3 Obstacles to Getting the Best Price for Your Franchise

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The best exit strategy is one that has unfolded over the course of years. It is never too early to begin an exit strategy. You should have had one on the day you signed your franchise agreement.

In addition, you should review your goals annually. Part of the review should focus on your exit timing. If you think now is the time to exit then you must honestly ask yourself how motivated you really are to sell. Like any big project, you will need to devote time, money and effort to do it properly.

Most small business owners, however, worry more about building their business than selling it and never plan their exit. Be assured, it's never too late to develop a plan.

After making the decision that now is the time to exit you need to accomplish three critical things before placing your business on the market.

1. Discuss Your Exits with Your Franchisor.

First, you should discuss with your franchisor what your plans are. All franchise relationships eventually come to an end. You are not the first and won't be the last franchisee to exit your system.

You have used the franchise system, brand, and people to build your business. Don't be afraid to use them to exit. They have a
critical interest in a successful transition. Use them to help you close the deal.

2. Gather your Documentation.

Second, you need to gather documentation and clean up any inconsistencies, errors or omissions in your paperwork. The list is extensive and you can never have too much documentation.

Buyers will take lack of documentation or documentation they have to fight to get as a sign of trouble and it will break down the trust between you. Not only will it potentially affect your value, it will cause unnecessary delays.

In a small business transaction the trust between the buyer and seller is critical. Without trust the deal will not happen. The way you can build trust is by having all the documents readily available for any buyer who is serious about making an offer.

You need to tell a story to the buyer, and that story has to be validated by documentation.

3. Look for Financing Options for the Buyer.

Finally, you should see what if any financing will be available for a buyer. This should be done before you even list your business for sale. Talk to your business broker, attorney or accountant to get some recommendations on financing sources to pre‐qualify your business.

Not only will this make it easier to sell the business, it will be a great reality check on your price. If the price can't support financing, then maybe you shouldn't sell until the business grows into the price you want.

Buyers of small businesses always have to make a leap of faith, similar to the leap you made when you got into the business. You need to convince the buyer why this transaction makes sense.

If you are really ready to sell, have prepared a well organized and thorough package, and have pre‐qualified your business for financing, you will have a better chance of selling your business on your own terms.

When you are ready to think about selling your franchise, connect with me on LinkedIn and give me a call.

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1 Comment

Finding out if your franchisor has a well thought out franchise resale program or process is a good thing to know.

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