Frustrating trying to sell......

You would think that being a business broker I might be immune… but it’s not true. As many know from my posts over the years I am interested in selling. I spend quite a bit of time with my brokerage clients on the subject of how long it takes to find a buyer, what it takes to put together a deal, what kind of prices are realistic etc… but that does not save me from having the same frustrations the clients have.

In the last two years I have had quite a few lookers and three “offers”. In business brokerage only about 5% (yes, one in twenty!) of inquiries are what I would consider legit. By legit, I mean they are actually looking with the intent (vs the fantasy) of buying a business AND have access to a realistic level of funding to complete a deal one way or another… so the sorting process starts early!

Most inquiries do not get past the stage of signing a non-disclosure because we figure out they are just tire kickers or they balk at providing financials on themselves to demonstrate the ability to close a deal (which we require before releasing financials on any business for sale). Of the ones that do, some consider themselves “investors” and back off when they find out that in order to receive the quoted seller’s discretionary earnings for a business they would actually have to WORK in the business. (a species of buyer perhaps unique to resort markets?) Others do not actually have enough money.

The three offers:

  1. Lowball. Too low.
  2. Price OK but money from family member was not going to be an investment after all and once the bank understood there would be additional debt in the picture the bank backed out.
  3. Contingent on seller carry… I am not opposed to the concept to a point, but the buyer would have to be bringing at least 2/3 to the table and I would also need to feel confident that the buyer would succeed and be able to pay off the rest… no go in this case.

Isn’t there someone out there that wants to live in Steamboat Springs, make a nice living and raise a family here (like we did) that actually has some cash and experience and likes running a delco?

We sold 3 different locations back 15 years ago. We found it pretty difficult. We ended up taking much less money than we expected. Lots of tire kickers and time wasters.

I don’t like snow or cold.

I’ve looked at a few places, that ended up being very, very similar. No financials, “take my word for it,” late on rent, etc… and I want this much (always an absurd number, laughable, really).

Steve, you pretty much run it absentee, and as I recall, own the building, so why sell?

You guys are discouraging me now, Knock it off!

I want out, It is not because we are not successful, it is due to the availability of competent labor.

I am sorry to hear it has been frustrating. I guess the saying “it just takes that one person that loves it”… I will soon be looking for a pizza ready space for our pizzeria in Reno, NV, but am not interested in buying a business, just the equipment I might need. Good luck and hang in there. Walter

No doubt… about half the businesses that contact me about selling suffer from those same faults with respect to records and financials (and we generally will not take the listing as a result). That is not the case with us.

You are correct on the way we run it and the building. We would like to sell both our businesses and move on to other things. Our home will be paid off later this year and we have one kid out of college now. With our expenses dropping, my brokerage activity could cover the bills and we are ready for a change.

I don’t want out… i just want competent labor !

I’ll ask around about the business sale, what are you asking?

@Joe, check your messages.

Interestimy post for a brokers perspective. I’m thinking that with high food cost, minimum wage going up , long work hours, it just isn’t attractive unless it’s turn key for someone. I think all the time, if I hold a note for someone, can they pay? Also, I think the only was to “get out” is to take a low offer.

I am not sure what “turn key” would be if this is not it. Up and running, profitable, no current issues or headaches.

I don’t have any real motivation to accept a stupid low offer. As was pointed out above, I do not work there day to day and it does make us some income as well as paying down the note on the property a bit more each year. It is currently priced a little under 2X discretionary earnings and those earnings are documented and supported by the tax returns. With my appraisal experience, I am confident that the price is reasonable based on the sales records of hundreds of similar stores around the country. There is no way anyone could lease a location, put in the equipment (even used), get open and ramp up sales for what we are asking so a startup would not be a comparative money saver.

Interesting… Folks that could be a 25% investment return over 4 years. Steve would you message me on your asking price?

Me too, But I have come to the realization that it is just not going to happen. I had to drop our catering because of it, and that was 35% of our gross sales in summer. I’d be willing to take on a partner if they could take some responsibilities off of me. It’s real hard to manage the place from the kitchen.

It may not be your price. It could possibly be other factors. I skied there one time back in the 1970’s so I don’t know too much about the town now. A Google search shows the population to be around 12,000 so that limits the potential buyer pool. It may simply be the fact that Steamboat Springs falls into that old saying “very nice place to visit but I don’t want to live there”. I’m sure that those that live there absolutely love it, as that is why they live there. I am sure that during ski season the population explodes but people are there to ski and to enjoy a winter vacation. I now live in South Florida and there is no way that I will move back to a cold climate even if a pizza shop were to be given to me. What is the cost of housing in the area? That could be another factor. I would like to live in Key West but there is no way that I could afford to buy a small house down there so it is not very likely that I will be moving to Key West to buy a business or open a business. I do wish you luck in selling your business and I am sure that you will find the right buyer. It just may take more time.

