As entrepreneurs, it's not uncommon to have a touch of shiny object syndrome, always seeking the next exciting project to tackle. However, there may come a time when you consider selling your business(es). In this article extracted from the most recent episode of The Infinite Franchisee Show Podcast with Host April Porter we delve into some reasons why franchisees might choose to sell, priorities you need to focus on, and how to navigate the process of selling a business successfully. Let's explore the three essential steps franchisees should consider when deciding to sell their businesses.
Get a Professional Valuation of Your Business
Before listing a business for sale, the first step is to obtain a professional valuation. This process provides crucial information about the business's value and helps determine the appropriate listing price. One can approach this in two ways: engaging a business broker or utilizing specialized valuation firms that banks often pay for, especially if the buyer plans to secure an SBA loan.
The valuation will reveal the business's earning potential, known as EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization), and the multiplier that can be applied to determine the listing price. If the valuation results in an unsatisfactory price, franchisees have two options: clean up their books to uncover additional EBITDA or focus on growing the business before listing it. By understanding the true value of the business, franchisees can make informed decisions and take appropriate action to achieve their desired selling price.
Stay Motivated and Continue Growing Your Business
One of the biggest challenges when selling a business is maintaining motivation and focus on growth during the sales process. It's natural for entrepreneurs to mentally check out once the business is listed for sale, but this can be detrimental to the business's performance. Franchisees must resist the temptation to shift focus onto new projects and neglect the existing business.
To combat this, setting a purchase price above the current valuation can serve as a motivator. By striving to achieve a higher selling price, franchisees can set new revenue goals and implement strategies to drive growth while waiting for a buyer. Maintaining the business's upward trajectory not only maximizes its value but also ensures a smoother transition to new ownership.
Become Educated and Work with a Broker
Franchisees may hesitate to engage a broker due to the fees involved. However, speaking with brokers can be a valuable step in the selling process. Brokers possess extensive networks and experience in connecting sellers with potential buyers. Although their fees may seem steep, the benefits they bring in terms of finding buyers quickly and handling the intricate sales process can outweigh the costs.
To make an informed decision, franchisees should speak with at least three brokers, gaining insights into the selling process and assessing which broker aligns best with their goals. Brokers' networks are filled with potential buyers actively seeking businesses to acquire, increasing the likelihood of a timely sale. Selling a business independently might save on fees but can significantly prolong the process, potentially reducing the final sale price and exposing the business to unnecessary risks.
Selling a business is a significant decision for any business owner, and careful consideration of the process is crucial. Understanding the business's true value through professional valuation, staying motivated and focused on growth during the sales process, and seeking education and support from brokers are key priorities when deciding to sell.
By keeping in mind these essential steps, you can ensure a smoother and more successful transition while maximizing the value of your businesses. Remember, it's vital to start the selling process early, approximately three to six months before listing the business for sale, to give ample time for preparation and finding the right buyer.
As entrepreneurs, the journey towards infinite success is filled with both challenges and opportunities. Embracing these steps can help you achieve the SWAGTM of Sanity, Wealth, and GratitudeTM you desire, both in your business and in your life. Stay tuned for more insightful business strategies on the Infinite Franchisee Show, and don't forget to share this blog with fellow entrepreneurs who can benefit from the knowledge shared here. Together, we can continue to build successful and thriving businesses in the franchising industry.