BUSINESS BIRTHS, BOOMS, BUSTS, AND RECYCLED NEW BEGINNINGS

With the shut-down, many business owners are going to be at night wondering if this is it. Is it time to get out? If you are thinking about selling your business, there are things you can do right away to maximize your sale price. If you simply close the doors, you may be left with significant losses and lawsuits from landlords and creditors. Selling a distressed business may not get you as much as you want, but it can relieve you from the burden of lease obligations and clear some or all of the business-related debt load.  

When the restaurant is closed down, it is an ideal time to do a deep cleaning and take pictures. Stage the interior to show it in its best light. Pictures and video tours can create online interest from window shoppers. People who may have been “on the fence” can be persuaded to take a deeper look with great imagery. A few hundred dollars in professional quality video tours can result in tens of thousands of dollars in increased sale price. If the business has a liquor license, take an hour to prepare interior diagrams and block plot diagrams. Take photos and have them available for the buyer to expedite the application process. 

You also have the opportunity to take a detailed inventory of the business assets. The better the inventory, the more value a prospective buyer can see and validate. These can be especially important to lenders. Take the opportunity to capture the inventory in photos and video as well.

Use the time to make minor repairs that have gone unattended because of lack of time. Consider having inspections done. You will know of any issues and have them corrected ahead of time. But more importantly, you can command a higher price and faster closing when the inspection records are readily available to purchaser. The offer won’t need to be discounted for such risks and contingencies and the closing won’t need to be delayed for inspections to be scheduled and completed. A small investment can reap big results at the end of the day.

When selling your business, you will want to have a solid historical financial history to show the buyer. You will want to ensure that the buyer (including the lawyers, accountants and lenders) take a comprehensive look at the business over at least a 3 year period rather than focus on only current year cash flow. To present your business in the proper light, you will have to blend pre-recession and recession level sales and net profit margins. There are several standard formulas available to help determine a company’s value. Sales are only one piece of the puzzle.  Other parts are profit margins, FFE, financial strength, operations, real property and staff.

It is critical to have your financial records in order. Get your taxes filed and your P&L’s up to date. Make copies of critical records that will be required for the due diligence process. Due diligence is often where the deal fizzles out. Be ready to show you are ready for an immediate sale and transition. 

Partner with an experienced broker who can provide a market valuation and prepare a sales prospectus to market the opportunity to potential buyers. Also, partner with an experienced business attorney to facilitate the sale process. You may hire an attorney to represent your individual interests throughout the sale process, or if the transaction is fairly standard, both buyer and seller can opt to use settlement attorney services instead. The settlement attorney will be a neutral third party who transfers title, removes liens and can even do private financing agreements such as seller financing. In the rare situation where a dispute unexpectedly arises, the parties can bring in a separate attorney to negotiate in their respective interests. This is less common in New York than in other states, but at least one local firm offers these settlement services.

For those who take action quickly and get the business for sale before the business is beyond saving due to extraordinary debt accrual, the transition from entrepreneur to employee, consultant or retiree can be a good transition. Change is scary, but it doesn’t have to be bad if you are proactive.