England Restaurant Brokers
I find it annoying that ‘timing’ is the buzzword in so many situations-sports, schooling, careers, relationships, and especially in sales. You can’t sell anything to someone who doesn’t see a need for your product or service. Yet when the time is right, the sale is easy. ‘Timing’ is a function of need, or more specifically, of motivation.
Try to get on a baseball team as a pitcher when there is a supply of pitchers ahead of you; try to get into a college class that is so popular that it’s overbooked; try to get a job as a an auto mechanic when the time has passed for carburetor specialists; try to begin a relationship with someone recently divorced who can’t run fast enough away from commitment. It’s all in the timing. The same is true in the food and beverage industry.
There are three stages of motivation that are affected by timing. First, when a restaurant is first opened and still in its ‘honeymoon’ period, no one can pry the owners from realizing his (or her) dream of fame and fortune. The second stage is one of sustainability. Most restaurateurs are optimists. Blinded by potential and affected by past successes. Even when the business flat-lines, the ever-hopeful optimist rationalizes that no-growth or minor downturns of business are a temporary manifestation and will surely return to prior growth and profitability. The third stage of timing is the most damaging and costly, and moreover, the most unforgiving. There’s an axiom that is true in so many cases...’when a business begins that dreaded downward spiral, it can rarely be reversed’. The effort to reverse the spiral is costly, and many times not successful.
Timing is diametrically opposite depending on whether you the buyer or the seller. The most profitable time for the buyer to act is when the seller is most vulnerable and motivated. On the other hand, if the seller decides to sell, it should be from a position of strength, from a point where selling is an option and desire, but is not required by necessity.
Much like the stock market, the best time to sell a stock that is increasing in value is when you can lock in a satisfactory profit...hopefully at its high. However most investors sell far off from the high and usually well on its way down.
Restaurateurs are no different. It’s very satisfying to build and hold.make as much money as possible when the market, competition, and profit margins dictate that holding is the best course of action. However, it is critical to maintain macro-oversight. Restaurateurs usually focus on the micro day-to-day issues, sometimes ignoring the larger picture.
A successful business provides for the beautiful home, the luxury cars, the wonderful vacations, and the piece-of-mind that comes with a profitable business.
The lifestyle that you’ve created for your family is quickly diluted when the fundamentals of your business turn negative. Subsequently, many times, in hindsight, the time to sell was when you least wanted to sell.
Many restaurants have a life-span of 5 - 10 years. Most restaurants have 5, 10, or 15 year leases. The time to sell is when you’re satisfied with 5 years of making $100,000 per year in net profits...not bad.
In this example, you’ve brought home to ‘Mama’ about $500,000 (a half a million dollars!). Now, if you sold for only what you paid for the business, that business that has given you $500,000, cost you ZERO. Let new blood and sweat bring the business to the next level.
Life is all about “timing.” A time to buy and create wealth, a time to sell and secure wealth, and ultimately a time to enjoy the wealth and fruits of your labor.
That said, many of our clients are former owners who’ve had success (or loss) and passed their business onto someone else thereby providing the new owners with the opportunity to grow and prosper. The time to buy occurs ONLY when it’s someone’s time to sell.
Timing is everything.
Dennis Serpone is president of New England Restaurant Brokers of Wakefield, Mass.