6 Things to Consider When Selling Your Restaurant Business in St. Louis
The restaurant business is a lucrative one with annual sales comprising more than 4 percent of America’s gross domestic product. That’s a whopping $863 billion in sales. So, there’s no doubt about it, the hospitality industry is cut-throat.
With so much competition around you, owning a restaurant is not for the faint of heart. This is probably one of the most common reasons most restaurant owners choose to sell when the time is right.
If you’re one such business owner, check out these selling tips before you put your restaurant on the market.
1. Know What Your Business Is Worth
As a business owner, there’s nothing worse than undervaluing or underpricing what you’ve spent many years building. Before you list your restaurant for sale, ensure you have a clear idea of what it’s really worth.
To add to this, potential buyers or investors will want a detailed breakdown of your financials because they need to know what they’re buying into, too.
Set aside enough time to gather all the necessary financial data you need so that your sales pitch is attractive to potential buyers/investors. They’ll want to see a steady influx of cash flow as well as high-quality sales. During this time you can also augment and streamline your sales and expenses to improve your cash flow.
It’s also a good idea to scope out what other restaurants are selling for in your area. Hire the expertise of an appraiser if you want to make extra sure that you sell your business for the right price.
2. Understand the Terms of Your Lease
Selling a business is not always as easy as finding the right buyer. You often have other responsibilities that need consideration, such as the terms of the space you are leasing.
If you do not own the restaurant building/space, you’re most likely leasing it from someone. Before you sell your business, you must ensure you aren’t breaching any lease terms.
Remember that your landlord could jeopardize the terms of a good sale if you are in breach of a lease agreement. If you’re unsure of all the legal particulars when it comes time to sell your company, it’s best to hire a lawyer who can explain your legal rights to you.
It’s in your best interest to speak to your landlord about your plans to sell the restaurant. They might be willing to let you out of your lease early, so it’s worth being open and honest.
3. Enlist the Expertise of a Business Broker
While you think you might have a good handle on the restaurant industry, no one understands trends like a restaurant business broker. These professionals specialize in selling and buying restaurants of all types and sizes, in different markets too.
A business broker can help you create the perfect marketing scheme in order to find the perfect buyer. They are specialists in their field and have a full grasp of the restaurant business, current trends, what buyers look for, and how to settle on the best deal.
If you have no idea where to start when trying to sell your restaurant, a business broker has you covered.
4. Sell Your Restaurant as a Commodity
How well is your restaurant doing? If it’s a thriving business with great staff, good customer turnover, intact furniture and fixtures, and up-to-date equipment, it’s a real commodity. And you should consider selling it as such.
In short, this means selling your business as a whole, an entire asset, rather than in parts. In general, most buyers find a thriving business that’s well established far more enticing than buying it in parts.
5. Consider Selling Off Your Liquor License
As a restaurant owner, you’re probably fully aware of just how valuable a liquor license is. In fact, it’s one of your most lucrative assets, depending on the location of your restaurant.
If you don’t plan on selling your business as a whole, you can begin by selling your liquor license to a willing buyer. Most of the time, you could receive a decent profit as liquor licenses are difficult to acquire so a potential buyer might be willing to pay.
Again, you can opt for the help of a broker to find you the right buyer.
6. Improve Your Restaurant’s Physical Condition
Selling a restaurant is much like selling a home — its ”sellability” hinges on what it looks like and its physical condition, especially from the outside. Curb appeal is not only important for homes, but for all street-side restaurants and businesses.
Before you list your business for sale, put some effort into upping your curb appeal, first. This might include a fresh coat of paint for the exterior, new paving, awning covers, light fixtures, tables, and chairs.
Always keep rubbish and other forms of refuse out of sight from your customers. The staging of the interior of your restaurant is also important. This is probably one of your key selling points.
You might need to consider replacing outdated furniture, the interior might need a repaint or updated tablecloths. Going that extra mile to improve the physical space of your restaurant can do wonders for how quickly it sells, and the profit you pocket.
Looking To Sell Your Restaurant Business?
The decision to sell your restaurant business is huge — that’s why you need the right guidance. With Fusion Business Services you have the expertise, support, and industry connections of one of the best business brokers in the St. Louis region.
