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How to Sell your Catering Business Fast

Do you run a catering business and want to cash out or exit profitably? If YES, here is a quick 7-step guide on how to sell your catering business with ease.

If you have spent some time running your catering business and for whatever reason you would like to retire or cash out, then now may be a good time to sell.

According to research that was made by (an online marketplace with more than 40,000 business listings for sale), the median asking price of businesses for sale grew 12.5 percent in 2015 to $225,000, up from $200,000 in 2014.

The entities are selling on average of about two to three times their annual cash flow and at 90 percent of the asking price, according to the website.

If you will like to sell your catering business then you should begin by getting your business ready to be sold at least a few years before you actually intend to sell it off. This will help you to slowly wean yourselves from the day-to-day responsibilities of the business and get it in tip-top financial shape.

Steps to Sell your Catering Business Fast

  1. Make sure that you are making the right choice

Before you think of selling your catering business, you should make sure that you have a clear business and personal objective for the sale. This will help you to avoid “seller’s remorse” that can come from not knowing where to go next after you have closed the deal.

The best time to sell is when there is a peak in market activity, in your own profits and in your market sector. Many sellers hang on for a perfect time that never comes, losing sight of the fact that their goal should be a successful, not perfect sale.

2. Value Your Business

Before you put your business up for sale, you should have done your due diligence in order to determine the actual worth of your business. If you should meet buyers without first knowing the true value of your business, you may end up selling it for less that it is worth.

3. Enlist the help of advisors

Even though the service of a business broker who will end up charging you as much as 15 percent commission on the sale price is not an absolute necessity for selling your catering business, but the truth still remains that a broker will spend the time vetting buyers, ensuring confidentiality of the process and answering questions so you can focus on making money.

You will need to hire an accountant to help you prepare all the necessary financial paperwork and an attorney to help review offers, contracts and deals.

4. Get your financials organized

A buyer who knows his onions will most likely require that you provide him or her with up to five years’ worth of profit and loss statements, bank statements, tax returns, leases, supplier and vendor contracts, and customer data. As such, you should do your best to ensure that that the paperwork of you catering business looks clean, organized and clear so that it is representative of a well-managed business, and so that you do not inadvertently mislead the buyer.

5. Transfer assets that won’t be sold

When you have made up your mind to sell your catering business, you should begin to transfer assets into your personal name that you know that you will not sell alongside your catering business. Such assets can include your food trucks, recipes, real estate, et al. so they’re off the expense column of the balance sheet. This will show the buyer a clearer picture of cash flow potential.

6. Justify the price

If you want you sell, you will have to bear in mind that the value of your catering business is the value that others see in it. Businesses are often priced as a multiple of either their revenue or cash flow.

The average small business is priced about two times its annual cash flow, but as cash flow increases, so does the multiple. Businesses with a cash flow under $100,000 received a sale price of about 1.97 times cash flow. Those showing between $300,000 and $500,000 exhibit a multiple of 2.81, according to BizBuySell.

An experienced buyer will not place all the emphasis on just cash flow. Buyers are going to look for the quality of leadership and whether you are differentiated. That means presenting the buyer with a plan for how the business could grow and flourish over time.

7. Work yourself out of the business

If the catering business looks like it is dependent on you or a few key chefs, a buyer may believe the potential for its growth will go away when you do. As such, you will have to make sure that your catering business can survive without you being in the helm of affairs.