Benefit #2 – Have Better Systems in Place

Benefit #2 – Have Better Systems in Place

 

10 Benefits of Having an Exit Plan

 

Benefit #2 – Have Better Systems in Place

 

A big part of the sales process is about reducing the risk in the mind of the buyer. The perceived value of your business may be more affected by potential risk than you realise.

 

If you are planning on selling your business to a first time operator then business  systemisation as part of your exit plan is crucial. When selling to an experienced operator or strategic buyer then a well systemised business will help you to drive the value higher than these buyers will typically consider.

 

With a first time operator there is generally a lot of concern about whether or not they will be able to run the business. You may not see this at the start of the sales process but trust me, it kicks in at some point. Plenty of buyers get cold feet once the emotional feelings are replaced by logic and fear.

 

Working on putting strong systems in place is going to help you overcome this objection, ideally even before it becomes one. Having demonstrated systems in place is also going to help you to convince your landlord that the business can and will run without you.

 

I am sure you have seen posts in the group about landlords refusing assignments and deals falling over just when you think its all done. This happens a lot with first time operators, you need to prepare the business and the application for assignment thoroughly.

 

Exiting your business involves more than selling the fixtures, fittings and goodwill to your buyer, you also need to sell your buyer and their plans to your landlord. If the buyer has less experience than you then the landlord can legally (and often will) refuse to assign the lease.

 

By including details about the business systems in the application to assign the lease you are reducing the potential risk in the mind of the landlord (or agent).

 

Think about it commercially, this is a deal and deals need to work for both sides. Look at it from the landlord’s perspective, put yourself in their shoes and ask yourself what potential risks you would see if presented with your buyer as a tenant?

 

Demonstrating that the business is systemised and running with limited input from yourself is a big advantage. Presenting this alongside information about how the business handover, the training process in addition to the standard information required will significantly improve your chance of getting a positive response.

 

Strategic or experienced buyers generally don’t want to pay premium prices, the fact that they have the confidence and experience means that unless you have a stand out business they may not see the value.

 

In most cases these buyers are not looking to work in the business themselves, they will either want a bargain or something under management or at least well systemised, which one of these is your business?

 

If you present a buyer like this with a well prepared business opportunity then although they may try to drive the price down they will be able to see the value. Ultimately the value is going to be determined largely by the market. If you are able to confidently generate interest from multiple buyers then this will help you to push the price up with experienced and strategic buyers.

 

By having your business fully systemised and thoroughly prepared for sale you are going to be able to control the pace of the sale right from the start. Not feeling rushed will help you to negotiate in a more confident manner and you will sell on your terms.

 

In the short term this is also going to make your transition out of the business a lot smoother. The time that you will free up will help you to think clearly about your next move, something that is almost impossible to do properly when you are flat out.

 

If you don’t currently have any systems in place then don’t worry, you are not alone! In this position its easy feel overwhelmed at the thought of setting this up but I have found just trying to do something on this each week can make a huge difference.

 

I try to encourage the people I work with to set aside a small amount of time each week to push this forward. Broken down into small chunks this is much easier, it does not have to all be done at once and you will be amazed at how much better you feel just to be taking some action on this.

 

Simple documented procedures can make a big difference to staff as well as to you. Take onboarding new staff members as an example. How much easier would it be for you and for them if there was a system in place with checklists and guidance about different aspects of their new role?

 

I have always maintained that one of the biggest success factors in hospitality is being consistent. Do you have a system in place to clearly communicate how tasks should be carried out? Are all of your team doing the same thing? Do you team know what you expect of them?

 

There are very few areas of your business that can’t be systemised, which one causes you the most dramas? Think about how you can gradually systemise one area at a time and don’t fall into the trap of thinking that you have to do everything. Believe me, once you get this moving in the right direction the momentum will really build and the results can be literally life changing.

 

If you have never tried this then I hope this inspires you to at least give it a go. For a small investment of your time (and little or no cost) you can make a big impact not only in the value and saleability of your business but also to your own working and personal life.

 

As always feel free to post any questions, experiences or suggestions in the comments below.

 

Good luck and let me know how you get on.

Paul

 

Benefit #1 – Make More Profit 

Benefit #1 – Make More Profit 

 

10 Benefits of Having an Exit Plan

 

Benefit #1 – Make More Profit 

 

Having an exit plan for your business is not something that you should only think about when it is time to sell. Ideally you would have your exit planned before you start or buy the business.

