June 6, 2020  
 
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Selling a Food Service Industrial Business

You've heard the naysayers - now isn't the time to sell a food service industrial business. But what they don't know is that many entrepreneurs see food service industrial businesses as a smart business investment.

You won't find any magic formulas for selling a food service industrial business, especially while the market is struggling to overcome the perceptions created by a down economy.
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The economy hasn't squashed the market for food service industrial businesses. Like always, unprofitable and poorly positioned businesses struggle to find buyers while sellers who have invested time and effort to prepare their sale are being rewarded in the marketplace.

Average Preparation Time

There are no effective shortcuts for selling a food service industrial business. For starters, the financials need to demonstrate a track record of profitability and growth. Next, the business will need to be documented in professional financial statements and manuals that facilitate the ownership transition. Unless you have already started planning for your food service industrial business sale, it's going to take at least six months to prepare your business. A more likely scenario is that it will take more than a year to create the conditions necessary to receive the maximum sale price.

Business Valuation

Professional appraisers can use three methods to determine the value ofa food service industrial business: The income method, the asset method and the market method. While the income method uses anticipated revenues as a value basis, the asset method focuses on the company's capital, real estate and intellectual assets. In many sales, the most accurate valuation comes from the market method which determines value based on the recent sales of similar businesses. All three methods have multiple variations and it's not uncommon for appraisers to use a combination of the three to determine the value of your business. Sellers should take note of the fact that all three valuation methods reward businesses that takes steps to increase assets and income.

Working with Accountants

Accountants lay the financial groundwork for a business sale. Before your food service industrial business goes on the market, you should sit down with your accountant to clarify your financial goals and the tax consequences of a sale. Brokers often advise their clients to have an accountant perform an audit of the business prior to sale. With seller financing becoming common, professional accountants are playing a more central role in negotiations and buyer qualification.

More Exit Planning Articles

Ready to learn more? You may find these additional resources to be of interest.

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Renewing Leases Prior to Selling a Business


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The learning process for selling a food service industrial business is an ongoing journey. Send us your comments and questions, and let's continue the conversation!


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