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Steps Necessary to Sell Your Restaurant in 2020 for a Premium Value

Steps Necessary to Sell Your Restaurant in 2020 for a Premium Value

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 specializes in the sale of hospitality businesses and is IBA’s representative in the Washington Hospitality Association ( https://wahospitality.org/).

Steps Necessary to Sell Your Restaurant in 2020 for a Premium Value

Mise en Place, or “Everything in its Place.”  The old French culinary maxim suggests that preparation and organization are the cornerstones of any successful kitchen. Indeed, the battle for a smooth dinner service is won or lost on preparation long before the guests arrive.  The level of overall organization in a restaurant positively or negatively impacts every aspect of the business, including the process of sale and transition of ownership.  When preparing your business for sale, implementing some low cost, high impact housekeeping measures in advance will go a long way toward, maximizing the value received at the time of sale and laying the groundwork for a smooth transition.

Organize Your Financial Records.

Assembling a complete set of updated financials will enable your broker to accomplish the following important objectives to successfully transition your business through the process of sale:

  1. Establish a fair market value price range for your business.
  2. Identify the correct buyer demographic and market the business effectively.
  3. Substantiate the assessed value with buyers, their advisory teams, and deliver the deal for maximum value and on the best terms.
  4. Secure financing for the transaction once buyer and seller have reached agreement.

Continuity and transparency of your financials are just as important as the profitability indicators.  While your federal returns may show an attractive profit, gaps in ancillary documentation can raise concerns in a buyers mind about potential trailing liabilities and disrupt an otherwise coherent financial narrative.  Missing quarterly tax and wage statements can speak to unpaid payroll taxes.  Unfiled combined excise tax returns can be an indication of unreported income and a potential tax lien in lieu of unpaid sales tax to the state.   Think of 36-48 months of past financial history as a book about your business that any buyer will want to read prior to acquiring your company.  Avoid missing pages and omitting important plot points.

Update Your Operational Manuals

If the financials provide a snapshot of profitability, your manuals represent a roadmap to get there.  Your business is your life and running it has become second nature.  It’s easy to forget the jitters of uncertainty you felt the first time you walked through the door.  Written manuals describing the operational infrastructure of your company form a window through which potential buyers can get a glimpse into how your business operates on a daily basis.  In the initial stages of evaluating an acquisition, commonly requested documents include the company policy, employee handbook, employee organizational chart, equipment list, and floor plan.  Update your recipe books to correlate with your current regular menu. Describe the processes and timelines associated with important seasonal events and menu items.  Buyers want to realistically assess their ability to run the existing model as well evaluate the potential for expansion.  Businesses with detailed written operational manuals routinely command increased buyer interest, sell in shorter time frames and for higher value, have an easier time securing financing, and enjoy a smoother transition at the helm.

Avoid Major Overhauls

Undertaking a remodel or making a significant investment into new equipment at or close to the time of transition will deliver a negative double whammy to the overall bottom line of the seller.

  1. Costs associated with large, infrastructural and leasehold improvements are fully recaptured only through increased profitability over time and long-term operation of the business. The soon to be retiring owner will not see a significant return on their investment over the relatively short time they left at the helm or be able to pass those costs along in full measure to the buyer at the time of sale.
  2. Revenue will be lost in the short term due to down time and decreased operational efficiency often accompanying such undertakings.

In contrast, improving your curb appeal by freshening up outside signage along with sandwich and menu boards are a practical, cost effective way to make a good first impression on potential buyers.  Think spring cleaning, not full-scale remodel.

Review Your Marketing Programs

Buyers will often begin their assessment of the business in the same fashion that customer do.  By reviewing the company’s online profile.

  1. Update Your Website.

In the digital age, your website is your business card.  Buyers will assess the effectiveness of your website in maintaining rapport with the existing customer base and generating new business.  Your webpage should be functional, informative, easy to navigate, and optimized for mobile devices.

  1. Monitor Reviews

Buyers will evaluate your online ratings and reviews as a proxy of the business’ reputation and goodwill with its customer base.  Over time, being responsive, working with dissatisfied customers to make up for mistakes, and removing any inaccuracies can significantly improve the company’s online image that your buyers will encounter.

  1. Assemble Your Highlight Reel

Curating the large amounts of data available to the public about your business will help you to not only address any negative aspects or inaccuracies, but also to highlight your achievements and solidify your image and identity in the minds of customers and potential buyers.  Put together a collection of awards, glowing reviews, and accolades received by your business as a reflection of the company’s goodwill and reputation with its customer base and community.

If you have questions relating to the content of this article, the process associated with preparing a business for sale, or selling a restaurant or hospitality business 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”.

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