 

Lets be honest, running a food business does not usually leave you with a great deal of free time. It is totally understandable that many hospitality owners don’t have a plan in place when it comes to exiting their business.

 

The thought of using any free time to work out an exit plan (usually something that you may have heard about but are not too sure what it includes) is a very easy thing to put off.

 

In my line of work I speak to people looking to sell their business almost every day, in most cases by the time I speak with them the decision to sell has already been made.

 

In many situations this decision has been forced by circumstances that they did not see coming or they are simply just over it and by their own admission they should have sold a while back, many have also been trying to sell without success.

 

Selling a business when you are in this position is difficult, time pressure is much more likely to force you into taking less for the business and you can easily walk away with tens of thousands less than you deserve. If you need to sell quickly then the process can seem to take twice as long and the whole situation becomes more stressful for all involved.

 

If that does not sound like the type of approach that you would like to take then making a small amount of time each week to work on your exit plan can make a huge difference as and when you decide to sell.

 

The good news is that having a solid exit plan in place will also give you a more profitable, easier to run business in the short term.

With a strong exit strategy in place the ideal situation is that you will have a business that is ready to sell at anytime but you have to question yourself as to why you would want to sell such a profitable business that is not causing you too many issues.

 

I have seen first hand both with my own business sales as well as those of clients just what a difference a good plan makes. Over the next few posts I am going to outline ten of the benefits of having an exit plan in place.

As you will see many of these benefits will kick in almost immediately and will make your business more valuable and saleable.

 

In this first post we are looking at the profitability of your business.

 

There are several factors that affect the value of your business, one of the main elements (that you have control over) is the profit that the business generates.

 

In many cases the value of your business is going to be calculated and considered by working out a multiple of the annual net profit generated for a working owner/operator.

 

With this in mind it stands to reason that the more profit the business makes then the more valuable it will be.

 

Knowing your numbers is crucial at any stage of the business cycle and if you do not already know your key metrics and margins then now is the time to make start, don’t put this off any longer!

 

This does not mean that you have to do all of the bookkeeping yourself and become a financial whizz but it does mean that you should be able to see how your busines is tracking and spot any potential issues before they are allowed to get out of control.

 

In this video you will see just what a difference two small changes can make to the value of your business.

 

Once you have identified the way that you are going to start tracking your numbers then it is crucial that you do this regularly. Typically I would suggest that you do this at least every two weeks, weekly if possible.

 

When you have identified the most important KPIs for your business and your goals then you should be tracking and monitoring the results consistently.

 

It always amazes me the impact that this simple process has with my coaching clients and those that do not know how to do this are always surprised at how simple it actually is.

 

This will take you no more than one hour per week and, as you saw in the video linked above this can add significant value to your business and make you a decent bit of extra profit in the meantime.

 

 

What you track is going to depend on your own particular situation but I would suggest that you look at the following as a starting point.

  • COGS %
  • Labour %
  • Gross Profit %
  • Net Profit %
  • Net Profit $
  • Sales vs Last Month
  • Sales vs Last Year

 

There are a lot of other metrics that you can add into this list but the trick is to make this quick and easy to do so that you keep doing it consistently, no excuses!

 

If you are not doing this already then give it a go for a couple of months, I can guarantee that if you are running the reports and recording the results yourself you are going to pay a lot more attention than somebody telling you what they are.

 

Own your P&L, weekly, monthly and quarterly results and record them.

 

Do this as a non negotiable and watch the numbers improve.

 

The example given in the video mentioned above puts $700 per week into your pocket, this is for a 2% reduction in labour and COGS. Even if you get half of that then that’s $350 for an hours work on this part of your Exit Plan. How does that compare with your current hourly rate?

 

I hope that if this is not something you are already doing that this post inspires you to at least try this for a short period of time.

 

I would love to hear how you get on, if you have any questions, comments or feedback feel free to post in the comments below.

Paul

 

P.S.

If you would like me to help you with an Exit Plan then check out The GSE Hub https://www.thegsehub.com.au/

 

For as little as $99 you can get access to all the tools, resources and support that you need to create your exit plan and whenever you are ready you can execute the sale of your business.

 

If you would like to discuss your options then feel free to book in a 1:1 chat about your business here https://calendly.com/paul-gse/appraisal_call

 

Business Brokers in Brisbane

Business Brokers in Brisbane

 

Andrea

I started my hospitality career in my early twenties in a very successful franchise café in London. Since then in every place I’ve worked I’ve always aimed to learn more and improve my career and understanding, firstly from the service side and later the management side.

