How to determine your listing price when you need to sell your franchise fast
One of the first determinations in selling your franchise is to establish an appropriate listing price. For some, this is a grueling process full of worry, headache, and uncertainty. However, if the right approach is taken, determining your listing price on our franchise business directory can be a simple process through which you navigate smoothly and confidently.
In some ways, the mindset of a franchise owner can be similar to that of a homeowner. Most homeowners carry a number somewhere in the back of their mind that represents a perceived or desired value of their home. It may or may not be an accurate number, but if you own a home or a franchise, you probably have a dollar amount in your head that you hope, or believe, it is worth. The question is: is it a realistic number? And if not, how can you quickly and painlessly determine the right number?
- Be realistic
- Don’t sell yourself short
The reality is that no one values your business as much as you, the franchise owner, because no one has invested the level of blood, sweat, and tears that you have.
Think of your business as if it were your child. Others may love and care for your child, but no one else has invested in her the way you have. Thus, no one loves and values her the way you do, and your franchise is no different.
Even if you are frustrated with your business, just like you may be frustrated with your child from time to time, nobody cares for it like you do. To sell a business quickly on our franchise directory, you must realize that the value a buyer might place on your business may be less than your value, and you should price it with this in mind.
Don’t sell yourself short
Conversely, it is also critical to not sell yourself short and leave hard-earned dollars on the table. This is especially true in a franchise system where buyers have the benefit of more stability, structure, and certainty. Even if your franchise has not performed to your expectations or its potential, that doesn’t mean it lacks value or that others won’t love it and thrive in it.
I once heard a story of a daycare owner who, after years of owning and operating her business, realized she was tired of wiping noses, cleaning windows, and being around noisy kids. She simply didn’t like her business anymore, and the value in her mind may have been diminished because of her own personal feelings towards the business. However, a new buyer may be energized by kids, specifically looking for a daycare opportunity, and willing to pay fairly for such a business. Removing negative emotion from the picture is critical in establishing the right listing price.
Our 3rd piece of advice on setting the right price is to validate your listing price, and make sure the value you are placing on your business can be supported. Don’t ignore the number that’s been rolling around in your head, but do be sure you can justify it.
There are 3 specific things you can do that will guide you to validating your listing price before considering a more lengthy and expensive valuation process:
- Ask your franchisor for their valuation or recommended sales price. Many franchisors provide a simple rule of thumb or formula for valuing franchise resales. If your franchisor offers guidance in this way, it is likely the simplest and most reliable source for determining your sales price.
- Compare. First, look for recent franchise resales within your own franchise system that you can compare to. This is similar to what you might do with recent home sales in your neighborhood to get an idea of what your home might sell for. Other resales in your franchise system are great reference points. Sometimes this information can be difficult to obtain, but your franchisor, and possibly your fellow franchisees, should be able to provide some helpful info on recent resales.
Second, look at other similar franchise resale listings. Peruse the Franchise Flippers marketplace for other similar franchises so you can get a sense for how they are priced. It’s not a scientific approach, but you might start to see patterns or get a feel for what type of multiple (3 x Net Income, 4 x Net Income, etc.) might be common for businesses similar to yours. Regardless of where you search, try to stick to evaluating and comparing franchises rather than non-franchise businesses.
- Use a free business valuation tool. Franchise Flippers offers a free Quick Valuation Tool to provide another reference point in validating your listing price. There are also other free valuation calculators you can find online, although they may not be specific to franchises. A free online valuation calculator might not replace a comprehensive valuation provided by a specialized business valuation expert, but it is a great way to get a quick range of what your franchise resale might be worth without having to spend a lot of time or money.
At the end of the day, the best way to get your business sold is to get it listed so buyers can see it. Once you list it, let the market provide feedback. You can always adjust the price and terms in your listing.