Business owners can go through all kinds of emotions when selling up, but how you feel about exiting your business could all depend on three things. Firstly, your reason for selling, secondly, how well the sales process goes and, finally, your personality. Some people cope with change well or are excited about their plans for the future, but others can find the process unsettling or upsetting. In this article, Paul Dodgshon, Sales Director of Business Partnership, gives his advice on preparing yourself when selling a business.
So, you have built a fantastic franchise… now what? Regardless of what you envisage for your next chapter, there are key factors that will lead to a happy and lucrative exit from the business’s day-to-day operations. However, not preparing adequately for an exit can often lead to feelings of regret. In fact, 75% of owners who sold their businesses say just one year after exiting that they wished they had never sold it1. So, to avoid being part of this statistic, here are my three top tips on how you can prepare to sell your business and minimise the emotional impact.
1. Establish why you want to exit your franchise
In most cases, there are a combination of factors that are either “pushing” you away from your franchise or “pulling” you to something else. Push factors are legitimate reasons to exit your franchise, while pull factors are things you want to do after leaving the business.
Say you are a franchisor; an example of typical push factors forcing you to step away from your franchise could be that you are reaching retirement age, you feel your business has reached its peak and you are getting bored, you have health issues, or you just need a break and want to reduce your stress. Alternatively, things that attract you to leave your franchise could be that you could have more time with friends and family, or it could give you the opportunity to make a real difference in a new business.
In my experience, the happiest departures happen when there are just as many compelling pull factors as push factors. So, find five minutes and write out a list of all the elements that make you want to exit your business. Then make a list of all the things you are excited to do after leaving your franchise. This will help you make peace with exiting the business.
2. Align your exit with why you are leaving
Picture this – you sell your franchise for way over the asking price to a strategic buyer who you know will look after the business whilst you ride off into the sunset to begin a new venture. Now stop. Unfortunately, the ideal scenario does not always happen when exiting your business. So, aligning your exit with why you are leaving is the best way to approach selling your franchise and reducing the emotional impact. Some examples of the most common exit types can be selling a business outright, going into liquidation, transferring the business over to a family member, or going through a management buyout.
Here are a few examples of aligning your exit with why you are leaving. The first could be that you have a health issue and need to exit the business quickly. In this instance, the best exit strategies for you would be to sell outright; you could ask if one of your managers wants to buy you out or even transfer the business to one of your family members. Another example could be that you are looking to retire. Again, the best options for you would be to sell the franchise outright or pass it on to one of your family members. The truth is, there are several ways to exit the day-to-day operations of your franchise, and the smartest franchisees or franchisors will align their exit type with their reason for leaving, to reduce the emotional impact.
3. Figure out your number
If an existing franchise territory’s value was determined by the owner, it would most likely be priceless. However, the ultimate judge of your company’s value is the market itself. No matter how much you want for your company – or what you think you need – if the market says the business is not worth that, then you are out of luck.
So, as well as having your franchise evaluated to understand what it might be worth to a third party, there is another calculation you should make, which is to understand what the franchise is worth to you. My advice would always be that when the market valuation and your personal valuation coincide, it may be time to consider an exit. However, the price you are willing to accept could depend on why you are exiting the business. For example, if you are looking to retire, you will want to ensure you have enough investable assets to create the income stream you need to fund your retirement. If you have decided to exit your franchise because you are bored and want to move on to another project, you may want to sell your business quickly and would be willing to take a discount.
My advice is to work out why you are exiting the franchise and then estimate what you think the business is worth. Once you have considered all factors and have a number you would be happy to accept, then you are ready to sell your business.
So, when looking to exit your business, ensuring you have dotted the i’s and crossed the t’s is essential to an exit with no regrets. Be honest with yourself. Have you established how much your business is worth to you? Do you have a contingency plan in place for once you are out of the business? Are you mentally going to be able to detach yourself from the business? Have you considered how your employees will be treated when you exit your company? If you want an exit with no regrets, these are all important questions to consider. Of course, only you will know the answer to whether you are prepared to sell your business or not, but this advice will go a long way in helping you prepare.