We can put you in touch with legitimate business buyers willing to offer you the price and profit that you deserve after many years of hard work. Learn more about how we can help!
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How to Work With a Small Business Broker in St. Louis
There are plenty of reasons a small business owner in St. Louis would choose to sell their business.
The market may be in your favor, and you’re ready to make a profit by selling. It could be time to move on to the next thing or just time for you to end this professional chapter. Finding the right buyer can be difficult regardless of why you’re selling.
When you’re ready to sell, working with a small business broker is always a good idea. Having extra help from an expert who knows the ins and outs of the local market can be a huge help.
If you’re considering hiring a business broker, you’ll want to ensure you get the most out of your arrangement. Here’s what you need to know to have the best experience possible with your broker.
Understand How Payment Works
Every business broker handles payment in their own way.
Some require money to be paid upfront, others collect money once the sale has gone through, and some do a combination of the two or something new entirely. Regardless of how the broker handles getting their payment, ensure you understand payment terms before agreeing to work with them.
Most business owners expect brokers to take a small commission from the sale. The issues start to arise when they’re unclear about how much the broker plans on taking or when it’ll happen.
It isn’t unusual to see some brokers request anywhere from 8% to 15% in commission. In addition, some brokers charge monthly or progress fees on top of that commission.
Make sure that payment is discussed and understood early in the process. This way, everyone involved can avoid unpleasant surprises.
Come Prepared
When working with a business broker, there’s no such thing as giving them too much information. The more information you can provide the broker about your business, the easier job they’ll have finding the right buyer.
Take the time to prepare for your first few meetings by gathering all the documents and files they’ll need to sort through. Going as far back as possible can help give them insight into your business, but generally, a good rule of thumb is to have documents going back at least three years.
Bring documents around money like profit/loss statements, balance sheets, and information about cash flow. They’ll play a significant role in your business valuation. However, they’re far from the only helpful documents your broker will need.
Any paperwork you can bring that explains your business plan or executive summary can benefit your broker. It’ll teach them essential details about your business and could help them form their marketing plans and sales pitches.
Agreements with vendors, suppliers, and employees can also be beneficial. This can educate your broker on any legal obligations with employees and entities.
Be Prompt
Things move fast in the business world. The last thing you or your broker would want is to miss out on something because you didn’t notice a missed call or sent email.
Remember, you’re far from the only small business owner that wants to sell their company. You can have a lot of competition in your local market or industry, and they could snatch up your buyer if you aren’t careful.
Make it a point to check your phone and email throughout the day. Answer questions your broker may have as quickly as possible, and don’t be afraid to let them weigh in on some of your decisions.
Develop a Communication Cadence
Some business owners want weekly updates from their brokers to see how things are progressing. Others only want to hear from their broker when they think they’ve found the right buyer. Regardless of your choice, talk to your broker about how often you wish to communicate.
Both you and your broker are busy professionals. Coming up with a communication schedule is an easy way to ensure you get the information you need at the right time.
When thinking about how often you want to be in contact, also think about how you want to be contacted. For example, some people prefer to talk on the phone. Others only want things in writing and prefer texting or emails.
Have the Right Expectations
Brokers may be a great asset, but there are some things even the best brokers can’t do.
It can take time to sell a business, and as recession fears loom, it may take even longer. Your broker may be able to find a buyer, but they won’t be able to help you make thousands in profit if your business is underwater.
A lot of the tension that happens between brokers and business owners comes from having misaligned expectations. This is why both parties must be as open and honest as possible.
Be as upfront as possible with your broker. Talk to them about your expectations around how long it’ll take to find a buyer, the broker’s involvement, and how much you think you’ll get for the business.
This allows you to be transparent about what you want. The broker may change some expectations, but that can be good. You’ll want to work with someone realistic who also understands what you want.
Find the Right Small Business Broker for You
A broker is a must when you’re trying to sell your business. If you follow the tips in this post, you’ll be setting yourself up for success with your small business broker.
Are you ready to work with brokers that understand the right way to sell in St. Louis? We’re dedicated to helping you find the right buyer. Contact us today to discuss the best way to market and sell your business.
