Where do I start?
The best exit strategy is one that has unfolded over the course of years. It is never too early to begin an exit strategy. You should have had one on the day you signed your franchise agreement.
In addition, you should review your goals annually. Part of the review should focus on your exit timing. If you think now is the time to exit then you must honestly ask yourself how motivated you really are to sell. Like any big project, you will need to devote time, money and effort to do it properly.
Most small business owners, however, worry more about building their business than selling it and never plan their exit. Be assured, it’s never too late to develop a plan. After making the decision that now is the time to exit you need to accomplish three critical things before placing your business on the market.
First, you should discuss with your franchisor what your plans are. All franchise relationships eventually come to an end. You are not the first and won’t be the last franchisee to exit your system. You have used the franchise system, brand, and people to build your business. Don’t be afraid to use them to exit. They have a critical interest in a successful transition. Use them to help you close the deal.
Second, you need to gather documentation and clean up any inconsistencies, errors or omissions in your paperwork. The list is extensive and you can never have too much documentation. Buyers will take lack of documentation or documentation they have to fight to get as a sign of trouble and it will break down the trust between you. Not only will it potentially affect your value, it will cause unnecessary delays.
In a small business transaction the trust between the buyer and seller is critical. Without trust the deal will not happen. The way you can build trust is by having all the documents readily available for any buyer who is serious about making an offer. You need to tell a story to the buyer, and that story has to be validated by documentation.
Finally, you should see what if any financing will be available for a buyer. This should be done before you even list your business for sale. Talk to your business broker, attorney or accountant to get some recommendations on financing sources to pre‐qualify your business. Not only will this make it easier to sell the business, it will be a great reality check on your price. If the price can’t support financing, then maybe you shouldn’t sell until the business grows into the price you want.
Buyers of small businesses always have to make a leap of faith, similar to the leap you made when you got into the business. You need to convince the buyer why this transaction makes sense. If you are really ready to sell, have prepared a well organized and thorough package, and have pre‐qualified your business for financing, you will have a better chance of selling your business on your own terms.
Should I Use A Business Broker? How Long Does It Take To Sell?
View the entire Franchise Resale Bulletin to learn more.
About Spadea Lignana… (www.spadealaw.com)
The firm’s founding partners have decades of corporate franchising experience working as executives for some of the most respected brands in franchising. As a boutique law firm with a primary focus on transactions in franchising they have developed a focused niche and a loyal following of clients looking for attorneys to get deals done in an ever increasingly complex business environment.
Tom Spadea is an attorney with over 15 years of direct business experience. He has been a business & franchise broker, entrepreneur and senior franchising executive at Rita’s Water Ice, Saladworks and the Huntington Learning Centers. He is a hands on partner that negotiates franchisee retail leases, asset purchase agreements and has helped many entrepreneurs launch a new franchise system.
Nancy Lanard is an internationally known and respected attorney in the business and franchise worlds, starting as in-house counsel for three different international companies and then spending the last 20 years building a boutique law firm serving businesses, franchisees and franchisors all over the world.
Josh Lignana brings over 15 years of business experience, providing him with the valuable ability to understand the concerns of business people; a rare quality among attorneys. His practice focus is on the intellectual property issues in franchising and the complex regulatory and registration requirements for franchisors.
All of the associates at the firm have years of experience in franchising, and as a group have negotiated hundreds of franchisee resales and retail leases.