We sold our restaurants this week.
My dad finally gets to take a little break—not sure he’ll ever retire 🤣.
We were on pace to have our best year ever for cash flow in 2021, and if there’s one thing I learned during my time with a small private equity firm, it’s that you want to exit while things are trending up, not down.
So we started the process. Now, almost exactly three years later, it finally happened.
Here are a few things I’ve learned in case you’re thinking about selling a restaurant.
1. List It Before You’re Ready
At the end of 2021, I was still in touch with some friends at the private equity group. The market was hot, and the broker we were referred to confirmed this.
However, the broker required a “skin in the game” fee. We had to use one of their providers to get an independent valuation done for $5,000. Was it worth it? Probably not. But it looked nice, and we decided to play by their rules.
I work fast, so waiting on others drives me crazy. We started talking to the broker in October, but by the time we got our business listed, it was almost February. And guess what happened? The market came to a screeching halt. The Fed started raising interest rates, inflation went crazy, and buyers became cautious.
Lesson #1: The market plays a big factor in your success. List your business 2-3 years before you actually think you want to sell.
2. Learn How to Write Copy
This is the second business I’ve sold in the last two months. Both sold through my own listings on BizBuySell.
In September, I sold a small publishing business I’d bought four years ago. After two years with the broker only bringing us one serious conversation that went nowhere, I took control and created a listing for the restaurants myself at the end of 2023.
BizBuySell is the largest listing site for businesses for sale, so your listing needs to stand out. That’s where my copywriting skills came into play. It’s not about clickbait titles like “Highly Profitable X Business” that’s making $60K a year. It’s about appealing to smart buyers who want a well-run business.
Each time I had a conversation with a buyer, I edited the listing based on their feedback and questions. Something I know the broker wasn’t doing. Within three months, we had an LOI.
Ultimately, the first two LOIs fell through, but by June, the third one led to a successful sale.
Lesson #2: Your listing needs to paint a picture of the benefits a future owner will receive, not just the features of your business.
3. Remove Yourself from Operations
In 2016, I read The 4-Hour Workweek by Tim Ferriss. While the idea of passive income is oversimplified, it started me on the path of delegating responsibilities.
I passed off tasks one by one until I only needed to spend 2-4 hours a month in my role. I hired a dedicated catering salesperson, someone to run catering operations, and an offshore bookkeeper who also handled marketing tasks. This freed up my time, allowing me to buy another business and explore other ventures (like this one).
Most importantly, it allowed us to add my entire salary back when calculating cash flow for the sale.
Lesson #3: Smart buyers won’t give you credit for your salary if you’re working 40-60 hours a week in the business. Remove yourself as much as possible.
4. Know Your Numbers
When I inquire about a business on BizBuySell, 9 out of 10 times, I only get one year of financials. Brokers.
When people signed NDAs for our restaurant, I sent the last two complete years and YTD for the current year. This builds trust and shows you’re serious.
Sure, I have my CPA license, so it was easier for me to prepare this, but you can have your CPA do it too.
Lesson #4: Have your financials and tax returns ready and buttoned up to help speed up the process.
5. Question the Value of a Broker
I’ve mentioned some frustrations with brokers. No one knows your business better than you do, so you’re likely the most qualified to sell it.
The ONLY reason to use a broker is if they have a large list of potential buyers and can sell your business without listing it publicly. Otherwise, listing on BizBuySell costs about $100/month, which is much cheaper than a 10% commission.
Lesson #5: Try not to rely on other people. Take control of the process where you can.
6. Don’t Be Too Conservative
We were nervous about staff finding out, so our broker didn’t list the business in Gainesville—just “North Florida.” We also avoided describing the business too specifically, which probably didn’t help.
However, we were in a good place. Making more money than we ever had.
My dad only worked a few hours each day.
I was spending most of my time on other ventures.
We didn’t want to risk losing any key managers/employees to disrupt that.
Additionally, we started with a high asking price based on the broker’s encouragement. The valuation suggested 3.6x cash flow, but I knew the average multiple for restaurants was closer to 2.23x. We ended up selling at 2.5x. In hindsight, listing at 2.8-3x and being more open might have brought better results faster.
But I wouldn’t have learned all of these lessons along the way.
Lesson #6: Combine the previous five lessons, and don’t be overly worried about your listing or staff finding out.
Post-Sale Reflections
We have 60 days of training obligations, but I don’t expect it to take that long. Almost all employees have been supportive. A few cried, some are nervous, but most were happy for us.
The conversation with our GM, who had a 5% stake, went better than expected. The buyers are keeping him on, so he’ll get a nice bonus and doesn’t have to look for a new job.
I hope these lessons are helpful for anyone considering an exit. If you want me to elaborate or have questions, I’m happy to answer.
That’s it for now.
P.S. Hope you’re promoting your holiday specials to your list by now!
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