Note from Editors:
Five lessons from a couple that successfully exited their cafe business using the For Sale By Owner (FSBO) practice. The first lesson was to build value of your business on the day you start it.
by Bob House
Selling a business can be a challenging process. However, like many challenges in life, business owners who take the time to properly prepare will fare much better than those that jump right in.
This is the real life lesson learned by one couple that successfully sold their North Carolina cafe after 18 years of devoted ownership. Their story is an example of how a little prep work can ease the selling process and perhaps more importantly, lead to a higher sales price. For every small business owner, whether planning to sell now or much farther down the road, these lessons apply.
Build Value From Day One
Vicky Ismail and her husband Abdul opened The Cary Cafe shortly after moving to North Carolina in 1995. Named after the Ismails’ hometown of Cary, North Carolina, The Cary Cafe specializes in breakfast and lunch options, which Vicky and Abdul decided better fit their lifestyle and new customer base. They were right. For 18 years, the Cary Cafe thrived on their food and a friendly family environment.
Although the couple wasn’t always thinking about the café’s final asking price, they were always looking for ways to make it more successful. Vicky was particularly proud of the goodwill and loyalty they established in the community, something that does often add value during a sale.
“The real draw was the freshness and the family atmosphere,” Vicky said. “We knew our customers well. We even placed Christmas cards and pictures from their family vacations on the wall.”
But like most small business owners have experienced, there eventually came a time when the Ismails felt it was time to move on to the next chapter of their life. In early 2013, Vicky and Abdul decided to start the process of selling the cafe so they could focus on their second business, a catering, event and wedding venue in nearby Fuquay-Varina, North Carolina.
Lesson 1: Your business’ value is a reflection of all your hard work, therefore it’s something owners should be working on from the day they start their business. Strong financials are always a key metric to mind, but reputation, customer satisfaction, partners, suppliers and even the physical appearance of your business all play into what will be your final sale price.
Take Time To Ensure The Business Is Market-Ready
Although the Ismails first spoke with local business brokers, the couple ultimately decided to try selling the cafe on their own given their previous experiences with the process, a practice commonly referred to as for-sale by owner (FSBO).
But rather than immediately listing the business online, the couple conducted research and preparation to make sure any potential buyer’s first impression was a great one. The couple organized their financial documents including profit and loss statements, taxes, bills and order receipts.
“I started to think about what I would want to see as a buyer and we invested about 80 hours over the next few months to prepare the business for sale,” Vicky said. “We made sure everything from the physical upkeep to the financial statements were in good order before we finally decided to list the business for-sale.”
Besides organizing their financials, Vicky worked on sprucing up the restaurant’s curb appeal with fresh flowers and thorough cleaning of their outdoor space so the restaurant would leave buyers with a positive first-impression. She also paid about $2,000 to get a professional business valuation of their cafe. Vicky then researched the market online and compared her appraisal price with other listings before deciding on a final asking price of $165,000, which she supported with a gross income of $380,000, and cash flow of $90,000.
“I felt like having the professional valuation gave our asking price more credibility,” Vicky said. “Between that and our financial documents, I felt like we could back up why we priced the business as we did.”
Lesson 2: Small business owners should create, collect and review their profit and loss statements (covering the past two to three years), current balance sheet, cash flow statement, business tax returns (for the past two to three years) and any additional documentation to substantiate their financial standing. Don’t forget the physical business as well. Small renovations, paint refreshes or even organization efforts can all go a long way. You need to have ample support for your asking price since buyers will look for every opening to negotiate the price down.
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Curated from Selling A Small Business: How One North Carolina Couple Successfully Exited Their Longtime Restaurant
Image: The Cary Cafe
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