IBA, as the premier business brokerage firm in the Pacific Northwest, is firmly established as a respected professional service firm in the legal, accounting, banking, mergers & acquisitions, real estate, and financial planning communities. Periodically, we will post guest blogs from professionals with knowledge to share for the good of owners of privately held companies & family owned businesses. The following blog article has been provided by Oliver Kotelnikov. Mr. Kotelnikov is the Director of the Hospitality Transaction Division at IBA (www.ibainc.com):
The Exponential Benefits of a Collaborative Approach to Selling a Hospitality Business
For many business owners, the company is their baby: “Meet my first-born child” is an introduction I hear often. Years, decades, and sometimes generations of blood sweat and tears can make the prospect of selling and letting it all go exciting and daunting at the same time. How much is the business worth? Will everyone find out it’s for sale? How will employees be impacted by the change of ownership? How will my customers and the community respond to the news of the sale? Where and how do I begin the process of selling my business? In my many years as a business and commercial real estate broker to the hospitality industry, I have learned that the most successful transitions at the helm share one common trait: The collaborative, aka win-win mindset. The idea that parties to a transaction are not adversaries and will work together towards a common goal may seem counterintuitive and require a shift in perspective. Yet this is exactly the strategy that builds legacies, and reliably produces mutually beneficial outcomes in the sale of family businesses and privately held companies.
Working with a Team
Early stage exit planning begins with larger questions: Why are you selling? What does the next chapter look like? It’s common for the equity in the business to be the retirement nest egg and represent a large portion of the family’s overall financial holdings. Working with a trusted team of advisors will assess the sale of the key asset in the context of a larger puzzle and ensure the transaction serves the future financial needs and goals of the seller. An experienced business broker can be retained to establish the fair market value of the business. A wealth advisor and/or estate planner will map the intelligent distribution of the estimated proceeds. A CPA will advise on tax mitigation strategies and the optimal price allocation of the assets. A contract attorney can provide input on whether a stock or an asset sale will best align with the recommendations of the CPA. Once listed for sale, the broker will incorporate the input of the advisors to deliver the optimal deal terms. The owners are experts at running their business. Recognizing that selling it for maximum market value and successfully transitioning to the next chapter of their life requires a very different skill set will make outsourcing the transaction to the experts a no brainer.
Joining Forces with the Successor
Once the buyer and seller agree on the principal terms of the deal, they begin to work together towards completing the sale and smoothly transitioning ownership. Close collaboration between the parties will be required to complete the due diligence of business records, secure financing, coordinate inspections, reassign the lease or transition the real estate, and transfer/obtain the licenses and permits legally required to operate the business.
Public Relations
Employees, trade partners, vendors, and customers are the heartbeat of the business. Preserving these relationships is the key to a smooth transition and the continued future success of the business. Any announcements related to the sale should be intentional, and a result of a thoughtfully planned out and closely coordinated effort between the parties. Effective messaging to deliver the news will: 1. Present a unified front. 2. Highlight the commitment to relationships and a successful transition. 3. Outline the next steps and keep the lines of communication open. The timing, format, tone, and the supporting narrative of the communication is often the deciding factor in winning hearts and minds of key partners in the business.
Crosscheck for Arrival
The last leg of the transaction is marked by preparations for closing. The parties will work with the escrow and/or title company to tie up loose ends and gather the necessary documentation for a timely closing. The seller may need to provide updated financials for the lender so the buyer can receive final approval of funding. The buyer may request photos or additional information on the facility to secure certificates of insurance or endorsements for liquor and health department licensing. The parties may need to come together for a joint inventory count to fine tune the value of stock included in the sale or work with vendors to transfer utility and merchant services accounts. Finally, the buyer and seller need to make it official by signing the closing paperwork and marking the occasion with a celebration.
If you have questions relating to the content of this article or the process associated with selling or buying a company in the hospitality industry, Oliver Kotelnikov would welcome the opportunity to talk with you. Mr. Kotelnikov can be reached at (425) 454-3052 or oliver@ibainc.com.
IBA, the Pacific Northwest’s premier business brokerage firm since 1975, is available as an information resource to the media, business brokerage, mergers & acquisitions, and real estate communities on subjects relevant to the purchase & sale of privately held companies and family owned businesses. IBA is recognized as one of the best business brokerage firms in the nation based on its long track record of successfully negotiating “win-win” business sale transactions in environments of full disclosure employing “best practices”.