By: Joe Hebeka, Vice President of Clean Brands
For over 25 years, I've been fully invested in the drycleaning industry, first starting as an independent owner, and now, working as the Vice President of the largest dry cleaning franchisor in the world. During my time, I've been involved in a number of exit processes, from small family-run businesses ushering in new owners to welcoming new leadership at the corporate level.
Although there are plenty of complexities in each transition, for the most part, every exit process in our industry hits the same beats. My goal today is to explain what those beats are and how you can make the process even easier if you're considering your succession plans.
Succession Planning Starts Today
Succession plans aren't something that you can make happen at the last minute. The smoothest ownership transitions ideally take years of planning, and then, when the time comes, excellent communication and leadership skills.
Think of it this way - retirement rarely sneaks up on you. It's an end goal in itself, and as an entrepreneur, your responsibility is to take the necessary steps to make retirement a real possibility. If you haven't already, envision what you want your retirement to look like - whether that be selling your business completely, or transitioning into a fully hands-off position. This is your starting point.
It Takes Money to Make Money
The well-being of your business is an investment. If you have children that you plan to give the keys to, you wouldn't give them rundown machinery and a facility that looks like it's from the last century. Conversely, if you're looking to sell to a stranger, an average buyer isn't going to take over a business that needs a complete overhaul.
Starting today, invest in making incremental improvements that will eventually raise the value of your business when it becomes time to sell. One of the biggest mistakes I've seen is that owners let their facilities become outdated and chalk it up as the next person's problem. In reality, that neglect ends up becoming their financial burden, and only lengthens and hinders the selling process, and ultimately, your retirement!
Keep your machines up to date. Invest in a modern waiting room. Maintain your curbside appeal. Yes, these expenses add up, but in the end, it'll help you secure a better future for yourself and the business.
Understand the Timing
Your business is like a stock - you want to sell high, and you don't want to give someone the opportunity to buy low. When your dry cleaner is operating at its peak, that's when you should sell. If you wait for business to grind to a halt before calling it quits, the next owners can factor that into your business's valuation, and you won't walk away with nearly as much money as you would if you sold high.
Documentation, Documentation, Documentation
Location is everything when buying a home, and documentation is everything when selling a business. Too often, we try to help owners attract new buyers, but we hit a wall when it comes to getting their paperwork in order, particularly tax documents and lease agreements.
I can't stress enough the importance of having strong, verifiable accounting books. A broker, buyer, bank, or anyone else involved in the exit process likely will not move forward without having a clean book of business to work with.
Next, make sure your lease agreement is fully in order. A new owner isn't going to pay hundreds of thousands of dollars for your business if there's an angry landlord ready to kick them out on day one. Be sure there is sufficient time remaining on your lease to notify the landlord of an extension with the sale, and that rent is current.
Utilize Outside Resources
No matter how simple the exit process looks on paper, there are plenty of complexities that often overwhelm the average entrepreneur. That's why I always strongly recommend you bring in a professional when it comes to ushering the process along.
At Clean Brands, for example, we've introduced the Clean Exit program specifically for that purpose. The Clean Exit program aims to eliminate most of the hassle on the seller's end. An owner looking to leave their business behind can contact our franchisor and quickly begin transitioning the business. We come in and immediately provide the location with updated branding, cosmetic upgrades, and Green Earth's environmentally friendly solutions, before ultimately matching the location to a new owner. Most importantly, we retain all staff and ensure that the legacy of the former owners is well-kept. No matter what you want your glory days beyond the dry cleaning industry to look like, you can only get there by making incremental progress. Think about your exit process early and often, and remember, the money you put in now is the money you'll take out later.