Getting Top Dollar When Selling Your Franchise Business

EvanHackel.jpegWant to sell your business for top dollar? This article is here to help. Don’t want to sell your business yet? This article will help you be ready for the day you do sell.

Here is some good news for you. Franchises are worth more to buyers than other businesses are, for many reasons. Your franchisor offers a brand, established marketing programs, tested systems, and many other pluses.

Buyers realize that franchises have those advantages, but that doesn’t mean you can sit back and expect your franchise to sell itself. If you follow the advice in this article, you will sell it at a much higher price.

Selling Secret One: Follow the Franchise System

To sell at the highest price, you need to demonstrate that your business has succeeded because you followed the franchise rules. Why? Because if you have succeeded by following those rules, you increase the perception that the franchise is a good one. But if you’re ignoring the rules and doing things your own way, potential buyers will think, “This franchise isn’t worth too much.”

Another reason to follow the system is that as the seller, you will be expected to stay around for a certain period to show the new owner how to run the business. If you’ve been following the system, the franchise will give the buyer the tools to learn on his or her own, and your involvement can be shorter.

Selling Secret Two: Make Sure Your Business Is Spotless

Because buyers equate cleanliness to the quality of your management, you want your place looking great before you put it on the market. Make sure that it is freshly painted, that the sign out front is new or in excellent condition, that employee uniforms are new and spotless, just like everything else in the business. 

Selling your business is like selling a house. Most people want to buy one in beautiful, move-in condition. Other people want fixer-uppers, reasoning that they can improve their value by fixing them up. But those buyers are expecting to buy houses on the cheap. The same scenario holds true for businesses.

Selling Secret Three: Show that There Are Ways for the New Buyer to Grow the Business

You want to imply or openly state, “If I had more capital or more time, there are the things that I could do to make the business much better.”

Those things could include opening more locations nearby, expanding into an adjacent space, or hiring outside salespeople. Create a PowerPoint that tells the history of your franchise, explains how the business is run, and spells out ways to increase the business. Buyers will get excited by what they see.

Selling Secret Four: Have Perfectly Clean Financial Statements

As the business guru Michael Gerber once observed, it’s wise to run your business every day as though you are grooming it to be sold. Part of that means keeping excellent financial records and statements. Start doing so as early as you can. Clear, well prepared financial statements help buyers compare your business to others that are for sale, and speed the decision to buy.

Avoid the all-too-common practice of putting your personal expenses through your business. We have all seen owners who say that their car or boat is a business expense, when it really isn’t. That kind of activity lowers the perceived value of your business. It is also a red flag that you have been using your business to avoid paying taxes.

Selling Secret Five: Pick the Most Advantageous Way to Sell Your Franchise

Listing your business with a local business broker can work well, because he or she will sell it to someone is looking for a business in the local market. Such buyers can be willing to pay more for your business.

If your business is profitable enough, normally making at least $1 million a year, consider a private equity advisory firm, or sometime called an investment banker. They will help you achieve a higher price, and normally charge lower fees than a business broker.

Another option is to sell to another franchisee who already owns several units of your franchise. These buyers may be willing to pay more for your franchise, because by buying, they become bigger and all their units become more valuable.

Extra Consideration: Selling an Underperforming Franchise

I hate to close this article on a negative note, but what if you are selling a franchise that is not making much money? Does that mean you should resign yourself to selling it for a give-away price?

Not necessarily. Granted, your unit will not command as high a price as a very successful franchise will. But think of the valuable things that you do own because you own that franchise. The person who buys it might be able to avoid paying a franchise fee, avoid having to build up a physical location for a business, and avoid buying fixtures and equipment. All those things are worth money.

Evan Hackel, the creator of the Ingaged Leadership concept, is a recognized business and franchise expert and consultant. Evan is also a professional speaker and author. Evan is Principal and Founder of Ingage Consulting, headquartered in Woburn, Massachusetts. A leader in the field of training as well, Evan serves as CEO of Tortal Training, a Charlotte North Carolina-based firm that specializes in developing and implementing interactive training solutions for companies in all sectors. To learn more about Ingage Consulting and Evan’s book Ingaging Leadership, visit Ingage.net. Follow @ehackel.