Selling a restaurant business for a reasonable figure might at first glance appear to be something of a gamble.
But just like the process of buying a restaurant, negotiating a deal becomes a lot easier if you put some time and effort into the preparation.
Put another way, there are a number of things you can anticipate (and thus be prepared for) before they arise. So, with that in mind, here are a few things you should think about well before any sale negotiation takes place.
Business valuation
A solid business valuation will form the cornerstone of any later negotiations you conduct with an interested buyer. After all, your negotiating strength will just melt away if a potential purchaser is able to undermine the logic and rationale upon which your estimate of the value of your business is based.
Having a clear understanding of the value of your business is very important when it comes to negotiating the terms of the sale. So, obtaining a professional valuation from a respected valuer should be your first priority. Not only will a professional familiar with the restaurant trade be more likely to produce a reliable valuation, your valuer should also be able to give you vital detail which clarifies precisely where that inherent value actually lies. That information will prove invaluable during any sale negotiation.
Determine your bottom line
Once you know the true value of your restaurant business, you are in a position to set how low you would drop the price, if that were necessary. Unless you establish that figure in advance, without (of course) disclosing it to any would-be buyer, you are at a potential disadvantage if a smart buyer catches you off guard – for example, with a ‘take it or leave it’ ultimatum.
Provided you know your bottom line, you will have the confidence to refuse absurdly low offers. You may even have the confidence to close down negotiations and look for another buyer if it becomes clear no pricing agreement can be reached.
Accept that money could be only part of the deal
While selling a restaurant enterprise you have worked so hard to build is important, you may legitimately hope the deal brings you more than cash. For instance, one of your priorities may be that your present staff are kept on and treated well by the new owner. Or you may be keen to see the trading name of your business retained, even if the restaurant is sold to someone acquiring a chain of food-oriented businesses.
While such aspirations are understandable, any buyer may ask for price concessions to meet your ambition to influence the future in some way. Therefore, you must decide beforehand how much business value you might be prepared to forego to achieve your aims and close a deal.
Decide what you would be prepared to lose
Leading on from the previous point, you should look at any concessions and compromises you might be prepared to make to achieve a sale. Having such a plan in place will keep you one step ahead of your buyer. It will also make you appear more confident, and you can often use such confidence to help swing a negotiation your way.
For example, would you be prepared to retain some valuable equipment (to dispose of later) if it meant you could bring the sale price down to a level your buyer could afford? If you know that in advance, you may be able to clinch a deal. If not, a promising negotiation may fizzle out and you may lose a serious, if somewhat cash-limited, buyer.
Thoroughly research your buyer
You need to know a lot more about your buyer than the fact they are keen to purchase your restaurant business. Are you negotiating with someone who knows the food and catering business well, or a first-time entrepreneur with some dreams he/she wants to try? Is your buyer an individual or are they acting for a corporate chain wishing to acquire a new entity? And what motivates your buyer in the first place? Are they perhaps wanting to move into the restaurant sector? Or are they buying to grow large enough to compete at a new level in future?
These are important questions because the better you understand what the buyer really wants, the easier it will be for you to frame negotiations accordingly. For instance, knowing in advance what your buyer is looking for will enable you to tailor the USPs your restaurant offers to meet precisely those needs. And that means you could be more than halfway to securing a deal.
Jo Thornley is the head of brand and partnerships at Dynamis.
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