Like with any goodbye, there are a range of emotions attached to selling your franchise. However, how you feel about selling your business depends on three things. The first is your reason for selling, the second is how well the sale goes, and the last reason depends on your personality. Whilst some people can cope with change and excited about leaving their franchise behind, others can find the process upsetting. Paul Dodgshon, Sales Director of national business broker, Business Partnership, gives hi insight on how to prepare yourself when selling a business.
The day has come to say goodbye to your franchise and start a new chapter in your life. For some it might be a day of sadness, but if you want a happy and profitable exit from the business’s day-to-day operations, there a few steps to take. As with anything in life, preparation is key and 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.
What is your ‘why’?
In my experience, the happiest departures happen when there are just as many compelling pull factors as push factors. 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 factor forcing you to step away from your franchise could be that you are reaching retirement age or you feel your business has reached its peak and you are getting bored. 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 most cases, there are a combination of factors that are either “pushing” you away from your franchise or “pulling” you to something else. 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.
Associate your exit with your ‘why’
Aligning your exit with why you are leaving is the best way to approach selling your franchise and reduce the emotional impact. Some of the most common exit types include 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 parting:
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.
The market has peaked. Here the best outcome would be to sell your business outright. This is the closest exit to the stereotypical sale where you sell 100% of your business to a third-party buyer and walk away.
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.
Name your price
Figure out the price you want for your franchise. 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.
My advice would always be to determine what the franchise is worth to you and partner this with an evaluation to understand what it might be worth to a third party. 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. However, when the market valuation and your personal valuation coincide, it may be time to consider an exit. Once you have considered all factors and have a number you would be happy to accept, then you are ready to sell your business.
Only you can know whether you are prepared to sell your business or not. Ensuring you have dotted the i’s and crossed the t’s is essential to an exit with no regrets. There are, however, a few questions you need to consider – 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?
1 According to The State of Owner Readiness Study 2013 conducted annually by the Exit Planning Institute