How to Sell Your Restaurant

There may come a time when you decide the right move is to sell the business. It may be because you want to trade up, or move to another area or even get into a different concept but whatever the reason planning ahead before putting your business on the market will substantially increase the value it will bring in a sale. These are things that a lot of business owners don't do but which end up hurting the price they can get for the business and most of them area easy fixes.

The biggest thing is to have adequate documentation of what the business is doing in terms of sales, expenses and net profits. Hopefully you've taken the advice offered earlier and decided to keep close track of everything and a careful eye on your numbers but if not now is the time to start doing it.

A restaurant is valued based on a multiple of the numbers it can prove, which means if you are keeping things off the books like some of your sales, your vendor payments or your payroll these figures are now unprovable and will mean the business will sell for less.

Even though doing this will cut down on some of the taxes you are going to pay (unless you get caught and then it really is going to hurt) but the added value in the sale is more than going to make up the difference. If you haven't been diligent up to now, try to start at least a year before you plan to sell as having less than a year's worth of accurate records still won't help as much. Buyers like to see independent proof of your sales such as sales tax records, bank statements, payroll records, vendor invoices and merchant account statements as well as tax returns so if you can make sure everything hits the books your value will reflect that.

The next thing is just to make the business look prosperous. This means giving the place a good cleaning, fixing anything that's broken, updating any fixtures or décor that's badly out of date and making sure the tables are always full. A lot of owners slack off on things like cleaning and marketing before they sell figuring this is going to be the new guys problem but that attitude just results in fewer offers and a lower price because these are the exact items buyers point out when justifying their lower offer.

The last thing that can really make a difference although it sounds simple is to create an operations manual that you can show the buyers. A buyer's biggest fear is that they will be overwhelmed and unable to run the business and make their money back. If you can make it look easy and show them it is already all laid out for them in an instruction book you will go a long way towards making them feel more comfortable and even willing to pay more to buy your place over others they may be considering.

You can also give them a copy of your restaurant business plan or even offer to help them create one of their own- anything to make them feel like they aren't going into the business blind.

You can sell it yourself if you feel comfortable handling the process but you will probably be better off using a qualified business broker. Not only will they be experienced in finding and working with buyers but they usually also can provide all the legal forms necessary so you can skip having to also hire an attorney unless the deal has unusual provisions or you aren't using industry standard business broker forms.

The typical bar takes six months to sell, restaurants even a bit longer so again plan ahead and be patient as the process can start to feel like a grind before you finally get the check.

As for deal terms, a lot of business sales involve an owner note, meaning you get part of the price up front and take payments for the rest. If you do this kind of deal, and many times there are no other choices if you want to get anywhere near a fair price, be sure you attach sufficient collateral to the note. More than likely, the actual assets of the business won't cover the note if the buyer defaults so try to get a lien on real estate or something else of value in addition to the business assets.

Sometimes sellers decide to sell because their lease is almost up but having no time left really puts the buyer in the driver's seat. They fell like they can just wait you out. If this is the case, go the landlord and see if you can negotiate another six or nine months and then a long option period such as two five year options. This will improve the value of the business without committing you to a long term lease you won't feel good about signing.

One thing to try and avoid is remaining on the lease for the entire remainder of the lease term if you do have a long time left. Having a long lease is an asset in the sale but at the same time you don't want to be at risk for owing lease payments if the buyer defaults.

Most landlords won't let you off immediately since it is in their interest to keep as many people attached as they can but you can often negotiate a limit such as a release after one year of payments by the buyer even if there are four years left on the lease. Doesn't hurt to ask and it may save you a bundle if the buyer turns out to not be a success.


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