My mother said, "making money isn't "a" reason to be in business, it's the ONLY reason." I'm sure she didn't invent that phrase, but she definitely taught it to me and it stuck. We owned a Hallmark Greeting Card Store for 27 years. From March of 1989 to August of 2016. We did not have a down year until 2007. That's 18 years of growth! Yes, we did have the occasional month that was down here or there and the year might of ended with a small increase, so small we would refer to the year as flat and consider that a slump, but nothing like what happened between 2007 and when we closed. Between those years, the opposite happened. There was the occasional up month, but the year would end down. Way down!
What I want to share is how I now know when it is time to sell or close a family retail store. Why do I know this? Because I just went through it...and I did it wrong. My desire is to tell my story and help someone else (you?) avoid the same mistakes. Let's get started.
A brief timeline:
1989 - My family bought the Hallmark store in Haygood Shopping Center in VA Beach for $175,000. We made some changes and immediately increased the sales.
1996 - My mother was diagnosed with colon cancer. (Uh oh, things just got heavy.) I'm sharing this to convey a sense of the upheaval we were experiencing. You may be thinking that I'm going to say this is when we should have exited the business. Nope. Up to that point we had built a strong and loyal customer base and were still growing.
- Also that year, the local owner of Haygood Shopping Center, died. This is significant. Haygood ended up being bought and sold two times to giant conglomerates outside our area.
1997 - We did our first extensive remodel in 8 years. (Here's another Blog for the future..."Hey mom and Pop, REMODEL that tired a** store!")
2000 - My mother passed away. Time to get rid of the store? No. Sales were robust. We had great employee's and I wanted to protect the legacy my mother had left me.
2006 - We renew our lease for 10 years with the new owner of the shopping center. We agreed begrudgingly to annual increases that in their agents opinion, would bring us closer to the current market rates.
2007 - Our last up year at Hallmark. That year we grossed over $530,000.00.
2009 - I was told by a multi-store Hallmark operator that if I ever wanted to sell my store to let him know. We had at that point just experienced 2 consecutive down years.
2011 - This is the year we should have sold the store. I'll explain later.
2013 - To maintain the status quo, I start to fund the Hallmark store from my personal money. This was a BIG mistake! My strategy was to remodel with the most current Hallmark fixtures hedging my bets that this downward trend could not last forever and I wanted to be ready for the boom in sales that was about to happen. Wrong.
2014 - I continue to fluff up the store financially and start to get serious about selling the store. I contact the multi-store operator I'd spoke with years before and other Hallmark store owners in the area and am told they are not in acquisition mode. Most intimate that they too are experiencing a downward trend. This is not a good sign.
2015 - I engage a professional business brokerage service called Trans World Business Advisors. My lease was up August of the next year and I needed to get serious about unloading my store. Rent was going up and sales had continued to go down.
2016 - The store was actually "sold" twice. I had signed contracts where I was selling my store below the cost of the inventory. I was essentially giving away the fixtures and the technology. Remember, I had just remodeled less than two years prior and the store had fresh carpet, lighting, cash wrap counters, and the latest scanning registers. A bad deal for me. A great deal for a buyer. I'll share why those deals fell through in a bit. In August, we started our going out of business sale.
- August 31st, 2016, we closed for good.
The nitty gritty:
I mentioned above that I should have sold my store in 2011. To quote Ian Flemings book Goldfinger, “Once is happenstance. Twice is coincidence. Three times is enemy action.” In 2008 there was a market crash. There had been other seemingly similar crashes over our years in business, but none had resulted in a down year . This was not a normal cyclical fiscal fluctuation. 2009 was just as bad. 2010 we were obviously under attack. 2011 was the time to retaliate. The enemy was our slipping sales. My moms wisdom about the only reason to be in business had yet to resonate. If I'd tried to sell our store in 2011, the downward trend would have been much easier to swallow for potential buyers. I might have sold it for what we had invested. Heck, I might have even come out ahead! Not just for the money we put into it over the years but our goodwill. Why did I not sell it then? I can directly point to two reasons: Vanity and emotions. I was emotionally attached to the store and too proud to admit it was sinking. Honestly, I didn't really appreciate what my moms phrase meant. It means
emotion is the enemy of good business decisions. In business, the only emotion that is acceptable is happiness when you are making money. This doesn't mean you can't be a caring, empathetic citizen. You should be. But your business won't be the base of that compassion for long if it's not making money. If you aren't making money then you don't have a business, you have a charity.
I became desperate:
As I mentioned, I did sell my store twice. My broker found buyers who were willing to give me forty thousand dollars for the merchandise in the store that was worth one hundred forty thousand at retail. I just wanted out and was trying to avoid the turmoil of a going out of business sale. The only reason the sale didn't close is because Hallmark had to approve the deal. Hallmark requires a potential buyer to have at least a half million in net worth and $117,000 liquid. Neither of our buyers met that requirement.
Believe me, I know it's hard to let go of something to which you've dedicated so much of your life whether it's been 1 year or 27. Here is the essence of what I learned that I hope will help others in the same position:
- Rule: Don't be in business for any other reason than making money.
- Know: Leasing agents understand this. To them you are just a number.
- Caution: If you've lost money for 2 to 3 years, it's time to exit.
- Warning: Delaying can cost you dearly.
- Never: Never throw good money after bad.
A broker said something to me that brought together my self flagellation and clarity to my moms quote about business. He recognized that I was down and stressed. In the middle of a conversation, he stopped me and said "listen, I deal with businesses failing every day. The average business lasts only 2 to 3 years. You had a business that grew every year for 18 years! I admire you. You need to stop beating yourself up and stand proud for what you accomplished." There is no shame in closing a business if it's not making money. The shame is keeping it going when it's not.
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