When it is time to sell your convenience services business, follow this advice from the high-end real estate world

If you have been to a reasonably high-end real estate open house within the past few years, you have seen a real estate marketing technique known as staging. A home that has been staged has been set up with furniture and accessories to create a look that is particularly attractive to potential buyers. It is a strategy that works — and one that should be employed by any convenience services operator who is planning to sell their business.

The numbers add up

“We have seen homes that are staged selling for 15%, even 20% more than homes that are placed on the market without any staging treatment,” said Jerry Bolin, a veteran real estate professional in Southern California. “The math makes sense. A buyer might spend $7500 on staging, but when a staged million-dollar property sells for $200,000 more than a property that has not been staged, it is obviously a great investment,” he said. “That’s why it makes sense to allow a professional to stage your property and facilitate the transaction.”

In the world of M&A best practices for the convenience services business, it is not about furniture — it is about planning to make your business as attractive as possible to potential buyers. In this initial article about how to successfully sell your business, we will look at that important first step: positioning your company to sell it for the highest possible price, with multiple offers.

Future articles in the series will cover:

Valuation
Marketing
Negotiation
After the sale

All five of these installments in the series are designed to maximize the selling price of your business, but it all starts with staging. For the operator, that means planning and preparation. Preparing your company before attempting to put it on the market is the smartest thing an operator can do. This process can begin six months, one year or even two years before you put your company on the market.

Clean up the clutter

Bolin notes that the first conversation he has with a seller is about getting rid of the clutter. “I ask them questions like, ‘Do you really need to have that food processor, espresso machine and blender on the kitchen counter?’”

M&A best practices: How to successfully sell your convenience services business

Operators typically have unattractive clutter in their business as well. At VBB Advisors, we look at clearing the clutter and making sure that your company is as attractive as possible to buyers. Operators need to focus on their strengths — maximizing those areas — and take control of the defining characteristics of their company that can be controlled.

In “Your convenience services company looks great, but is it a premium acquisition?” published on VendingMarketWatch.com last year, I listed five key factors and defining characteristics that can elevate your company to the status of “premium acquisition.”

Location. Desirable markets are a positive for buyers.
Gross Profit Margin. Critically important. While the selling price might be stated as a multiple of gross sales, buyers are looking carefully at gross profit.
Technology. Do you have modern equipment? The right technology?
The General Economic Outlook. Are buyers feeling confident about the future?
Quality Accounts. Do you have a strong core of contracted local business?

Control what you can control

While you cannot control your location or the general economic outlook, there are many factors that can be controlled with long-term planning. I work closely with my clients on the following areas, all of which represent defining characteristics of a premium acquisition that an operator can control.

Contracts. Are your key accounts based on a handshake deal? Buyers want the security that contracts offer.
Recurring Income. Buyers love any income that is totally predictable. Rentals, delivery charges, service fees and subsidies are big positives.
Management Business. Are you top-heavy in this area? It can be considered serious clutter to some buyers.
Gross Profit. There are many ways to pump this number up. As noted above, this is very important to buyers.
Choosing technology. Use the same big-name technology providers that the buyers are using. A budget-oriented technology choice is a negative factor that will require costly changes.
Pricing. Raise your prices to the appropriate level to make your company more attractive. Planning makes that possible.
Leases. Avoid long-term leases as part of your long-term exit strategy. Buyers will definitely consider any burdensome leases a negative factor.

Proper preparation by the operator requires a patient and thoughtful approach to selling your company. You cannot be in a rush to successfully execute what is arguably the most important business deal of your life. If you are planning to sell your company within the next two years, now is the time to start planning with professional guidance.