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How would you sell your shop?

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RichM

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We are going to sell our pizzeria and werwondering what the best way to go about it would be? Any suggestions would be greatly appreciated.
 
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We tried to sell our pizzeria from September 2009 to March 2010. I found people wanted everything for free and there was no way in this economy that we would get back our investment so we took it off the market.

People don’t understand that goodwill is worth money, not to mention the work it took to bring your pizzeria to it’s current economic state.

My suggestion to you is to find a real estate agent that knows business. We ended up in a terrible contract with a real estate agent that didn’t bring even one person through during the time we were under contract with them. I brought a few through myself… that was it. We asked to be released and they would give a partial which means I would pay double if it sold. Both real estate agents would get equal amount of money… I decided to wait out the contract and let it lapse instead of paying double.

Be prepared to get beat up from people that come through. You will get the typical saying of… I could put this together for way less that the value on your asset list. I just tell them to go ahead then!!!

Make sure the real estate agent you pick will be able to list national on the internet much like the MLS system.

I would make sure you are able to get a FULL release at anytime during the time period if you are unhappy.

Remember that rates that real estates charge is negotiable. Don’t let them tell you otherwise. If they don’t do much work then they don’t desire the higher rate. In Canada we can actually call the real estate board if they aren’t willing to negotiate on the rate.

Good luck to you. It is very tough to sell a pizzeria right now.

Make sure you have all of your financial documents ready but ONLY give them to people who are REALLY interested, Some people even charge a non-refundable amount ( such as $100- 500) to view the documents.
 
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PicassosPizzeria:
Make sure you have all of your financial documents ready but ONLY give them to people who are REALLY interested, Some people even charge a non-refundable amount ( such as $100- 500) to view the documents.
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We never charged anyone to view these documents, but we did make them sign a non-compete contract.
 
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PicassosPizzeria:
People don’t understand that goodwill is worth money, not to mention the work it took to bring your pizzeria to it’s current economic state.
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I would have to disagree with that. The only thing that’s worth any money to a business buyer is cold, hard cash flow. Without that you’re selling assets, not a business… “Goodwill” is the amount paid above and beyond the book value of the assets, so yes it’s worth something but only if cash flow exists.

Unfortunately for all of us, the work we put into our businesses isn’t worth anything if we aren’t profitable. I know that’s hard for us to accept sometimes, but years and years of 10 hour days don’t mean anything to a business buyer. And also unfortunately, the amount of money we invested into it has no bearing on the current value either.

We’re programmed to make these decision errors in selling because of the emotional attachment. Just ask anybody that has ever rode a stock down, when they knew the rational decision was to sell, because they didn’t want to realize a loss.

To the OP, I would find a business broker if you’re going to sell. Best way to do it is through networking and references.
 
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Speaking as a pizza store owner AND as a licensed broker who specializes in commercial property and business brokerage, there is good advice in the posts above.

http://dev.prudentialsteamboatrealty.go … hitchcock/

I would not go to any real estate brokage office to start though. Look through the business for sale ads in your area and find someone who is doing a fair amount of that kind of activity, better yet, find 2-3 of them and go interview them. A real estate broker who understands business is nice, one that actually sells businesses and deals with leases regularly is a lot nicer.

Cash flow IS king. If your business is profitable, there will be be buyers. Right now, pizza stores sell for a multiple of cash flow in the area of 2.5X (look for my detailed post on the subject from a couple of weeks ago in another similar thread) If your store does not make more than a good manager would earn in wages, it will be an asset sale and the comparison to start up cost is a valid approach to price. You may not wish to hear that but it is the truth.

Your lease will be crucial. If you do not have at LEAST three years left on the lease, that may hinder the sale. Feel free to PM me with questions. This topic comes up a lot around here and there is a lot of wishfull thinking on the subject.
 
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Our pizzeria has had profits over 15% of gross the past 4 years and we only wanted $60 000 for the business and got laughed at. We have a strong customer base, tons of historical data and customer databases for direct marketing and are a big part of the local committee and gained a ton of business from that. The sales are on a upward climb and have more than doubled in 5 years.

Out lease is cheap ($550 a month for 1500 sq ft, and cheap utilities). I think we had a great deal for someone yet no one came in through the door or laughed at the amount.

I wish you luck in the sale but just because you make money, doesn’t mean you will sell it.
 