 

I spent 4 years working in London, progressing from the café where I started to restaurants and bars, finally reaching the pinnacle of my career at that time managing a large cocktail bar in East London which was part of a very successful group of venues in the area and all over the United Kingdom.

 

After that experience and 4 very productive years in the UK I felt ready to open my own venue. I opened a seasonal restaurant on the west coast of Italy inside a well-known beach resort.

 

The season went great but what was even better (beside the fact of working 20 meters from the sea) was the different view that you have when you run your own place instead of working for someone, everything changes.

 

After finishing the season in Italy I decided to come to Australia with my wife to start a family and in 2012 I moved to Melbourne where I worked for the Lucas Group who own a number of venues in the city.

 

After two great years in Melbourne I moved to Sydney where I managed a restaurant in the city, owned a café in North Sydney and one on the Lower North Shore.

 

During the processes of buying and selling my own businesses I met various brokers and one of them was Paul Leach from GSE Business Consultants. Paul was the only one who inspired professionalism and took care of what he was doing.

 

After my experience in Sydney I decided to move to Brisbane with my family with one thing in mind and that was to get my agents licence and start helping café/restaurant owners to reach their objectives. There is so much good that can be added to this industry and most brokers miss the point, which is the relationship; the transparency, communication and  professionalism.

 

I found all of these qualities only in Paul and GSE business consultants so I am very happy to join his team and provide the best service, professionalism and respect that a buyer or  vendor deserves.

 

Sam Turkan

Growing up as a youngster I would spend most of my school holidays and weekends helping out at my parent’s café business.

 

Sacrificing my school holidays (usually not by choice) I would work and learn first hand about the general operations of a food business. I didn’t realise it so much at the time however I was gaining invaluable experience that would turn out to play a big role in my future endeavours.

 

Upon graduating from high school I pursued and successfully held roles in sales and account management based mainly around consumer electronics. After working for numerous years in the sales industry I was over the corporate gig and decided that it was time to pursue a role in the hospitality industry which I had a lot of passion for.

 

I took on a manager’s position at my parent’s café and hit the ground running. Due to outdated menus and possibly a slight lack of motivation from my ageing parents who worked for as long as I remember I was able to inject fresh new ideas, design and manage a small very overdue face lift and give the business a new marketing approach which all proved to be a success.

 

I would end up working with my parents for a period of 4 years during which I am grateful to have been able to learn about every aspect of the industry from them,  including leases, supplier contracts, system creation and integration, and my favourite, shopping suppliers for the most competitive pricing.

 

My parent’s semi-retired and I went on to purchase and operate Sylvan Beach Seafood Restaurant in Bribie Island.

 

The transformation of this business from when I first purchased it in February 2013 to when I sold in December 2018 is still a topic of conversation with the locals and our loyal customers still today. Implementing systems that would allow the store to trade efficiently from open till close and a huge focus on training staff to portray our culture and work ethics were key ingredients to the success of this business.

 

I live and breathe the industry and understand the blood, sweat, tears and sacrifices that need to be made to allow us owners to operate a successful business. We decided to sell the business as our second child was on the way and operating a shop with 15+ staff did not work in-line with family life.

 

After the sale was completed I took some much needed time off and during this time met Paul from GSE. Paul operates a Facebook page where he provides an invaluable amount of information including material documents to help owners with any issues they may be experiencing all free of charge. The page is also used by others to answer and help one another. Seeing that Paul was offering such a humble yet necessary service was a key driving factor in wanting to learn more about his approach to selling.

 

Integrity, honesty and pride in the service that is delivered by GSE puts hope back into listing your business with a hard working broker that gets results and knows the industry.

Business Broker in Canberra

Business Broker in Canberra

 

My name is Robert Illsley,  I am a licensed business broker in Canberra that specialises in the sale of Cafes

 

I am originally from Somerset in the South West of England and in 2000 I married a Wagga girl and moved to Australia in 2007. In 2014 I opened my own Café which I poured my heart and soul into and was able to establish it as one of the towns most prestigious and popular locations for coffee and food. When we decided to sell nearly 4 years later I realised how difficult it was to sell a business, although I felt that I was capable of handling the sale myself, I needed help. I wasn’t sure exactly how to evaluate my business, how to properly and discreetly market it and I found the process quite daunting.

