Business

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! 

Are you a “Baby Boomer” Business Owner?

What is so special about “Baby Boomer” business owners?  Well, there are a lot of them.  It is estimated 52 percent of businesses are owned by people between 50 and 88 years of age. This equates to 9 million businesses in the United States. Put it another way, a business owner is turning 65 every 57 seconds.

So, why is this important?  Typical of most business owners, the value of their business amounts to 50 to 75 percent of their net worth (if not more); the remainder in personal real estate and financial investments. Ordinarily, the business owner has only one chance to monetize his or her largest asset through the sale of the business.

It is estimated that 11,000 people are turning 65 years old every day, with this trend continuing for the next 18 years. Being that many of these Baby Boomers are also business owners, one would suspect that every year for the next two decades more and more business owners will be wanting to sell their businesses to cash out and fund their retirements. These businesses amount to some $10 trillion worth of assets.

Yet while more and more businesses go up for sale, the audience of buyers is decreasing. Today, the highest segment of business buyers is the same Baby Boomers in the age range of 55 to 64 years old. The 80 million millennials in the U.S. make up a larger demographic, though their abilities to purchase these businesses are quite low.

Applying the law of supply and demand, there is going to be a growing inventory of businesses for sale each year, while the number of qualified buyers is decreasing each of those years. The law of supply and demand would suggest there will be pricing pressure on these businesses. In addition, overall only 1 out of 4 businesses actually sell after being put on the market; however, the success rate increases to 1 in 3 for businesses with sales of $10 million, and the sale success rate grows to 1 in 2 for businesses with sales greater than $10 million.

Now What?

The PriceWaterhouseCoopers accounting firm estimates more than 75 percent of business owners have done little planning for their single biggest financial asset. It is sad to say, but business owners spend more time planning their next vacation than planning for their exit into retirement.

Business owners should start the exit planning process today. Serious consideration should be given to creating a timeframe to place the business in the best position to be sold at the highest possible valuation.

Fortunately, the window of opportunity is quite good. Current conditions of rock bottom interest rates, low inflation, historically low capital gain taxes and overall high business valuations make this an ideal time to sell a business. In real estate it is all about “location, location, location,” whereas in business it is all about “timing, timing, timing.”  Now is the time to cash in.

Exit planning, however, is a process that requires a significant amount of work. Most important, business owners need to assemble a team of professional advisors to assist them in this process.  The team may consist of all or some of these professionals: a business intermediary firm, CPA/accountant, business attorney, financial planner, investment advisor, insurance advisor, valuation specialist, investment banker, banker and business consultant.

Using the analogy of an actual roadmap, this process can be broken down into five exits:

Exit 1:  Making the Decision to Sell
Exit 2:  Exit Planning Process
Exit 3:  Maximizing Business Value
Exit 4:  Preparing the Business for Sale
Exit 5:  The Deal Process

The actual Planning Process often includes the following seven steps:

1.  Identify Exit Objectives
2.  Quantify Business & Personal Financial Resources
3.  Maximize & Protect Business Value
4.  Ownership Transfer to Third Parties
5.  Ownership Transfer to Insiders
6.  Business Continuity
7.  Personal Wealth & Estate Planning

There is no time better than right now to start planning an exit, whether that is tomorrow, next month, next year or the next decade. Just be careful not to miss your EXIT…else you will hear your GPS (or significant other) say, “when possible turnaround” or as my GPS would say, “you idiot, you missed your exit…proceed on this road for another 20 miles.”

This article appeared in the November 2015 edition of Traverse City Business News.