Model store economics before you buy — revenue per square foot, rent burden, store EBITDA, and the breakeven you need to survive lease assumptions.
Retail businesses are valued on store economics: revenue per square foot, gross margin after COGS, and how much of that gross profit survives rent and labor costs. The two biggest levers for a buyer are the lease and the cost of goods — both can be renegotiated, and both have an outsized impact on EBITDA.
When acquiring a retail business, get the lease(s) reviewed by a commercial real estate attorney before close. Understand exactly what you're assuming — NNN leases pass property taxes, insurance, and CAM charges through to the tenant, making rent-per-sqft look lower than the true occupancy cost.
| Metric | What it means | Benchmark range |
|---|---|---|
| Revenue / Sq Ft | Sales productivity of the space | >$300 strong; $150–300 average; <$150 weak |
| Gross Margin | Revenue minus product cost | 30–55% depending on category |
| Rent % of Revenue | Occupancy cost as revenue share | <8% ideal; 8–12% manageable; >15% risky |
| Labor % of Revenue | Payroll and benefits cost | 15–25% typical |
| EBITDA Margin | Store-level operating profit | 5–15% healthy retail |
| EV / EBITDA | Acquisition multiple | 3–6x for independent retail |
The breakeven revenue figure above tells you the minimum revenue the business must generate to cover all fixed costs (rent) and variable costs (COGS, labor, other opex) before EBITDA goes negative. The closer your actual revenue is to breakeven, the less cushion you have if sales drop or costs rise.
A retail business running at 110% of breakeven has almost no margin for error — a slow month or a lease renewal at a higher rate could push you underwater. Look for businesses where current revenue is at least 130–140% of breakeven.
Get monthly revenue by location for the trailing 24 months — you're looking for seasonality patterns and any trend in same-store sales. Declining same-store comps is a red flag that the business is losing share, even if total revenue looks stable due to new locations. Ask for lease expiration dates, renewal options, and any personal guarantees. The leases are often as important as the P&L when buying retail.
An editable Excel workbook — 5-year income statement, balance sheet, cash flow, DCF + exit-multiple valuation, and a deal tab with debt schedule, IRR & MOIC. Pre-filled with the inputs above; every assumption recalculates.