 

After a number of bad experiences with agents I discovered GSE Business Consultants and it was at this point that I realised how valuable a good business broker can be, the right advice and preparation allowed me to properly prepare my business for market. After using the services of GSE I quickly found a potential buyer and found that I was in a competitive situation with another Café. Because of the way I was able to present my business the buyer felt more comfortable buying my business even though my competition had a bigger business with higher turnover.

 

I think that at this point a lightbulb went on in my head and I made the decision that I wanted to become a business broker myself. I approached the owner of GSE and thankfully he was looking to expand his business and when I sold Jardine’s I qualified as a business broker in NSW and the ACT and set up my own business operating as an affiliate of GSE Business consultants.

 

Put simply a good business broker can be the difference between selling your business and having it languish on the market, many brokers are happy to list a business without doing the necessary preparation and do not always increase your chance of selling in a timely manner. In my role as a business broker I intend to bring the same level of service, quality advice and ethical standard as when I owned my Café.

 

The difference between working with us at GSE compared with other brokers is clear; we only work with cafes, all the brokers at GSE have owned, operated and sold food businesses of our own and we understand the unique challenges that this industry faces. My regional knowledge as well as my background in hospitality means that I can help you to add significant value to your business during the sale process.

 

If you are considering an exit strategy then please get in touch with me as soon as possible on 0415 243750.

How to Apportion Goodwill, Fixtures and Fittings

How to Apportion Goodwill, Fixtures and Fittings

 

 

The split between goodwill fixtures and fittings is something that will be agreed as part of your sale negotiation, knowing your tax position and what will suit you best is going give you the best chance of getting the terms that you want.

If you have this figure worked out before you agree the sale then you can make sure that your solicitor adds this figure to the first draft of the contract.

In this video from our Six Steps to Sale Program I break down what the apportionment is and how to go about working out what yours should be.

 

 

How to Apportion Goodwill, Fixtures and Fittings

Video Transcript

Let’s talk about how to apportion Goodwill, Fixtures and Fittings when selling your cafe. Now, if this is a term you’re not familiar with, don’t worry. I’m going to go through and break down exactly what it is and what you need to do.

 

 

The apportionment of goodwill, fixtures and fittings is, basically, it’s a split between the value or the sale price of the business. It’s going to be broken into two parts, so, firstly, all the plant, fixtures and fittings, so that’s all of your kitchen equipment, all of the inventory, furniture and all that sort of thing, that forms one part of it and then, on the other side, it’s the goodwill that’s being applied to the business’ sale price.

 

 

It’s really good to be on the front foot with this and make sure that that you’ve taken some advice early on so that you know what your tax position is and what split your accountant suggests is going to benefit you most. It will always form part of the contract of sale, and it’s going to be the figure that’s used for tax purposes for you and for the purchaser. Its a really good idea as I mentioned just to make sure that you know what your tax position is and what your accountant suggests that you should do in regards to that split, so all you need to really worry about at this point is taking some advice, so talk to your accountant and make sure that you find out what they suggest about that split. It’s going to depend on your personal and business tax situation.

 

 

Now, normally speaking, when you’re the seller of the business, it’s going to be in your interest for that split to be higher on the goodwill side, and for the person purchasing, it’s usually better for them to have it higher on the fixtures and fittings so that they can then write down the depreciation at a higher level, so do take some advice on that. It’s not a one-thing-fits-all. It’s going to be very specific to your business and your personal tax situation, so make sure, as part of that, it’s on the checklist there for what you should discuss with your accountant, but make sure that that’s a figure that you’re aware of.

 

 

Make sure that when you do get to the contract stage of your sale that you’re going to advise your solicitor this early on, so it’s a great idea to put this into the first draft of the contract. Sometimes, this won’t even be questioned by the purchaser, so, as mentioned, good idea, be on the front foot, be proactive, make sure that you know what’s going to suit you best.

 

 

Having said that, you need to be prepared to negotiate. It is usually something that a savvy buyer with a good accountant and a good solicitor is going to probably pick up on what you’ve put in there and realise that that’s not to the best advantage of their client, the purchaser, so you may well need to negotiate on that, so be prepared to do that.

