10 Rules to Understanding and Finding Franchise Buyers
Finding franchise buyers and getting a win-win deal done is hard to do. Here are 10 important pointers to understanding and finding franchise buyers:
1. There is no silver bullet:
You must stir the pot (take a shotgun approach) with a variety of efforts. Strong, consistent, and diverse marketing efforts are required to market your franchise for sale successfully.
2. Cash flow is king:
Most franchise resale buyers chose to purchase a business because of the cash flow it produces now. If your business is not producing cash flow, the pool of potential buyers will be smaller and finding a franchise buyer may be more difficult.
3. Bridge the financial gap:
If you need to sell your franchise fast, consider offering seller financing or an earnout for a portion of the purchase price. The more eager you are to sell your franchise, the more you may need to be willing to bridge the financial gap for a franchise buyer. Flexibility is the key to sell-ability.
4. The broader, the better:
The more people that know about your franchise opportunity, the better your odds are of selling. Confidentiality is important, but you should consider whether or not your buyer could be a current or former customer/client.
5. Look within:
Many franchises are sold to employees, and many franchises are sold to fellow franchise owners. Employees and franchise owners may not provide the highest sales price, but if you need to sell your franchise quickly, don’t overlook employees and franchisees.
6. Franchise Buyers don’t pay extra for opportunity they have to earn:
Most franchises that are for sale provide the current or future owner with opportunity for growth and improvement. If you want to be paid for that opportunity in your sales price, you’ll need to be able to clearly demonstrate how that work and the resulting benefit has already begun, and how that benefit will continue after the sale.
7. Your franchise start-up costs do not equal franchise value:
Unless you find a buyer who is otherwise going to a) start a new franchise, b) in your geographic area and, c) in your specific industry, a franchise buyer is not going to place a value on your franchise simply based on what you spent to get it started. Just like a new vehicle, once you “drive” a new franchise “off the lot”, the value to most franchise buyers is based on the cash flow it produces for the owner(s).
8. Monitor Results and React:
Franchise for sale ads should be monitored and assessed monthly. If you aren’t getting the results you want, change the headlines, adjust the price, try a different business category, and update your ads with fresh content. Fresh content can help you find a franchise buyer faster.
9. Know when to hold ‘em, know when to fold ‘em:
Some businesses are simply not at a point where they are ready or likely to sell. In this case, it may be best to put all your energy into growing your franchise business now so it can be sold later. Or, in rare cases in which a business is hemorrhaging cash and the owner is unable to continue, it may be best to close the doors. No matter what, selling a franchise will require perseverance. Knowing whether to wait and try again another time or to stick with it requires good advice and guidance from someone you can trust.
10. Don’t give up:
Selling a Franchise is not easy! On average it takes 8-12 months to sell a franchise, and many businesses don’t sell the first time. Oftentimes the difference between franchises that don’t sell and franchises that do sell is simply… perseverance.
Franchise Flippers is the premier franchise resale marketplace and resource center. Our franchise resales experts are dedicated to helping franchise buyers and sellers get win-win deals done. To get help from an expert franchise resale adviser schedule a free consult here or visit us at www.franchiseflippers.com and learn how we can help you.