How to value a small retail business So called "human capital" also plays an important role, especially in the case of service and experience-based retailers. If you have a real character within your business, this can add value through their charisma and the customer relationships that person has built up over the years. An example of this would be a well-known local pub landlord or French café owner (Bet Lynch or Rene Artois types). Repeat custom is achieved because of the relationships with customers and the experience that goes with that - in some cases, customers may prefer to support a local retail business even if the same products or services are available more cheaply elsewhere; of course, the key risk for a prospective purchaser of a business where one personality is so important for generating custom is whether the business is sustainable without that person. Losing key people could be permanently detrimental to the business. Therefore, this risk would be factored into the value assessment of the prospective purchaser, particularly if it is the vendor's personality and relationships which are helping generate the company's sales. The location of a business is also a key value driver. A good example of a well placed retailer is Kwikfit, whose sites are typically located on arterial routes out of towns and cities; the locations are easily accessible but just as important, thousands of potential customers drive pass the sites every day, reinforcing the brand name and making it easy to remember where you can go if in need of a new exhaust. Likewise, having a prime location in a busy shopping area will benefit the business due to the high level of footfall e.g. Westfield Shopping Centre or Hatton Garden. However, and as with any property, the quality of location comes at a cost and a key consideration for a prospective purchaser will be the rental or purchase costs of the property that goes with the business. In an attempt to mitigate the risks of the economic downturn and to provide a better shopping experience, the UK high street has recently seen a number of retailers collaborate; service led retailers such as hairdressers have combined with beauty salons, convenience stores and coffee shops have joined forces in order to widen their client base, increase the footfall and share the risk. Developing a sense of security on future revenue flows will have a positive impact on valuation. When considering the value of a retail business, historical financial performance should provide some guide to the future but sensible acquirers know past successes are no guarantee of future profits. Currently, with real incomes falling in the UK due to sluggish wage growth in private and public sectors, retailers will continue to be faced with the uncertainty over future custom. Due to the relatively low barriers to entry and economic climate, this remains a very challenging sector. However, for the canny owner-manager, significant value can be generated by focusing on building and making the best use of its assets (brand, people, location etc) coupled with good products and services.