Perception is just as much a part of selling products as the product itself. In a restaurant transaction, it boils down to the person who owns the space and is trying to sell it (the seller) and the person who wishes to purchase it from that owner (the buyer). In the grand scheme of things, there was a point in time when the seller was, in fact, the buyer. Regardless of the current condition of the restaurant, this current owner/previous buyer has a number of considerations prior to the actual transaction. For instance, is the price fair for the location? Are there any glaringly obvious problems with the building itself? Most importantly, is this transaction going to end up profitable in the long run?
These questions are crucial to the purchaser of a restaurant – and we’re not even scratching the surface. In order to properly sell your property, you need to think like the people you’re selling to. As the seller, you could get caught up in getting a proper value for the space and lose sight of what really mattered to you when you were an inexperienced buyer.
What the Seller Thinks
As the current owner, you’ve put years of hard work and toil into fleshing out your vision for the restaurant. It’s the product of your creativity, experience and dedicated staff. You’ve established yourself as an important member of the local neighborhood identity. You’ve watched the restaurant flourish and start to wither away – through the ups and downs. You struggle with letting go of the thing, but you have to. Personal feelings aside, the place simply has to go!
The seller tends to believe that their restaurant has much more to offer than the price it’s being sold for. In other words, the seller thinks that their restaurant’s potential for profit is definitely higher than what the books are saying. Owners take into account the hypotheticals. If the restaurant were open a few hours earlier every day, it would attract a lunch crowd and double profits. If the menus provided more premium entree options, their high profile clientele would come around more often and validate the menu strategy. In the case where either of these two ideas is actually put into effect, perhaps the value of the restaurant would be higher. The keyword here is “perhaps;” the money-making scenarios only make profits in theory. It didn’t happen during the current restaurant’s lifespan, so why would it happen later? This should not (and does not) factor into the restaurant’s net worth.
Put Yourself In a Buyer’s Shoes
It’s not easy being a restaurant owner, to be sure. From day-to-day management to that dreaded tax season, restaurants are burdensome to say the least. Keeping everything above board and tight-knit for the books is in and of itself one of the most difficult processes associated with restaurant ownership. The novice buyer who doesn’t understand the realities of having a restaurant might skip over some of the details. Someone with experience will scrutinize every nook and cranny of an establishment, and its financial records before even thinking about buying it.
The books and records from the restaurant business will likely not show every cent that came in or out of that place. This isn’t necessarily a red flag, but is more of a commonly accepted reality. Most individuals who make money through an independently owned business do not pay all of their taxes. Restaurants and cafes that are “cash only” tend to cheat a little bit more, so skepticism for their business practices is even higher.
Regardless of the owner’s integrity, the restaurant’s ability to turn profits should be the first thing a buyer looks for. It’s all about understanding the numbers to the best of your ability and conveying understanding to the buyer doing their due diligence. There are reasons that close to 60% of restaurants fail in their first year. Sure, you could have the best management staff. You could have the best food in the neighborhood, too. However, all of this might be overshadowed by the fact that you’re located in a bad part of town. Who are the customers that your buyer looks to target? They would need a lot of foresight and reassurance to take a risk on such a place.
Sell Like a Buyer
As a seller, be as prepared as possible to take on the demands of the buyer. Do not try to persuade them by what your property could be worth – focus on maintaining great standing as a well-operated business. As you prepare to finally part ways with your business, make as much information available and accessible as possible. Focus less on slick presentation and unsubstantiated potential. Poor bookkeeping is the biggest deal breaker of them all. The established system of buyers and sellers caters toward profit as a marker. The more obvious the profit margin, the more easily the restaurant will sell to the right bidder.