The following article was found in the New York Times, and it’s writer makes reference to a prior article that was written, that was about an elderly Atlanta woman who had a decades-old, successful restaurant with no buyers. In the article below, she gives some poignant tips on how to sell your business.
“Can This Business Be Sold?
Last week, NBC Nightly News featured the story of Ann Price, who is proprietor of Ann’s Snack Bar in Atlanta and has been struggling to sell her business. While Ann’s is a beloved regional icon, both the NBC Nightly News feature and this New York Times video that was published in November (along with this article) offer some wonderfully visual examples of classic problems that can make it very hard to sell a small business.
Problem No. 1: The business revolves around the owner.
The personality of Ann’s Snack Bar appears to reflect her no-frills, I’ll-do-it-my-way approach to business ownership. The interior of the building has a small counter with just eight stools. Ms. Price, known to her many fans as “Miss Ann,” is content to let customers wait in line two to three hours for one of her signature “Ghetto Burgers.”
Ms. Price, who is in her late 60s, runs the business pretty much by herself. In essence, she has created a job, not a business. That’s O.K.; there’s nothing wrong with what’s sometimes called a “lifestyle business.” In fact, there are plenty of people looking to buy a job for themselves and be their own boss. But Ms. Price’s job has entailed working 12- to 13-hour days for 38 years, with no vacation. This is not a job that most people would be willing to pay for.
Solution: Remove yourself from daily operations.
Ms. Price may want to pop in around lunchtime to chat with her loyal customers, but she needs to hire employees and let them do the actual work. She may have a hard time doing this, given her business philosophy: “You can’t depend on someone else, you’ve got to do it yourself,” she says in the Times video. But if she really wants to sell her business, she will have to structure it so that it can run without her.
Problem No. 2: The asking price is based on what the owner needs to retire.
The business was originally priced at $1.5 million; she is now asking $450,000. Obviously we don’t have any background on these valuations, but we do have Ms. Price’s own words: “I have all my money – all my savings – tied up in the business,” she told NBC. “I need to get enough to retire on, or I’ll keep running the business.”
This is a common attitude among small-business owners. The tendency is to approach the issue of pricing the business for sale based on what the owner wants, or needs, not on what a willing and able buyer would reasonably pay. In my experience, this is not a winning strategy.
Solution: Have the business professionally valued and consider creative deal terms.
The most common approach to valuing a small business is based on a multiple of earnings. If the cash flow of the business cannot support the purchase price — including mortgage payments if real property is involved — then it may be difficult for Ms. Price to sell.
If she needs a lump sum of money for retirement that she cannot get through the sale of the business, Ms. Price may want to consider what kind of monthly or annual income she needs to maintain her current lifestyle. Perhaps she could sell the business, hold back a portion of the purchase price with a promissory note, and collect monthly payments on both the note and a lease on the real property. It’s hard to make suggestions when you don’t have all of the facts in front of you, but the point is that Ms. Price may be able to sell her business if she’s willing to consider alternatives to getting all cash at closing.
On the one hand, Ms. Price provides a wonderful portrait of an authentically American, entrepreneurial free spirit. She serves up wisdom, as well as burgers, with irresistible frankness and charm. “You can’t let a handful of no-good customers run you away,” she tells us. Amen to that. On the other hand, like a lot of business owners, she probably could have positioned her business better for sale.
Still, I congratulate Ms. Price on building a much-loved institution that has inspired decades of support from her community. And I hope the next story I read about her and her business tells of a happy ending.
What do you think? Can Ann’s Snack Bar be sold?”