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New Rules for Selling Your Spa
By: William J. Lynott
Posted: October 26, 2010, from the November 2010 issue of Skin Inc. magazine.
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That’s why you need to divorce yourself from emotional considerations and look at your spa from the viewpoint of a cold-hearted buyer. Any business broker can tell you stories about sellers who place unrealistic selling prices on their businesses because they are too emotionally involved to be objective. “The single most important piece of advice I can offer to a business seller is to develop an understanding about what your business is really worth,” says Siegel. “Trying to sell a company that is worth $100,000 for $500,000 won’t happen, and it can result in real damage to the business. During my 27-year career as a broker, I have witnessed how unrealistic expectations can have terrible results.”
Marsh advises, “Ask yourself, ‘Would I pay my asking price for this business if I were buying it?’ If the answer is ‘No,’ it’s time for you to re-evaluate.”
“The first thing a sophisticated buyer will want to see is three-to-five years of financial reports in a form that follows conventional accounting standards,” explains Marsh. A prospective buyer or an accountant won’t be satisfied with claims that your spa is actually more profitable than financial records indicate. A seller who hopes to get a fair price for a business is going to have to demonstrate its true financial condition in black and white. You may or may not need full balance sheets and operating statements to run your business, but you most certainly will need them if you expect to sell it.
“When you’re ready to sell, you should have copies of all documentation related to the business—leases, a list of capital equipment, accounts receivable and payable, tax returns and more. It’s also important to have a written description of the business, a current marketing plan and projections for the future,” says Petrecca. It’s in this area that many small business owners come up short. “Make sure that your last couple of years of financial reporting are meticulously accurate, and be prepared to clearly validate any financial claim,” says Siegel. Paperwork may not be your favorite activity in business, but when it’s time to sell, any inability or unwillingness on your part to produce the required information will tarnish your offering in the marketplace.
Don’t drop the ball
“It’s not uncommon for a seller to neglect the business once it’s been put up for sale, and that’s a big mistake. Any evidence that a business may be going downhill is a serious red flag to prospective buyers,” explains Marsh.