BY THE BOOK MARKETING THE SALE OF A LICENSED BEVERAGE RETAIL BUSINESS

BY JONATHAN SOPHA AND LAUREL C. MONTAG

It’s important to consider why a sale is right for you and why right now. Some reasons why business owners may want to sell include a new business opportunity, a change in career path, a retirement, family succession, partnership disputes or even a health scare. Before you decide to sell, however, take time to reflect on whether now is the right time to sell and if your business is attractive to potential buyers.

Selling a business is not as simple as listing it on the Internet and buying a business is not an add-to-cart transaction. There are critical actions to take before publicly marketing the business and negotiating with a buyer.

With today’s vast accessibility and array of information, buyers are educated and scrupulous, and sellers need a well-prepared plan to stand out from the pack. This requires differentiating your business, targeting likely buyers, and creating an effective marketing and sales plan. This is a good time to contact your professional advisors — attorney, accountant and lender — to help with strategy.

You can’t sell your business without determining a realistic sale price. Setting the right price is critical to driving early interest and surviving buyers’ due diligence reviews. There are different levels of valuation reports that can be prepared based on comparable sales or financial multipliers. Using a third-party expert to provide a carefully prepared business valuation may cost more, but may be more trusted by buyers, investors and lenders.

Business brokers specialize in helping clients buy and sell businesses, and understand the relevant marketplace. In Wisconsin, business brokers are also often licensed real estate agents and assist with business real estate concerns. These professionals can market the business, locate qualified buyers, help buyers secure favorable financing and help fulfill licensing requirements.

When choosing a broker to guide you through the sale of your business, be sure to determine the broker’s experience selling restaurants or taverns, and ask specific questions about the broker’s strategy. Some brokers will even provide general advice at early stages, hoping for an engagement when the business is ready for sale.

How do you know if a buyer is serious and credible? Business owners should be inquisitive of potential buyers, without divulging trade secrets, or wasting time and money. Weed out unqualified buyers with questions like:

1. How soon is the buyer looking to buy?

2. Does the buyer have the requisite education, licenses and certifications to run the business?

3. Has the buyer qualified for financing or have other sources of capital?

You should clearly identify what you expect from a buyer at the onset of the selling process. If you are selling your business without a broker, you should contact a lawyer to assist with negotiations and documentation.

Small business sales are usually financed with loans from a local bank. If the buyer is working through a Small Business Administration (SBA) loan program, though, you may need a longer due diligence process. Seller financing may also be a useful component, as it often produces a higher sale price and shows seller confidence in the business.

An offer for your business will likely include contingencies like inspection of the books and records, obtaining licenses and permits, and buyer financing. This is customary and communicates that the buyer is serious about the business. If the business includes real estate, there could be additional contingencies for property inspections, a Phase I environmental assessment and a title review. TLW

This is Part 1 of a two-part series on selling a licensed beverage retail business or tavern. Part 1 covers marketing the sale and Part 2 will cover closing the sale. For any inquiries, please contact Jonathan Sopha, attorney at DeWitt LLP in Brookfield, at (262) 439-2363 or jsopha@dewittllp.com, or Laurel C. Montag, attorney at DeWitt LLP in Brookfield, at (262) 754-2876 or lmontag@dewittllp.com.