If you are thinking about the idea of selling your vending and office coffee business, here are some basic things to expect.
Set realistic expectations
Most owners will expect a higher price than what the business can actually sell for. The blood, sweat and tears you have put into your business is why you expect this. While you think your business may be worth a certain amount, a good and honest broker should be realistic with you on what you can sell your business for.
In some cases, we have helped several sellers get a higher price than what they asked for. It’s our job to educate you on what is a realistic price you can expect when selling your business.
Business brokers are a necessity to assist you with the selling process and to get you the highest price for your business. A few sellers have sold the business themselves, thinking they are saving money, only to find out that they sold too cheap. A business broker should have the industry experience to know what your business should sell for. Selling your business could be the most important financial risk in your life, so you shouldn’t go at it alone. A business broker takes the emotions out of this process, which is why we are called intermediaries.
Be ready to show reports
You can expect to be asked for many reports, such as sales by account for a time period, equipment lists by customer level, profit and loss statements, balance sheets, bank statements, vehicle lists and more. Of course, we never give any customer names until the time is right and the deal is set to close.
For credit card readers, expect to be asked how many machines are not equipped with card readers, and why.
You can also expect to be asked why your P&L has certain expenses on it that do not look to be related to the business.
Employee considerations
Expect to be asked how many employees you have and what you pay them. If you pay them “under the table,” expect to be asked why. Cash that doesn’t make it to the bank can hurt your sales price. It is always better to be honest up front so that your broker can explain it to the buyer. Many buyers “expect” some operators to not deposit all cash into the bank. Just be ready to explain.
You never want any employees to know that you are considering selling your business. If this happens, it can lead to your employees quitting, leaving you vulnerable for operation problems.
Many sellers are worried that the buyer may run off certain employees or family members. You should understand that many buyers need your talented employees for a smooth transition. Expect a few of your employees to leave once the company is sold. We have seen a “blood bath” happen where an operator sells the business to a large buyer, only to lose almost all route drivers. Not to sound unsensitive, but employees come and go – if you are ready to exit the business, it’s never good advice to base selling your business on retaining certain employees. Most of the time, they are offered a job with the buyer. Sometimes, they don’t like working for the buyer and leave. This is on them, not you. You got them a job, now it is up to them to make it work. Expect it to not be perfect for all employees.
Expect holdback period
When it comes time to review the LOI (letter of intent), the offer for your business, you should expect to see a “holdback” on a percentage of your sales price so that the buyer can verify the sales under their new ownership to verify that the sales are indeed there, and that no fault of the seller, that any customer leaves during the holdback period. This worries most sellers but is generally part of the purchase requirements. It is always a good idea to keep yourself available to assist with any customers who may want to leave after the sale has happened.
After the 2020 COVID-19 pandemic, expect to be asked if the PPP loans were forgiven, and how it was treated on your financial statements.
Be patient
Timing: Expect the process of selling your business to take several months. Typically, what brokers wait on the most is for the seller to send over the due diligence information, so that we can prepare it to present to a qualified buyer. In some cases, we have waited months for this information to be sent to us. If you plan to sell, it is always a great practice to keep good records available such as tax returns, balance sheets, P&Ls, etc. CPAs generally keep this information for you, but they seem to always be too busy to send it to you. Have them send these documents to you in a PDF format so you always have this info ready.
Once a qualified buyer is determined as the best fit for your business, expect the process for them to review your due diligence information to take a few weeks before they make you an offer. Once they do make you an offer, and you accept the offer, expect a few more weeks for them to prepare the APA (asset purchase agreement). This is the final agreement that is made to close on your business.
Most sellers tend to get impatient and worried during this process. Buyers, just like you as the seller, are generally running a business as well or working for the buyer with the daily interruptions and business practices that you deal with every day. Expect a time lag during this process.
Here are some items that brokers spend time waiting on:
- We wait for the seller to send us the due diligence information.
- We wait for the buyer to review the due diligence information to prepare an offer.
- We wait for the offer to be reviewed by the seller.
- We wait for the APA to be drawn up by the seller once the offer has been accepted.
- We wait for the seller’s attorney to review the APA and make any changes.
- We wait for the buyer to accept these changes and make additional changes back.
- We wait for a closing date.
Brokers – just like you as the seller – expect to do our fair share of waiting. The best advice: be patient, be willing to negotiate, be open to changes, be ready to wait yourselves. You didn’t build your business overnight; don’t expect it to sell overnight.
ABOUT THE AUTHOR
Mike Ferguson is a sell-side business broker intermediary for the convenience services industry. He has over 33 years of vending and office coffee ownership and operations experience, so he speaks “fluent vending and coffee.” Ferguson knows it is important for any seller to have an advocate on their side, verses attempting to sell on their own. He can be reached at 713-569-6463, email at [email protected], or visit him online at VMACsolutions.com.
