Selling a franchise business during the recession – part 1
David Young, Chief Executive of Shield Corporate Finance
Considering selling a franchise business during the recession? Why not test the market to find out what value you could achieve, without committing yourself to a sale.
If we compare running a franchise business to flying a plane, business sale market testing is like going in for a landing through the clouds, taking a look at the terrain when it comes into view, but being prepared to pull up again if the conditions are unacceptable.
Maybe you have been flying your franchise business for a while, hoping to land a sale this year or next. But the economic storm that has engulfed so many parts of the world is severely restricting visibility. In the prevailing conditions, it’s very hard to see where the value in a business lies. And making a safe landing with poor visibility is risky. But continuing through storm clouds is risky too; the turbulence may destroy us and not all of us can keep going indefinitely. We may run out of fuel (money, debt or equity) or time (due to illness or retirement). And things may get a lot worse before they get better.
So difficult decisions are being made. Owners and managers are weighing up their chances; flying on, or going in for a landing. And it’s a fateful choice, either way. We all know that a failed sale is extremely dangerous and possibly fatal for a business:
- The continuing uncertainty that hangs over the future of the business can kill the confidence of your staff and your customers, and attract competitors to move in on both.
- The sheer time and effort absorbed by any kind of business sale process distracts management’s attention from their day job of running the company and often leaves them exhausted.
- If the sale of the business fails, they’ll be demoralised as well.
Yet keeping going may not pay off either; worsening recession pressures lie ahead and most worrying of all is that nobody knows how bad it will get this time. Unprecedented government initiatives in the wake of almost unprecedented financial sector insolvencies may not succeed in averting further turmoil. Battling on may be futile and drain us of whatever remaining reserves we have.
These are without doubt the toughest conditions for potential sellers of businesses we have witnessed in 25 years in the M&A market. So here’s an idea, born out of bitter experience, but helpful to those who embrace the reality it reflects. Why not test the market to find out what value you could achieve, without committing yourself to selling the franchise business.
Use the franchise business sale market testing process http://www.shield.uk.com/market_testing_process.html to learn what potential buyers do and don’t appreciate in your business, so that if you decide to fly on, you can put those insights to work during the rest of your journey. If we compare running a business to flying a plane, it’s like going in for a landing through the clouds, taking a look at the terrain when it comes into view, but being prepared to pull up again if the conditions are unacceptable.
Next time: How does the business sale market testing process work?
Useful links:-
- http://www.shield.uk.com/business_sale_market_testing.html
- http://www.shield.uk.com/selling_a_business.html
Tags: business sale market testing, business sale process, corporate finance, David Young, Selling a franchise business
