Owning a franchise is one of the most common business models. There are advantages to being a franchisee including the proven operations strategies and the ready-made reputation and branding. Of course, there are considerations including the rules and restrictions you have to adhere to as a franchise owner.
But what if you want to sell your franchise business? As was the case when you originally purchased the franchise, your franchisor wants to know a new buyer will be able to run the business as you did.
If you’re considering selling your franchise, you’ll have to read over your agreement to determine first, if this is an option and second what you’re required to do in the process. For example, you may have to settle all your business debts before you sell your business. The franchisor is also going to have the ultimate approval.
If you’ve read the fine print and determined your next step is selling your business, how can you get the most value for it?
Here Are 7 Ways to Sell Your Franchise for Maximum Value
- Create Contracts Whenever Possible
If you’re going to sell a business of any kind, franchise or otherwise, you want potential buyers to see not only its present value but also future value. As part of this, to get the most money out of the sale of your business, create contracts whenever possible. This includes contracts with suppliers, customers, and employees. This will give a possible buyer more peace of mind that the business will continue to be successful after you leave. For example, keep key employees on with agreements.
- Ensure Your Accounting Books Are Ready
You should start organizing your important financial documents and make sure your books are in order well before you actually list your franchise. You want to have an understanding and also be able to demonstrate your franchises’ performance for the last several years. This will also allow you to spot red flags in advance.
- Value Your Business Correctly
This Home-Based Franchise Business
Includes 6 Different Profit Centers
Valuing and pricing your business correctly is essential. If you go too low, you’re not getting the most value out of it, even if you sell it quickly. If you go too high, however, you may not find a buyer at all. A good step is getting an appraisal before listing your franchise. Not only will this give you an appropriate baseline to value it, but it will be easier for a buyer to get financing if necessary.
Some of the documents you’ll need as part of the valuation process include income and cash flow statements, your balance sheet, and a statement showing your cash flow as the owner.
- Be Proactive
Sometimes business owners will make the mistake of waiting until there’s trouble or problems to think about selling. It’s much better to be proactive and sell when you’re at a high point if you want to maximize the sale price.
Also be aware that while you have your business on the market, you should keep focusing on operations. Some owners will put a business on the market and focus on that while neglecting the other areas of the business. That’s ultimately detrimental to a potential deal.
If there are any possible problems currently or forecasted issues, be proactive with how you address those as well because they can quickly turn into deal breakers.
The longer your business sits on the market, the less value it’s likely to bring during a sale, so being proactive can help you find a buyer and make the sale happen more quickly.
- Involve Your Franchisor Early On
There are some reasons you might not want to involve your franchisor early on if you’re planning on selling. Namely, it can turn into a race to see who can find a buyer first, and if it’s the franchisor, they’re going to charge a fee.
However, a franchisor can be a valuable resource to connect you with potential buyers that already have an interest in buying your business. It’s also important to let them know early on because they do have the final say. If they feel like they’re out of the loop, it could be an incentive to prevent a deal from going through.
- Reach Out to An Existing Manager or Employee About Buying the Business
If you want to skip the broker or finder fees to franchisors, you can identify existing employees who could be a good fit to purchase your business and already have a working knowledge. Since this helps you avoid potential fees, you’ll make more off the sale if you’re able to go this route.
- Use a Broker If Necessary
You may be hesitant to use a broker because of the fees. However, this can be the best way to find qualified buyers if you’re not able to tap into your network. A broker will market more aggressively, which may ultimately be worth the fees. You do have the option to market your business on a website, but this reduces your confidentiality.
If you want to sell your franchise for its maximum value, be proactive in your timing, your approach and how you work with your franchisor. Not only will you have the opportunity to sell your business for more, but you’re also likely to experience fewer hurdles along the way that could be deal killers. I hope the 7 ways I shared above will help you make a lot of money!
(About the Author: Marla DiCarlo is an accomplished business consultant with more than 28 years of professional accounting experience. As co-owner and CEO of Raincatcher, she helps business owners sell their business to get paid the maximum value for their business.
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