Everything You Need to Know About Selling a Health Store
Whether you’re planning to sell your health supplement store in 5 months or 5 years, you need a plan.
As Americans become more health conscious and strive to take better care of themselves, it makes sense that the health supplement industry is on fire right now. Every year, thousands of people make the decision to improve their well-being by working out, taking vitamins, or finding other ways to maintain their health. Because of this growing consumer base and emerging trends in the health supplement market, business owners in this sector are in a very favorable position. Health supplement stores have proven to be a great investment with high gross margins and we see a lot of first-time entrepreneurs actively looking for businesses in this sector because they align with their own hobbies. If you have been thinking about the future of your health or vitamin store for a while now, it is never too early to begin planning and this article may help you get started of the beginning stages of planning your exit.
As mentioned before, the health supplement industry is rapidly expanding due to main drivers such as our aging population, fitness, and self-care. The industry is expected to see an annual growth rate of 6% every year for the next three years, mainly due to our aging population. There are currently over 83,000 health stores in America and on average, profit margins are around 5.7%. On a worldwide scale, the health supplement industry equates to over $85 billion in sales, with the United States as the largest market and China as the fastest-growing. Health supplement stores also draw a large, diverse buyer pool because they generate good money and also allow entrepreneurs to run a business that align with their hobbies. As the owner of a health or vitamin store, the robust market and growing buyer pool make it a great time to begin planning for your future. If you have seen steady growth and healthy financials over the last 3 years, the timing could not be better. The first step to planning your exit is finding out what your business is worth and while only a true business broker can give you that number, these formulas give you an idea of what is factored into that calculation.
- 1-2x SDE + Inventory
- 40% of annual sales + inventory
Now that you have a better idea of how your business’s value will be calculated, you’ll probably want to ensure that your business is able to secure the highest multiple and increase its salability. After selling a variety of businesses in the health and wellness industry, our brokers have compiled this list of tips to help you get the most for your business and set it apart from the rest.
Customer Loyalty Program
For middle market businesses in the health supplement industry, your biggest competitors are going to be the stores like GNC and Vitamin Shoppe. To stay competitive against name brand stores such as these, you will need to find new, creative ways to get clients in your door and keep them coming back. Starting a customer loyalty program can really help build up your client base and increase your sales by rewarding repeat customers. Some stores use a point system that they track through their POS system or even a card that tracks purchases. Whatever method you decide to use, I recommend researching current trends and using them to your advantage when designing the program. Steady cash flow and client base are the key to showing buyers you have a stable business and any measure you have in place to help with that will be noticed.
Employee Education/Client Consultation
The world of vitamins, fitness, and health supplements is confusing. New studies and products are constantly being released and it can be difficult for regular consumers to stay current and understand what works and what doesn’t. By educating your employees on trends and products, you can build your brand into more than just a retail store but also a place where the staff is knowledgeable about health. Educated employees that help consumers make smart decisions on their purchases will keep customers coming back to your store and serve as another way to build a repeat client base. Building a brand around being a reliable source of health information will help your business increase cash flow in the long run and will show buyers that your business is viewed as credible to the community.
Website & Marketing Campaigns
More purchases are being made online than ever before and as long as you are attempting to remain competitive in this digital age, you need an e-commerce style website with detailed marketing campaign. Most consumers live by the mantra of “quick and easy” and shopping online for vitamins and health supplements encompasses that. It also allows you to expand your inventory without keeping all of your product on the shelves and thus increasing your revenues without adding expenses until the sale is finalized. A website will also help customers find you easier and paired with a robust marketing plan, the sky is the limit. Claiming social media pages and using them to push fitness or health blogs or specials will help you build a following among your customers. Once you begin to reap the rewards of your marketing campaign, you can invest more to build your return through Google adwords, SEO, guest blogging, and direct mail. Having an established website and marketing campaign in place will help you significantly grow your business prior to the sale, increasing it’s value and ultimately, the asking price.
The health supplement industry is always evolving. Staying on top of the trends and what’s hot is critical to the success of your business, and if you have noticed a plateau in your financials, or you just want to increase revenues, adding new products might be the way to do it. When trying to figure out which products to add, think about current trend and growth factors in your industry. An example would be the aging Baby Boomer population. The baby Boomer population of 65 and over is expected to increase by 75% between 2015 and 2050, creating a serious demand for vitamins and supplements relative to that age group. Obesity is also a major issue in America with nearly 70% of adults over 20 being classified as overweight. Offering products to assist in weight loss or dieting would get more customer in your doors, especially if you have educated staff to assist them on their weightless journey. In addition to these two major groups, offering some of these products could also boost your sales: fresh juices, protein bars, natural/organic products, workout gear and demographic-specific vitamins.
Due to the increasing demand for health and wellness products, the health supplement industry is on track for extreme growth over the next few years. While it may feel like the worst time to sell because of the upcoming opportunities, this is actually the best time to begin planning your exit. Business owners are more likely to secure higher sales prices when the economy is thriving, industry trends predict growth and stability and your business is doing better than ever. Those factors combined with a growing buyer pool put business owners in a very favorable position. Even if you are not ready to sell right now, our no-cost, no-obligation business valuation can give you a better idea of what your health and vitamin store is worth and how to increase your sales price. As a business owner, you should always have a plan for your future and the best time to start planning is now.