The hospitality industry is one filled with possibilities, one of them is starting a venue and building up its reputation so that you can sell it later on. On the other hand, this is just one of many reasons to sell the place. For instance, you may have been enchanted with the idea of running a restaurant but once you’ve actually tried it, you might have come to the conclusion that it’s not really to your liking. Then again, in order to be successful, your restaurant may require a hands-on approach, which is why, if you’re planning to relocate, selling the place would be the most sensible thing to do.
The problem with selling a business, regardless of the industry, lies in the fact that the buyer can often feel your desperation to sell. However, there are so many things that you can do in order to improve the resale value of the place or, at least, get decent leverage in order to get a higher price. For this, you might have to invest some work, hire professional help and, above all, figure out what is it that your buyers want. With that in mind and without ado, here’s a brief guide on how to get a higher price when selling your restaurant.
1. Prepare a financial profile
People who are looking to buy your venue are buying a business, a tool for generating a profit and, as such, they want to see that your business is profitable. Don’t get us wrong, even the businesses that aren’t doing that great will, eventually, get sold, however, the price will be all but ideal. This is due to the fact that the future buyer needs to actively invest in the place in order to make it profitable. So, what is the best way to appeal to them? Most experts agree that your safest bet is to create a decent financial profile.
For starters, you need to make a list of all your assets including your inventory, specialized equipment and even furniture. Next, you need to provide a detailed record of your income, as well as make a mention of your average overhead. This will help them from a managerial standpoint and give them a general idea of what they’re up against. Unfortunately, you might have also amassed some debt, over the course of years and, if that is so, you need to mention this to the buyer. Sure, the last one will make your business less appealing but it is something that you simply must do.
2. Carefully consider your asking price
One of the most important negotiation strategies is knowing how to properly set your asking price. First of all, you need to keep your offer as realistic as possible. Second, you need to go a bit above that. Why? Well, because the buyer will always try to bargain a bit and by refusing to budge, even for a bit, you’ll not only annoy them but also antagonize yourself. Even if your asking price is well below what the place is actually worth, chances are that the buyer will still try to haggle a bit. Why deny them the pleasure, especially when the psychological effects of a successful haggle go your way?
The next thing you need to understand is that setting a price that’s too high paints you in a negative light, as well. Why? Well, because it portrays you as someone who’s either oblivious of the worth of their own asset or oblivious of the state of the industry. Needless to say, this is the best-case scenario. The worst-case scenario depicts you as someone who assumes the buyer to have all these negative traits discussed just a minute ago. In this case, you’re someone who’s trying to trick them or exploit their lack of business prowess. All in all, setting the right price might just be more important than you can imagine.
3. Present the strengths
Every business has its strength and you need to learn how to discover yours in order to exploit it to your own benefit. For instance, your restaurant may have been down on its luck recently, however, the location of the venue might be quite formidable. Other than this, a strong online presence can also be considered a major plus. Keep in mind that a great online presence doesn’t necessarily translate into great sales, even though, more often than not, this is the case.
Another thing you need to take into consideration is the volume of guests in weeks preceding the sale. You see, the first thing that the potential buyer will want is to come over. When this happens, they’ll not just inspect the place but also try to make an estimate of how you’re doing. Having them over to an empty restaurant robs you of the majority of your leverage and puts you in quite an unfavorable situation. Instead, try making some special offers or launch a new marketing campaign in order to draw the crowd to your place. This way you’ll get a far better price than you could have hoped for.
4. Improve curb appeal
The thing that matters the most, when making the sale, is the first impression. Why? Well, because it has a strong impact on the emotional side of the buyer and helps create a desire that’s hard to shake off, later on. The thing is that in order to do so, you need to make an investment in the curb appeal of the place and there are several ways for you to do so.
First, you need to put some greenery out front in the form of some nice planters. Second, get yourself a nice welcome mat. Then, keep in mind that teams behind some restaurants go particularly wild with their signs. You could also take a different direction and add some more functionality to your restaurant’s exterior. For instance, you could consider installing commercial pergolas and patios in front of the restaurant. This way you’ll provide the place with a nice visual addition, as well as protect both the venue and your guests from a downpour.
5. Try to outcompete other sellers
One of the things about selling the place that you have to understand is the fact that not a lot of people sit on the fence of whether they should buy your restaurant or not. That is unless A) your offer is simply ridiculously in their favor or B) your restaurant is of the major strategic/cultural significance. More often than not, they’ve decided to buy a restaurant in a certain area, which means that they’ll have to make a choice between your place and several other places in the vicinity. For you, this means that all you have to do is outcompete these other offers.
To do so, you need to start with some investigative work. Find out a thing or two about these other restaurants. We’re talking about the square footage of the place, the price, the average revenue and similar other factors that will help you determine whether the offer is actually superior to yours. Once you have the idea of where you stand in this regard, you’ll be able to figure out how you can outcompete them. Sure, restructuring your business in order to get a better price is usually not worth your while but doing something extra to sweeten the pot a bit is a whole other thing.
6. State what you do actually own
Early on, we’ve mentioned the fact that you need to list all your assets in your financial statement. However, one additional thing that you should definitely do is make a list of all your work-related equipment and handle it from the perspective of lease. You see, some restaurants don’t necessarily buy their equipment but rather lease it. Misleading your buyer and tricking them into thinking that they’ll inherit your inventory is just one of the things that you should give your best to avoid.
On the other hand, the buyer can also keep your current lease, which would ensure a great deal of continuity in the restaurant business as a whole. Before this can actually take place, you need to take into consideration the expiration date and the lease extension options. Also, chances are that you don’t actually own the venue, which is why it’s paramount that you bring your landlord into the mix, as well. Overall, stating what you own and what the buyer can inherit is crucial in helping them make up their minds.
7. Hire a business broker
Previously, we’ve talked about attracting a buyer, however, if you’re really in the hurry, you need to consider getting a business broker. This is due to the fact that such a person probably has a buyer or two already, which is a far more proactive approach to selling your restaurant. Moreover, it is someone with previous experience in the field. Brokers also have their own network of contacts and advertising practices in order to promote your business. This way, they guarantee sales on the short term.
Keep in mind, nonetheless, that the broker charges for their services and their fee often goes between 10 and 25 percent. Still, you can always use this as a backup plan. You can start by trying to sell the place on your own and then opt for the services of the broker if things don’t work out as planned. This can be your own little contingency plan.
8. Paying for potential is a good idea
The most optimistic (some would even say outright delusional) amongst the buyers often expect people to pay for the potential of their business. The problem is that the word potential, in the vocabulary of your potential buyers, spells additional investments. Try looking at things from the perspective of the buyer. Sure, the potential is there but it’s up to them to fight to achieve it. It’s their job to invest in the restaurant and the marketing and it’s their job tap into the unused potential. If that is so, why would they be the ones paying this “privilege”? In other words, you’re selling the place as it is, not as it could be.
As you can see, the list of options goes on and on. Sure, some would expect us to mention a potential kitchen renovation but the chance is that such a massive investment wouldn’t really make up for the increase in the business resale value. In the end, it would result in a quicker sale but would definitely lose money. Instead, you need to look for more frugal ways of growing the value of your business and getting a much better deal. With that in mind and without further ado, any of the above-listed eight tips will do.
Bio: Patrick Adams is a freelance writer and rock-blues fan. When he is not writing about home improvement, he loves to play chess, watch basketball, and play his guitar. More than anything, he loves to spend his time in his garage, repairing appliances and creating stuff from wood.