 

 

That’s a very brief look what the split between goodwill and fixtures and fittings is. It’s nothing that that you need to be too concerned about, but it’s something that you should be taking some professional advice on from your accountant just to make sure that you’re fully prepared and, when you do get to that stage, as I said, make sure that you communicate that split that you’re aiming for with your solicitor and get in the first draft of the contract early on. You may find there’s no negotiation about that at all and it’s accepted on your terms, which, obviously, for your tax purposes is going to be perfect.

 

 

Hopefully that all made sense. If you’ve got any questions, as always, get in touch in the usual channels, let me know. I’m more than happy to answer any queries you might have about this.

 

 

 

Do I Need To Pay GST When I Sell My Cafe?

Do I Need To Pay GST When I Sell My Cafe?

 

 

 

Do I need to pay GST when I sell my Cafe?

 

The question about whether or not GST is payable on the sale of a cafe is something that seems to confuse many people and, it is certainly something that you should look into before you sell.

 

The short answer to this question is no (providing that you meet certain criteria outlined by the ATO).

 

The term used commonly in this ruling is “supply of a going concern” simply put this means that the business is still trading.

 

The ATO make it quite clear that if the business is being sold as a going concern then there will be no GST payable on the transaction.

 

What determines if a business is being sold as a going concern?

 

In order for the business sale to be deemed as a going concern then you must make sure that:

 

  • The business continues to operate up until and including the date of supply (settlement)
  • All of the equipment required to continue the operation is supplied as part of the sale.

 

Most cafe sales will fall into this category. An example of an exception might be a sale of fixtures and fittings in a shop which is no longer trading.

 

If you are selling your cafe as an operational business then the sale will most likely be considered “a going concern”.

 

What else needs to be considered to ensure you don’t have to pay GST on your sale?

 

In addition to making sure you are selling as a going concern you will need to make sure that both you and the person buying the business have agreed that the the business is being sold as a going concern.

 

This is generally taken care of in the contract of sale, this is quite a standard clause in most contacts and looks something like this:

 

By you both signing this contract you will have effectively agreed that the sale is as “a going concern”

 

The buyer must also be registered for GST

 

Whoever is buying your business must also be registered for GST in order for the transaction to be GST exempt.

 

If you can meet all of the criteria above then your sale will likely not include GST.

 

Where can I get more info?

 

You can read more about the ATO guidelines here

https://www.ato.gov.au/General/ATO-advice-and-guidance/In-detail/Private-rulings/Supporting-documents/GST/Sale-of-a-business-as-a-going-concern/

 

Details about the tax ruling can be found here

 

http://law.ato.gov.au/atolaw/view.htm?docid=GST/GSTR20025/NAT/ATO/00001

 

Speak to your accountant and double check your personal situation and if you are still not sure then the ATO are very helpful in explaining this.

Contact the ATO directly on 13 28 61

 

I hope this helps make the understanding of GST on cafe sales a bit clearer, if you need any help or advice feel free to get in touch at any time.

How to Transfer a Liquor Licence NSW

How to Transfer a Liquor Licence NSW

 

 

Transferring your liquor license is not a lengthy or complicated process, the steps outlined below walk you through what you need to do.

 

 

Transfer of your liquor licence

 

You can transfer a liquor licence when you buy or sell a business. This allows the new business owner to trade under the existing licence.

Liquor & Gaming NSW allow a business to continue operating while it considers a licence transfer.  Provisional approval is usually given and the official confirmation of the transfer with follow later.

The licence transfer does not become effective until Liquor & Gaming NSW give provisional approval.

There are 4 ways you can transfer a licence but transferring with consent of the outgoing licensee is the most common.

Transfer your licence with consent of outgoing licensee

This is a straightforward process for both individuals and corporations.
Transferring a liquor licence this way takes two steps:

• provisional approval
• confirmation.

How to apply for provisional approval

You must give Liquor & Gaming NSW the following inforamtion:

• Evidence of Responsible Service of Alcohol (RSA) qualifications.

• If required, evidence of Responsible Conduct of Gambling (RCG) qualification.
(not relevant to cafes)

• If the liquor licence includes gaming machine entitlements, you will also need to provide a direct debit form and data monitoring forms to show there are no outstanding payments. (not relevant to cafes)

• A copy of your NSW National Police Certificate that is less than 3 months old.

• Corporate licensees must provide a current ASIC extract showing directors and officeholders. You can buy this document through the ASIC website

Liquor & Gaming NSW usually confirm your licence transfer within 60 days.

Fees

Please note that fees vary depending on the type of licence you want to transfer.