Hmmmm well, depends on how you define “investment return”. Seller’s Discretionary Earnings assumes that an owner in a business like this works there full time and includes all the economic benefits from doing so whether they CHOOSE to take income as W2 earnings, S-Corp dividends, Life insurance policies, Family cell phone plans, ski passes etc etc. But yes, If you assume that the owner takes a market wage as “manager” the balance of the discretionary earnings would be in the neighborhood of 25% of a likely selling price EVERY YEAR… not just over 4 years… That is about what our return comes to compared to the asking price. The business pays market rent to the property which is enough to service debt to pay the asking price for the property so that side of the equation is covered.

@Smokin Certainly cost of living has a lot to do with it. This is not an inexpensive place to move to. On the other hand, there are reasons that it costs what it does. This is a great place to live, has excellent schools and quality of life is first rate… cold temps notwithstanding. (We also do not get the brutal summer temps and humidity that Florida suffers from and I feel the same way you do… I would never move there even if you GAVE me a house and free pizza store!) Full time population is about 12,000 as you mention. Then we have roughly 5000 second homes whose owners come and go and can represent as many as 10-15,000 people if they were all here. Nightly rentals (tourists) (overlaps second home owners somewhat) top out around 15,000 on our biggest weeks. Christmas week there are probably 35,000 people in town and we do $4,000-$5,000 per day.

I believe that an owner operator would also improve costs. My guess is that food/supplies cost would drop by at least 2 points and there would also be savings in labor beyond just the replacement of the GM with an owner.

Thanks for the commiseration… a comment on your plans though, in many cases, buying a place is actually LESS expensive than opening from scratch. It is certainly the case in my business. (PJs spent about 300K opening my location including equipment and build out) Even if you change the name, change the business plan, change the recipes… opening from scratch is expensive.

For the others that have been contacting me back channel, here is the link to the listing:

Inquiries will lead to my colleague Ben who I have been working with for several years. He will require a non-disclosure and some information from you before releasing any info beyond the general summary. In particular, with this listing (and all others we work with) financials are not released until a potential buyer provides financial information demonstrating ability to close. If the potential buyer is not currently located in the area a meeting in person or on the phone is arranged to discuss the timeline for moving. This is not the kind of business that is likely to sell to someone 1000 miles away to be run totally absentee (even though there is an outstanding GM in place that runs things from day to day) Please do not be offended, but we do not send financials to just anyone who signs an NDA.

I could never spend 300k on a place. I am focusing on a restaurant ready space with max 50k in modifications. We own about 3/4 of the equipment needed. This will be a simple, old school pizzeria. No granite, no fancy tables, no fancy floors, no big sign out front, and around 1,000 sqft. It will be stainless steel work tables, 3 compartment sink, walkin, mixer, ovens, prep tables. Basically a typical place like I grew up with/ working in NJ. I checked your price. For someone that doesn’t have their own concept it sounds like a great price. Keep the faith it will sell at just the right time and right now isn’t the right time. These things are revealed in hindsight. Walter

Hang in there the right person will come along. I pretty sure this doesnt help but my previous place was in the los angeles area and it took a year to sell. Now we are in south orange county and I had a guy come in last week asking if the place was for sale I was very tempted to say yes but we are 11 months in and doing really good but I got the guys info just in case. You just never know what you are gonna get.

Haha… I have been telling my brokerage clients for years that the best time to sell is… when you have a buyer!

In the brokerage industry the statistics are that only about 10-15% of businesses listed actually sell. That includes self listed businesses and is diluted by the same business being listed more than once. Even among listings with professional brokers the “sold” percentage is less than 50%. My own overall sold percentage is about 60% (In more recent years it is 80%).

Of the businesses that did not sell the most common reason for me has been “priced too high” which in the end is as much my fault as anything else since in nearly every case I did tell the seller it was too high but did not prevail on them to lower it. Also, in nearly every case we had interested buyers who backed away quoting price. In 2010 I went business appraisal school I and since then I become more insistent on a price within sight of what I consider a likely selling price and my sold percentage is up although I have lost some salable listings as a result.

In the end… once business is listed and it attracts a genuinely qualified customer who is really interested it is a VERY good idea to make the deal happen as there may not be another one any time soon.

I have been looking at all the listing in the southeastern MA area and western RI. I see that most of them have been on the market for pretty much the last 8 months I’ve been looking. They certainly don’t sell quickly. Let’s say 70% of them are listed for $1. The other 30% they seem to want $1.60 (of course adjusting for revenues etc)… If I was selling and I see my competition who is equal to or even a better trying to sell with no success and I want 60% more maybe my valuation isn’t quite up to snuff?