Businesses are selling at record prices, buyer demand is growing, and sellers are in an ideal position to negotiate with the many entrepreneurs seeking business ownership. In this article, John Hatt, Managing Director of Business Partnership, explains why he believes now is a great time to sell your franchise.
Businesses are selling at record prices
According to BizBuySell’s Insight Report, business for sale transactions experienced steady growth in the first quarter of 2022, rising 24% over the previous year and just 3.7% shy of Q1 2019, long before COVID-19 shocked the market1. Median sale prices have also continued to sit at record levels, up 6% over the previous year to $345,0001. These statistics, which come from the USA, prove that not only is there a demand to sell, but buyers are willing to pay a premium for businesses that are performing well. We expect a similar movement to take place in the UK over the next couple of years.
The businesses that seem to be performing well when it comes to sales often share three common traits: they are in great locations, have well-trained and skilled employees and have great long-term growth potential. One sector in particular that has performed well is the service sector. Businesses in this sector have proved themselves to be recession and pandemic proof in recent years and are therefore the most sought-after among buyers. From healthcare and nursing facilities to gardening franchises, car washes and laundromats, these businesses, many of which are essential, offer steady streams of income and are less likely to be impacted by economic uncertainty.
Increased demand for business ownership
It is no secret that with the Great Resignation more individuals are choosing entrepreneurship over returning to the 9 to 5 job. According to PwC’s Global Workforce Hopes and Fears Survey 2022, one in five workers plan to quit their jobs in 20222 in the pursuit of higher salaries and more fulfilment in the workplace. So, it is easy to understand why the demand for existing businesses is expected to remain strong in 2022. With people looking to take on their own business ventures, franchises are in pole position to benefit from this work revolution as they get to run their own business and have the support and guidance from the franchisor. A privilege new business owners don’t have when starting an independent business.
Sellers still have the market advantage
Right now, 2022 has proven itself to be a seller’s market. Over the past two years, many business owners have chosen to wait to sell their businesses. In turn, this has created an imbalance in the market because buyer demand exceeds the supply of available businesses for sale. We can expect median sale prices to continue growing as buyers have to pay premium prices for these businesses. To conclude, 2022 could be the perfect time to act – as the effects of the pandemic fade and more people retire and exit their businesses, the market is expected to become more balanced.
How to maximise your sale price
To ensure you succeed in negotiating the sale of your franchise and get the very best deal, it is crucial to have all the necessary skills required to close your sale. Selling a business is a process that takes finesse and sensitivity, as well as grit.
First, I recommend you set out clear negotiating goals for selling your business to help you answer critical questions and guide your negotiations when selling. Then put together a negotiation strategy. By being proactive and planning a strategy, you will stay ahead of the curve. Make it clear you are willing to walk away from a deal and always try to lead the discussions. This way, you will be in the driver’s seat throughout the sales process.
It is also crucial to make sure you understand and know everything about your accounts. Prospective buyers usually request to see records of three years’ worth of trading, so even if it’s a while off selling, make sure your accountant can advise on how best to present statements. Items of interest could be increased profits, a consistent but varied client base, and regular revenue growth.
Finally, when it comes to selling your franchise business, believe in yourself! No one will want to buy your business if you are not passionate about it. Keep in mind all your business’s best assets and ask yourself what would be of interest to your prospective buyer. Do not doubt yourself and let the success of the business do the talking. By following these tips, you should have no problem selling in 2022. Good luck!
1BizBuySell, 2022, BizBuySell Insight Report
2PwC, 2022, Global Workforce Hopes and Fears Survey