Positioning Your Franchise Resale
Posted on 1st July 2021 at 12:23
The standard test of honesty in the UK used to be “Would you buy a second-hand car from this salesperson?” - and it’s just as likely to be applied to you if you’re trying to sell your franchise.
Apart from the obvious fact that you’ll want to get the highest possible price for your franchise while the buyer will want to pay as little as possible, the prospective buyer will look for any weaknesses in your defences in the hope of driving the price down further.
One of the first things the buyer will home in on is your reason for sale. Are you being forced to sell up?
If so, that makes it a distress-sale, and you can hear the buyer’s hands being rubbed together gleefully even as you read this.
Or have you been less successful than you’d hoped to be? Give the prospective buyer the slightest hint that it’s a failing business, and he or she will start knocking zeros off the asking-price.
If you’re selling because you’re divorcing and can’t give the business the love and attention it deserves, it’s perhaps wise to put a positive spin on your change in circumstances, or the buyer will think “distress-sale” again, presume you’re desperate to sell, and bargain accordingly.
But if you’re retiring or moving to a different part of the country, the buyer can’t use that as a bargaining chip.
And don’t let your pride get in the way of a potential sale.
Most buyers are especially interested in your franchise’s potential for growth. If you’d like the world to think you’ve maximised every possible opportunity to gain more clients and make more profit, a buyer may conclude that there’s no potential to do much more than keep the business ticking over.
But some exiting franchisees are reluctant to say their business has great potential for growth, fearing that prospective buyers will think they’ve failed in some way and judge them as people who couldn’t be bothered to make the most of their business and wouldn’t recognise an opportunity if it bit them.
There are lots of reasons why a franchise may still have excellent potential for growth, and prospective buyers won’t need to reach for a negative if you offer them a positive.
For example, there might be huge opportunities for growth if you marketed your products to the hundreds of schools in your patch - but you haven’t, because you’ve been too busy making the business profitable in other ways and can’t do everything.
If the prospective buyer hears you’ve identified a strong opportunity for growth but left it unexplored because you’re retiring, the buyer will see that as a first-rate opportunity to make a lot more money out of the franchise than you did, and that will help to justify the price you’re asking.
Honesty is certainly the best policy when you’re reselling your franchise, and asking a realistic price, backed up by transparent financials, will win you a faster and more satisfactory sale.
It can be a tricky road to navigate, even if it is a road you have travelled before, the ability to lean on experienced professionals who have been there and done that, who don’t have the same emotional attachment, can be a real gamechanger.
If you’d like professional help to sell your franchise as well as a sensible valuation, our colleagues at Franchise Business Brokers will be happy to discuss your options.
Contact the team here.
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