When Selling A Restaurant Business, This Is What To Consider
Selling a Restaurant Business
Selling a restaurant business depends on many factors. The most obvious concern is the price. Everyone wants top dollars for his or her company. Unfortunately, the buyer is looking for the best deal. The buyer will, therefore, scrutinize your business thoroughly is a bid to lower your asking price. In such an environment, a seller must ask several questions before going to the market.
Why are you selling the business? Is your business struggling? Are you retiring or changing careers? Is your business profitable? How well you answer these questions will determine your market position. If your business is profitable and healthy, you are in a strong market position. If your business is struggling, you are already in a disadvantaged position. However, you can still get the value for your business. Different companies will require different approaches when it comes to selling a restaurant. In this guide, we look at restaurants.
If you are looking to sell your restaurant, you should consider these things.
What is your unique selling point?
When buying any business, the founder’s vision plays an important role. People tend to buy a company that has a brilliant proposition. Since you cannot present yourself as a proposition, no matter how good you are as a chef; yourbusiness should have intrinsic value beyond you and your cofounders.
Your unique selling point should be in the business plan and operations. It can be a competitive menu or an unbeatable service offering. Whatever it is, it has to be transferable.
The curb appeal
The hospitality industry relies heavily on presentation and appeal. First impressions matter to the client. They will matter to the potential buyer. You will need to work on the physical look of your business.
Before anyone looks at those impressive (or not so impressive) numbers, he or she will see the physical attributes such as décor, signage, waiters’ uniforms, and such things. You can do some repairs and upgrades if you can. However, you should first evaluate the impact such an investment will have on the list price. You can start with the interior décor. Ensure the business looks decent and appealing to the eye.
The value of the business
Valuing a company is a job for professionals. The buyer is enlightened. He or she will not overpay for a business. If you want to sell your restaurant fast and for good value, back up your valuation through a written appraisal.
Potential is good; sentimental value is good; vision is also good; but have you actualized these things? Can the buyer see the potential in the projections? Can they see the value for money?
Most buyers will look at the business as a commodity. The buyer will want to buy it as it is. Let the value reflect that. You will increase your chances of winning if you do that. If you feel that the valuation does not capture everything, it is your responsibility to explain to your pre-qualified client.
The business operations
Often, small business owners cannot separate business from personal life. They are part of the business, if not the business itself. That can complicate any sale of a business. You will need to invest in systems that will power your business operations in your absence. Try to take some time off from the business to see if it will stand on its own. If it can run in your absence, someone else can run it. If not, that business is not ready for the market. You can take some time to operationalize it.
Records give the business its form. Good records can help you gauge profitability. They can help you track your payables. They can help you determine your overall value. Without them, expect a chaotic sales process. Nine out of 10 potential buyers will not even make a bid. Considering that it takes about four months to sell a business, you cannot afford to put off potential buyers. You need as many buyers as possible.
Of all the business records, the lease is the most important. When is your lease expiring? Can you get a renewal before trying to go to the market? Is the contract transferable? Answer those questions before going to the market. The new owner will want to know the answers to those questions. He or she will want to be convinced that the business premises are protected. Deal with expiring permits and patents, too.
Do you have a transition/succession plan? What will happen to your employees if you sell? Will they continue under new management? Will your suppliers continue to service the restaurant after you are gone? Have a watertight transition plan that will see all things fall perfectly into it. The buyer will want to know how you intend to handle the transition.
Selling your restaurant all by yourself is possible. However, it pays to have a professional around you.
It is in your best interest to hire a professional restaurant for sale broker. You may need other experts such as a lawyer, an accountant, or a real estate agent.
If you are not careful, your deal might turn sour. For example, negotiating in bad faith can come back to haunt you. Selling something that you don’t own can also land you in court. If you have leased equipment, let the buyer know.
Selling a restaurant should be a rewarding experience for you and your staff. If you can get a deal that respects your team, it will be a win-win situation.