GETTING READY TO SELL?

5 Attributes That Enhance Business Value in Sale

The last couple of years have been quite a ride for hospitality industry entrepreneurs with COVID-19, staffing shortages, supply chain obstacles, and urban issues in the Rose City. If you have successfully made it through the storm and are operating profitably in 2023 you deserve respect and admiration as a business owner. The two most common motivations we hear from our clients at IBA, the oldest business brokerage firm in Oregon, for selling a business are a desire to retire or move on to a new project or career path. In an effort to help entrepreneurs exit at the highest possible value the following five attributes are shared which have consistently demonstrated to enhance business value at time of sale.

1.Transparent, Comprehensive Financial Documentation – At its core the decision to purchase a business is an investment decision. All business buyers seek to maintain or increase historical business profit and make money on the acquisition. The ability to obtain a comprehensive understanding of revenue streams and expenses makes a business more attractive. In most cases, documentation will be reviewed by the buyer, their CPA, and a bank and/ or investors. All three parties need to endorse a deal, or it will fail. The most important documentation in a sale are the federal tax returns filed with the IRS. A filed 2022 return is recommended prior to going to market in 2023.

2. Long Term Lease or Real Estate - Next to profitability and financial stability the most valuable asset a hospitality business can have is location security. If a business owner also owns the property, the ability to acquire both assets simultaneously is likely to enhance value. If the business operates out of a leased space, the longer the lease, including extension options, the higher the value that will be paid for the entity. Insider Fact: If an SBA loan is being used to acquire the business, the term of the lease will need to match the term of the loan. Most 7A SBA loans are ten years in term.

3. Staff Infrastructure – The businesses that sell at the highest values against comparable establishments have experienced, quality staff in place. The restaurants that sell at discounts have ownership wearing too many hats and working long hours. Ask yourself are you working on or in your business? If you are selling, you want the answer to be on the business with the ability for it to operate successfully if you take a vacation or are away.

4. A Unique Market Offering – Customers vote positively with their dollars for products and services that differentiate themselves in the market. In Portland, there is frequently a line outside of Voodoo Doughnut, despite donuts being readily available in many other locations, and a full dining room at the Ringside Steakhouse, even on a Monday night (I know this as a fact because eight IBA business brokers recently celebrated a sale there in February on that day of the week). It is important to be able to convey to the market and buyers your “Why?” Why do they come to your food and beverage establishment and what motivates them to return, hopefully again and again.

5. Online Reviews – How do you pick a restaurant in an unfamiliar place? The most common practice is to assess online reviews. Do you pick the business with one review or many? Do you pick the place with a 2.3 cumulative review rating or 4.4? If customers are reviewing online comments about a food and beverage establishment prior to making a purchasing decision, you can be sure a buyer thinking about purchasing the entire entity will do the same thing. If you have not encouraged your customers to leave reviews in places like Google and Yelp, it is prudent to do it prior to going to market to sell your business. You only have one opportunity to make a first impression on a potential buyer. That impression needs to be positive whether they enter your business, dine on your cuisine, or take a look at what people are saying about you online.

IBA has been successfully selling businesses in Oregon since 1975. We welcome the opportunity to be a resource to ORLA members. All communication is held in strict confidence and 100 percent of our fees are performance based. Reach out if you are interested in learning more about preparing for a sale.

Joseph Hollcraft, IBA’s representative for ORLA, can be reached at 503.739.4880 and joseph@ibainc.com. Gregory Kovsky, IBA’s President & CEO, whose first job was washing dishes and serving as a prep cook at Beef & Brew on Canyon Road can be contacted at the same number and gregory@ibainc.com.

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