Online transfers

To complete the online form you will need to download and complete by clicking the button below, once you have filled it out you can submit it using the instructions on the form.

How to Transfer a Liquor Licence NSW
What to ask your solicitor when selling a cafe

What to ask your solicitor when selling a cafe

 

 

When talking to your solicitor about the sale of your one of the most important things to review is the current lease of the business.

 

In most cases we don’t tend to look at this document after we’ve bought the business but during the sale process it’s important to go through this again in detail at it can have a huge impact on the valuation and the ability to sell, I always suggest that my clients make the solicitors meeting one of the first in the process.

 

If you do find it there is an issue with the lease then this can take some time to sort out so its always better to get this checked out early on.

 

Key questions to ask.

 

A few of the key points to review with your solicitor during this meeting are

 

How much time is left on the current lease and do you feel that buyer’s will feel it is long enough in relation to the price that you’re asking for the business?

 

• If you’re not already sure check how often the rent is due to increase and how this is calculated. This is a commonly asked in the early stages it’s good to answer it in the initial marketing.

 

• What does the lease say about assignment?

This is the transfer of the lease from yourself to the person buying the business.

Most leases will state that all costs relating to the assignments to be paid by the lessee (you) and it’s a good ideas at this stage to make sure your solicitor pushes for you to only pay 50%.

 

By giving your solicitor the heads up about this early on you can make sure that this agreement to pay 50/50 is drawn into the contract of sale and its an easy way to save yourself a good chunk of money on legal fees.

I’ve always advised my clients to do this and it’s very rarely gets questioned by the purchaser’s solicitor but, it is important that you instruct your solicitor to do this it can be missed.

 

• How much are they going to charge you?

I’ve noticed that solicitors fees of my clients seem to vary greatly for very similar transaction.

It’s a good idea at this stage to get an indication of what the solicitor is going to charge you in relation to dealing with preparation of the contract of sale and helping deal with the assignment of the lease

 

Understanding what your legal fees are likely to be is important when you work out the sale proceeds you will be left with after all of your costs.

 

If you feel that their costs are too high don’t be afraid to question them or seek other quotes, a lawyer working for you on this does not necessarily have to have any history with you.

 

I work with a couple of lawyers in Sydney who specialise purely in business sale transactions so if you need a second opinion feel free to let me know and I’ll happily pass on their details.

 

Also, just so you know I don’t take any kickbacks or referral fees from anybody that I work with and I only recommend people who I know can genuinely help the people that I work with.

 

I hope this helps, feel free to get in touch if you have any questions about selling your café.

 

 

 

 

 

 

What to ask your solicitor when selling a cafe

How to Sell a Café – Financial Preparation

How to Sell a Café – Financial Preparation

How to Sell a Café – Financial Preparation

 

One of best things that you can do in order to prepare your café for sale is to have your financials prepared and ready to provide to qualified buyers.

 

Having your financials prepared basically means having up to date information that proves the amount of sales, expenses and profitability of the business.

 

When your financial information is prepared and ready to go it helps with the business sale in several different ways but, most importantly it will save you, the business owner a great amount of time.

 

In worst cases if this information is not properly prepared (and accurate) then it can cause a sale to stall and even fall through.

 

If you have worked hard to market and advertise your café and you have generated some interest you need to make sure you keep those people interested and give them very little reason to pull out or try and negotiate the price downwards.

 

Selling a cafe has a lot to do with reducing risk in the eyes of the buyer and if you do not have things like your financials in order the alarm bells will start ringing.
Many of the people that consider buying your café may not have any experience in the industry and may not be aware of how many café businesses operate (I think you know what I am talking about here).

 

Your job is to demonstrate the income that they can expect from the business and, if your BAS statements and financial accounts can’t prove this 100% then you need to think strategically.

 

One way that you can get around this is to use a tracking sheet in an application like Excel. This kind of spreadsheet can be completed in a matter of minutes each day and can be a very useful during the sale process.

 

How to Sell A Cafe - Financial Prearation

 

One of the key things to remember with this system is that you need to back up the information entered onto the spreadsheet. For example it’s no good just putting down that you took $1200 on the 14th of August unless you have kept a Z report or a POS record which verifies that.

 

The same applies with your invoices and staff payments, keep a separate record and make sure that everything matches with your spreadsheet.
I know what you are thinking and can almost hear the groans but trust me, spending a few minutes each day entering this information and filing the matching paperwork will pay dividends.

