CHICAGO — When it’s time to bid farewell to a self-service laundry business, the owner’s exit strategy may involve selling the operation or having a family member take over. Whichever is in play, there are some essentials for simplifying the transition.
SELLING TO THE UNRELATED
Selling to an unrelated buyer can require careful planning, negotiation and attention to details. Some steps should be taken before listing a laundry business for sale.
“Having clear and accurate financials, a well-maintained customer list, market research, and up-to-date contracts, permits and licenses ready can make a huge difference,” says Justin Koh, CEO of Advent Cleaners LLC, which operates Al Phillips the Cleaner and Thrift D’Lux in Las Vegas.
“This (level of) organization not only saves the buyer time but also shows that you’re offering them a business set to thrive with useful tools in place. A detailed asset list with not only maintenance records but a routine preventative maintenance schedule is invaluable.”
“Verify (that) entity registration, licensing (if any), and business entity governing documents are current,” advises Jake Pollack, a partner in the Dallas law firm of Shackelford, McKinley & Norton, who specializes in estate planning, family-owned business transactions, and estate and trust litigation. “Update and verify business financial information (balance sheet and P&L). Determine whether there are any outstanding obligations that could interfere with a sale or significantly reduce potential value. Assemble (a) team of professional advisers: attorney, CPA, broker.”
“Understanding the financial implications of the sale beyond just net profit and being prepared for potential tax implications can make a big difference in the final outcome,” says Koh. “It’s good to be heavily involved in the sale of your business because you know your business best.”
By assessing a business objectively and providing insights into the current market, a professional appraiser or business broker can help determine a fair market value.
“Have a valuation done by a valuation expert who can assess comparable sales,” suggests business leader, speaker and author John Abrams, who will release “From Founder to Future: A Business Roadmap to Impact, Longevity, and Employee Ownership” next summer.
“The best way is to speak to local business brokers who should be familiar with, or have access to, recent transactions,” says Pollack.
“If you don’t know how to evaluate your business, getting outside estimates gives you validity and confidence when negotiating,” says Mary Kelly, Ph.D., author of the best-selling “Who Comes Next? Leadership Succession Planning Made Easy.”
Once that value has been determined, marketing the business discreetly is essential to avoid alarming customers or employees. Working with a broker or listing on business-for-sale websites can quietly help attract serious, qualified buyers.
“Be very transparent but reassuring,” Kelly says of addressing the laundry’s current employees as part of the process. “Let them know your short- and long-term intentions. One of them may be a good candidate to buy it!”
“Rather than ‘handling’ or ‘preparing’ employees, consider selling the business to them,” says Abrams.
“Share your plan openly and encourage their buy-in by helping them see the potential benefits,” says Koh. “Emphasize that a new owner brings fresh ideas and ambition, which could lead to new opportunities for them. Make sure they understand that their experience and commitment will be invaluable during the transition, as the new owner will be relying heavily on their support from day one.”
Finding a balance between maintaining day-to-day business while exploring for or preparing for its sale will likely be a challenge. Abrams believes it “will actually enhance business operations.”
Starting transitional planning too late is a common mistake made by small-business owners, says Kelly: “They wait until there is a health crisis or some other catastrophic event, and then when they do sell, it is at a discount that would not have been necessary if they (had) started the process earlier.”
She suggests starting to plan five years before you intend to walk out the door, because “it takes longer than you think.”
Waiting too long to inform key employees is another common error, according to Koh.
“This can be disruptive and unsettling for the team, who may feel blindsided or uncertain about the future. It’s crucial to be transparent early on, allowing them to help build and maintain the systems that will support the buyer’s success.”
Pollack also lists not considering tax consequences or overestimating market value and/or goodwill as common mistakes made when preparing to sell.
After identifying a buyer, due diligence—wherein the buyer reviews the business’ financial records, operations, and legal standing—begins. Negotiations follow due diligence, often involving both parties’ legal and financial advisers discussing the sale price, payment structure, and terms of the sale.
Once terms are agreed on, a purchase agreement is drafted and signed, finalizing the sale and outlining the responsibilities of each party. After closing, the seller transfers ownership—turns over the keys—and may, depending on the deal struck, provide initial support to the buyer during the transition phase.
Coming in Thursday’s conclusion: Selling or gifting to a relative
Have a question or comment? E-mail our editor Bruce Beggs at [email protected].
