normal stock is already included and how any surplus or impaired items are treated.
Assess the costs of maintaining the trading footprint
Review rent, outgoings, lease terms and fit-out obligations. A favourable location can support sales, but the business must also be able to continue occupying it on the assumed terms. Proposed rent changes, refurbishment or relocation can alter future earnings and cash requirements.
Owner hours, store management and buying responsibilities also need a realistic staffing model. An adjustment that removes the owner’s pay while retaining their work can overstate profit. Property owned separately should be distinguished from the retail operating business.
Bring together store, product and financial information
A proposed sale should also make clear whether it transfers assets or shares. That distinction affects how liabilities, leases, stock and other balances are considered.
Before we begin
Your industry information checklist
- Annual accounts and monthly store results
- Sales and gross margin by channel
- Inventory ageing and count reports
- Leases and fit-out obligations
- Staffing, supplier terms and finance schedules
We confirm the documents needed once the purpose and scope are clear. For the common starting documents, see our valuation preparation guide.
General business valuation guidance. Service suitability, specialist input and fee are assessed for the individual matter.