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Retail Business Plan: Planning Your Exit Strategy
For some investors in your retail store, exit strategy might not be a concern. If they are funding your launch through debt, they are promised their principal plus interest. Others who purchase equity in your business may be comfortable with receiving ongoing dividends if you can demonstrate that the business will be a great cash generator. However, even if these dividends are significant over time, much of the value of their investment is still tied up in shares of the company which cannot be liquidated without some kind of exit strategy.
Selling your store can make sense for the right buyer, who has the ability to reduce costs or drive revenues further than you can. This will likely be an owner who owns other stores and will share costs and marketing across them. A successful sale that realizes the full value of the store will be to a buyer like this who can increase the store's value through their ownership. Some of that increased value will flow to your investors in the sale through cash or shares in the buyer's company, depending on the deal. When planning for exit through a sale, investors will expect to see some suggestions of potential buyers you will court. These suggestions will be most believable if they have purchased similar businesses to success in the past.
If one store for your retail concept is profitable, it should stand to reason that two stores can be more than twice as profitable. If you have the right managers and the needed capital, expanding to a second store and beyond should increasingly spread revenue over some of the fixed costs involved in the first store. For example, costs in many areas should not double with two stores as long as you centralize many functions (ordering, accounting and finance, software systems, inventory, top management, etc). Furthermore, revenues can potentially increase more than double as the brand awareness for your store reaches new heights through additional locations.
A plan for expansion presents investors with the happy prospect that their eventual return from your retail business is limited only by the capital available to add new stores and management's ability to strategically expand.
Franchising your retail concept is like the expansion strategy, but without the capital, more or less. Franchising means that you must take the mindset that you are not only selling your products, but are selling the concept of your store and additional resources to franchisees who will operate independently owned store that are nonetheless dependent on you, the franchisor for a certain level of guidance. In this situation, it is the franchisees who must come up with the capital and much of the management skill needed. In return, you will forgo some potential profit from new stores.
Want more business plan resources ? Here's a related article: Starting a Retail Business.
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