The Best Time To Sell a Restaurant or Bar in Tucson
Posted on Thu, Jun 03, 2010
A respected colleague in the business brokerage industry in Prescott, Arizona, Brian Harron, is the original author of this helpful article about selling a restaurant or bar. Much of what Brian writes is applicable to the sale of any business. We hope you find this valuable.
When is the best time to sell a restaurant or bar? Another question that I get asked is when is the best time to list a restaurant or bar for sale? So here are ten answers to the questions.
#1 Before you absolutely have to. The best time to sell is when there is no sense of desperation due to economic circumstances, divorce, health or whatever. Whenever desperation is present, it seems to infect the process everywhere and creates an unbelievable buyer advantage or a situation where buyers just stay away.
#2 After you have sought professional advice. Smart Sellers confer with their attorney, their tax adviser and a professional business broker and perhaps a business appraiser before putting their business on the market. Tie up loose ends first, not last, get your legal and tax house in order and know the consequences of the sale first so that when the sale is done there are no unpleasant surprises and you get a deal that you can live with.
#3 Before a deadline. You do not want to be trying to sell when the lease is running out or when you thought you were going to retire. When you want to sell, you need to know that the average time length for a business sale can be six months or longer. Allow for it and let the process unfold normally.
#4 After you spruce the business up. This is all about fixing up your business both physically and fiscally. Paint, clean, replace. This is no different than selling a house. Then get to work on the money side of your business. Clean up your financial reports, report all sales. remove unnecessary expenses and maximize your Seller's Discretionary Earnings, the thing that most likely will have the greatest impact on the price that you can get for your business.
#5 When cash flow is strong. Don't know what Seller's Discretionary Cash Flow is? SDE has a formula but in short it is the amount of cash taht an owner has access to directly or indirectly. Profit counts but not as much as SDE because most small business owners do not like paying taxes. SDE gets at the ways owners can have cash and it is generally the number that gets capitalized to create the estimate of listing price. Better read the Blog on SDE to be sure that you realize it importance to brokers, bankers and appraisers and yes, seller's too.
#6 When general economic trends are rising. Right now, April of 2010, is an excellent time to list a business. The economy is improving as is the general level of optimism. When the economy is hot is also a great time to have a business on the market as buyers are willing to pay higher prices and there are more buyers to deal with.
#7 When it is a Seller's market. A wonderful time to sell is when there are more buyers than sellers and buyers get anxious to buy, sometimes becoming a little less demanding than what they might ordinarily be. Supply and demand is always in the favor of the seller when there is a small supply and a great demand.
#8 When you have ample time left on your lease. The length of time on your lease can be critical to your ability to sell your business. Your buyer needs time to get his investment back and then time to get a return on the investment. Anything less than three or four years will cause a very deep discount in your price. With an average life span for restaurant ownership of approximately five years, a five year lease with one or more renewal options can be very important to your sale strategy.
#9 When sales are steady or increasing. Strong sales are a very good indicator of a healthy business. Generally only bottom feeders are going to be interested in a business with significant reductions in sales. Start your sales plan two to three years ahead of the time that you list your business for sale and make increasing sales one of your biggest goals.
#10 When the business is no longer fun. Most entrepreneurs get into the restaurant business because it is fun and they love it. it is for many, a physically and emotionally demanding business. When it is no longer fun or when you can feel the burnout arriving, it is most likely time to sell - before your performance,. your attitude and the business deteriorates, making it harder to get the best price at the time you want it.
To read Brian Harron's original article on his blog, click here.
If you'd like more information on this subject, please contact us at 520-327-4454 or visit us at www.allenandyoung.com