This simple system will help you to clearly demonstrate the value of your business and at the same time speed up the sale process by giving buyers less things to ask questions about.
The earlier you can start this the better, the more information that you can give to buyers like this the easier it’s going to be to get them over the line.

 

When to give out this information.

Naturally this information is very confidential and should not be shared with anyone unless you are confident that they are serious.

 

With my brokerage clients I take a goodwill deposit of 5% before this kind of information is shared. After this deposit is paid we grant the buyer a two week period of exclusivity where they can carry out their due diligence.

 

If you are selling on your own then you can still get a signed confidentiality agreement, (something that we cover in out Six Weeks to Sale program) which helps to ensure that any information provided is treated with confidentiality.

 

If you have any objection from somebody about signing a simple agreement like this then that is normally a sign that they are not a serious buyer.

 

When you get to the point that you consider sharing this information you will probably have had several interactions with the person interested and you should feel comfortable providing all the details required for them to confirm the figures you have quoted in the marketing of the business.

 

 

I hope this has given you a couple of ideas about how you can sell your café with more ease, it does not have to be a long or stressful process you just need to be prepared.

 

If you would like a copy of the spreadsheet I mentioned above just type “Spreadsheet” in the comments below and I will send you a copy.

Exit Planning For Cafe Owners - Lease Considerations

Exit Planning For Cafe Owners – Lease Considerations

 

 

 

The Sweet Spot – Timing the Sale of Your Business

 

This post marks the first in a new series discussing the ways in which you can add value to your cafe and maximise the return when you sell. This article discusses what an important part of the valuation process the lease is and, how it can affect how saleable your cafe is when you go to market.

 

 

All retail food businesses have a built-in clock. For some this clock sets the time frame for business growth and for others it is a ticking time-bomb. The realities of the retail food game are harsh. A profitable business on a poor lease, is a still a poor business. In this article, we explore the relationship between the length of the lease and the sale of your business.

 

There are two closely related moving parts. The first, is the impact your lease has on the value of your business and secondly, the sweet spot – when your business stands the best chance of achieving maximum sale price relative to the time left on the clock.

 

So we start with a simple reality.

A profitable business with a long lease can be sold for more than a profitable business with a short lease.

No two businesses are alike, so what value drivers are common to most successful business sales?

Answer: Profit and lease years remaining.

We will explore profitability later on in this series, here the focus is on lease years remaining, and more particularly the valuation multiples that apply to food businesses.

 

If you have come along to one of my workshops, or heard me talk at trade shows or industry events, you would know that establishing the correct profit (earnings) multiple for your business is crucial in planning the sale.

 

There are a host of value drivers and detractors that depend on the subjective circumstances of your business. The days, hours and intensity of operation, the relative skill (or not) required to produce menu items, the location and demographic are all examples of the factors you must carefully consider and balance.

 

Say, for example, having found that balance with your business advisors and accountants you arrive at a profit multiple of 2.6. That means you could expect a buyer to pay 2.6 years’ worth of profit for your business.

How many lease years need to be left on the clock to justify the buyer paying you 2.6 years of profit upfront ?

If you were buying would you pay 2.6 years of profit with 2, 4 or 6 years remaining ?

What if the landlord refuses to extend the lease ?

 

Take-Aways

This brings home the plain truth – you must plan to sell your business before you sign the lease. Opt for a lease with a baked-in exit strategy that coincides with sales growth, projected profitability and the multiple you need to make the risk worth it. Yes, you need to value your business before you build it.

Knowing the multiple means you can make strong decisions early, rejecting sites, offers and landlords that drive the multiple down. Remember apart from a bunch of second hand equipment, all you really have to sell is the opportunity to make profit from a site for a fixed number of years. The more years left on the clock, the higher the price.

 

© Peter Panagiotopoulos 2017 @cafelawyer

 

Exit Planning For Cafe Owners – Lease Considerations

 

 

Peter Panagiotopoulos of CRAFT Legal is a leading lease and business sale negotiator who has protected the rights of food and beverage retailers for over two decades.

 

Known within the industry as the cafelawyer®, Peter has personally choreographed the sale of hundreds of small businesses and has dedicated his legal career to giving businesses the tools and confidence to make the right business-building decisions.

 

 

Mobile              0414 257 298

 

Web                 www.craftlegal.com.au

 

Twitter              @cafelawyer https://twitter.com/cafelawyer

 

Blog                 https://cafelawyer.wordpress.com/