Time to sell - how to prepare

The time has come. To sell. 2 small shops ($10,000 per week combined) , 7 miles apart in small towns. Can someone who has been in my shoes direct what steps to take to prepare for the sale? Should I sell together or separate since they are so close in proximity? How do I keep my employees from finding out?

Would it not be near impossible for your employees to not find out?..I am thinking a far better idea might be to be upfront with them…

Nobody is going to buy one or two shops doing 5K a week strictly as an investment. They will buy them as a dream and a job. Who dreams of owning their own pizza shops and working as their own boss? Your employees do. Let them know what’s going on and you might find that one of them has some financial means to buy them from you.

Clean up your books. Stop taking any owner “benefits” including groceries so the business looks as profitable as possible. DO NOT allow your sales to decline even if that means ramping up marketing and not making more money. Nobody wants to buy a business that is sliding. Keep the place clean.

Forget about your employees not finding out. They will. That does not mean you need to tell them in advance, but you do need to be ready for the question and answer it well when it comes.

Do what everyone above said. Be patient and expect a long wait as these type of deals usually take a loooong time.

It is not unusual for businesses of this type to take a long time to sell. The MAJORITY of sales of this kind of business include some seller financing so wrap your head around that. Another very important factor in finding a buyer is price. Most businesses for sale are listed at silly prices initially. I understand that no one wants to leave money on the table and many believe that having room to negotiate is important but having at least a distant connection with reality can be important; experienced buyers (or those with good advisers) may not even inquire about an opportunity that is clearly priced unrealistically.

Have a read through this old thread: http://thinktank.pmq.com/threads/selling-your-pizza-store-what-is-it-worth.13300/#post-81868

Is the sale for a business, business + real estate, or business + lease?

Business + Lease. We have no debt on any of it and are actually quite realistic about what price to ask - far below what the broker even suggested. No desire to sell it to any employees - they are kinda the reason we’d like to get out of it.

If an employee has the money take it. Not your problem once you cash the check.

Regarding the lease, have a look at your lease assignment clause and see what is required. Also, if you do not have at least a couple of years left on the lease, you might see about extending it now so a buyer does not have to worry about the location being secured.

I feel your pain on the employee issue.

It may be tough to sell someone on the purchase of the business only. You will have to show them that purchasing the business is a better financial deal then simply opening their own pizzeria. If I was looking at opening vs buying a pizzeria, this would be my first and most important question.

I have had former clients try to sell and be to picky about who bought their business and the price they wanted to get…Some eventually just shut the doors and liquidated…At the end of the day they had more miserable years “grinding” away and far less $$$s than they were hoping for…

I have to second Royster13’s comments. I seem to be doing that a lot in here lately :slight_smile:

The above quote by Steve puts a little different spin on who buys the business. Carrying a note justifies a little “pickiness”. If I’m loaning money to somebody, I’m going to manage my risk.

I agree with you on being picky on price though. So many owners fall prey to the sunk cost fallacy.

about ten years ago i put my shop up for sale and came very close to selling,had an offer i thought was too low, not by much, neither of us budged,no sale,i am so glad i didn’t sell now,at the time i had employee problems, customer problems etc…looking back it was just a bump in the road. things change,good luck whichever way it goes for you, i wish you the best !

Credit worthiness of a buyer is important for sure. I would be much more willing to carry a note from a buyer who I thought was going to work hard and succeed than from someone I did not have that confidence in. But…

The reasons to for a seller to carry a note include:

  1. Only way you can get it sold. Often the case as many of the kinds of buyers that could pay cash are not looking to “wear an apron” as one buyer so succinctly put it too me. There are lots of good buyers for pizza stores that could operate them successfully that do not have the $$ for a down payment.

  2. Can get a higher price or higher total value to the seller than a cash price. i.e. you are being paid for the risk you are taking. Which would you rather have: 200K Cash or 175K at closing and a note for 75K paid back over five years with 8% interest? I know which I would rather have!

There is a world of difference between a deal where the seller carries 50% or more of the selling price and one where they carry a smaller amount that frees up the buyer to have healthier reserves and succeed. I have had offers on my business where the buyer was wanting to put 50K down and ask me to carry the rest over 10 years. Why would I do that? On the other hand an offer where a buyer I had some confidence in offered what I consider to be a full price and asked me to carry 50K would be another story. Somewhere in between might be a deal where a buyer offered 50K down, payments for three years and then a balloon to take me out when they had enough equity and track record to qualify for an SBA loan. It would not be my first choice deal but for some sellers it could get them out when another buyer is not available.

There are many ways to put together a deal. Don’t close your mind to these kinds of ideas. Work with an experienced broker and stay in close touch with your bank!

The BEST time to sell is… when you have a BUYER. Often the first offer on a business is the ONLY offer. Don’t let a solid opportunity to sell get away from you if selling is what you want to do.

At 5k a week I would be happy with giving someone the business for the value of the used equipment if they just got me off the lease

It’s hard to sell something at that low of volume

I don’t think that is an accurate statement. Sale price of a business is based on profit (cash flow), not sales.

A store with 4-500/month rent (yes, we have them where I am at - and probably even more likely in a rural area), small footprint, open 4-9/4-10, independent - no royalties, low advertising budget, etc. can be very profitable at 5K. And there are two stores…there could be significant value above equipment cost.

Let’s at least ask the question before we make assumptions.

What is the cash flow on these two stores?

Are their volumes similar - different?

Are you (the owner) involved day to day - I am trying to understand if you have created businesses (in my mind an entity that will produce income in the absence of an owner\operator) or simply a job for yourself?

Please stop bashing the 5k per store per week. I am sorry if we are not a “million dollar store” like many of you on here. We never will be and don’t try to be. Our shops are in 2 very small towns with populations of 6-8k each. Between salary and perks, we clear over 100k per year, and do not even work 40 hours per week - actually physically in stores less than 2 hours each day - how many owners can say this?. I was simply looking for smart steps to take to make the business clean cut. Most of you have been very supportive and I do appreciate that constructive feedback.

I owned a 6k/week store for years. I have to ask why would you think about selling a business that nets you 100k/yr on less then 40 hours a week? How is it possible to have 100k out of 250k as profit? If these numbers are true then the last thing that you should ever do is sell.

I think he has TWO stores doing 5K week EACH. With low cost locations 100K out of that scenario is very plausible.