Thinking about selling your business but don’t know where to start? Our Business Turnaround expert, Susan Routledge, gives you the lowdown on the why, what and how of preparing your business for sale.
Over the course of owning a salon for more than 30 years, I’ve had my fair share of big decisions to make; not least whether to sell up and move on. In my case, so far, I’ve always chosen not to, instead finding ways to step back so that the salon runs smoothly without my constant, direct input.
Strange though it may seem, I learned how to do that by working intensively with experts specialising in the merger and acquisition of distressed businesses. Through two years of training, I discovered how to set up and turn around any business so that it’s both scalable and saleable. Now I spend my time sharing that knowledge with other salon owners.
ARE YOU READY TO SELL?
One of the first questions I ask any salon owner I work with is, “What are your short and long-term business plans?” Most haven’t thought beyond the next six months and aren’t being proactive about managing their business as a long-term commodity. If you’re thinking about selling, then planning is vital. A planned sale needs at least a year of preparation; ideally two. Selling reactively means you’re not in control and makes you vulnerable to negotiation and lower valuation by prospective buyers. None of us can be certain what the future holds, so having your salon prepared for sale – even if you’ve no intention of selling today – is smart. Businesses that aren’t prepared are likely to go for a song. A sudden change in circumstances for an owner or their family, a once-energised owner falling out of love with their business – situations like these happen and usually result in sudden sales at low prices. Don’t get caught out.
WHY DO YOU WANT TO SELL?
You must have a very clear answer to this question because, when the time comes, it can be a very emotional decision. Selling is unlikely to be your only choice. Perhaps, like me, you might re-structure your business to be profitable and self-sustaining while you pursue new ambitions, or you might transition your team from employed to self-employed. Consider all your options before you commit. Once you’re certain you want to sell, it’s time to start getting your business in the best possible shape so you can maximise your returns.
WHAT DO YOU NEED TO DO?
Start by taking a detached view of your whole business. How dependent on you is it? What would your salon finances look like if you took three months out? A business is far more saleable if it isn’t reliant on its owner. Buyers want to know they can pick up where you left off with minimal risks or disruption. Are specific, regular clients tied to key employees? Try to distribute clients across your team. Neither you nor your buyer wants the risk of one employee leaving and taking lots of loyal clients with them. I strongly advise you to systemise as much of your business into written processes as possible. That way, a new buyer can take over seamlessly by following your procedures while they find their feet – a very attractive proposition. Look to make every area of your business stronger and tidier. If you were selling your house, you wouldn’t leave dirty washing strewn across the floor or wallpaper peeling off the walls, would you? So let a prospective buyer see an operational and effective marketing plan, consistent branding, a motivated team, a powerful database and clear, well-prepared – and profitable – accounts. For one thing, there isn’t a tidal wave of buyers out there ready to roll in the moment you hang up the For Sale sign. To boost your chances of getting the best price possible, your business needs to appeal to industry professionals and brand-new investors alike. Be sure to choose the right broker, too, and speak to them as soon as you’re thinking of selling. Look for someone with an understanding of the industry who’ll answer all your questions and help you plan your sale with no upfront fees.
HOW DO YOU GO ABOUT SELLING?
There are lots of questions to consider: Do you want a public or private sale? Do you tell your team, or will that unsettle them? If you keep quiet and plan a private sale, how will they feel if they find out anyway? The more prepared you are for each eventuality the better in my experience. Selling a business can be a bit of a game – you want to get the most money, your buyer wants to spend the least. Somewhere in-between there’s lots of negotiation. A good broker comes into their own here by working out a deal that satisfies both parties, but there are so many ways to sell a business. Don’t expect to get a bank account full of money on the day a sale goes through – staged buyouts over a period of time are common. Sometimes a salon owner will help the transition as a consultant, sometimes they’ll continue to work in the business as an employee on a short or ongoing basis. Be open to different possibilities to get the best return.
HOW MUCH TO SELL FOR?
That all depends on how much preparation you’ve put in! The value of your business varies enormously upon profits, assets, demographics, structure and more. A good business broker will analyse all these elements and give you a guide price before you go to market. With this information, you can work out how to increase your salon’s attractiveness even more by further improving, systemising and eliminating risks. If you’ve plannedwell and given the buyer complete confidence in their investment, the easier and more lucrative the sale is likely to be for you.
Selling your salon can be a very daunting prospect! I hope this article has given you some food for thought, but if you’d like more insight then I’m happy to chat. To arrange a complimentary one-to-one call, email me at susan@susanroutledge.com.
Susan Routledge is a salon business turnaround specialist with over 30 years in the hair and beauty industry. She is a multi-award winning salon owner, author, speaker, industry advisor and awards judge. Susan is deeply passionate about helping salon owners develop cashrich salons that give them more freedom. To find out more about her one-to-one consultancy, online business programmes and memberships, visit susanroutledge.com.