Selling Your Business
Last month Big Dave fielded a question from Judy Holse of Stevetty’s Pizzeria in northern Indiana. Judy wants to sell her pizzeria and move closer to family in Kentucky, but she’s having trouble moving it. Dave turned to a commercial Realtor for advice and we published his comments for Judy’s benefit. This month, Dave personally expands on Judy’s question on how to attract buyers to her pizzeria.
Q: Why am I not getting anyone interested in purchasing my pizzeria? It has been a successful business for over 60 years. Any pointers?
A: From personal experience, I can state with great certainty that the two happiest days of your professional life are the day you open and the day you sell your pizzeria.
Every owner will eventually deal with his or her exit strategy. Some folks will financially benefit and some will lose their nest eggs.
One of the best pieces of advice I ever received is, from the day you first open, run your business with the express vision of selling it for a big profit or turning over a profitable, valuable asset to the next person in line. All so often, owners don’t think about their big pay day until just before they decide to sell. Many times they have a heartbreaking reality check when they decide to list and sell.
First and foremost, a potential buyer wants a money-making business. Before they make a serious offer they will want to examine at least three years of financials. These financials will need to be verified and proven with personal or corporate tax returns. Gone are the days when the seller whispers, “You understand that these aren’t the real numbers.” Buyers only believe what you can prove with official filed tax returns. If your business looks unprofitable or break even your sale will be labeled as “distressed.” Your chances of selling for anywhere near your asking price will be very slim.
Many people I’ve worked with have been led to believe that the selling price of a business/pizzeria is derived by multiplying net income times two or three. Or gross sales times another percent. This is bunk. The only real price of any business that is for sale is the amount that a qualified buyer is willing to pay, period. Forget all of myths you may have heard in the past.
To prepare yourself for the future I’ve compiled a list of things you can do that will help you maximize your sale. Like I said earlier, you can never be too proactive.
1. Get your financial house in order. Your books will be scrutinized. Now is the time to have a professional accountant do their thing.
2. Have a licensed commercial real estate appraiser value your operation. All real estate brokers are not the same. Commercial agents are specialists. They understand that selling a business is totally different than a residence. These pros are trained to weed out the buyers who aren’t qualified.
3. Have some basis for justifying your asking price. Just because you want so much money doesn’t cut it.
4. Give your place a good “wash and wax” inside and out. Buyer’s eyes tend to focus on small details of dirt, debris and junk.
5. Have a representative do the “dirty work”on your behalf. It may be your real estate rep, a close friend or a consultant. These experienced reps will engage in the haggling for you. When the deal is done they go away, so your image and reputation is not damaged.
6. Get very creative in the marketing of your life’s investment. Buyers quite often are looking for a lifestyle change. When my broker sold my place he mailed out handwritten letters and rolled them up and slid them in a clear plastic bottle. These were mailed to potential buyers with a teaspoon of Lake Huron beach sand and a willow bud from the banks of the Au Sable River. The letter spoke volumes about my cool resort town and pizzeria a stone’s throw from the lake. 7. Be sure to let food suppliers and sales reps know of your intention to sell. These folks know hundreds and hundreds of people in the industry. If they send you a buyer and the deal closes, you pay them a finder’s fee. Money is a big motivator. No two sales are ever the same. The more you prepare and the farther out you start the better off the end result will be. It’s almost impossible to not get emotionally involved in the transfer of ownership. After all, it’s your baby. Thanks for the fantastic question and good luck.
Big Dave Ostrander owned a highly successful independent pizzeria before becoming a contributor to Pizza Today.