Selling Your Restaurant — 6 Important Mindsets You Should Adopt
Want to sell your restaurant?
If you are like most owners the answer is a resounding YES. If not now, then certainly in the near future.
Sadly, most restaurants put up for sale never get sold.
To illustrate this fact consider the following: most business brokers operate on the assumption that they will need to list 5–6 businesses for sale in order to earn just one commission.
There is a thriving industry of attorneys, CPAs, brokers and M&A advisors who help owners sell their businesses.
Most of these professionals make a very nice living despite their industry’s low success rate.
Perhaps you have a great attorney, a brilliant accountant and the best consultants in town helping you. You may even have a restaurant broker who is great at his job. But none of these people have as much at stake as you do.
They each have many clients from whom they will collect their fees. Your team of professionals will be just fine whether you sell your restaurant or not. Regardless of how much help you have, it is your responsibility to take control for the selling process. It is you and you alone who has their financial security at stake.
The status quo within the business-for-sale world is this: the success rates are dismally low but the professionals that make their living within the field do just fine.
It is the business owners alone who suffer.
With these facts in mind, here are 6 mindsets I recommend you adopt to maximize your odds of success.
#1. The Best Buyer-Prospects Have The Most Options — You Will Have To Compete With Other Sellers For Their Money
Anyone who is qualified to buy your restaurant is qualified to buy lots of other restaurants too. You can be sure that buyers will consider many other opportunities besides yours.
And they will continually compare those other businesses to yours. Sure, they will tell you they are very interested and they like your business the best.
The more money, experience and motivation a buyer has, the more you can be sure your competition is targeting that buyer too. Those sellers are doing all they can to get a deal with that exception prospect. And that leads us to the next important concept.
#2. You Are The Person Who Is Responsible For Moving The Sale Along To The Next Step
Don’t wait for a buyer to follow up with you or initiate the next step in the process. Whenever you speak with a prospect always let them know what the next step is. Then set up a time to take that next step.
Never forget that one option buyers always have available is the option to do nothing. Not only are you competing with all the other businesses a buyer can choose from, you are competing with the status quo.
Earlier I mentioned that brokers average only one business sold for every 5 to 6 that they list. Well, the number of buyers they need is typically about twice that number.
The natural tendency is for people to maintain the status quo. To just keep doing what they have been doing.
Acquiring a new business is risky. Few people are in a situation where they have to buy a restaurant. But you must sell in order to retire or move on to your next venture, so you should be the aggressive one.
Whenever you share detailed information with a prospect give them some time to digest it. But not too much time. Send over the requested information and let them know you will followup with them in a day or two.
Setting the standard for quick followup sets the tone for the rest your interactions with that buyer. If you wait for buyers to take the next step or make the next contact you may be waiting a long time.
#3. Having One Buyer Is The Same As Having No Buyers
Even if you do everything right, your favorite prospect may choose to buy someone else’s business. You can never let your success depend on the decision of just one person. You can’t control or predict what that one person will do.
A mentor once told me that all great marketers expect their campaigns to fail — so they are always thinking about what to do next. If an idea or campaign doesn’t work they already have the next option in the works.
I suggest you take a similar approach. If you operate on the assumption that your best prospect won’t buy, you’ll always be cultivating new prospects.
And you never know — the next prospect you cultivate may be the one who winds up buying your restaurant.
#4. Nobody Will Pay You Today For The Benefits Of The Work They Are Going To Do In The Future
“A new owner could explode profits by adding new items to the menu and staying open throughout the dinner hour (we currently are open just for breakfast and lunch). Also, there are a number of marketing and advertising opportunities a new owner could capitalize on to take this business to a whole new level.”
Owners often value their business based on what the business could be…. potentially…. in the future.
It’s common for sellers to say of their company that “a new owner with fresh ideas and energy could come in here and blow the roof off the place!!!!”.
That may be true.
But someone will have to put in the work and invest the money to make that potential a reality. If you are convinced it will be easy to transform your restaurant into a profit-machine then hold on to it and make those changes yourself.
But you can’t price your restaurant today as if you have already realized that potential.
I am not saying the growth potential is not important.
Remember in Mind Set #1 we talked about how you are competing with all the other businesses that are for sale. Potential is one reason for a buyer to choose your business instead of all those other business he or she could invest in.
So do all you can to demonstrate the realistic upside. It will help distinguish you from the other businesses on the market. But don’t expect to get paid for the work the new owner is going to do to make that potential a reality.
#5. Cash Sales Are Rare …. And Cost The Seller A Lot Of Money
I know you would like to sell your business for cash. But if you want to sell sooner rather than later and put more money in your pocket, you should be prepared to finance part of the selling price.
According to BizBuySell.com over 80% of small businesses sales include some form of seller-financing. And among those sales that include seller financing, the eventual sales price averages 89% of the original asking price. But businesses that sell for cash bring in an average of only 69% of the original asking price.
Again, it all comes back to the fact that qualified buyers have options. They will compare your offer to all the others that they can choose from. It is hard to convince a buyer to pay the entire price in cash up front without a steep discount in that price.
I know this is not a popular position to take. In our 15 years in business we have consistently seen that about 70% of owners who list with us — at least initially — ask for all cash. We talked before about the ways that asking for all-cash shrinks the pool of potential prospects while also increasing the amount of competition
If you have your heart set on getting all your cash up front, fine. But if 6 months or more go by with no results you may need to adjust your expectations in order to make a deal happen.
#6. Keep The Sale A Secret For As Long As Possible
It can take a long time to sell a restaurant. 6 months to a year. If not longer. That is a lot of time for things to go wrong. Employees may become distracted and possibly start searching for a new job. And news of your sale could make suppliers less likely to extend terms.
Earlier I said you need to compete for buyers just like you compete for customers .
But that doesn’t mean you should market your business-for-sale like you market your food.
Increasingly I see people marketing their business with video. Just because the technology has become cheap and easy doesn’t mean using it is a good idea. When you include your company name, pictures and video in your advertising you are giving up any control you may have had over the selling process. Strangers will have the ability to show up at your place whenever they feel like it. And when they do show up they may talk to whomever they please, including your employees and customers.
When it comes to advertising your restaurant for sale, less is usually more. Give the public just enough information to peak their interests. Then prospects will be motivated to respond to your advertisements so they can learn more. From that point you can gather some basic information on the prospect and then decide if they are qualified to hear more.
What questions do you have about selling your restaurant?
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