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Low volume shops are rarely worth more than a pitance based on the equipment. As I stated elsewhere, if the profit is not more than a manager would make in wages, it will be an asset sale and the value of the assets of a small low volume shop is not much.
 
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I believe Piper & Bodegahwy are on target. While “15%” profit sounds good, what is it really? 15% of 100K or 15% of 2mil?? It would be CRAZY to pay someone $60K for a potential 20K/yr job (who wants to work 3 yrs for $$s they already have???). However, if it looked like you could improve that 20K to 200K, well, 60K might be cheap.

If you’re interested in selling, then by all means get to it. Just like you promote, market, and sell your pizza, do the same for your business. Dress it up, throw on some new lipstick, and market the heck out of it as an EASY way to make money, a darn ATM if you will. But, as other threads have discussed, being 2 years into a hard recession, with a long term recovery, means that there isn’t any easy money. So many prospective buyers simply won’t have the assets for a purchase. That leaves the hard-core buyers who will quickly see whether or not the ‘buy’ has any value - they only buy assets that make them money on the purchase.
 
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pizza2007:
15% of 100K or 15% of 2mil?
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Exactly what I’m wondering. Profit as a percentage of sales doesn’t tell us anything about what a business might be worth. I’m going to guess, based on your size and rent of $550 per month, that you have a fairly low volume shop - which I would define as under $350,000 or so.

A low volume shop is going to have a lot of trouble selling as a multiple of cash flow because you’re essentially selling a job. You begin getting multiples of cash flow when you’re selling a business as an investment, not a job.

If you’re doing $350,000 per year and dropping 15% ($52k) I think you’d have a lot of trouble selling for $60k. The new owner will have a more than full-time job at a below market rate, be $60k out of pocket, probably not have health insurance and have significantly more risk.

I’ll reword my above post (to agree with Bodega) that not only do you need a profitable business, but you need a business profitable enough that it would make a great investment, not a job. I’d think a pizzeria would have to be in the $500,000+ per year range before you really start seeing it as a business sale and not an asset sale.

Again, I know most of us don’t want to come to terms with this - but if you have a little neighborhood pizzeria you probably don’t have a company to sell. You have a job where you are your own boss, but you won’t see multiples of cash flow on a sale.
 
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I agree with the number of 350K suggested as being kind of the break point. Your best buyer for a store like that is a family that wants to set up one of the kids with a business. The key elements of the sale are that the business is not too complex, that you are willing to help with training and that things are generally in good shape and running smoothly. Focus the sales pitch on those things and the fact that opening from scratch and building to a profitable state would cost more, take longer and have a higher risk of failure.

My store was originally a PJ’s that failed. They spent close to 350K on build-out, equipment and start-up expenses. I bought the equipment in place for 10 cents on the dollar after they closed 11 years ago. There is no way I could get anything like 350K for my store now, even though it would cost that or more today to duplicate it from scatch. That is just the way it is.
 
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I am selling my shop for what I owe. Need to just be done. Sales are in the toilet and I can’t work for free anymore. I am really discouraged and feel beat up. Been at it for 4 years and still have not brought home a paycheck. Bills are paid, owe some taxes and have to pay my inlaws back the downpayment they lent me. I am willing to walk away with nothing so long as I don’t take a short sale.
 
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Rich, I hope you are succesfull getting what you need. Please get some advice from somebody in a neutral position that knows your market and with whom you can share your numbers, both so you don’t leave money on the table and also so you do not pass up a legitimate and fair offer. You may or may not be able to “get what you owe” as that really has nothing to do with value. I understand the number is important to you, but I have seen sellers pass up good offers that they wish they had accepted some months later when they finally just walked away from the whole mess.

If you are working without taking a check, you may need to face facts about what the “walk-away” value really is, and it may not be equal to what you owe.

Best of luck to you.
 
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I agree with Bodge… don’t get caught up in wanting “to get something” out of it. It is worth what someone is willing to pay. Dave Ramsey always says “the heck with the cheese, just get out of the trap” and that is where you are at. If you are not and have not collected a paycheck in years you are gonna have a hard time finding a buyer.

Get what you can and cut your losses. At least you will have a paycheck to pay what you will still owe.

Good Luck to ya…

Kris
 
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That is good news. Good luck with your sale.

In the mean time, keep the store looking good, make sure your records are easy to access and complete. Respond to inquiries promptly. Don’t let sales slide, if the trend is down it will be even harder to find a buyer.

Again, best of luck to you. I know it is not an easy decision to make.
 
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