When owners retire, it’s a life or death decision for the business
When he first moved from the San Francisco Bay Area to Boston, Chris Silvera did not think he would be the owner and manager of Cheap Chic for 15 years. He admits the store is not making him rich but is providing a good income so long as he continues to work. His is the sort of small business that depends heavily on the everyday presence of the owner and that reliance would make it difficult to transfer ownership to a new owner. Eventually, when Silvera retires, he will make the space tidy and return it to the landlord in near same condition as when he moved in over a decade ago. Upon his retirement, Cheap Chic will be dissolved and contribute to what the US Government Bureau of Labor Statistics calls the “Business Death Rate”.
The ominous term brings to light a potential crisis for the country. The office of Bureau and Labor Statistics found that the number of business deaths has outpaced the number of business births each year since 2008. Prior to 2008, business births had been greater in number by about 100,000 per year. Earlier this month Gallup polls chairman and CEO, Jim Clifton, brought to attention that about 470,000 “employer” businesses die each year. These are businesses with one or more employees. What President Obama has called “the backbone of our economy and the cornerstones of our nation’s promise”.
Silvera says that after 15 years of being in this community he’s gotten to know the regulars and the seasonal shoppers. Students moving in and out of apartments visit the store each year around August and September. That sort of consistency creates a dependable source of cash flow for the business, an important factor when courting potential buyers. The sort of recognition earned by Cheap Chic is an intangibles included in the accounting item known as “goodwill,” which describes intrinsic value that can be quantified and carry over to the next owner. Despite 15 years of goodwill, Silvera thinks he is most likely to liquidate the business eventually rather than try to sell it. He points out that two of his major obstacles to a business sale are; difficultly finding a fair value for his inventory of used goods and that he does not own the real estate, making any transfer of ownership contingent on landlord approval. Many small businesses face similar challenges and instead of selling decide to liquidate instead. However, on the online marketplace BizBuySell.com small businesses are able to list themselves for sale to a network of potential buyers. The website reports that 1700 small businesses sold via their website in 2014.
Boston based Dining Room Showcase (DRS) was recently listed for sale on BizBuySell. Like Cheap Chic they are also in the used merchandise business, although their goods are higher end antiques. The for-sale listing is dated January 16th and asks $400,000 for the business with inventory. Despite having listed the business for sale, owner Ali Roozbehani is still planning a ‘going out of business sale’ starting next week until everything is sold. Without a buyer to acquire the business, Mr. Roozbehani’s retirement will mark the death of Dining Room Showcase after 35 years in the community.