I’m looking for some advice on selling my store. After 17 years, it’s time to move on. We have a great business, a little over a million in sales and we’re only open 5 days a week. We’ve had steady 8-10% growth annually for the last 6-7 years. We’ve also just signed a new 20 year lease.
One of my concerns is finding a buyer who can pay up front. I don’t want to carry a note for 10 years like I’ve seen some people do. Too many times I’ve seen the new owners run a business down and then the original owner has to come back and try to pick up the pieces.
I’m also concerned about things I haven’t even thought of yet…never having sold a business before I’m not sure what else I should be thinking about.
So if anybody has some advice I’d love to hear it. My plan is to sell the store within a year to 18 months
Bodega is the expert here on stuff like this. Hopefully he will chime in with his usual wisdom.
Assuming that you have typical profitability for a store doing that volume you should have a very salable offering. Things to think about:
- Build confidence in your potential buyer. Confidence that they can run the business successfully. Good systems in place. Key people sticking around. Confidence in the income as presented. Minimize the owner “benefits” that you take. Be prepared to present the last three years tax returns plus YTD info in a clear and organized way.
- When you get into a potential deal be prompt with complete answers to questions. Nothing will turn a buyer away faster than feeling like something is being hidden.
- More than half of sales of businesses like yours involve some seller carry. Don’t close your mind to the idea. You already know why you don’t want to do that, here are a few reasons why you might want to consider it in some circumstanes:
a. Sales with a seller-carry often achieve a higher value. Would you prefer to sell for 300K with no seller carry or 350K and carry a note for 100K? How about if the note was for 50K?
b. Talk to your accountant. There are some ways that a seller carry could save you money on taxes or at the very least delay when they are due.
c. Depending on what you are planning to do with the proceeds, getting a decent interest rate on the amount carried can also increase the income from the transaction. If you are planning to bank 100K in a CD where you make half of one-percent interest, getting 6-8% on 100K starts to look pretty good.
There is a world of difference between a transaction where a buyer brings 50K to the table, has little or no additional operating capital and the seller carries 250K and one where the buyer brings 200K to the table, has another 50K in operating capital and asks the seller to carry 100K at 7% for five years. In the first example the buyer is swimming in debt and will struggle to earn a living. In the second example a strong buyer can probably handle the $2,000 a month payment with no problem.
Hire a business broker (NOT a realtor!). Find one that has several other active listings and ask to speak with a previous seller about how it went. Ask how they qualify buyers. You do not want one of the brokers that will send your info to anyone who signs an NDA.
Be prepared to provide the last three years tax returns and up to date info for the current year.
Clean the place up! First impressions matter.
Get informed about what your business really might sell for. Going out with too high a price can delay or even kill a deal.
Have a store policy manual: Employee policies. cleaning schedule. Recipes, processes and portions.
Have organized information about everything: Vendors with contact info. Summary of marketing. Current and accurate list of FF&E.
100% above board book-keeping. All employees paid through payroll with withholding etc. All sales reported. All taxes and licenses current. Base your financial presentation on tax returns. That is what buyers will have more confidence in.
Expect to provide an example of the financial picture for a full year by month. All sales, all expenses etc. This should match up with the tax return!
If you have any UCC filings or liens get them cleared if possible. Disclose fully and early (when offer accepted and before they find them on their own) if not.
Clean the place up. Make sure all the lights are working. Throw out that junk on the back shelf that you will never use again.
I mistakenly did not clarify: I am not trying to sell my store, I am trying to improve the operations and have a better grasp on training and follow up with staff, I have heard / read one should specify down to the type of brush, amount of soap and exact type, temperature of water to clean, etc. I have never been disciplined / focused enough to get to that level, so I wanted to know your thoughts and tools you recommend and to what degree this needs to be done considering all the tasks and moving parts of running a pizzeria, thanks in adavnce