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Telling the Story of Your Business
Often selling a business comes down to storytelling. The buyer and seller are the main characters of the story that is being told. The seller is the one relaying the story, and the ideal buyer is the one who truly sees the future opportunity.
A Brokerage Professional Can Help Tell Your Story
The simple fact of the matter is that often even sellers don’t know what the true story of their business actually is. They tend to lack the proper perspective as they are too deeply involved. Sellers may be burnt out or have never really thought through the story of their business in the first place.
Business brokers and M&A advisors serve a great function as a third party who can look at the story from a different perspective. These professionals are numbers people, but it goes beyond that, as they can clearly see your business as a story to be told. And they can help you control that storyline for optimal results.
Embracing the Human Element
In order to tell the story of the business and why a buyer should want to buy it, it is necessary for your business broker or M&A advisor to truly understand your business. This is why good communication is so important. After the interview process, these professionals must precisely arrange all the relevant information in such a way that the buyer can digest it and see the potential within the business. Through that means, a prospective buyer can understand that value and envision him or herself as the hero.
It Goes Beyond the Financials
Business brokers and M&A advisors also help sellers determine the price and work as advisors on pricing. The story of the business does start with the financials and the facts. But this is only the beginning of the process. Brokerage professionals will want to interview you to learn how to weave together your story.
In the end, every story has a moral. It is important to pull all of these elements together to make an engaging story that will ultimately inspire and motivate a buyer to buy the business.
Storytelling Leads to Successful Deals
When buyers open their minds to the story being told, they are able to envision the future potential of the business and why it is going to be a valuable opportunity. At the end of the day, selling a business isn’t strictly about numbers, figures, facts, profit and loss margins, and other financial variables. Instead, it is also about the people.
Copyright: Business Brokerage Press, Inc.
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Is it Possible to Buy a Business Without Collateral?
When it comes to getting a loan, you can be certain that a bank will want collateral. This is true for both personal and business loans. Simply stated, if you have collateral, your bank won’t be concerned about being left empty handed if you can’t repay the loan. Many budding business owners are, in fact, held back by the fact that they lack the collateral needed to buy a business. However, the good news is that there are ways that one can buy a business with no collateral or very little collateral.
The Small Business Administration (SBA) is the first stop for those wanting to start a business with a low level of collateral. The SBA’s 7 (a) program provides banks with incentives to make loans to buyers. It is through this program that the SBA will provide guarantees for a whopping 75% of the loan amount. The borrower still has to have the remaining 25% of the loan amount. This means that on a $1 million dollar business, the borrower just has to come up with $250,000 and not the full $1 million dollars.
Through the SBA’s 7 (a) program it is possible for prospective business owners to consider businesses that would otherwise be completely out of their reach. Yet, there is a second excellent aspect to the program, namely that the cash that buyers use to meet the 25% requirement can come from an investor or a gift. Anyone looking to become a first time business owner will want to fully explore all that the SBA’s 7 (a) program has to offer.
A second route for those looking to buy their first business is seller financing. Seller financing is not rare, as many may suspect. This method of financing is actually quite common. If sellers are motivated, they are much more willing to consider seller financing. Keep in mind that there are many reasons why a seller may be motivated, such as retirement, unexpected personal problems, or just burnout. Seller financing and the SBA’s 7 (a) program could, in some situations, be used together. This combination could serve to greatly increase your chances of buying a business.
This is not to state that there are zero obstacles or limitations with the SBA’s 7 (a) program. For example, the program requires that sellers cannot receive any form of payment for a full two-year time period. There are ways to address this problem, but it is something that buyers and sellers alike should be ready to address.
A lack of collateral doesn’t have to mean the end of the dream of owning a business. If you are interested in owning your own business and lack collateral, meet with a consultant at S.C.O.R.E. and other experienced professionals, such as a business broker or M&A advisor. An experienced brokerage professional will have a wide-array of ideas for how to buy a business with little or limited collateral.
Copyright: Business Brokerage Press, Inc.
The post Is it Possible to Buy a Business Without Collateral? appeared first on Deal Studio – Automate, accelerate and elevate your deal making.
